Organization culture and compensation system design function as complementary elements in achieving the strategic goals of the organization. When compensation systems are not aligned with organization culture, it causes many unintended consequences. This research study looks at the impact of organization culture on compensation and vice versa. Various frameworks provided in this article will help managers in effectively managing compensation costs as well as enhancing performance of the organizations. The organization culture can be shaped by the type of compensation system used and the kinds of behaviors and outcomes the organization chooses to reward and punish. When culture and compensation structure (fixed pay vs. variable pay) are synchronized, the culture acts as an asset and generates competitive advantage. Depending on how compensation system is designed, developed, communicated and managed, it can positively or negatively influence an organization’s culture. This research identifies compensation strategies for various types of organization culture and suggests the best-case scenario for optimal performance.
This article explains the organizational life cycle, its impact on organization performance and role of an HR manager in effective compensation management. The stages in the life cycle are a key determinant of compensation strategies and their effectiveness in achieving organizational goals. The sales revenue, business risk and free cash flow of organizations change considerably during different stages of the organizational life cycle. Sales organizations must review, update and align their sales force compensation strategy in keeping with the organizational life cycle. Realigning fixed and variable pay in the compensation structure according to different stages of organizational life cycle will help organizations design an optimal compensation strategy for building competitive advantage.The salesperson represents the organization to many of its customers, serves as the organization's direct link and often works away from the organization with minimal direct supervision. The salesperson usually knows business clients better than any other employee of the organization and brings back much-needed information about the customer, markets and competitors. Although organizations devote considerable time and effort to managing their sales forces, few focus much on how sale force compensation needs to change over the life cycle of the organization. One type of sales compensation plan does not match all stages of an organization in its life cycle.As an organization grows and develops, it needs to change. By understanding how it changes as it grows, one can understand how human resource (HR) management practices in the organization must change. Life cycle is perhaps one of the most used theories of development and change in management literature. A number of researchers have proposed that organizations progress through various stages in a life cycle as they grow and develop from birth to death. 1 The concept of organizational life cycle has developed to explain changes taking place in an organization over time. The stage in a life cycle is likely to be a key determinant of compensation strategies and their effectiveness in achieving organizational goals. 2 Once the stage of organizational life cycle is identified, appropriate HR management responses can be developed. The primary objective of this article is to propose a framework for selecting an appropriate sales force compensation plan according to different stages of organizational life cycle. The Effective Sales Compensation StrategyCompensation is one of the major components of a HR system, and it is defined as the monetary and nonmonetary rewards that employees receive for performing a job. 3 Monetary rewards include base pay compensation (or fixed pay) and incentive compensation (or variable pay). Nonmonetary rewards include fringe benefits, some of which are legally required and some of which are discretionary in nature.Fixed pay is a noncontingent reward, not tied to the completion of a specific task or a specified level of performance. Simply, it is pay for parti...
A salesperson’s ethical behavior plays a critical role in forming, maintaining and sustaining long-term customer relationships. Ethical sales behavior increases customer satisfaction, trust, loyalty and eventually enhances customer lifetime value (CLV). The CLV approach quantifies the potential monetary value of customers over their lifetime and builds linkages between ethical sales behavior and the financial performance of the organization. An ethical sales practice is one of the drivers influencing and enhancing CLV. An ethical climate of the organization can be reinforced by implementing an effective sales compensation plan. The purpose of effective sales compensation is to recognize the role fulfilled by salespeople to maximize CLV as a result of ethical sales behavior. The frameworks developed in this research illustrates how the compensation practices of an organization influence ethical sales efforts and also shows that what a salesperson does influences customer acquisition, customer retention and customer expansion in the form of cross-selling/up-selling, which in turn affects customers’ CLV or their profitability to the organization. This article also provides a methodology for CLV calculation and provides its key dimensions. The research identifies various drivers of unethical sales behavior, looks at the optimal design for the sales compensation plan and develops various models for enhancing ethical behavior of salespeople and ultimately CLV.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.