Fixing The Incentive Is Almost Always Easier Than Fixing The Behavior Directly
If a team optimizes for volume at the expense of margin, that’s usually a comp design problem, not a people problem. Once you see it that way, you stop blaming behavior that’s actually rational given the incentive and start looking at the comp structure as the actual lever to pull.
Discount To Hit The Number, Every Time
A sales team comped purely on revenue has no reason to protect margin. Deals get closed with unnecessary discounts, terms get given away that cost more than the deal is worth, and nobody has visibility into which deals were actually profitable. If margin isn’t in the comp plan, it isn’t in the decision either.
Buy Generously, No Accountability
A merchandising team comped on units bought has no reason to be conservative on sell through risk. That creates buys sized larger than sell through data supports, with no consequence tied to markdown or excess inventory outcomes. Buying volume without margin accountability is a bet the business pays for, not the buyer.
No New Headcount, No New Systems
This is one of the highest leverage, lowest cost changes available to almost any brand. It requires a clear definition of margin contribution by role, comp plan language rewritten to include that metric, and a simple dashboard so the team can see their own margin number in real time. This is a policy change, not a reorg.
For Anyone Touching Pricing Or The Buy
The right metric accounts for the real cost of a decision, not just its top line size. Include margin contribution net of discounts actually given, return and markdown exposure attributable to the decision, and a weighting that balances volume and margin instead of just one or the other. What gets measured and paid on is what actually gets protected.
In Dollars, Not Just A Memo
Telling a team margin matters is different from making it matter in their paycheck. Show the dollar impact of a margin eroding decision on their comp and remove any comp path that rewards revenue with no margin floor. A trade off that costs nothing in comp will keep happening, no matter what the memo says.
Your team isn’t doing the wrong thing.
They’re doing exactly what the comp plan pays them to do.
If that’s not the behavior you want, the fastest and cheapest fix available is usually the incentive structure itself, not a new hire, a new system, or a harder conversation about effort.
Swipe through for How to Redesign Your Teams Comp Plan Around Margin. 👇
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