Reallocating Fixed and Variable Pay in Sales Organizations

Abstract

Organizations design and implement incentive plans to attract, retain and motivate their sales force. With the objective of achieving goal congruence between the sales organization and its sales force, many sales organizations implement variable pay plans. However, in the case of the sales carryover, such incentive plans do not always align sales force motivations with organization objectives. This article identifies various factors affecting sales carryover and examines its impact on the sales organization as well as the sales force. This article also recommends various strategies for mitigating the impact of sales carryover and suggests appropriate modifications in sales force compensation plans. By reallocating fixed and variable pay in compensation plans, sales organizations can inhibit the adverse impact of sales carryover and align the objectives of the sales organization and the sales force.