A cross-national investigation of incentive sales compensation

Abstract

Why do managers choose one sales compensation form rather than another? Theoretical answers typically focus on the type of plans managers should design, not on the factors that managers actually consider. Managers from various national origins pursue and weigh objectives through experience in a way that theoretical models may not capture. Incorporating conceptualizations from a wide range of disciplines, we specify a model examining the influence of cultural factors on sales compensation decisions of managers (incentive vs. fixed pay and parity vs. equity allocation). The model, tested with data collected from bank managers across six European countries, illustrates the importance of considering national culture when designing sales force compensation policies applied across multiple countries. We also find evidence that most European bank managers accept incentive pay to motivate salespeople but, perhaps paradoxically, overwhelmingly reject equity allocations to achieve control and parity. We discuss the implications of our findings for research on international governance systems and the diffusion of sales force management practices.