In uncertain economic climates, businesses are often forced to revisit compensation structures. One critical area is On-Target Earnings (OTE) - the total expected pay a sales rep can earn when hitting performance goals. While economic changes may pressure companies to cut expenses, it’s essential that cost management efforts don’t come at the expense of maintaining motivation. This article explores practical strategies to adapt on-target earnings structures in a way that protects both the company’s bottom line and employee engagement.
On-target earnings are designed to reward performance. However, in periods of inflation, recession, or market volatility, fixed compensation models may become either unsustainable or demotivating.
Key pressures during economic changes:
Lower or unpredictable revenue
Increased cost sensitivity
Shifts in buyer behavior
Changing sales cycles or quotas
Adapting OTE is not about reducing compensation - it's about balancing cost management with strategic motivation to retain top talent. Companies should view OTE adjustments as an opportunity to realign incentives with shifting business priorities, ensuring that sales teams remain engaged and focused on the right outcomes, even as cost pressures mount.
Protecting the earning potential of high performers is crucial for minimizing turnover and preserving the institutional knowledge and client relationships that drive future growth. By recalibrating OTE structures thoughtfully, organizations demonstrate their commitment to rewarding value-creating behavior and maintaining a competitive advantage, all while making prudent financial decisions in challenging times.
When demand drops, high quotas can become demoralizing. Sales professionals may feel they have little ability to achieve their targets, leading to disengagement and a decline in overall performance. Unrealistic quotas erode trust in leadership and can even push top performers to exit for environments where their efforts are more likely to be rewarded. Adjusting quota expectations to reflect new market conditions helps maintain motivation while keeping OTE achievable and fair.
By analyzing shifting industry benchmarks, sales cycle lengths, and changes in buyer behavior, organizations can recalibrate quotas so that they represent a challenging but attainable goal. This not only keeps compensation plans credible but also signals to employees that leadership recognizes external constraints and is committed to supporting their success, even in volatile markets. Thoughtful quota adjustment acts as a retention tool, preserves morale, and encourages sales teams to remain engaged and productive during uncertain times.
In times of economic uncertainty, consider guaranteed minimums or recoverable draws to provide income stability without locking in long-term fixed costs. By offering a temporary financial safety net, companies help employees weather unpredictable sales periods, while maintaining flexibility to adjust compensation upward again when conditions improve.
Guaranteed minimums assure sales reps of a baseline level of earnings, even if commissionable results lag due to external factors. Recoverable draws, on the other hand, function like an advance that is later offset against future commissions - giving employees immediate relief but incentivizing them to catch up as markets recover.
This strategy helps retain key talent, maintains morale, and gives your organization the agility needed to navigate shifting market or industry landscapes, all without committing to permanent increases in payroll overhead.
Temporarily increasing base pay while reducing variable components can ease pressure on employees, especially when external factors impact performance beyond their control. This strategy provides financial stability during uncertain periods and reduces anxiety associated with fluctuating commissions. For many sales professionals, knowing that a larger share of their earnings is guaranteed, even temporarily, demonstrates organizational commitment to their well-being, boosting morale and loyalty.
At the same time, adjusting the pay mix allows the company to respond flexibly as market conditions evolve, helping to retain top performers and prevent turnover. As economic conditions stabilize, organizations can revisit and rebalance the variable-to-fixed ratio, reintroducing higher incentives to align with renewed growth targets and market opportunities. This adaptive approach ensures that the compensation structure remains competitive, supportive, and aligned with both business needs and employee expectations.
Refocus variable compensation on retention, customer expansion, or upselling rather than pure acquisition. By channeling incentives toward activities that deepen existing client relationships and increase lifetime value, organizations can create greater revenue stability and maximize the impact of each deal. This approach also leverages trusted customer relationships, making it easier to generate additional business when new client acquisition proves more challenging in a down market.
Placing a premium on renewals, cross-selling, and value-added services helps counterbalance dips in fresh pipeline and keeps reps engaged, even when new business slows. This keeps reps engaged and aligns with the company's short-term survival strategy, ensuring that your sales team is rewarded for efforts that contribute directly to resilience and growth during uncertain times, while still supporting core business objectives and laying the foundation for stronger long-term performance as the market rebounds.
| Component | Traditional OTE Plan | Flexible OTE Plan |
|---|---|---|
| Quota | Unchanged - high targets despite market slowdown | Adjusted - realistic quotas based on reduced demand |
| Base Pay | Fixed - no change, even if sales are harder to close | Rebalanced - slight increase to base to stabilize income |
| Variable Mix | Heavy on variable (e.g., 50/50) - harder to earn full OTE | Shifted to 60/40 or 70/30 to ease pressure in tough conditions |
| Motivation | Low - reps feel OTE is unachievable | Higher - attainable targets restore confidence |
| Retention Risk | Higher - top reps may churn due to lost earnings | Lower - plan signals support and builds loyalty |
| Adaptability | Rigid - one-size-fits-all model | Dynamic - responsive to team performance and market signals |
Any adjustments to on target earnings must be clearly explained. Transparency builds trust, especially when changes may impact take-home pay.
Tips for effective communication:
Explain the “why” behind changes (economic shifts, business sustainability)
Show how new OTE models still reward effort and performance
Provide real examples and new earning scenarios
Allow feedback and questions to create buy-in
Just like economic conditions change, so should your OTE plans. Create a review cadence - quarterly or biannually - to evaluate whether the structure remains aligned with business goals and market trends.
Track:
Quota attainment rates
Rep satisfaction and turnover
Cost-to-revenue ratios
Customer retention and satisfaction metrics
Manual spreadsheets won’t cut it during fast-moving changes. Use compensation management software like Bentega to simulate new OTE scenarios, track performance, and maintain compliance across the board.
Adapting on-target earnings during economic changes doesn’t mean sacrificing sales performance or employee morale. With thoughtful strategies, transparent communication, and flexible tools, companies can protect both their workforce and their financial health.
Need to update your OTE structure to reflect today’s economic changes? Bentega helps you manage on-target earnings with agility and precision. From quota setting to incentive modeling, our platform supports you in maintaining motivation and controlling costs. Explore compensation solutions →