In brief
Structuring the variable compensation of a Managing Director is not an arithmetic exercise. It is an incentive design exercise. Variable compensation determines what the Sales Director looks at every morning when opening their dashboard.
- The base / variable ratio typical for a Sales Director in B2B Belgium ranges between 70/30 and 60/40. Beyond 50/50, the function becomes destabilized. Below 80/20, the motivational effect is removed.
- Three indicators maximum in the plan. Beyond that, the plan becomes unreadable and loses its incentive power.
- The classic mix that works in SMEs and mid-caps: 50-60% of the variable on the team’s revenue, 20-30% on margin, 10-20% on an annual strategic indicator (new accounts, new product, geographical penetration).
- The trigger threshold must be set between 70% and 85% of the target. Below 70%, the variable becomes an entitlement. Above 85%, it becomes unattainable and demotivating.
- The potential cap is a subject of ongoing tension. The best plans have none, or have a very high cap (200 to 250% of target). Capping too low means explaining to the Sales Director that beyond a certain performance level, they work for free.
Why this topic is trickier than it appears
The variable compensation of a Sales Director does not serve the same role as that of an individual salesperson. A salesperson is compensated on what they sell. A Sales Director is compensated on what they make others sell. The nuance is radical: you are no longer paying for a transaction, you are paying for a leverage effect on a team.
This difference in nature explains why importing a salesperson’s variable compensation plan to the Sales Director function almost always produces perverse effects: if the Sales Director is commissioned like a salesperson, they will sell. While they are selling, they are not managing. And it is precisely management that was at the heart of the recruitment.
Structuring their variable compensation plan means answering a strategic question before it becomes a financial question: what do we want the Sales Director to prioritize?
The base / variable ratio: where to set the cursor
In the Belgian market, for the Sales Director function in B2B, three main configurations coexist.
Conservative configuration: 80/20
The base represents 80% of the target package, the variable 20%. This is the most protective configuration for the company and the most reassuring for the candidate. It suits maintenance and optimization missions well for an already established commercial system, where risk-taking is limited and where stability is expected more than transformation.
Drawback: with a variable at 20% of the package, the incentive effect is marginal. If the Sales Director exceeds their target by 30%, they earn 6% more over the year. This is not what keeps commercial energy at its peak.
Balanced configuration: 70/30
The base represents 70% of the package, the variable 30%. This is the most common configuration in Belgium for Sales Directors in traditional B2B: industry, business services, professional distribution. It balances security and incentive. The variable at 30% allows real amplitude between a poor year (variable close to zero) and a good year (variable at 125-150% of target).
Aggressive configuration: 60/40 or 50/50
The base drops to 60%, or even 50%, the variable rises to 40-50%. This configuration is typical of tech, SaaS, and hyper-growth scale-ups. It corresponds to a “hunter” sales director profile who accepts short-term performance pressure.
This configuration does not mechanically transpose to traditional B2B industrial SMEs. Going there risks attracting a profile that will not survive a long sales cycle or a slow quarter. Many aggressive plans built in SMEs end up renegotiated downward after 18 months.
| Ratio | Suitable context | Type of profile attracted |
|---|---|---|
| 80/20 | Mature industry, long cycle, stable market | Structuring profile, manager, low volatility |
| 70/30 | Traditional B2B, SME / mid-cap, traditional sector | Balanced, experienced, clear motivation |
| 60/40 | Scale-up, growing sector, transformation | Hunter, ambitious, offensive profile |
| 50/50 | Tech, SaaS, highly competitive market | Pure sales profile, high risk tolerance |
The indicators: three maximum, not one more
The temptation, when building a variable compensation plan, is to include everything: revenue, margin, new clients, client satisfaction, retention rate, CRM quality, reporting punctuality, etc. This temptation kills the plan. A Sales Director looking at 7 indicators optimizes none.
The empirical rule that stands the test of time: three indicators maximum, with clear weighting between them. The simplest approach is to start with a three-block distribution.
Block 1: main commercial performance (50-60% of variable)
This is the indicator that captures the core of the job. Depending on the nature of the company, this could be:
- The team’s revenue, generally signed during the fiscal year. The most universal, most readable indicator.
- Recurring revenue (ARR, MRR) for subscription models.
- Order volume in professional distribution.
This indicator typically represents half to 60% of the total variable. It aligns with annual budgets and is measured monthly.
Block 2: performance quality (20-30% of variable)
This is the indicator that prevents block 1 from drifting. The most common is gross margin, which forces the Sales Director not to sign at any price. Variants: average profitability rate, contribution margin, average selling price per segment.
Without this quality indicator, after 18 months one almost systematically observes a pricing drift: salespeople sign with discounts to reach their quota, the Sales Director covers them to reach their revenue, and profitability erodes. Block 2 is the safety belt of block 1.
Block 3: the strategic indicator (10-20% of variable)
This is the indicator that changes each year according to company priorities. A few concrete examples:
- Year when the company wants to conquer a new geographical segment: “X new clients in zone Y”.
- Year of new product launch: “X% of revenue on the new range”.
- Year of transition to a subscription model: “X% of revenue as recurring”.
- Year of team structuring: “X salespeople recruited and qualified, turnover rate below Y%”.
This block 3 is what transforms a generic plan into a plan aligned with the year’s strategy. It is also the one that is systematically revised each year during review.
Our principle of transparency is embedded in our values: saying what needs to be said, even when it’s uncomfortable. Concretely, this means we will tell you if your salary range is aligned or not with the market. We will be transparent if the candidate you absolutely want is a “red flag” on a critical point.
The tiers: threshold, target, accelerator, cap
A well-constructed variable compensation plan generally includes four explicit tiers.
The trigger threshold
Below this threshold, no variable is paid. The golden rule: set the threshold between 70% and 85% of the target. If the threshold is at 50%, the variable becomes an entitlement and loses its incentive power. If the threshold is at 95%, an average commercial season is enough to destroy motivation for the rest of the year.
The target (100%)
When the target is reached, the target variable is paid in full. For a Sales Director with a total package of 130,000 € and a 70/30 ratio, this corresponds to 91,000 € in base and 39,000 € in variable.
The accelerator (beyond 100%)
This is the lever that truly motivates ambitious profiles. Beyond the target, each percentage of overperformance triggers additional variable at an increased rate. Classic example: for each percent beyond 100%, the variable increases not by 1% but by 1.5%. At 130% achievement, the variable therefore reaches 145% of target, or in our example approximately 56,500 €.
The accelerator is a widely used convention because it fuels the motivational effect without costing the company: the additional expense is mechanically funded by the surplus revenue generated.
The cap: to be handled with extreme caution
The practice of capping is highly debated. Capping and the Sales Director, with an analytical framework: what did we reward that we did not want to reward? What did we neglect that should have been incentivized? What behaviors do we want to see next year?
Building the right variable compensation plan is half the success of recruiting a Sales Director. The other half depends on the profile selected, the quality of onboarding, and the clarity of assigned missions. On these two topics, see our analyses on the priority missions of a Sales Director in SMEs and on the actual budget to plan for an experienced Sales Director in Belgium.
