A firm sets its prices in one place and its compensation in another. The price comes from the pricing conversation: the rate card, the proposal, the negotiation with the client. The comp plan comes from the compensation conversation: what the salespeople or partners are paid, on what, to do more of.
These are treated as separate decisions, made by separate people, on separate timelines. They are not separate. The comp plan is setting the prices, and in most firms nobody decided that it should.
The pricing policy is the document leadership believes governs what the firm charges. The comp plan is the document that actually governs it, because it governs the behavior of the people who do the charging. When the two disagree, the comp plan wins. It wins every time, because it is the one with the money attached.
What an Incentive Actually Does
An incentive is an instruction with a payment behind it. It tells a person which outcome the firm will reward, and people who are paid for an outcome produce more of that outcome. This is not a controversial claim. It is the entire reason comp plans exist.
The problem is that the outcome the comp plan rewards is rarely the outcome leadership thinks it is rewarding, and the gap between the two is where the pricing damage lives.
A salesperson paid on revenue closed will close revenue. A salesperson paid on revenue closed will also discount, because a discounted deal that closes pays more than a full-price deal that does not, and from inside the comp plan a closed deal at a lower price is a better personal outcome than an open deal at the right one. The firm wrote a comp plan to drive sales. It also wrote, without noticing, a standing authorization to trade price for closing speed.
Nobody decided the firm should discount to close. The comp plan decided it, on the firm's behalf, every time a salesperson chose the certain commission on the discounted deal over the uncertain one on the full-price deal. That choice is being made constantly, by every person on the plan, and it adds up to a pricing policy the firm never wrote down and cannot see, because it does not live in the pricing document. It lives in the commission structure.
The Partner Version
In a partnership, the mechanism is the same and the disguise is better.
Partners compensated on the revenue or the originations they personally control will price to protect those numbers. A partner facing a client who pushes back on fee has a personal incentive to hold the relationship, because the relationship is in their book and their book is their compensation. Holding the relationship often means giving on price. The partner gives. The firm's margin absorbs it. And the partner's comp is insulated from the margin consequence, because the partner is paid on the revenue they keep, not the margin they preserve.
Multiply this across a partnership and the firm has a pricing policy set by the intersection of every partner's individual incentive to protect their own book. That policy was never debated in a pricing meeting. It emerged from the comp structure, one fee concession at a time, and it points wherever the comp plan points, which is toward whatever protects individual partner revenue regardless of what it does to firm-wide margin.
The firm believes its partners exercise pricing judgment. They do. The judgment they exercise is the judgment the comp plan pays them to exercise, and the comp plan pays them to protect revenue, not margin. So margin is what gives.
Why This Stays Invisible
The reason this goes unexamined for years is that the two documents are owned by different functions and read against different questions.
The pricing policy is owned by whoever sets strategy, and it is read against the question of what the firm should charge. The comp plan is owned by whoever runs sales or manages the partnership, and it is read against the question of how to motivate production. Neither owner reads their document against the other one. Nobody sits with the pricing policy and the comp plan side by side and asks whether they are giving the same instruction.
They are usually giving opposite instructions. The pricing policy says hold the line. The comp plan says close the deal, protect the book, hit the number. When a salesperson or partner stands in front of a client and those two instructions conflict, the one with the commission attached is the one that moves their hand. The pricing policy is a statement of intent. The comp plan is a statement of consequence. Intent does not survive contact with consequence.
This is not a failure of the people on the plan. They are responding correctly to the incentives in front of them. It is a failure of design, specifically the failure to design the two systems as one system, which is what they are whether or not anyone treats them that way.
Designing the Two as One
The fix is to read the comp plan as a pricing document, because it is one, and to align the two so they give the same instruction instead of opposite ones.
If the firm wants to protect margin, the comp plan has to pay on margin, or on something that moves with margin, not on revenue alone. A salesperson paid on contribution rather than revenue closed has a personal stake in the price holding, because the discount that closes the deal now costs them in the same currency it costs the firm. A partner whose compensation reflects the margin of the work they control, not just its volume, has a reason to defend price that did not exist when they were paid on originations alone.
This is not about paying people less or policing their judgment. It is about ensuring that the outcome the firm rewards and the outcome the firm wants are the same outcome. When they are, the pricing policy and the comp plan stop fighting, and the prices the firm charges start matching the prices the firm intended. When they are not, the comp plan keeps setting the prices, and it sets them wherever the incentive points, which is rarely where leadership was looking.
The Principle
The comp plan is a pricing policy. It is the one that governs behavior, which makes it the one that governs prices, regardless of what the pricing document says.
Read the two together. Find the places where the incentive rewards an outcome the pricing policy forbids, because those are the places the firm is being priced by its comp plan instead of its strategy. Then design the two as the single system they already are.
If you have never read your comp plan as a pricing document, it has been setting your prices without supervision. It has not been waiting for permission.
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