Sales Recruiting:
On‑Target Earnings (OTE) is one of the most important concepts in sales hiring, yet it’s often misunderstood by both employers and candidates (and even LinkedIn for that matter). When used correctly, OTE creates transparency, aligns expectations, and attracts stronger talent. When used poorly, it leads to disappointment, mistrust, and churn.
What is OTE?
OTE is the total amount of money a salesperson can expect to earn in a year if they meet their performance targets or quota. It combines:
- Base salary
- Variable compensation (commissions, bonuses, incentives)
For example, a role might be advertised as “$60,000 base + $60,000 variable = $120,000 OTE.” This means that if the rep hits their quota, they should reasonably expect to earn about $120,000.
Why OTE matters to candidates
Good salespeople compare opportunities based on potential earnings and risk. A clear OTE:
- Signals that you understand sales compensation
- Helps them compare your offer to others
- Sets a performance target linked to reward
If the OTE is unrealistic or poorly explained, experienced candidates will quickly lose trust.
Why OTE matters to employers
A well-designed OTE structure:
- Aligns total compensation with revenue produced
- Encourages performance instead of entitlement
- Helps forecast compensation expense relative to expected sales
However, OTE must be rooted in reality. If historical data shows that no one has ever achieved 100% of the OTE, you don’t have an OTE problem—you have a credibility problem.
Designing realistic OTE
To design realistic OTE:
- Use historical performance data where possible
- Consider market norms for your industry and segment
- Ensure quota is achievable for competent reps with proper support
If average attainment in similar roles is 70–90% of quota, your OTE expectations should reflect that, and you should be able to explain why top performers can exceed OTE.
Communicating OTE clearly
When posting roles or making offers, be explicit:
- Show base, variable, and OTE separately
- Clarify whether commission is uncapped
- Explain how often commissions are paid and on what basis (bookings, revenue, collections)
Done right, OTE is not just a number; it is a promise about how performance and reward are linked. That promise is central to attracting, motivating, and retaining top-tier salespeople.