It's annual planning season, and as we head into another year, companies are doubling down on incentive compensation as a growth strategy.

According to CaptivateIQ’s 2025 State of Incentive Compensation Management Report, 59% of organizations are leaning on their incentive compensation programs to help drive business growth.

On paper, it makes perfect sense. 

Budgets are tight. Revenue targets keep rising. Teams are expected to do more with less. In that environment, incentives feel like an elegant solution. They are flexible, can drive fast results, and unlike new headcount or major tools, they usually do not require long approval cycles.

However, there’s a disconnect. While leaders are looking towards incentives to foster growth, most organizations still struggle to execute them in a way that actually drives performance. The intent is right, but the follow-through isn’t. 

Companies are spending more on incentive programs without achieving the results that would actually move the needle and that means most of the 59% of companies betting on incentives aren’t seeing the growth they’re paying for.

Why Most Incentive Programs Don't Work as Intended

The biggest misconception in incentive compensation is that the payout itself drives behavior. Many teams assume the payout alone drives behavior. Research in behavioral psychology, including work by Daniel Pink, shows that rewards by themselves are not enough.

Sales reps are also motivated by clarity, predictability, and trust. If those are missing, incentives lose most of their impact. 

Complexity Kills Action

Incentive structures have become increasingly elaborate, including anything from tiered accelerators and product-specific bonuses to seasonal adjustments, SPIF overlays, and intricate quota mechanics. The structures may be mathematically precise, but they're difficult for reps to digest and act on. If a rep can’t understand how they earn, they can’t optimize how they perform. 

Limited Visibility Creates Confusion 

Visibility is one of the strongest predictors of motivation. Almost all payees (92%) say that clear visibility into compensation is a major motivator. Yet, according to our 2025 report, only half of companies offer visibility into current and potential earnings, and only 52% provide real-time performance tracking.

This information gap creates a predictable cycle: confusion → uncertainty → shadow accounting → mistrust → disengagement.

If your reps are disengaged, they're less likely to consistently focus on the tasks that drive revenue for your business. 

Reps Don't Trust the Plan

This is the clearest signal of incentive dysfunction. A notable 85% of commissionable employees say they manually recalculate their commissions at least some of the time to confirm its accuracy. In other words, they don't trust the numbers. When the people earning the incentives don't trust the system, it ceases to be a motivator. 

Mistrust also drains productivity. Every hour spent validating statements or reconciling discrepancies is an hour not spent selling.

Incentives Reward the Wrong Behaviors

Even well-intentioned plans can reward outcomes that don’t map to strategic priorities. This happens when:

• Plans are designed based on historical norms or “what we’ve always done.”
• Organizations prioritize controlling how their reps operate over influencing their behavior.
• Incentives focus on outputs (e.g., closed revenue) instead of the inputs that drive sustainable growth (e.g., pipeline quality, deal health, customer fit).
  

When incentives aren’t aligned with strategy, performance stops contributing to organizational goals. Reps follow the plan, not the business priorities.

Strategy and Incentive Design Are Misaligned

Revenue teams often treat incentives as the last step in the planning process, finalized once product priorities, GTM motions, and capacity models are already locked. But incentives shouldn't be an afterthought. They’re the behavioral engine of go-to-market performance.

When incentive mechanics don’t reflect the company’s strategy, customer experience, or revenue model, plans backfire. 

Taken together, the five issues outlined above explain why so many companies are failing to see the growth that incentives programs could unlock for them. 

What Effective Growth-Driving Incentives Actually Look Like

If incentives are going to drive real performance, they need to do more than outline potential earnings. Incentives should give reps the clarity, confidence, and direction to take actions that ultimately support business goals. The most effective programs are clear and easy to implement, aligned with broader KPIs, and predictable. The principles below form a practical framework you can use to revisit your incentive program for 2026.

1. Simple Enough to Understand in Minutes

Reps shouldn’t need spreadsheets, formulas, or a 1:1 with their manager to understand their earnings. High-performing teams design plans that can be explained quickly and remembered easily. When reps are clear on the incentive plan, they spend less time interpreting compensation mechanics and more time executing the behaviors that drive results. Simplicity reduces cognitive drag and accelerates performance.

2. Aligned With Company Strategy

Effective incentives reinforce the company’s goals, not legacy structures. They should map directly to your company's product and pricing strategy, customer acquisition motions, revenue targets, and more.

In practice, this looks like rewarding actions that directly support the company’s strategic goals. For example:

• If your strategy is increasing retention: Incentivize multi-product adoption, healthy onboarding, or expansion milestones rather than only first-deal revenue.
• If you're trying to improve pipeline quality: Reward early qualification accuracy, ICP-aligned opportunities, or forecast hygiene.
• If you’re shifting toward long-term profitability: Reduce heavy accelerators that encourage discounting and instead reward margin-preserving behaviors.
• If your GTM motion depends on land-and-expand: Incentivize reps to prioritize accounts with strong expansion potential, not just the fastest deals to close.

When the incentive structure mirrors what the business is trying to achieve, reps intuitively focus on the actions that move the company forward, and the plan becomes a genuine growth lever instead of a legacy compensation formula.

3. Transparent in How Outcomes Are Earned

Transparency is one of the strongest predictors of trust, and trust is what turns incentives into a reliable source of motivation. Reps need clear statements, real-time updates, and straightforward explanations of what changed and why. But transparency does more than remove confusion.

It gives reps the context to make smarter decisions. When reps understand the mechanics behind their earnings, they can prioritize the right deals, avoid low-impact activity, and manage their pipeline with intention rather than guesswork. Transparency turns compensation from a retrospective surprise into ongoing guidance.

It also reduces operational drag. Clear visibility eliminates recurring “how was this calculated?” questions, reduces shadow accounting, and cuts down on compensation-related escalations. This frees up Sales, Finance, and RevOps to focus on higher-value work.

Ultimately, transparent incentives give the entire organization a cleaner, more accurate picture of performance.

4. Predictable Enough That Reps Can Adjust Mid-Cycle

Predictability is what turns incentives from a static payout into an active performance tool. Reps should be able to anticipate how today’s actions influence tomorrow’s results. A predictable plan gives them a clear sense of where they stand and what’s still possible within the period.

When reps can see how current performance stacks against targets and how specific deals will influence attainment, they can prioritize high-impact opportunities early rather than scrambling at the finish line.

Predictability also improves revenue quality. Reps with clear trajectory insight tend to spread their effort more evenly across the cycle, maintain healthier pipelines, and avoid the eleventh-hour deal compression. This leads to more accurate revenue projections and fewer end-of-quarter surprises.

What To Prioritize as You Launch Your 2026 Plan

With most organizations already deep in 2026 planning, now is the time to re-evaluate how your incentives signal performance. These practical, immediate steps will help you identify what’s working, what’s unclear, and where your program needs to evolve.

Review Your Current Incentive Framework for Clarity

Start by pressure-testing the plan with a simple question: Can your reps explain how they’re paid? If the answer is no, or if the explanation requires a calculator, compensation office hours, or a manager-led walkthrough, the plan needs simplifying. Here’s how to start:

• Map your plan from end to end and identify any components that feel overly complex or require interpretation.
• Rewrite confusing mechanics in plain language, then test your revisions with a small group of sellers.
• Ask two reps and a frontline manager to explain the plan back to you in their own words; adjust where explanations diverge.

Identify Areas That Generate the Most Confusion

Your support channels hold the clearest clues about where reps get stuck. Every program has a few high-friction mechanics that generate most of the questions. It’s your job to surface and fix them.

Start by reviewing the last two to three quarters of compensation-related tickets or Slack threads. Then group inquiries by theme to identify repeat offenders. Prioritize simplification or additional documentation for those high-volume areas.

Clarifying just a handful of confusing mechanics can dramatically improve trust and reduce operational overhead.

Assess How Much Time Reps Spend Validating Their Earnings

Shadow accounting indicates mistrust, unclear statements, or misaligned expectations. It's draining time better spent on strategic initiatives. Run an anonymous survey to ask your sales reps if they are manually recalculating their compensation and how much time goes toward this task. Ask managers how much time they spend fielding compensation questions. This will give you a picture of how much time could be saved with clarity.

Evaluate Whether Incentives Reinforce Your Strategic Goals

Effective programs reinforce the behaviors that support long-term growth. To mitigate misaligned incentives, you should:

• Compare your incentive structure to your revenue targets, product priorities, and customer journey.
• Analyze performance data to identify where incentives may be pushing short-term wins instead of sustainable pipeline health.
• Identify any disconnects between the behaviors your plan rewards and the outcomes your business needs.

From there, adjust your mechanics so every rewarded action ladders up to a clear strategic objective. The ideal state is a plan where incentives guide reps toward the same priorities your leadership team is driving.

Ensure Transparency at Every Stage

Reps shouldn’t be surprised by payouts. When incentives mirror performance in real time, motivation increases, and shadow accounting decreases. Have a documented rundown of how the plan will impact their payouts and preemptively answer any frequent questions. Provide them with a self-service dashboard that gives them visibility into their status so they can stay on top of their performance without having to make scratchpad calculations.

Align Sales, Finance, RevOps, and Compensation Around Outcomes

Incentives are cross-functional by nature. When Sales, Finance, RevOps, and Compensation teams collaborate on design and share a common understanding of intended behaviors, plans perform better and require fewer mid-year adjustments because every team is reinforcing the same outcomes instead of working at cross-purposes.

Companies that approach 2026 planning with this level of clarity and rigor will see greater ROI from every incentive dollar spent, as more of the budget directly fuels the behaviors that drive predictable, sustainable revenue growth.

Incentives Are a Growth Lever When Executed Properly

Companies are betting on incentives as a key growth lever next year,but there's a gap between relying on incentives and making them impactful. At the end of the day, incentive programs only drive performance when they’re simple, trusted, transparent, and aligned with strategic priorities.

Organizations that fail to address the execution gap risk spending heavily while seeing minimal results. Meanwhile, companies that focus on clarity and behavioral alignment will pull ahead.

Incentives are a strategic engine. And in a year where every dollar needs to work harder, the companies that get this right will outperform the market.

For leaders preparing their 2026 plans, the message is clear: Incentives can drive growth, but only if they’re designed to actually shape behavior.

‍For more research-backed insights on compensation design, performance drivers, and revenue strategy, explore the CaptivateIQ Resource Hub.