1. Start with the Business Strategy
One of the biggest mistakes sales compensation teams make is starting with the plan itself. The conversation immediately shifts to measures, quotas, pay mix, accelerators and mechanics. Those discussions are important, but they’re not the starting point.
The first question should always be: What does the business need to achieve in 2027?
Whether the focus is profitable growth, customer retention, cross-selling, expansion or market share, sales compensation should reinforce the behaviors that help the organization achieve its objectives. Because when strategy and sales compensation are aligned, the entire sales organization moves in the same direction.
2. Establish Clear Principles
Before getting into plan mechanics, leadership teams should agree on what principles will guide sales compensation decisions. A clear philosophy creates a consistent “north star,” defining the role sales compensation plays and how it should support performance, culture and business priorities.
Those principles should answer fundamental questions:
- What is our pay-for-performance philosophy?
- How should we balance individual and team performance?
- What role should sales compensation play within our broader talent strategy?
- And how should our approach reflect company culture and values?
They should also recognize what sales compensation can’t solve, including poor sales management, an ineffective sales strategy or structural issues.
Once established, these principles should remain consistent unless the business undergoes meaningful change, giving leaders a shared framework for making annual plan decisions.
3. Build a Smarter Quota Setting Approach
If there’s one area that deserves more attention during planning, it’s quota setting. Too often, organizations spend months debating incentive mechanics while still relying on legacy approaches to quota allocation. But even the best-designed compensation plan can struggle if quotas aren’t perceived as fair and attainable.
Leading organizations are increasingly using better data, processes, modeling and AI capabilities to align quotas more closely with market opportunity. The goal isn’t simply to set targets, but to create confidence throughout the sales organization. When sellers trust that their quotas are fair and achievable, they’re more likely to focus on achieving them and execute the sales priorities outlined in the sales compensation plan design.
4. Make Scenario Planning a Standard Practice
One of the biggest advantages organizations have today is the ability to model outcomes before making decisions. Rather than launching a sales compensation plan and discovering issues six months later, revenue leaders can evaluate different design options upfront:
- What happens if attainment increases?
- What happens if territories shift?
- What happens if growth rates change?
The ability to test scenarios before launch helps organizations make more informed decisions, understand financial implications and reduce unintended consequences. The objective isn’t finding a perfect plan. It’s reducing surprises and decreasing risks.
5. Prioritize Seller Understanding
A sales compensation plan doesn’t create value if sellers don’t understand it. Yet many organizations continue to underestimate the importance of communication and education.
The strongest compensation programs invest in helping sellers understand how they’re paid, what drives earnings and where opportunities exist to improve performance. Modern technologies, including AI-enabled support tools, are helping organizations improve transparency and provide faster answers to seller questions.
By doing this, organizations will typically see greater trust, stronger engagement and better alignment between intended and actual seller behavior.
6. Strengthen Governance Practices
When sales compensation programs struggle, the issue isn’t always the design. In many cases, how governance is set up is often the difference between success and stalling.
Clear ownership, defined approval processes, documented policies and consistent decision-making help organizations maintain alignment throughout the year. As companies grow and sales compensation programs become more sophisticated, governance becomes even more important.
The most effective sales compensation plans are usually supported by equally strong governance practices. That’s rarely an accident.
7. Use Technology to Redirect the Team’s Time
One of the most exciting developments in sales compensation is how AI can help teams focus on higher-value work.
Organizations are exploring ways to automate repetitive administrative activities and improve capabilities across the end-to-end process: assess, design, model, communicate, administer and manage. This allows sales compensation professionals to spend more time working on plan strategy, plan effectiveness and business impact.
Technology won’t completely solve sales compensation challenges, but it can give your team more time to solve the right ones.
The Most Important Question for 2027
With planning discussions underway, I’d challenge leadership teams to ask a simple question:
If we were designing our sales compensation program from scratch today, would we build the same plan we currently have?
Most organizations would make at least a few changes, and that’s exactly why annual planning matters. It’s an opportunity to move beyond incremental updates and ensure sales compensation continues to support the business, the sales team and the growth objectives that matter most.
The organizations that will be most successful in 2027 won’t necessarily have the most complex sales compensation plans. They’ll have sales compensation programs that are aligned to strategy, supported by data, reinforced through governance and clearly understood by their sellers.
