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Management article
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Reference no. SMR3215
Authors: F V Cespedes
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 1990
Length: 13 pages

Abstract

Sales compensation is a crucial management decision, but it is too often approached as an exercise in comparative pay levels or as a debate concerning the relative merits of fixed-salary versus commission systems. This article provides a ''preface'' to sales compensation which outlines generic issues and choices implicated in designing a sales compensation plan. It discusses the following: (1) the links between compensation, evaluation and motivation; (2) an analytical process helpful in developing a compensation plan; (3) important choices in setting goals and rewarding results in sales; and (4) the relevance and limits of compensation policies within an effective sales management system.

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Abstract

Sales compensation is a crucial management decision, but it is too often approached as an exercise in comparative pay levels or as a debate concerning the relative merits of fixed-salary versus commission systems. This article provides a ''preface'' to sales compensation which outlines generic issues and choices implicated in designing a sales compensation plan. It discusses the following: (1) the links between compensation, evaluation and motivation; (2) an analytical process helpful in developing a compensation plan; (3) important choices in setting goals and rewarding results in sales; and (4) the relevance and limits of compensation policies within an effective sales management system.

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