https://www.eurekalert.org/pub_releases/2021-03/ama-vca030421.php
News Release 5-Mar-2021
News from the Journal of Marketing
American Marketing Association
Researchers from University of Houston and University of Bochum published a new paper in the Journal of Marketing that examines how variable compensation plans for salespeople can lead to lower health.
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Sales compensation plans typically comprise a variable component. Variable compensation is issued on top of a base salary and the amount is contingent on performance. For example, a salesperson with an annual target salary of $100,000 and a variable compensation share of 80% would receive $20,000 as a fixed amount with the remaining $80,000 contingent on the achievement of predetermined sales targets. Variable compensation is widely used and accounts for approximately 40% of total sales compensation in the United States--equivalent to more than $320 billion. However, variable compensation can conjure substantial compensation uncertainty for salespeople.
Variable compensation has been frequently shown to motivate salespeople to work harder and thus achieve higher performance. However, this research shows that variable compensation also induces performance pressure, which causes stress, burnout, and sickness. These "hidden costs" of variable compensation directly counter the hoped-for positive effects on performance.
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