Earnings Management Practices in Sales and Strategic Accounts Survey Report

44 Pages Posted: 12 Sep 2013 Last revised: 18 Nov 2013

See all articles by Michael Ahearne

Michael Ahearne

University of Houston - C.T. Bauer College of Business

Jeffrey Boichuk

University of Virginia - McIntire School of Commerce

Craig J. Chapman

Northwestern University - Kellogg School of Management

Thomas J. Steenburgh

University of Virginia - Darden Graduate School of Business

Date Written: September 11, 2013

Abstract

Section 1 reports findings regarding the expense and revenue management requests that sales leaders are asked to implement. Through a 2012 Strategic Account Management Association (SAMA) survey, we find that customers and strategic accounts are often shielded from these myopic forms of management, but that shortsightedness is an internal barrier that a vast majority of strategic account managers face. When the sale force is asked by finance to cut back in the fourth quarter, results suggest that conflict between the two groups is high (see Section 2). The perception among respondents is also that finance does not engage in earnings management actions a great deal and that sales is in a more opportune position to move the needle with earnings management actions, when compared to finance.

Section 3 shows that customers selected to be strategic accounts have long-term growth potential, substantial amounts of current business, global presence, strategic fit, and leadership roles in their industry. Perhaps due in part to these characteristics, nearly a quarter of respondents reported that their strategic account business earned profit margins in excess of 20% over the past three years. Strategic account programs operate in relatively open waters, too – greater than three quarters of respondents indicated that they compete with five or less comparable offerings.

Section 4 provides a snapshot of the compensation practices used in sales forces today. Many organizations arrive at performance targets for their employees based on their performance in the prior year and set such targets on an annual basis. Even still, sales employees’ performance often falls short of these targets, with approximately half missing the mark. The income of sales force members can generally be described as 70% salary, 15% commission, 7% short-term bonus, and 8% long-term bonus. Strategic account managers are paid the most in the sales force (approximately $120,000 for an average performer) and non-strategic account sales personnel the least (approximately $75,000 for an average performer).

Keywords: earnings management, strategic account management, sales force incentives

Suggested Citation

Ahearne, Michael and Boichuk, Jeffrey and Chapman, Craig J. and Steenburgh, Thomas J., Earnings Management Practices in Sales and Strategic Accounts Survey Report (September 11, 2013). Darden Business School Working Paper No. 2324325, Available at SSRN: https://ssrn.com/abstract=2324325 or http://dx.doi.org/10.2139/ssrn.2324325

Michael Ahearne

University of Houston - C.T. Bauer College of Business ( email )

334 Melcher Hall
Houston, TX 77204-6021
United States
713-743-4155 (Phone)
713-743-4572 (Fax)

HOME PAGE: http://www.bauer.uh.edu/Directory/profile.asp?firstname=Michael&lastname=Ahearne

Jeffrey Boichuk (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

Craig J. Chapman

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Jacobs Center 6227
Evanston, IL 60208
United States
8474912662 (Phone)
8474671202 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu

Thomas J. Steenburgh

University of Virginia - Darden Graduate School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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