Which Type of Compensation works Best?
In their 2022
article appearing in Compensation &
Benefits Review, Turner College associate professors Edward O’Donnell (marketing) and Laurence Marsh (management) provide an extensive review and
critique of the academic literature on salesperson compensation. This project was undertaken, according to
Marsh, to “gain insights into the impact that compensation has on salesperson
perceptions and behaviors.” Their
examination of the sales compensation literature dating back to 1985 reveals
that much of this body of research has focused on incentive-based, than
salary-based, compensation. As O’Donnell
explained to Turner Business, “the
sales compensation literature strongly suggests that incentive compensation
negatively impacts salesforce perceptions and behaviors. In fact, sales
compensation researchers appear to conclude that incentive-based compensation
should be avoided if the goal is to develop and maintain customer
relationships.” In contrast, salaried
salespeople report, according to published research, higher levels of
satisfaction with their jobs and increased commitment to their employers than
those who were compensated by incentives.
As a result, organizations that use salary compensation benefit from
less salesperson turnover, lower recruiting and training costs and a more
experienced and skilled salesforce.
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