Sales Force Compensation

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.