Enhancing Return on Salesforce Investment

[We’re pleased to welcome back Pankaj M. Madhani, Associate Dean and Professor of ICFAI Business School (IBS). Dr. Madhani is the author of “Enhancing Return on Salesforce Investment: Reallocating Incentives and Training Resources With Intrinsic Valuation Approach,” which has been published in Compensation and Benefits Review and is currently free to read for a limited time. From Dr. Madhani:]

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What motivated you to pursue this research

In view of escalating budget for sales incentives and training, it is important for sales organizations to optimally allocate these resources to enhance sales performance and retain their best salespeople. Retention of an employee is very important for organizations from the cost perspective. If the best salespeople are not retained, a firm can be negatively affected from the operational level to the strategic level. Owing to the significant investments made in the salesforce in terms of incentives and training, it is important to study the impact of such an investment on a salesperson’s performance. Traditionally, in most sales organizations, salesforce performance evaluation has mostly relied on reflective metrics such as sales volume, revenue, and manager’s evaluations of salesforce, and hence they have limited insight into how a salesperson will do going forward and what types of training and incentives will be most effective. Sales organizations should emphasize sustaining and improving their salesforce performance with strategic decisions about rewards and training optimization.

In what ways is your research innovative, and how do you think it will impact the field?

This research develops “Intrinsic Valuation Approach” and provides various decision frameworks for determining salesforce resource allocation. Optimizing a salesperson’s training and incentive resources according to “Intrinsic Valuation Approach” can improve sales performance. With such proactive approach, sales organizations not only identify a better salesperson but also realize why a salesperson’s profit potential (i.e., intrinsic value) is plateauing/decreasing while another salesperson’s intrinsic value is high. Research also emphasizes that all sales employees do not perceive organizational rewards and training alike because for some groups certain needs can be more prominent than others. A combination of incentives and training needs had the biggest impact on salespeople’s intrinsic value. Reallocation of incentives and training resources based on proactive approach developed in this paper not only reduces sales employee turnover but also enhances performance of retained employees because it takes into consideration the needs of the sales employees and the requirements of the organization.

What advice would you give to new scholars and incoming researchers in this particular field of study?

“Intrinsic Valuation Approach” is a predictive analytic that forecasts intrinsic value of salespeople. Such futuristic analysis provides the starting point for finding an answer to the salesforce resource allocation questions but there is need to empirically study interactions and interdependency of specific parameters such as:

1. What are the drivers of a salesperson’s future performance, and what is their impact?
2. Is there significant heterogeneity within the salesforce that affects intrinsic value?
3. What type of rewards and training will bring out the best in a high achiever or help a
promising sales employee improve?

Although, “Intrinsic Valuation Approach” links organizational factors (e.g., training and incentives), it does not investigate the role of the salesperson’s cognitive and attitudinal elements (e.g., motivation, ability /aptitude) that could mediate the effect between organizational variables
and intrinsic valuation. Hence, future research could study the mediating variables and adopt a dynamic model to describe the time-varying effects of the parameters in a more “continuous” sense, thereby building on this research stream.

 

 

Pankaj 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 an 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 journals. 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 more than 20 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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