Salesforce compensation plans: An individual-level analysis


Journal Article

A series of recent analytic papers have investigated the issue of how to compensate a salesforce using either the agency theory paradigm or transaction cost analysis. Similarly other more descriptive investigations have led to practical guidelines for managing compensation plans. These two approaches are difficult to reconcile since there is no direct mapping between the more managerially relevant independent variables used in the descriptive literature and the more abstract variables used in the analytic frameworks. While several empirical studies have focused on the predictions of the analytical frameworks, in this paper we test the guidelines provided in the descriptive literature, as in Smyth. Our study is unique in that it uses cross-sectional data at the individual level in relating the effect of various independent variables to salesperson-specific compensation plans. Although our results support many of the guidelines suggested by Smyth, we do not find support for his guidelines that the proportion of incentive pay should decrease if the company places more reliance on advertising or if the company has a quality advantage over its competitors. We use the agency theory framework to rationalize our findings with respect to reliance on advertising and existence of quality advantage as it effects the proportion of incentive pay. Finally, we find support for a number of the agency and transaction cost analysis variables such as uncertainty and salesperson efficiency. © 1994 Kluwer Academic Publishers.

Full Text

Duke Authors

Cited Authors

  • Lal, R; Outland, D; Staelin, R

Published Date

  • April 1, 1994

Published In

Volume / Issue

  • 5 / 2

Start / End Page

  • 117 - 130

Electronic International Standard Serial Number (EISSN)

  • 1573-059X

International Standard Serial Number (ISSN)

  • 0923-0645

Digital Object Identifier (DOI)

  • 10.1007/BF00994102

Citation Source

  • Scopus