Practice / Quiz

Common Commission Mistakes

Identify the most common pitfalls in plan design and operations - and how to avoid them.

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Quiz questions (no-script preview)

A rep keeps a personal spreadsheet to track commissions. This is a sign of:
- A diligent rep
- Broken trust in official statements (correct)
- An ICM platform with too many features
- Compliance with SOX
Shadow accounting is the canary signal that statements aren't trusted. Industry research shows reps spend 2-4 hours per week on shadow accounting when statements lack deal-level transparency.
Capping plans at 200% attainment will:
- Save money in the long run
- Demotivate top performers and increase top-of-team attrition (correct)
- Improve ASC 606 amortization
- Force reps to focus on margin instead of revenue
Hard caps look financially responsible but consistently demotivate top performers - once a rep hits cap, productivity drops sharply and attrition risk rises. Top-quintile reps are too expensive to lose.
Your sales org has 35 reps and uses spreadsheets for commission. What is the likely error rate?
- Below 1%
- 1-3%
- Around 5%, often higher (correct)
- No errors if the spreadsheet is well-designed
Industry research finds 83% of companies experience commission inaccuracies averaging more than 5%, with about half over- AND under-paying in the same year.
A plan has 7 components, including 3 product-line kickers and 2 strategic SPIFFs in the recurring plan. What's the predictable outcome?
- Reps optimize across all components
- Reps focus on what they understand and ignore the rest (correct)
- Reps build complex spreadsheets and master the plan
- Reps stop selling because the plan is too rich
Behavioral economics is unambiguous: incomprehensible plans don't change behavior. Reps optimize what they understand and ignore everything else. Push complexity to MBOs/SPIFFs, not the recurring plan.
A rep is terminated. Which is the safest plan-document approach?
- Plan silent on termination - rely on company discretion
- Forfeit all unpaid commissions on termination
- Define earning trigger explicitly + state-specific addenda + counsel-reviewed post-termination clause (correct)
- Pay all in-flight pipeline whether or not deals close
Without explicit post-termination language, courts often default to procuring-cause doctrine. State-specific addenda (CA, MA, NY, IL) prevent treble-damage exposure. Have employment counsel review annually.
Channel and direct reps both claim a deal. The org has no Rules of Engagement. What's the most likely outcome?
- Manager-arbitrated decision that erodes trust on both sides (correct)
- Both reps walk away happy
- One rep gets a kicker
- Sales Ops automatically resolves
Without published Rules of Engagement, every credit dispute becomes a manager negotiation that erodes trust. The cost of a published-but-imperfect ROE is far smaller than the cost of ad hoc arbitration.
A clawback policy exists on paper but never triggers. What's the issue?
- The policy works correctly because there are no churns
- Refund / churn / cancellation data isn't flowing into the ICM (correct)
- Clawbacks are illegal in 49 states
- The policy is fine - Finance does the clawbacks manually
Most clawback gaps are integration gaps. Without churn / refund / cancellation feeds into ICM, paid commissions on subsequently-reversed deals never get recovered. Gartner estimates 3-5% of variable comp leaks via this path.
A plan's quota was set without back-testing against historical data. Six months later, only 25% of reps are at quota. What is the most likely cause?
- Reps are slacking off
- Quotas are mis-calibrated, not the reps (correct)
- ASC 606 is depressing payouts
- ICM software has a bug
Healthy plans target 70-80% attainment. When 25% of reps hit quota, the plan is mis-calibrated relative to territory potential and historical productivity. Plan modeling against 18 months of data prevents this.
A rep claims they're owed commission on a deal that closed after they were terminated. What likely applies?
- The plan automatically forfeits
- The procuring-cause doctrine, unless the plan explicitly displaces it (correct)
- Federal arbitration only
- Nothing - terminated reps have no claim
The procuring-cause doctrine gives reps a right to commission on deals they substantially originated, even after termination, unless the plan clearly displaces it. Many states (TX after Perthuis 2022) reaffirm the doctrine strongly.
The biggest hidden cost of a manual / spreadsheet-based commission process is:
- Software license
- Shadow accounting + dispute SLA breaches + audit findings (correct)
- Excel licensing
- Data center costs
Beyond direct calculation errors, the hidden costs add up: ~89 hours/month in SalesOps time (industry research), 2-4 hours/rep/week on shadow accounting, repeated ASC 606 audit findings, and ~3-5% leakage on variable spend (Gartner).

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