Baseline

What is a Baseline?

A baseline is a reference point in commission models used to measure performance or determine when variable pay begins. It can be a minimum threshold (below baseline = no commission), a starting point for comparison, or the foundation for incentive calculations. According to Alexander Group (2024), 68% of B2B companies use baselines to ensure commission is only paid on value-creating sales.

Types of Baselines

Baselines come in several varieties depending on their purpose:

Type	Description	Example
Commission threshold	Minimum performance before commission pays	No commission below 50% quota
Territory baseline	Starting revenue in a territory	Existing ARR of $300K
Performance baseline	Expected or average level	Historical win rate of 22%
Comparison baseline	Reference for measuring progress	Same period last year

Why Baselines Matter

Baselines serve multiple functions:

• Set expectations: Define what's "normal" or "acceptable"
• Enable measurement: Provide context for evaluating results
• Control costs: Ensure commission matches value
• Create fairness: Account for different starting points
• Drive behavior: Motivate performance above minimum

According to WorldatWork (2024), companies with clear baselines report 34% fewer commission disputes than those without.

Baseline Examples in Practice

Example 1: Commission Threshold

Rep only earns commission at 70% quota attainment:

Attainment	Commission
0-69%	$0 (below baseline)
70%	Baseline reached, commission starts
100%	Full target commission

Example 2: Territory Baseline

Rep takes over a territory with $75,000 in existing ARR. Commission only on growth:

Metric	Value
Baseline ARR	$75,000
Year-end ARR	$97,500
Commissionable growth	$22,500
Commission (10%)	$2,250

Example 3: Performance Improvement

Measuring win rate improvement from historical baseline:

Period	Win Rate	vs. Baseline
Baseline (last year)	22%	-
Q1	25%	+3 points
Q2	28%	+6 points

Baseline vs. Quota

Aspect	Baseline	Quota
Purpose	Reference point or minimum	Target to achieve
Commission impact	Often where commission starts	Where target commission is earned
Typical level	Below expected performance	At expected performance

FAQ About Baselines

When should you use baselines?

Use baselines when you want to ensure commission is only paid on value-creating results. This is especially relevant in territory models where reps inherit existing customers, or during ramp periods for new reps.

How do you set a fair baseline?

Use historical data. The best baselines are based on actual performance, not wishful thinking. Adjust for territory potential, market conditions, and seasonality.

What if the baseline is too high?

If baselines are too high, reps give up before they start. Most should be able to exceed baseline with reasonable effort. Check that 70-80% of the team consistently exceeds baseline.

Set Baselines That Drive the Right Behavior

A well-set baseline balances the company's need for cost control with reps' need for a fair chance. Too high demotivates. Too low rewards mediocrity.

With Prowi, you can analyze historical performance, set data-driven baselines, and track progress in real time. This ensures baselines are fair, transparent, and motivating.