The Comprehensive Effects of Sales Force Management: A Dynamic Structural Analysis of Selection, Compensation, and Training

Abstract

This study provides a comprehensive model of an agent’s behavior in response to multiple sales management instruments, including compensation, recruiting/termination, and training. The model takes into account many of the key elements that constitute a realistic sales force setting: allocation of effort, forward-looking behavior, present bias, training effectiveness, and employee selection and attrition. By understanding how these elements jointly affect agents’ behavior, the study provides guidance on the optimal design of sales management policies. A field validation, by comparing counterfactual and actual outcomes under a new policy, attests to the accuracy of the model. The results demonstrate a tradeoff between adjusting fixed and variable pay; how sales training serves as an alternative to compensation; a potential drawback of hiring high-performing, experienced salespeople; and how utilizing a leave package leads to sales force restructuring. In addition, the study offers a key methodological contribution by providing formal identification conditions for hyperbolic time preference. The key to identification is that under a multiperiod nonlinear incentive system, an agent’s proximity to a goal affects only future payoffs in nonpecuniary benefit periods, providing exclusion restrictions on the current payoff. This paper was accepted by Matthew Shum, marketing.

Engaging the sales force in digital solution selling: how sales control systems resolve agency problems to create and capture superior value

“…Moreover, we enhance the prior understanding of capability controls by “digitally updating” existing solution selling capability descriptions (Böhm et al , 2020; Salonen et al , 2021) with necessary software and RRM knowledge and with additional sales and service skills. Our description of different training approaches contributes to a more nuanced understanding of this often-overlooked sales control (Chung et al , 2021). Furthermore, as our findings suggest, we shift the focus of the activity control literature from intrusive micromanagement (i.e.…”

“…This is a major limitation because sales force compensation and performance management are difficult in firms where traditional and digitally-enabled business models coexist (Ulaga and Loveland, 2014). Recent research has used advanced theoretical (Jerath and Long, 2020) and empirical modeling (Chung et al , 2021) to compare control systems and compensation plans in generic business-to-business sales settings. SaaS companies provide a fertile ground to further explore DS sales control systems and compensation plans.…”

Reducing Product Expiration by Aligning Salesforce Incentives: A Data‐driven Approach

“…Researchers have found empirical evidence for agency theory in salesforce compensation (Ghosh andJohn 2000, Misra et al 2005). Lately, structural econometric models have been utilized to understand the impact of sales quotas on sales effort (Misra and Nair 2011), the effectiveness of bonuses (Chung et al 2013), and salesforce attrition rates (Chung et al 2019). We contribute a waste reduction perspective to this literature on the design of salesforce compensation schemes.…”

“…2013), and salesforce attrition rates (Chung et al. 2019). We contribute a waste reduction perspective to this literature on the design of salesforce compensation schemes.…”