[We’re pleased to welcome back Pankaj M. Madhani of ICFAI Business School (IBS). Pankaj published an article in Compensation & Benefits Review entitled “Sales Organization Culture, Compensation Strategy and Firm Valuation.” Notes from Madhani:]
The culture of sales organization is comprised of fundamental principles and beliefs that are shared by its members and hence determines the norms that dictate how sales employees should think and behave. In addition to this, compensation systems promote behaviour of sales employees that ultimately becomes dominant behaviour in the sales organization. Thus, many sales organizations today are focusing on their culture as a strategic tool, deciding what it should be, aligning with strategic goals, business strategy and sales compensation design. Sales organization culture is defined both in terms of its causes and effects such as process-oriented culture and outcome-oriented culture, respectively.
A process-oriented culture focuses on behavior controls and emphasizes sales behaviors, whereas an outcome-oriented culture focuses on outcome controls and emphasizes sales outcomes. This research provides various frameworks and models for establishing relationship between organization culture and compensation structure and deriving its impact on sales performance. Study also provides numerous illustrations to calculate optimal compensation structure and corresponding organization culture to achieve maximum valuation of sales organization. An effective sales performance supported by an appropriate compensation strategy and culture of sales organization plays a significant role in determining financial performance, enhancing valuation of the sales organizations and increasing competitive advantage in the market place.