Incentive compensation is quickly becoming one of the most formidable levers for driving efficient growth, motivating teams, and sharpening organizations’ competitive edge. But while compensation leaders are thinking more strategically than ever, many are still held back by outdated systems, limited visibility, and increasing complexity. 

Our 2025 State of Incentive Compensation Report research confirms what many already feel: teams want to modernize, but most are still stuck in manual mode. Nearly half (47%) of organizations still rely on spreadsheets, at least in part. Inaccurate payments remain commonplace. And automation, while promising, hasn’t quite reached its full potential.

Yet, forward-thinking companies are making headway — and they’re using incentive compensation to unlock growth, improve efficiency, and boost profitability.

Read on for an overview of the trends shaping ICM in 2025 and the strategies top teams are betting on to future-proof their compensation programs. 

Pressure Points and Priorities: The State of ICM in 2025

What's the current state of incentive compensation? We did the legwork, surveying over 200 compensation leaders across B2B organizations to find out. The themes below highlight the most persistent challenges in 2025 and where the urgency for change is most acute. 

Complexity Is Outpacing Compensation Systems

Incentive compensation is evolving, and with it, the level of complexity that compensation leaders have to manage. Plans aren’t confined to a single sales team, and span multiple roles, departments, and geographies, all while under pressure to drive growth and efficiency.

But as comp strategies get more ambitious, execution hasn’t kept pace. Our research reveals that:

• 66% of companies have overpaid and/or underpaid commissions in the past year
• Only 27% have fully automated their end-to-end commissions process
• 30% of companies aren’t using ICM software

In short, teams are managing high-stakes programs with tools that weren’t built for the scale and intricacy they face today — or with no real tools at all. In both cases, the result is the same: execution can’t keep up with strategy, and risk is baked into the process.

Inaccurate payouts hurt morale, dismantle trust, and create expensive downstream problems. At the same time, manual work slows down the very teams incentive programs are meant to accelerate. Which leads us to…

Manual Work Is Still Dragging Teams Down

Despite all the talk of digital transformation, too many compensation teams remain buried in manual work. And it’s costing them. 

Our research shows that companies spend an average of 89 hours per month on comp-related admin, including payouts, reviews, and troubleshooting. On top of that, nearly one-third say they’re spending too much time on manual tasks, but haven’t yet fixed the problem. 

That’s over two full workweeks each month spent on routine admin, just to keep things running. And it gets worse as headcount scales. The more commissionable employees you have, the more time your team sinks into tracking, calculating, and correcting.

The time mismanagement is expensive enough, but the financial risk is also very real. Even a seemingly minor 3% error rate in a company paying $500M in incentives translates to $15M in incorrect payments annually. 

AI & Automation Are on the Rise (But Not Fully Realized)

Automation and AI (arguably this decade’s biggest disruptor) have earned their keep by helping teams improve efficiency, accuracy, and decision-making across industries. Still, while there’s plenty of appetite for both, implementation in the context of ICM hasn’t caught up with intention.

For instance, according to our research, 61% of leaders said automation would significantly improve their reporting and analytics, yet only 39% have actually increased automation to reduce costs this year. 

The same holds true for AI: while 58% of companies are using the tech in some shape or form to automate manual tasks, only 22% use it extensively, while another 24% are still in exploratory stages or planning adoption.

The gap isn’t due to a lack of awareness, but rather operational inertia. Integrating new tools, justifying the spend, and adapting legacy processes can slow even the most motivated teams.

But the teams that are embracing automation and AI are seeing faster reporting, cleaner data, fewer errors, and stronger seller engagement. All without adding headcount.

Data Visibility = Motivation, Retention, and ROI

Merely existing doesn’t make an incentive comp plan effective. To drive real impact, it has to be understood by the people it’s meant to motivate.

But for too many organizations, a visibility gap persists. Sales reps aren’t sure how their payouts are calculated, leaders lack confidence in the ROI of their comp plans, and compensation teams spend hours fielding the same questions every pay cycle.

And so, a glaring trust issue emerges. When reps can’t see how their performance ties to earnings, motivation erodes. When execs can’t see how incentive dollars impact revenue, investment stalls. Visibility, it turns out, is a force multiplier.

Future-Ready Compensation Starts With These 5 Strategies

Our 2025 State of ICM Report takes a hard look at where compensation programs are falling short, but it also points to what leading teams are doing differently. The following strategies reflect where top performers are investing time and resources to close those gaps, align incentives with outcomes, and build programs that are ready for what’s next:

1. Cut the Admin Load and Reclaim the Work That Matters

The 89 hours per month that compensation teams spend on manual tasks represent more than lost time — they’re a graveyard of missed opportunities to improve efficiency and drive strategic impact. 

Automation solves for both speed and stability. Teams that have adopted purpose-built tools are reducing payout friction, scaling more effectively, and improving accuracy at the source. In fact, 43% of companies have already improved commission accuracy with better technology, a clear sign that modernizing the infrastructure behind incentives pays off.

For teams running on spreadsheets or stitched-together workflows, automation is one of the most immediate ways to strengthen execution and regain control.

2. Connect Incentives to Outcomes

Quota attainment still defines success for many sales teams, but the savviest organizations are going further. They’re tying incentives to the behaviors and business goals that matter most: customer expansion, product adoption, retention, and long-term value.

This outcome-first ethos sharpens focus and leads to more measurable impact. It’s no surprise, then, that 59% of companies now use incentives to support business growth, making it the most-cited strategic priority tied to compensation.

3. Show Reps Where They Stand

One of the simplest ways to improve motivation, trust, and performance is to show reps where they stand in real-time.

Yet, only half of companies currently offer real-time visibility into earnings or performance. For everyone else, incentives remain a black box: reps have to wait, ask, or do the math themselves.

Real-time visibility empowers. That’s why the most forward-thinking orgs are shifting from reactive reporting to real-time insights. They’re giving reps tools to track progress and forecast earnings on the fly, and giving leaders the data they need to optimize performance faster.

4. Make the Case for Smarter Compensation 

Recognizing the need to modernize your comp strategy is one thing, but getting leadership buy-in to actually do it is another. In our report, many compensation leaders cited internal roadblocks, from competing priorities to a lack of visibility into ROI, and challenges surfacing the value of comp improvements in business terms. 

Leading teams know how to get around this and reframe the conversation. They’re connecting compensation strategy to what leadership cares most about:

• Reducing costs and manual complexity
• Accelerating revenue through aligned incentives
• Improving forecast accuracy and trust in the numbers

5. Review Often, Adjust Faster

We found that only 35% of companies adjust their plans quarterly, even though weekly adjusters see up to 3x higher revenue growth than annual ones. That’s quite the missed opportunity. 

Frequent optimization is what keeps plans aligned with real-time business goals. It helps you respond faster to what’s working (and what isn’t), re-engage reps around evolving priorities, and ensure performance incentives don’t fall out of sync with reality.

If your plans are static, your outcomes likely are too. Agile teams are making small, strategic tweaks throughout the year, and seeing outsized returns as a result.

CaptivateIQ’s 2025 State of ICM Report: Your Roadmap to a Smarter Comp Strategy

For the second year in a row, our State of Incentive Compensation Management Report kicks the door wide open on what’s really happening in compensation management strategies today. Download the full report to learn more about how forward-looking organizations are approaching incentive compensation, including best practices for leveraging AI and automation.