• Incentive-based compensation can boost productivity and alignment by tying pay directly to results that matter for the business.
• The key is keeping incentives simple, measurable, and margin-protected, then testing and adjusting until they drive the right behaviors in a way that also protects the business.

If you run a small business, you’ve probably wrestled with the question of how to pay your team in a way that motivates them without wrecking your margins. Oftentimes, owners overpay without guardrails to ensure they get the value they’re paying for.

You may have heard of incentive-based compensation — it can be a powerful growth lever, but it can feel overwhelming to design and roll out. A good plan rewards the right behaviors, protects profitability and keeps everyone aligned on your company’s bigger goals. And the data backs this up: Studies show that incentive comp can increase team productivity by up to 44%. Here’s how to structure one that actually works.

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