Rebalancing Fixed and Variable Pay in a Sales Organization: A Business Cycle Perspective

Compensation & Benefits Review, Vol. 42, No. 3, May / June 2010, pp 179-189

17 Pages Posted: 3 Mar 2010 Last revised: 3 Feb 2014

See all articles by Pankaj M. Madhani

Pankaj M. Madhani

The Icfai Business School (IBS), Ahmedabad

Abstract

The business cycle has a significant impact on the revenue and profitability of sales organizations and directly influences sales compensation costs. Operating leverage is a key variable affecting business performance during different stages of business cycle. Rebalancing fixed and variable pay in the compensation structure helps organizations in the effective management of operating leverage in business cycle stages. This article provides a framework for properly designing pay structure and determining how much pay should be fixed or variable, according to different stages of business cycle. It also explains the relationship between job challenges and compensation structures. By synchronizing sales force compensation structure with the business cycle, organizations can design optimal compensation strategies.

Suggested Citation

Madhani, Pankaj M., Rebalancing Fixed and Variable Pay in a Sales Organization: A Business Cycle Perspective. Compensation & Benefits Review, Vol. 42, No. 3, May / June 2010, pp 179-189, Available at SSRN: https://ssrn.com/abstract=1562551

Pankaj M. Madhani (Contact Author)

The Icfai Business School (IBS), Ahmedabad ( email )

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