In the highly competitive world of sales, variable compensation remains one of the key levers for motivating and retaining talent. Historically, commissions—one of the most widely used incentive structures—have been distributed linearly, based primarily on the revenue volume generated.
However, as sales teams become more diverse and company expectations grow, the limitations of this model are becoming increasingly evident. New hires struggle to establish themselves, high earners benefit from entrenched advantages, and mid-level performers—the so-called "middle tier"—often lack motivation in a system that does not sufficiently reward individual progress.
This is where the concept of "modulated commission" emerges: an approach designed to rebalance the playing field, encourage individual improvement, and restore a sense of fairness essential to sustaining sales motivation.
What is modulated commission?
Modulated commission differs from traditional models through a simple yet innovative principle: for the same sales results, an employee who has significantly improved their performance over a previous period is rewarded more than a colleague who, despite high sales volume, has shown no progress—or worse, has regressed. In other words, this system links variable compensation to two factors: contribution (the total revenue generated) and growth (the increase relative to a previous benchmark).
This approach fosters greater internal equity. A low-performing salesperson, despite lagging in total revenue, can receive a similar bonus to a seasoned salesperson in stagnation—if they demonstrate significant progress. Conversely, a top performer with a large client portfolio may see their commission reduced if they fail to maintain or grow their sales volume.
From a management perspective, this incentive mechanism is particularly compelling. Mid-level salespeople, who might otherwise lack motivation due to the unrealistic challenge of doubling their sales to significantly increase their earnings, are now encouraged to strive for incremental improvements. To maximize their commission, they must push themselves to perform better.
For high performers, this system introduces a challenge: maintaining commission levels requires continued growth, making stagnation financially punitive. Meanwhile, new hires—who often need months or years to build a substantial client portfolio—finally see their growth efforts recognized, even if their initial sales volume remains modest.
The limitations of traditional commission models
To understand the appeal of modulated commission, it’s important to examine the weaknesses of traditional linear commission structures.
A linear system, where every additional euro of revenue is rewarded equally, operates on an intuitive principle: the more you sell, the more you earn. While this approach is simple and transparent, it ultimately works against the company’s own interests.
First, linear commission structures fail to drive strategic growth. If the company aims for a 10% revenue increase, but salespeople are content with a much lower personal growth rate, there is little motivation to push beyond their comfort zone. Without additional incentives, there’s no reason for them to strive harder—so long as they maintain a certain sales level, they earn their commission, regardless of whether they exceed expectations.
Second, this model creates entrenched advantages for top salespeople. High performers—often long-standing employees with well-established client portfolios—enjoy a nearly guaranteed variable income that functions almost like a disguised fixed salary. While maintaining their revenue does require some effort (renewing contracts, preventing client churn), the pressure they face is significantly lower than that of a newcomer starting from scratch.
For new hires, the situation is far more discouraging. In their first years, even as they actively build their portfolios, their revenue remains modest. A linear commission system does not immediately translate these efforts into meaningful earnings. The implicit message is disheartening: "You’ll earn well… later, once you’ve accumulated enough clients." This distant and uncertain horizon fuels high turnover among junior salespeople, who grow frustrated waiting for fair compensation for their efforts.
Finally, for mid-level salespeople, the traditional system lacks dynamism. These employees are neither newcomers nor top performers, yet they face a steep challenge to significantly boost their earnings. Their efforts lead to only marginal improvements, discouraging them from striving for greater achievements.
Modulated commission: a tailored solution for account management sales models
To address these shortcomings, modulated commission proves particularly effective in account management-oriented sales environments. In these roles, the primary responsibility of a salesperson is to nurture and grow existing client relationships rather than constantly hunting for new leads. Success is measured by expanding customer engagement over time, driving upsells and cross-sells, fostering loyalty, and anticipating client needs.
In this context, modulated commission is a game-changer. It eliminates the problem of entrenched advantages among top performers while rewarding new hires for their steady progress. High earners must now justify their "top performer" status by demonstrating measurable growth, while newer employees see immediate financial recognition for their development efforts—even if their total revenue remains lower.
For mid-level salespeople, this system injects new energy. Instead of being stuck in an unchanging cycle, they can improve their earnings through consistent incremental progress. This provides a previously unavailable motivational boost that can significantly elevate overall team performance.
How does modulated commission work in practice?
The principle is straightforward, though implementing it effectively requires careful calibration of financial parameters to maintain budget control. The system evaluates:
- Total revenue generated during a specific period (monthly, quarterly, or annually, depending on the company’s structure).
- The growth rate relative to a previous period.
The commission is then based on two components:
- The absolute sales volume achieved during the evaluation period.
- The progression relative to past performance.
Greater growth results in higher bonuses, particularly for those starting from a lower baseline. Conversely, if a high-earning salesperson stagnates or declines, their commission is reduced, reflecting a lack of continued effort.
This shifts the focus from pure absolute results to a more nuanced evaluation—one that recognizes trajectory, not just the final destination.
A managerial tool to boost motivation across all levels
Beyond creating a fairer financial distribution, modulated commission is a powerful management tool. It provides sales managers with clearer performance signals:
- Top performers understand they can no longer rely on past successes. To maintain high earnings, they must actively grow their revenue, retain clients, and identify expansion opportunities.*
- New hires receive encouragement. Rather than waiting years for significant earnings, they see their efforts recognized from the outset. This early validation helps reduce turnover among young talent, who are often less patient with rigid, slow-growth compensation models.
- Mid-level performers regain agency. They are no longer trapped in stagnation. By making incremental improvements, they directly impact their earnings, fostering continuous personal and professional growth.
The psychological impact is significant: salespeople are rewarded for effort, which fosters a culture of ongoing improvement. Rather than competing solely against colleagues, each employee competes against their past performance—creating a positive feedback loop that elevates the entire team's results.
A favorable context for experimentation
The rise of modulated commission aligns with a broader technological and economic shift in compensation strategies.
- The digitalization of sales processes and access to detailed performance data make it easier than ever to implement sophisticated calculation models. CRM and sales tracking tools now offer granular insights into individual growth trajectories, making modulated commission practical and transparent.
- A shifting talent market favors this model. With increasing competition for skilled sales professionals, companies offering fair, growth-based compensation structures have a clear edge in attracting and retaining talent, particularly younger generations who expect equitable and transparent reward systems.
A transformative approach to sales compensation
Modulated commission is emerging as a serious and innovative alternative to traditional linear structures. By tying compensation to both absolute results and individual progress, it rebalances opportunities between new and experienced employees, encourages top performers to maintain their standards, and motivates mid-level employees to strive for continuous improvement.
In a world where sales challenges are becoming increasingly complex, this approach represents a fairer, more engaging, and ultimately more effective compensation model.
