Practice / Quiz

Plan Design Best Practices

Test your grasp of how to design a commission plan that drives behavior, scales financially, and survives audit.

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Quiz questions (no-script preview)

What is the maximum number of components a recurring commission plan should ideally include?
- 1
- <=3 (correct)
- 5-7
- Whatever drives the most strategic behaviors
Plans with three components or fewer correlate strongly with rep comprehension. More than three components usually shifts strategic behavior into MBOs and SPIFFs - not the recurring plan.
A new AE plan ratio's quota-to-OTE comes out to 12x. What does that signal?
- Healthy unit economics
- Quota likely unattainable; reps will churn (correct)
- Top performers will be richly rewarded
- ASC 606 compliance is at risk
Healthy SaaS quota-to-OTE ratios cluster 4x-8x. A 12x ratio means a rep would have to produce 12 OTEs to hit quota - almost always unrealistic and a leading cause of attrition.
What is the strongest argument against capping commissions?
- Caps are illegal in California
- Caps demotivate top performers, who deliver 40-60% of revenue (correct)
- ASC 606 prohibits caps
- Caps force shadow accounting
Top-quintile reps deliver 40-60% of revenue in most SaaS orgs. Capping their earnings reliably triggers a productivity drop after they hit cap and increases attrition risk among your highest performers.
Which is the STANDARD modern approach for tier mechanics?
- Cumulative tiers with hard caps
- Non-cumulative tiers paired with strong accelerators above 100% (correct)
- One-tier flat-rate with a windfall provision
- Cumulative tiers without an accelerator
Most modern plans use non-cumulative (marginal) tiers with a 1.5-2.5x accelerator above 100%. This delivers smooth accruals plus strong overachievement reward without retroactive rate jumps.
A team's plan changes mid-quarter without notice or true-up. What is the most likely impact?
- Improved alignment with strategy
- Multi-quarter productivity dip and elevated attrition (correct)
- Better ASC 606 compliance
- Higher trust in the SalesOps team
Mid-period changes without notice or a better-of-two true-up consistently produce a multi-quarter productivity dip and a measurable spike in voluntary attrition. Pre-commit a plan-change policy at fiscal year start.
Which leverage (pay mix) is most appropriate for a Customer Success Manager (CSM)?
- 50/50
- 60/40
- 70/30
- 80/20 (correct)
CSMs typically run 80/20 mixes. Their feedback loops on retention and expansion are longer and they have less direct deal-level control than AEs, so lower leverage is appropriate.
What attainment distribution is considered healthy?
- 100% of reps at quota
- 70-80% of reps at quota (correct)
- 30-40% of reps at quota
- No target - just hit the corporate number
The widely accepted target is 70-80% of reps at or above quota. Below 50% reps churn; above 90% you're under-quota'd and overpaying. Below 50% or above 90% almost always means quotas are mis-calibrated.
A new AE just signed an offer letter. The plan should include:
- Full quota from day 1
- A 0/25/50/75/100% ramp schedule paired with a non-recoverable draw (correct)
- Full quota with a recoverable draw that must be earned back
- No commission for 6 months
The standard SaaS pattern is a 0/25/50/75/100% ramp across the first 3-5 months paired with a non-recoverable draw at 50-80% of target variable. Document the ramp in the offer letter to avoid disputes later.
The single most important paragraph in a commission plan document is:
- The acceleration table
- The clawback definition
- When commission is 'earned' (correct)
- The SPIFF eligibility list
The earning-trigger clause (signed contract? cash collected? services delivered?) determines post-termination liability, ASC 606 treatment, dispute outcomes, and state-law exposure. It deserves employment-counsel review every year.
What is the recommended approach for strategic priorities not captured by revenue (NPS, training, customer reviews)?
- Add another component to the recurring plan
- Use MBOs or SPIFFs layered on top of a simple recurring plan (correct)
- Tie them to base salary increases
- Ignore them - only revenue matters
Strategic priorities outside revenue belong in MBOs or SPIFFs - not the recurring plan. Keep the recurring plan to <=3 components and use layered bonuses to drive specific behaviors.

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