Every trading company we have worked with eventually asks a version of the same question: why does variable pay energise the sales floor and fall flat everywhere else? The honest answer is that most businesses design one variable pay plan for two structurally different jobs, and cannot understand why only half the organisation responds to it. Get variable pay for sales and operations wrong, and you either overpay for volume you did not need, or you underpay for the reliability your business cannot survive without.
The Two Jobs Trading Companies Keep Confusing
A trading business is really two businesses stitched together under one P&L. One block is commercial: identifying the right vendors and the right product specifications, choosing the channel, selecting and managing channel partners, and converting all of that into closed sales. This is a Founder or Business Leader’s most visible work, and it is where most trading companies build their incentive architecture first.
The second block is operational: supply chain management, warehousing, logistics, distribution, IT, HR, and credit collection. None of this shows up on a leaderboard. All of it determines whether the sales in the first block generates actually turn into cash, on time, without a dispute.
The mistake is not having variable pay in both blocks. The mistake is assuming the same plan, or even the same logic, transfers cleanly from one to the other. Actually, it doesn’t, and there is decades of compensation research explaining why.
Line of Sight: Why the Same Incentive Motivates One Team and Confuses the Other
Compensation professionals use a specific term for this: line of sight, an employee’s perceived ability to influence the metric their incentive is tied to (Compensation Force, 2006). A salesperson who closes a deal with a channel partner can trace a straight line from their own decision to the number on their payslip. An IT administrator, a warehouse supervisor, or a credit controller cannot draw that same line, because the outcome they are being asked to move — company profit, overall customer satisfaction, group-level cash flow — is the product of a dozen people’s work, most of which is outside their control.
This is not a motivation problem. It’s a design problem. When line of sight is short, as it is for most sales roles, a strong individual incentive sharpens focus and effort. When line of sight is long and shared, as it is for most operations roles, the same individual incentive either gets ignored because people don’t believe their actions move it, or it gets gamed against a narrower proxy metric that is within their control but was never the actual goal.
What the Research Actually Shows Variable Pay Moves
Here is where I would push back on how most trading companies think about this. The assumption is that variable pay improves performance, full stop. The research says something more specific and more useful.
The most cited analysis on this question, covering 39 studies and 47 separate incentive-performance relationships, found that financial incentives had a meaningful, positive relationship with the quantity of performance, but no significant relationship with the quality of performance (Jenkins, Mitra, Gupta & Shaw, Journal of Applied Psychology, 1998). In plain language: money moves people to do more of something. It does not reliably move people to do something better.
That single finding, in my judgement, is the whole argument for treating sales and operations differently. Sales is fundamentally a quantity function — more qualified vendors identified, more channel partners activated, more deals closed. Operations is fundamentally a quality and reliability function — fewer stockouts, fewer collection disputes, fewer compliance errors, fewer IT outages. Applying a quantity-shaped incentive to a quality-shaped job does not just fail to help. It can actively work against the outcome you actually need.
Where It Breaks: The Channel Stuffing Trap
We have seen this play out in a specific and expensive way in trading businesses, and it is worth naming directly: channel stuffing, also called trade loading, where a sales team pushes more product into the distribution channel than the channel can genuinely absorb, in order to hit a volume target (Wikipedia, “Channel Stuffing”). It is not always fraud. Often it is simply a rational response to a bonus plan that rewards sell-in and says nothing about sell-through or collectability. The starkest illustration is Bristol-Myers Squibb, which paid the U.S. Securities and Exchange Commission $150 million to settle charges after inflating revenue by roughly $1.5 billion through excessive distributor inventory loading (LegalClarity, 2026). Few mid-market trading companies will ever see that scale of consequence. Most will see a smaller version of it every quarter: sales books the number, and operations inherits the aged receivable, the returned stock, and the credit dispute six weeks later.
One design fix that experienced finance leaders use, and that deserves more attention than it gets: paying a portion of sales incentive against collected cash rather than booked revenue alone, which converts the sales team into a partner in the collection process rather than the operations team’s adversary (Proformative practitioner discussion, 2014). It is a small structural change with an outsized effect on how the two blocks treat each other.
If you are curious whether your current plan is measuring the constraint or just the symptom? Start with a free consultation at 100dayrenew.com.
What Works for the Sales Block
For the commercial side of a trading business, the evidence points toward three design principles. First, pay mix should be genuinely at risk. Compensation benchmarking work by The Alexander Group, drawing on more than 300 sales compensation leaders across distribution, manufacturing and other sectors, shows pay mix varying by how directly a role influences the buying decision — a direct sales representative might sit at a 60/40 fixed-to-variable split, while an overlay technical specialist sits closer to 80/20 (The Alexander Group, 2024 Sales Compensation Trends Survey). Compensation guides more broadly place meaningful revenue-generating roles in the 40 to 60 percent variable range of total compensation (SalaryCube, 2025). The exact ratio matters less than the principle: if the split is too conservative, you have removed the incentive’s teeth.
Second, set targets you can defend. WorldatWork’s late-2024 sales compensation data put average quota attainment at only around 43 percent across surveyed teams (WorldatWork data, as reported by Optymyze, 2026) — a signal that many companies set targets the median performer cannot realistically hit, which breaks the motivational loop before it starts.
Third, watch for gaming. Harvard Business School research documents specific, repeatable tactics salespeople use to protect their commission when a plan is poorly built — sandbagging pipeline, inflating discounts, and in some cases falsifying customer data (Gardner & Wong, discussed in Harvard Business Review’s “When Sales Incentives Backfire,” 2025). Related HBR research on “free sales” — bonuses paid on revenue that would have closed anyway — shows how an unexamined plan quietly pays for nothing (Zoltners & Sinha, Harvard Business Review, 2017). None of this is an argument against sales incentives. It’s an argument for auditing them the way you would audit any other significant cost line, because U.S. companies alone spend more than $900 billion annually on their sales forces yet deliver only 50 to 60 percent of the financial performance their strategies promise (Cespedes & Wallace, Harvard Business Review, 2017).
What Works for the Operations Block
Operations needs a different architecture, not a smaller version of the sales one. Compensation consultancy Primeum’s guidance on support-function incentive design offers a useful, defensible range: below roughly 8 to 10 percent of base salary, variable pay stops changing behaviour altogether, and above roughly 30 percent, it stops functioning as a stable motivator and starts destabilising a role that was never built to absorb that much risk (Primeum, “Incentive Compensation: Which Indicators to Use for the Support Functions?”). That is a genuinely different design brief from sales, and Business Leaders who copy the sales percentage onto operations are usually either wildly overpaying for a role with weak line of sight, or triggering the exact gaming behaviour the earlier research warns about.
Metrics need to shift too. Credit collection has its own well-established indicators — Days Sales Outstanding, the Collection Effectiveness Index, receivables ageing — that measure what the function actually controls, rather than a revenue number it can only partially influence. Logistics and supply chain, similarly, are well suited to KPI-based incentives built around cost, delivery reliability and service quality, precisely because those are outcomes a warehousing or distribution team can see themselves moving (Primeum). Team-based or department-based payouts, rather than individual commission-style plans, tend to fit operations better for the same reason: the work is genuinely collaborative, and rewarding it individually manufactures competition where cooperation is what the job requires.
One Philosophy, Two Architectures
The insight I keep returning to with clients is this: Variable Pay is not a single lever you install once. It is a diagnostic question you ask separately for every block of the business — where does this role actually have Line of Sight, and is the behaviour I am rewarding a quantity behaviour or a quality behaviour? Get that diagnosis wrong, and no amount of plan redesign fixes it. Get it right, and you stop fighting your own incentive structure to get the operational discipline that protects the revenue your sales team worked to win. That’s the difference between a business chasing growth and one that has genuinely found its Full Potential — where the commercial engine and the operational backbone are both pulling in the same direction, deliberately, not by accident.
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References
- Jenkins, G.D., Mitra, A., Gupta, N., & Shaw, J.D. (1998). “Are Financial Incentives Related to Performance? A Meta-Analytic Review of Empirical Research.” Journal of Applied Psychology, 83(5).
- Cespedes, F.V., & Wallace, C. (2017). “Executives and Salespeople Are Misaligned — and the Effects Are Costly.” Harvard Business Review, January 26, 2017.
- Gardner, T., & Wong, C. “When Sales Incentives Backfire.” Harvard Business Review IdeaCast, March 2025 (discussing “How Salespeople Game the System”).
- Zoltners, A.A., & Sinha, P. (2017). “Sales Bonuses Are Supposed to Motivate, So Don’t Waste Them on Easy Targets.” Harvard Business Review, September 14, 2017.
- WorldatWork sales compensation data (late 2024), as reported in Optymyze, “Sales Compensation Benchmarks 2026” (2026).
- The Alexander Group (2024). “2024 Sales Compensation Trends Survey.”
- SalaryCube (2025). “What Is Variable Pay? A Practical Guide for HR and Compensation Teams.”
- Primeum. “Incentive Compensation: Which Indicators to Use for the Support Functions?”
- Wikipedia contributors. “Channel Stuffing.” Wikipedia, The Free Encyclopedia.
- LegalClarity (2026). “Channel Stuffing Definition: Fraud, Risks, and Penalties.”
- Proformative practitioner discussion thread. “Accounts Receivable Collections Incentives” (CFO/Board Advisor comment, 2014).
- Compensation Force (Ann Bares), “Line of Sight and Incentive Plan Design” (2006).