Managing Sales Force Compensation

Sales force compensation is influenced by various factors of development and change occurring at the individual, product, organizational and environmental levels. Companies that adapt to changing circumstances are likely to be more successful. The sales compensation strategy should be realigned according to changes in those factors. When they are viewed from the life cycle perspective, it gives rise to career life cycle of sales employees, product life cycle, organizational life cycle and business life cycle. Compensation practices are being increasingly planned and managed in response to changing circumstances. Whereas in the past researchers focused almost exclusively on how changes in compensation practices affect employee performance or satisfaction, researchers are now beginnings to ask how organizational as well as environmental conditions shape compensation practices. This article discusses several factors affecting the design of sales compensation systems and proposes a life cycle and a business value–added framework for strategic compensation planning.