Salesforce compensation plan for an industrial products manufacturer’s representative

Abstract

Compensation plan plays a critical role in motivating salespersons and indirectly affects their company performance. This project studied an industrial products manufacturer’s representative which pays its salesforce on a fixed salary basis, and reviewed the appropriateness of its current compensation plan from the agency theory and motivation theories perspectives. By taking various situational factors like effort-sales uncertainty, efforts-reward uncertainty and preferences into consideration, a compensation plan that is tailored to the situations and the needs of the company is recommended. A survey revealed that more than half of the company’s salespersons are not highly motivated under the current fixed salary plan and over half of them prefer a compensation plan with an inventive payment ranged from 15% to 30% and with an average of 20%.