2–4
Typical number of earning groups per plan
80/20
Most common weight split (NNA/Renewal)
20%+
Minimum weight for a group to drive behavior
Earning Group Payout — 80/20 NNA/Renewal Split
Plan Language
Weighted Pool — Two Measures
Participant's target incentive of $[AMOUNT] shall be allocated across two earning groups: (a) Net New ARR at [X]% weight ($[X_AMOUNT]) and (b) Renewal ARR at [Y]% weight ($[Y_AMOUNT]). Each earning group has an independent quota target. Incentive for each group is calculated as: (Group Weight x Target Incentive x Payout Factor), where Payout Factor is determined by the attainment schedule for that group. Over-performance in one group does not offset under-performance in another.
Independent Components — Three Measures
Participant shall earn incentive compensation from three independent components: (a) Practice Gross Profit at [X]% of target ($[AMOUNT]); (b) Milestone Pool at [Y]% of target ($[AMOUNT]); (c) AI Revenue Share at [Z]% of target ($[AMOUNT]). Each component is calculated independently against its own target. Components are uncapped individually. Total incentive is the sum of all component payouts. There is no cross-component offsetting or subsidization.
Product Portfolio Split — Four Measures
Participant's variable compensation pool of $[AMOUNT] is divided across four product categories: High Power ([W]%), Low Power ([X]%), Specialty ([Y]%), and Service ([Z]%). Weights sum to 100%. Each product category has its own revenue target derived from territory-level demand planning. Accelerators apply uniformly across all product categories (appliesTo: all measures). Product mix rebalancing may occur quarterly per the Sales Operations review cadence.
Formulas & Calculations
Weighted Pool Calculation
// Two-measure weighted pool (e.g., 80/20 NNA/RNW) TARGET_INCENTIVE = $130,000 NNA_WEIGHT = 0.80 // $104,000 at-target RNW_WEIGHT = 0.20 // $26,000 at-target NNA_PAYOUT = TARGET_INCENTIVE * NNA_WEIGHT * NNA_PAYOUT_FACTOR RNW_PAYOUT = TARGET_INCENTIVE * RNW_WEIGHT * RNW_PAYOUT_FACTOR TOTAL_INCENTIVE = NNA_PAYOUT + RNW_PAYOUT // Example: 120% NNA attainment, 85% RNW attainment // NNA: $130K * 0.80 * 1.30 = $135,200 // RNW: $130K * 0.20 * 0.85 = $22,100 // Total: $157,300 (121% of target)
Weight Entropy Check
// Diagnostic: are weights driving differentiated behavior? WEIGHTS = [W1, W2, W3, ...] // must sum to 1.0 N = COUNT(WEIGHTS) // Maximum entropy (equal weights) = 1/N each // Low-weight threshold: any weight < 0.15 = dead measure // Dominance threshold: any weight > 0.85 = why bother with multi-measure? FOR EACH weight IN WEIGHTS: IF weight < 0.15: FLAG "Weight too low — reps will ignore this measure" IF weight > 0.85: FLAG "Dominant weight — consider single-measure plan"
Scenarios
Well-Designed Earning Groups
SaaS company sets 80/20 NNA/Renewal split for Enterprise AEs. The 80% weight on NNA sends a clear signal: hunt. But the 20% renewal weight prevents reps from churning existing accounts for short-term new-logo credit. Each group has its own quota, own attainment tracking, and own payout factor. Reps can see exactly how much each deal contributes to which group. Over-performance on NNA doesn't mask under-performance on renewals — both are visible on the statement.
Poorly-Designed Earning Groups
Company splits variable comp into 5 measures at 40/20/15/15/10. The 10% measure (customer satisfaction score) is effectively ignored — reps calculate it pays $13K at target and deprioritize it entirely. The 15% measures conflict: one rewards deal volume while the other rewards deal size. Reps optimize for whichever is easier this quarter. The 40% dominant measure captures all attention, making the 5-measure plan function like a 1-measure plan with four decorations.
Comparison
Implementation Checklist
AI Prompt Template
Copy & paste into your AI assistant
You are a sales compensation analyst. I need to design the earning group structure for a [ROLE TYPE] role. Context: - Total target incentive: $[AMOUNT] - Business priorities: [LIST — e.g., 70% weight on new business, 30% on retention] - Number of measures: [2-4] - Measure types: [LIST — e.g., Net New ARR, Renewal ARR, Services Revenue] Please: 1. Recommend weight allocation with rationale for each group 2. Determine whether to use weighted-pool or independent components 3. Model payouts at 5 attainment scenarios across the groups 4. Flag any cross-measure conflicts or dead-measure risks 5. Define per-group accelerator scope (per-measure vs all-measure) 6. Draft the earning group clause for the plan document