Companies entering new markets often adapt their strategy, capabilities and sales coverage, while leaving incentive structures designed for their existing business unchanged.
Written by Edoardo Tiani
When a company grows beyond its established core, a predictable list of questions gets opened. How to segment the new market? Who covers it? Do the right capabilities exist? How to price without a reference positioning?
Incentives are often the last element to be redesigned
The incentive plan tends to come last, and sometimes not at all. The reason is simple: the plan does not appear broken. It pays out, the commercial team accepts it, finance department can model it, and only a few people raise it as an issue. Its fitness is judged against the business it was designed for, and by that standard, it usually performs well.
When the plan is revisited, the change is often modest. A small component gets attached to new business, large enough to signal intent and too small to compete with everything else in the plan.
Why collective plans work, until they do not
We saw this pattern in a diagnostic for a laboratory and diagnostic instruments manufacturer. Its core business served a small number of global accounts, where relationships ran deep and volumes were stable. At the same time, the company was entering newer end markets where it had a technical right to play but no installed customer base. Strategy, market analysis and coverage had been redesigned for those markets; the incentive plan had not.
Close to two thirds of variable compensation was tied to collective outcomes: overall profitability and a company-level target. Most of the remainder rewarded order intake and cash collection — outcomes that convert work already in motion — while only a limited additional component rewarded opening a genuinely new customer.
Exhibit 1: Variable Compensation by Component
Close to two thirds (60%) of variable pay is tied to collective outcomes, and no component rewards new customer acquisition
| Component | Category | % of variable compensation |
|---|---|---|
| Group profitability | Collective | 40% |
| Company business target | Collective | 20% |
| Order intake | Individual | 25% |
| Cash collection | Individual | 15% |
| New customer acquisition | — | 0% |
Collective: 60% | Individual: 40% — Source: Eendigo analysis, case data
The same design, two opposite effects
For the core business the design is defensible. When a handful of accounts drive most of the revenue, and serving them requires engineering, service and commercial teams to work across multi-year programs, rewarding collective profitability aligns the organization.
In a new segment the same design rewards little of the behavior that builds one. Prospecting a market without reference customers is slow and mostly unsuccessful. It generates no order intake for several quarters and no profit contribution for far longer.
If new business carries a small share of the payout, the rational choice is still to protect the rest.
Two design details compounded this:
- There was no minimum individual threshold, so collective performance could carry a payout regardless of individual contribution.
- Targets were not differentiated by segment, applying one expectation to a mature business and to one still establishing whether demand existed.
The damage is quiet. Nobody is underpaid, no dispute reaches HR, the plan works as designed. What does not happen is harder to see: conversations never started, accounts never opened.
So, the symptom surfaces elsewhere. Leadership sees few new opportunities in growth segments and reads it as a motivation or capability problem.
Why differentiated incentive plans are difficult to implement
- Redesigning the whole plan is usually wrong: the better framing is that the company now runs two businesses with different economics, but the existing plan does useful work in the core.
- Differentiate by commercial maturity, not only by role: a key account manager in an established segment and a seller opening a new market share a job title and little else.
- Separate protecting from building: retention and profitability belong to the core; opportunity creation and new accounts belong to growth.
- Pay for leading indicators in new segments: opportunities created and accounts opened beat profitability a nascent segment cannot produce for two years.
Differentiated plans get read as preferential treatment by the team carrying the core, usually also the team with the most revenue and political weight. The conversation lands better as adding a growth component than as rebalancing anyone’s existing plan.
Leading indicators depend on data most companies do not yet capture reliably. If opportunity creation carries weight in a payout, the CRM must be good enough to support it. Data foundations are a prerequisite, not a parallel track.
Exhibit 2: Core and growth businesses require different incentive logic
What an established core and a growth segment each require from an incentive structure
| Established core | Growth segment | |
|---|---|---|
| Primary objective | Protect and expand a concentrated base | Create a base that does not yet exist |
| Time to result | Months | Multiple years |
| Appropriate metrics | Profitability, share of wallet, retention | Opportunities created, new accounts opened |
| Metric type | Lagging | Leading |
| Weighting | Collective appropriate | Individual essential |
| Risk profile | Low variance | High variance |
Source: Eendigo analysis, case data
Results organizations can expect
Companies that restructure incentives alongside capability building typically see movement within four to six quarters:
- Share of variable compensation linked to individual commercial action rising from around one third to more than a half.
- Qualified opportunities created in growth segments increasing from a baseline close to zero.
- Faster identification of capability gaps, because a plan that pays for hunting quickly reveals who can do it.
- Improved forecast reliability, as pipeline activity becomes something the organization has reason to record accurately.
What leaders should watch
Would our plan pay meaningfully differently for someone who opened three accounts in a new segment than for someone who protected one existing account?
If a growth component exists, is it large enough to change how someone plans their week?
Are targets differentiated by the commercial maturity of the segment?
The plan is rarely wrong for the business it was built for. It is simply answering a question the company has moved past.
Get in touch
Email: office@eendigo-ops.com
Website: www.eendigo.com
LinkedIn: linkedin.com/company/eendigo
