FA-301d · Module 2

Comp Plan Scenario Analysis

3 min read

Every comp plan should be stress-tested against three scenarios before deployment: underperformance (what does it cost when the team misses by 20%?), plan attainment (what does it cost at expected distribution?), and overperformance (what does it cost when the team beats plan by 20%?). If the comp plan is affordable in all three scenarios and motivating in all three, it is a good plan. If it breaks the budget at overperformance or demotivates at underperformance, it needs redesign.

Comp Plan Stress Test — 20 AE Team:
──────────────────────────────────────────────────────
                Underperf.   On-Plan    Overperf.
──────────────────────────────────────────────────────
Avg Attainment:    72%         91%        112%
Total Revenue:   $10.4M      $13.2M     $16.1M
Total Comp:       $3.1M       $3.6M      $4.4M
Comp/Revenue:     29.8%       27.2%      27.3%
Gross Margin
 after Comp:      45.2%       52.8%      54.7%
──────────────────────────────────────────────────────

Key findings:
- Comp % stays in 27-30% range across all cases
- Accelerators at overperformance cost only $800K
  extra but generate $2.9M extra revenue
- Underperformance floor: $3.1M (base-heavy)
- Plan is affordable across all scenarios ✓

Do This

  • Stress test the plan at -20%, plan, and +20% before rolling it out
  • Check that the comp-to-revenue ratio stays within acceptable range (20-30%) across scenarios
  • Verify that accelerator costs are fully funded by the incremental revenue they produce

Avoid This

  • Model comp cost only at 100% attainment — that is the scenario least likely to occur exactly
  • Deploy a plan without modeling the overperformance cost — accelerator liability surprises are expensive
  • Assume underperformance costs are "just base salary" — there are management, tool, and overhead costs too