Reframing Salesforce Compensation Systems: An Agency Theory-Based Performance Management Perspective

Abstract

The importance of salesforce compensation systems is widely recognized, but many questions remain regarding what makes them effective. This article considers compensation systems within a broader performance management framework. The framework includes designing compensation systems, setting goals, evaluating performance, and providing rewards, as well as the associated justice perceptions and affective responses that ultimately link the process to retention/turnover patterns. Agency theory is used as a guide for compensation design. The proposed framework is aimed at considering not only issues of salesforce performance, but also who stays and leaves. Retention patterns over time ultimately determine the productive capacity of salesforce and warrant special sales management attention.