Abstract
A new profit-center approach for sales force compensation allows firms to replace quotas with an innovative commission structure that ties compensation to corporate expenses and desired profitability. Sales representatives contribute their share of corporate expenses and profit, after which they can keep most of the money they bring into the company. In addition, sales associates choose their compensation plan and decide how to contribute to the company’s expenses. With thismethod, firms can more effectively motivate sales representatives, strengthen recruiting, increase market share and ensure that the business meets profitability goals. This article explains the strategy in more detail, including the most effective way to allocate corporate expenses among sales associates, how a predefined level of profitability can be built in and the appropriate way to determine the correct placement of commission levels. The technology necessary to implement this strategy is also discussed.
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