Optimal Compensation Strategy during the Growth Stage: A Financial Modelling Approach

[We’re pleased to welcome Pankaj M. Madhani, Associate Dean and Professor of  ICFAI Business School (IBS). Dr. Madhani is the author of “Managing Salesforce Compensation During the Growth Stage A Financial Modelling Approach which appeared in most recent issue of Compensation and Benefits Review, Volume 47, Issue 5/6. From Madhani:]

The salesforce is a strategic lever of the sales organization for improving sales growth, market share and profitability. Although, the salesforce is a critical component to the overall success of the sales organization’s goals and objectives, it’s also a cost generator, influencing not only the cost of the salesforce but also the variable expenses associated with sales volume. The salesforce design (i.e. salesforce size and structure) has major impact on compensation policies and practices of sales organizations as it’s influenced by organizational and environmental variables.

The size and structure of the salesforce significantly impact the operation of salesforce in terms of efficiency and effectiveness and hence it needs to change as the sales organization enters the growth stage. It is mainly because these attributes have highest impact on overall success of sales organization in the growth stage compared to other stages of business life cycle. However, designing an optimal salesforce size and structure is an intricate task. This study looks into this area and develops various methodologies, matrices and analytical tools to determine optimal salesforce size and the right balance between generalized and specialized sales roles in the salesforce structure during growth stage. At optimal salesforce size and corresponding structure, sales organization is able to attract, retain and motivate the ‘right’ type of sales people, build long term relationship with customers, gain market share, enhance profitability and thus maximize the value of sales organization. Research develops a financial model and provides a numerical illustration to calculate optimal salesforce size and structure.

pa.jpgPankaj M. Madhani earned bachelor’s degrees in chemical engineering and law, a master’s degree in business administration from Northern Illinois University, a master’s degree in computer science from Illinois Institute of Technology in Chicago, and a PhD in strategic management from CEPT University.

He has more than 30 years of corporate and academic experience in India and the United States. During his tenure in the corporate sector, he was recognized with the Outstanding Young Managers Award. He is now working as associate dean and professor at ICFAI Business School (IBS) where he received the Best Teacher Award from the IBS Alumni Federation. He is also the recipient of the Best Mentor Award. He has published various management books and more than 300 book chapters and research articles in several refereed academic and practitioner journals such as World at Work Journal and the European Business Review. He has received the Best Research Paper Award at the IMCON-2016 International Management Convention. He is a frequent contributor to Compensation & Benefits Review and has published 19 articles on sales compensation. His main research interests include salesforce compensation, corporate governance and business strategy. He is also editor of The IUP Journal of Corporate Governance.

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This entry was posted in Compensation and Benefits, Management, Management Theory by Cynthia Nalevanko, Editor, SAGE Publishing. Bookmark the permalink.

About Cynthia Nalevanko, Editor, SAGE Publishing

Founded in 1965, SAGE is the world’s leading independent academic and professional publisher. Known for our commitment to quality and innovation, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students across a broad range of subject areas. With over 1500 employees globally from principal offices in Los Angeles, London, New Delhi, Singapore, Washington DC, and Melburne, our publishing program includes more than 1000 journals and over 900 books, reference works and databases a year in business, humanities, social sciences, science, technology and medicine. Believing passionately that engaged scholarship lies at the heart of any healthy society and that education is intrinsically valuable, SAGE aims to be the world’s leading independent academic and professional publisher. This means playing a creative role in society by disseminating teaching and research on a global scale, the cornerstones of which are good, long-term relationships, a focus on our markets, and an ability to combine quality and innovation. Leading authors, editors and societies should feel that SAGE is their natural home: we believe in meeting the range of their needs, and in publishing the best of their work. We are a growing company, and our financial success comes from thinking creatively about our markets and actively responding to the needs of our customers.

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