Publications
Publications
- March 2020 (Revised October 2020)
Sales Force Compensation
By: Doug J. Chung
Abstract
The author developed this note for scholars, educators, and practitioners that are interested in sales force compensation. It is based on the author’s investigations across a variety of organizations in multiple industries and provides a conceptual framework for the effective use of sales force compensation. The note, in addition to reviewing traditional theories and practices, aims to disseminate the concepts behind recent developments in the theory of sales force compensation and how it functions in practice. It specifically explains: 1) how the effective use of multiple variable compensation components can motivate all types of salespeople; 2) how intermediary bonuses can have differential effects on heterogeneous salespeople; 3) how the use of fixed pay can motivate salespeople to exert effort on non-outcome-related sales tasks that benefit an organization in the long run; 4) how the use of variable compensation can backfire and, thus, dilute an employee's intrinsic motivation; and 5) how compensation can be used effectively with other sales management instruments. The note also provides educators with ways to disseminate the contents of this note using field case studies.
Keywords
Sales Strategy; Sales Force Management; Sales Compensation; Salary; Commissions; Bonuses; Quota Setting/updating; Quota Frequency; Extrinsic Vs Intrinsic Motivation; Salesforce Management; Compensation and Benefits; Strategy
Citation
Chung, Doug J. "Sales Force Compensation." Harvard Business School Module Note 520-084, March 2020. (Revised October 2020.)