How Compensation Can Turn Your Team Into Business Owners
The right compensation strategy can align your entire startup, driving growth, accountability, and a performance-focused culture.
Build a Team That Thinks Like Owners—with the Right Compensation
Six months ago, I tied our VP of Engineering’s bonus to our company’s ARR (Annual Recurring Revenue) target. At first, he thought I was out of my mind. Half a year later, he thanked me. Why? Because shifting from owning a function to owning an outcome changed everything.
Startups today face growing pressure to hit revenue targets with lean teams. Yet, most compensation plans don’t reflect this. Sales teams often chase commissions, while the rest of the company operates on fixed salaries—disconnected from performance. That’s a lost opportunity.
Done right, compensation can align everyone around growth and build a culture where every team member thinks and acts like an owner. Here’s how to make it work—without damaging morale.
1. Focus on One Clear Metric
Startups are fast-moving and often chaotic. That’s why compensation must be tied to one central metric—usually revenue-related, like ARR.
At our company, the entire team focuses on Net New ARR. It’s not just a finance metric; it’s a shared goal. From engineering to customer support, every team contributes to driving that number. It encourages cross-functional collaboration and a broader understanding of success.
Tip: Don’t overthink it. Choose one metric that reflects your company’s lifeblood and make it the focus of your compensation model.
2. Make Compensation Meaningful
A small bonus won’t shift behavior. If you want real impact, the reward must be big enough to matter.
We set compensation bonuses at around 20% of salary. This level of incentive grabs attention and drives people to act. It motivates teams to focus on outcomes—not just tasks.
The goal isn’t to reward activity. It’s to reward results.
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3. Reward Big Wins with Bigger Bonuses
One of the strongest cultural tools you have is sharing upside. When teams see direct financial benefits from overperformance, it builds momentum.
If a team beats targets, their bonus increases—no caps. Keep the structure simple and transparent, so everyone knows how their work drives earnings.
The message is clear: when the business wins, everyone wins.
4. Let Missed Goals Have Real Consequences
Accountability matters. If employees still earn bonuses after missing company goals, the compensation system loses meaning.
We don’t blame individuals when things go wrong. But missed targets trigger honest conversations: What failed? What can we improve? What needs to change next quarter?
Without real consequences, you risk signaling that performance doesn’t matter.
Why This Compensation Model Works
This isn’t just about bonuses. It’s about building a company where every person takes ownership of results. When compensation is tied to outcomes, teams stop focusing on individual tasks and start thinking like business leaders.
Some founders worry this approach only works for sales. The truth is, avoiding performance-based compensation leads to disconnected teams and stagnant cultures.
If you want to attract driven people who care about value—not just paychecks—align compensation with results. Let your team share in the wins, feel the losses, and stay united around a shared goal.
Smart compensation builds ownership. And ownership builds stronger companies.