🎙️ Podcast – We’re Not on Easy Mode Anymore EP 03

Do We Still Need Variable Compensation

On our live webinar, “We’re Not on Easy Mode Anymore” Scott and I wandered straight into a hornet nest, sales compensation. We thought we were tossing out a provocative icebreaker when we asked whether we even need variable compensation anymore. Instead we opened up an hour of debate that made that question feel a lot less ridiculous and a lot more uncomfortable. The more we pulled on the thread, the more I felt how much of our go to market machinery is built on assumptions nobody has really re examined in years.

Nobody likes their comp plan

I have never worked anywhere that people genuinely loved the comp plan. Not tolerated it, not shrugged and said it was fine, actually loved it. At best you get a kind of grim, shared humor. Someone says that at least everyone complains about it equally, the reps hate it, the CFO hates it, leadership hates it, but everyone lives with it because it feels like the least offensive option. People treat that shared misery as if it is evidence of fairness rather than a sign that the system is broken.

When you zoom out, that is bizarre. Compensation is the primary lever we use to direct behavior in go to market roles. It shapes what people prioritize, which deals get attention, how teams collaborate, and how much risk individuals feel in any given month. Yet most reps think the plan is unfair or unachievable, SEs feel their contribution is under valued, finance worries that payouts are too rich or too volatile, and leadership fiddles with the plan every quarter like a thermostat that never quite hits the right temperature.

Once you see that pattern, the obvious question is not how to tweak the model for next year. The real question is whether the entire variable by default structure has quietly passed its sell by date. The discomfort comes from realizing that the habit is so ingrained that challenging it feels almost heretical, even when the results are clearly messy.

Variable comp, sacred cow or legacy artifact

Sales is one of the last true pay for performance jobs in tech. We tell AEs that they are taking on more risk so they get more upside, and that the fifty fifty split is the badge of someone brave enough to live on the edge of their number. We tell SEs that they are absolutely critical, but slightly less risky, so they get a seventy thirty or eighty twenty split that feels more stable. Everyone else gets a base salary, maybe a discretionary bonus, and a promise that things will work out during promotion cycles.

Over time I have become a lot less religious about that structure. On the webinar I said out loud something that has been quietly obvious to me for a long time. Quota is a made up number. We dress it up in spreadsheets and models, yet so much of it is forecast plus politics plus optimism plus a sense of what feels acceptable. We argue over decimal points as if the number came carved into stone when it is closer to a weather prediction with a strong dose of internal lobbying.

The randomness shows up everywhere. A great rep can have a brutal year because their territory got carved up, because a key champion left, because macro conditions hit their segment a little harder than others. A mediocre rep can ride a lucky patch of inbound, or inherit a territory where a seven figure deal was already half baked. If you run a huge group through this system, someone will always come out on top simply because any noisy tournament must produce a winner.

The problem is that we talk about those outcomes as if they represent pure signal. We treat quota attainment as objective proof of talent, grit, and strategy, while quietly ignoring how much noise sits underneath those numbers. Then we stack career progression, recognition, and even internal politics on top of that shaky foundation. Once you see it, the whole thing feels less like a sacred cow and more like a legacy artifact we keep polishing because it is too scary to retire.

The SE problem, three systems, zero real fairness

I have built and led solutions teams at places like Cloudinary, Moveworks, Copy.ai, Adobe, Sitan, and more. No matter the logo or stage, the same pattern keeps reappearing. SEs are central to how deals get won, yet their comp is bolted on, politically sensitive, and structurally misaligned. You can feel the tension the moment you look at how their targets are set.

On the webinar I described three rough “political systems” that tend to show up in SE compensation. In the communist model, every SE shares a global or regional number. The top performers carry a massive chunk of the outcome but end up paid the same as people who are comfortably cruising in the middle of the pack. In the socialist model, a portion of variable is tied directly to deals you touch while the rest is tied to a team or global goal, so at least there is a nod to individual contribution and some incentive for coverage. In the capitalist model, SEs carry a number like AEs, with maximum individual accountability and very little collective safety net.

Personally I have always disliked the pure communist approach. I have watched top SEs grind through complex deals, unblock product questions, and build trust with champions, only to see their outcomes flattened into a shared pool where everyone gets the same cut. That situation burns out your best people while training your average ones that there is no real cost to letting others carry the load. It is a slow, quiet way to lose the folks you rely on most.

There is also the lingering question of why SEs sit at seventy thirty or eighty twenty when AEs are sitting on fifty fifty structures that celebrate heroic risk taking. Nobody ever seems to have a satisfying strategic answer. Usually the explanation boils down to inheritance. That was how it worked when the current leaders arrived, so nobody wants to be the one who rips it up and starts again. Yet the cost of not touching it is paid in retention, resentment, and misaligned effort.

Compensation dictates behavior, whether you like it or not

There is one statement I feel completely comfortable making. Comp dictates behavior. Not aspirational values, not the three words on the wall, not the rousing all hands speech. The system that decides who gets paid for what will always override the slogans.

At a previous company we had a classic example. Reps were compensated only on the initial land, not on upsells or natural expansion over time. The product we sold tended to grow inside accounts once it was adopted, so the healthiest motion from a company perspective would have been to land sensibly, drive successful adoption, then expand once the value was proven. The comp plan did not care about that.

If I am a rep staring at four potential deals and I have a chance to push one from twenty five thousand to seventy five thousand, I will push hard for that expansion even if it cuts my odds of closing in half. My expected commission still comes out higher. The company, however, ends up with more strained implementations, more mismatched expectations, and higher risk of churn. That is not a story about immoral reps. It is a story about logical people responding to a badly designed game.

End of quarter behavior follows the same pattern. When someone’s rent or mortgage depends on clawing to a number, they will over discount, they will over promise, and they will push marginal deals across the line. It is not because they forgot what good customer fit looks like. It is because the short term survival instinct gets wired directly into the comp plan. We create the rules of the game, then act surprised when people play to win under those rules.

Spiffs and micro incentives, more powerful than we admit

There is a corner of variable comp that I genuinely like, which is highly targeted spiffs for very specific behaviors. During the webinar we walked through a bunch of examples from past companies, and I realized how much more leverage we often get from those focused incentives compared to yet another tweak in the core percentage.

We had spiffs for customer press releases, for logo usage and case studies, for securing trusted access to a building or a badge at a key account, for customers who were willing to speak on stage or join a panel alongside us. None of those are random perks. They are direct rewards for actions that turn into compounding advantages over time. Renewals get easier, expansions get warmer, and marketing is no longer starved for proof that real customers are happy.

I tend to frame it like this. I am all for interesting, one off incentives that tightly align with a behavior you can point to and say, that is what we want more of. It is far easier to pay for a press release, a reference logo, or a successful go live than to bend the whole comp system into a twelve variable formula in the hope that it nudges people in that direction indirectly.

Finance leaders understandably get nervous when they see a twenty five thousand dollar deal that ends up triggering twelve thousand in stacked spiffs. If you view that deal in isolation, the ratio looks ridiculous. If you zoom out and see that the deal, plus the logo, plus the press, plus the conference talk lead to ten more deals in the same segment over the next twelve months, the math starts to look extremely smart. The hard part is having the courage and the patience to treat these behaviors as investments rather than line items that must be justified quarter by quarter.

SDRs in the age of AI and PLG

Traditional SDR comp feels especially out of step with how work gets done now. For a long time, paying SDRs on meetings booked was crude but understandable. Each dial and each email had a real human cost, and volume itself carried value. More meetings meant more at bats, which at least loosely correlated with pipeline.

The landscape looks very different now. An AI workflow can generate a thousand tailored messages in an afternoon. Calendar spam is cheap. The scarce thing is not outreach, it is attention and trust. The SDR who treats their value as pure volume is competing with a machine that will always outpace them. The SDR who treats their value as judgment begins to look irreplaceable.

In this environment, the real value of an SDR sits in their ability to know who is worth going after, figure out how to break through the noise that every tool is generating, craft sequences that actually resonate with specific pains, and do the in person, high intent work at conferences, meetups, and small gatherings. That is a different job than “book as many meetings as possible and let someone else worry about quality.”

That is why I argued that SDR comp should lean toward qualified pipeline and closed revenue, not just meetings that show up on a calendar. Of course there are practical problems. Long sales cycles mean that money tied only to closed won can feel imaginary, and SDR roles have high turnover so some of the people who did the early work may not be around when deals finally close.

Because of that, I like hybrid structures. Tie some portion of variable to qualified opportunities, not just meetings. Add a meaningful kicker tied to deals that close, so SDRs care about quality and follow through. Put real feedback loops in place so they can see which motions lead to revenue and which ones produce noise. In a world where AI handles the grunt work, SDRs need to become strategic revenue creators, closer to a blend of product marketer, researcher, and field rep. Their comp should acknowledge that shift instead of freezing them in an old model.

PLG plus sales, why you cannot just bolt on an enterprise quota

We closed the session by talking about PLG heavy companies that want to layer in enterprise sales. This is where comp stops being merely complex and starts becoming outright dangerous if it is handled lazily.

Picture a product that has grown to forty million in PLG revenue. The board and executive team look at the customer list and think there must be enterprise upside. Someone suggests hiring a few enterprise reps, hands them one and a half million dollar quotas that came out of a spreadsheet exercise, and tells them to go “get strategic.” On paper it looks ambitious. In practice it often sets everyone up to fail.

If I were starting that motion, I would begin differently. I would probably choose two of the best existing sellers, or hire two proven enterprise builders, and carve out an enterprise pod with a very explicit experimental mandate. Their comp would reflect the uncertainty, with more base, flexible targets, and clear milestones that are not purely ARR in the first few quarters. The point would be to learn whether there is a repeatable motion at all before pretending it is a finished machine.

A few basics feel non negotiable. You need a clear definition of “enterprise” in your context, rather than letting any five thousand dollar corporate card swipe from a big logo count as proof. You need to treat the first phase of the motion as discovery, not as a guaranteed pipeline source that must support a board level plan from quarter one. You also need to be brutally honest about product gaps. If there is nothing truly distinct for those enterprise reps to sell beyond the swipe card PLG package, no comp structure will conjure healthy deals out of thin air.

PLG gives you a huge advantage. You have usage data, product telemetry, and in product champions before the first enterprise conversation. If your comp plan fails to reflect that land and expand reality, you will train reps to chase fantasy mega deals instead of orchestrating smart, layered growth paths inside accounts that are already engaged.

So, should we kill variable comp

When I first brought up the idea of getting rid of variable comp, it was meant as a slightly provocative thought experiment. What happens if we imagine a sales org where everyone is on a high base, with clear expectations and targeted spiffs, rather than the traditional variable heavy model. I expected the idea to stay in the realm of theory. Instead, as we talked, it started to feel strangely practical.

I am not ready to declare that variable comp should disappear from go to market roles. There are situations where it creates genuine alignment and where it reflects a level of control that individuals really do have over outcomes. However, I am very ready to say that we rely on variable comp far more than we should and lean on it as a crutch when we do not want to do the harder work of clarifying focus or fixing product and process issues.

We underestimate how much randomness shapes outcomes, how much damage misaligned plans quietly do to culture and customer experience, and how powerful simple, fair, transparent systems can be for building trust. If your comp plan is a complex math puzzle that no one can calculate while sitting at a red light, there is a good chance it is generating unintended behaviors you will spend all year trying to explain away.

If I were starting from scratch

If I were designing a go to market organization at a fifty person Series A company right now, here is how I would bias my decisions around comp. I would choose simplicity over cleverness almost every time. A plan that people can explain to a friend leads to trust. Trust leads to predictable behavior. Predictable behavior gives you a shot at building healthy systems instead of playing whack a mole with edge cases.

I would tilt toward higher base and more targeted variable, especially for SEs and SDRs. The upside would still be meaningful, but it would be tied to clearly defined high leverage behaviors instead of vague hopes that some metric might loosely correlate with ARR long term. I would reserve spiffs for behaviors that are provably critical to the business, like customer stories, press, references, go lives, speaking slots, and expansions, and I would be willing to make those worth real money.

I would treat SEs as true revenue partners, not as a shared service that quietly carries the number while earning a flattened team payout. Their comp would be at least partially deal tied, with a team element for coverage but a clear connection between impact and reward. For SDRs, I would measure impact rather than spam, focusing on qualified opportunities, influence on closed won, and learning loops that help them become smarter with every cycle. All of that would assume that AI is handling the bulk outreach, while humans focus on judgment and trust.

Most importantly, I would bring an experimental mindset to any new motion, especially PLG to enterprise. Early comp plans would be treated as hypotheses, not sacred doctrine. We would be explicit that some of those hypotheses will be wrong and need to be rewritten. That transparency often feels scary in the moment, yet it is far kinder than locking people into a broken structure for a full year just because the spreadsheet has already been sent to the board.

We are not on Easy Mode anymore

Buyers are savvier, products are more complex, PLG is everywhere, and AI is rewriting what outbound and pipeline creation look like. In that environment, clinging to legacy comp structures simply because they are familiar feels less like prudence and more like denial. The entire go to market engine runs on incentives, which means compensation design is not a side project for finance. It is a first principles design problem that touches every conversation with every customer.

The question is not whether variable comp is good or evil in some absolute way. The real question is whether the plans we run today reflect the world we actually sell into, the roles people actually play, and the behaviors we actually want. If the answer is no, then the riskiest move is not experimenting with new models. The riskiest move is pretending the old ones are still working just because they look familiar on a slide.