Sales force financial compensation - a review and synthesis of the literature

As designing effective sales force financial compensation (SFFC) is as important as it is challenging, it comes as no surprise that SFFC has been the subject of research for over 60 years. While this extensive body of research has provided many specific insights, the overall picture and state of the research is less clear. In this paper, we review and summarize the highly fragmented literature on SFFC. Specifically, we synthesize the findings related to the determinants of SFFC, its effects, and the moderators of the relationship between SFFC and sales force performance, and develop an integrated framework based on our review. Our review shows that SFFC, especially variable pay, can motivate salespeople to work harder and increase performance on targeted outcomes, but boundary conditions influence the performance consequences of SFFC. Our synthesis of extant SFFC research identifies a set of empirical generalizations and three largely neglected areas of SFFC effects, that is nonperformance effects on the organization, effects on salesperson relationships, and effects on the salesperson. With these three areas, we offer a new lens for the functioning of SFFC and suggest valuable avenues for future research.