sales force compensation : research insights and research potential

today’s b2b selling environment is characterized by much complexity. key drivers of this complexity include group sales efforts, multipart sales offerings and multibusiness unit participation on single deals (CFo research services 2010). Furthermore, the selling process is evolving from a transactional focus to consultative and enterpriselevel selling with a corresponding shift in competencies from price and problem solving to value creation (rackham and de Vincentis 1999). However, despite this increase in complexity, practitioners still demand compensation plans that are relatively simple, error free and cost effective (CFo research services 2010). against this backdrop, it is timely to review the role of sales force compensation in b2b organizations. indeed, sales force compensation is one of the most powerful tools in a b2b firm’s arsenal for influencing sales and profitability. the purpose of a sales compensation plan is to motivate members of the sales force and/or sales management, so that the firm can coordinate the salesperson’s (or sales team’s or sales hierarchy’s) activities with the firm’s own profitmaximizing goals. this would not be a difficult management problem were salespeople’s goals and objectives aligned with the firm’s profit maximization goal. but practitioners and researchers alike have long recognized the fundamental divergence between the objectives of firms and their salespeople; the academic literature’s extensive work on agency theory seeks to find compensation and motivation solutions to precisely this problem, in sales force and other principal–agent contexts. ours is not the first article to survey and summarize the literature on sales force compensation and motivation (see also albers 2002; Coughlan 1993; Coughlan and sen 1989; Mantrala et al., 2010). We do not replicate the summaries included in these articles; rather, we focus on issues that merit heightened attention. given the application focus, our review is organized by substantive problem areas. this allows us both to report on what is known in the academic literature and to comment on areas that are underresearched and, thus, ripe for future investigation. the b2b firm has a multidimensional sales compensation problem to solve. decisions to be made include: