Many firms depend on the effectiveness of their sales personnel to ensure success. Yet they often design sales incentive and compensation programs that misdirect their salespeople's efforts and sometimes even contradict organizational goals. This article reveals the pitfalls typically encountered in compensation and award programs and outlines steps that managers can take to develop sales compensation plans that complement and help meet organizational objectives @ 2000 John Wiley & Sons, Inc.

Of all of the reasons for a company's success, the most important often is the effectiveness of its sales personnel. These are field representatives and in-home telemarketers who bring the product to the consumer and make the sales that actually drive the business that drives the company. In ex-change for these efforts, the company is supposed to pro-vide financial and motivational rewards that drive the sales representatives. How a company determines what its compensation program looks like, and what it will pay in different performance scenarios, are key questions to be addressed in determining a sales compensation plan. As simple as that sounds, it doesn't mean that it is a simple concept.

When we think of the salesperson for whom we are going to design a compensation program, we often think of the stereotypical car or real estate salesperson whose ultimate goal is to earn a buck, without being very concerned about the consumer. The definition of a salesperson, however, covers a broad spectrum, from the most complex sales function to the clerk in a store who takes orders, rings them up on the register, and hands customers their merchandise. But many of these individuals don't really sell; they are strictly order takers and cashiers.