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Performance Metrics for Incentive Compensation: What to Measure

Incentive compensation only works if it’s tied to the right outcomes. That’s where performance metrics come in.

Whether you’re launching a new incentive pay program or refining an existing one, choosing the right KPIs (key performance indicators) is crucial. These metrics are the foundation of incentivized compensation - and the key to aligning employee effort with company goals.

In this article, we’ll walk through:

  • What performance metrics are

  • Why they matter in incentive comp

  • Examples of key performance metrics

  • How to choose the right ones for your businessLagging vs. Leading KPIs

What Are Performance Metrics?

Performance metrics are quantifiable indicators used to measure progress toward specific business objectives. In the context of incentive compensation, they serve as the basis for calculating bonuses, commissions, or other rewards.

KPI Key Performance = the measurable outcome of work that’s linked to business success.

If you don’t measure what matters, your compensation and incentives may drive the wrong behaviors - or none at all.

Why Metrics Matter in Incentive Comp

The goal of any incentive pay structure is to motivate the right behaviors. Poorly chosen metrics can lead to:

  • Short-term thinking

  • Misaligned priorities

  • Disengaged employees

  • Wasted compensation budget

Strong key KPIs ensure:

  • Transparency and fairness

  • Line-of-sight between actions and rewards

  • Goal alignment between leadership and frontline staff

✅ Bentega’s platform helps you link comp directly to performance KPIs - Book a meeting with us to see how it works

Performance Metrics Examples by Department

Let’s look at performance metrics examples across key business functions. These are commonly used in incentive comp plans.

Sales

Metric Description
Revenue Attainment Total revenue vs. quota
Win Rate % of deals closed vs. deals pursued
Sales Cycle Length Average days to close a deal
Upsell/Cross-sell Revenue Add-on sales to existing customers
New Customer Acquisition Number of new customers per rep

These performance metrics are typically used in sales commissions and sales incentive plans.

Performance metrics for sales incentives

Customer Success

Metric Description
Net Retention Rate Revenue retained after churn/upsell
Churn Rate % of customers lost
Customer Satisfaction (CSAT) Survey-based satisfaction scores
NPS (Net Promoter Score) Customer loyalty score
Onboarding Time Avg. time to get customer live

These performance metrics are perfect for customer success incentive pay plans.

Marketing

Metric Description
MQL to SQL Conversion Rate Quality of leads passed to sales
Campaign ROI Return on ad or event spend
Lead Volume Total number of new leads generated
Website Conversions Visitors converting to leads

These performance metrics aligns incentives with lead quality and pipeline growth.

Product & Engineering

Metric Description
Feature Delivery Timeliness Projects shipped on time
Bug Fix Rate Speed and volume of bug resolution
Technical Debt Reduction Quality and codebase improvement

These performance metrics can support team-based incentive pay or spot bonuses.

Key Performance Measures Examples to Consider

Here are key performance measures examples used across industries:

KPI Category Common KPIs
Financial Revenue, profit margin, cost savings
Customer Retention, satisfaction, lifetime value
Operational Efficiency, error rate, time to delivery
Employee Productivity, absenteeism, engagement score
Growth Market share, product adoption, expansion

Need help choosing the right ones?

Business Performance Metrics download free guide (1)

How to Select the Right KPIs for Your Incentive Plan

When building an incentive pay plan, your metrics should be:

  • Measurable: Data must be objective and accessible

  • Relevant: Linked to business goals and employee influence

  • Actionable: Employees can directly impact outcomes

  • Balanced: Combine quality, quantity, and teamwork if needed

Pro tip: Don’t overload your plan - stick to 2–4 key KPIs for clarity and focus.

Comparison Table: Lagging vs. Leading KPIs

Aspect Leading KPIs Lagging KPIs
Definition Predictive metrics that signal future performance Outcome-based metrics that reflect past performance
Time Orientation Forward-looking Backward-looking
Example Use in Comp Used to proactively reward behavior that drives results Used to reward results already achieved
Control High — employees can typically influence these directly Lower — employees have less direct control over final outcomes
Examples - Sales calls made
- Pipeline value
- Lead conversion rate
- Customer onboarding time		 - Revenue booked
- Quota attainment
- Retention rate
- Churn rate
Best For Driving desired behavior and early-stage effort Measuring final success and impact
Risk May not always result in final outcomes May cause delayed feedback and motivation
Compensation Fit Ideal for frequent, activity-based bonuses or SPIFFs Ideal for quarterly/annual performance bonuses and commissions

Bonus: Downloadable KPI Guides

Looking for inspiration?
Download our free “Guide to Business Performance Metrics” with formulas and examples to get started quickly. Get the Ultimate Guide to Business Performance Metrics for Free →

Final Thoughts: Build Incentive Comp That Works

Performance metrics are the backbone of any effective incentive compensation strategy. Whether you’re optimizing sales incentive plans or creating a new bonus structure, the right KPIs make all the difference.

Remember:

  • Metrics drive behavior

  • Simplicity beats complexity

  • Align rewards with outcomes

Need help designing an incentive structure that actually drives performance?
👋 Chat with the experts at Bentega - Book your free session →

Explore more:

Bentega helps companies design data-driven compensation and incentives using performance metrics that drive results. Explore solutions at Bentega.io.

Performance metrics for Incentives: What do you track?