The Dark Side of Aligning Sales Force Compensation Plans with Company Goals: The Role of Compensation Plan Complexity
(A2019-8828)

AUTHORS

Luisa Kuschke, University of St. Gallen/M.A. Strategy and International Management; Christian Schmitz, University of Bochum; You-Cheong Lee, University of St.Gallen/Institute of Marketing

KEYWORDS

sales force compensation; task complexity; sales performance

ABSTRACT

When designing compensation plans (CPs) firms align variable incentives with company goals for optimal sales behavior control. However, sales people often experience difficulties adhering to their CP in selling situations due to increasing compensation plan complexity (CPC). If salespeople cannot act upon the CP, it loses its central function of behavior control and decreases high quality decision making. How can firms manage the balancing act between company goal alignment and sales performance results? By being the first paper to introduce CPC this study opens a new field in literature. A large-scale laboratory experiment with 180 subjects examines the effects of CPC on sales effort, behavior and performance. The paper demonstrates that CPC can be detrimental to sales effort and performance and determines the ideal CPC level to maximize both variables. The findings indicate CPC needs to be included in future research and aid firms in designing the ideal CP for their sales force.