What is it about?
A successful pay system communicates organizational priorities and goals and motivates salespeople to achieve higher performance. Variable pay can help firms align employee and organizational interests. However, a shift from fixed to variable pay results in an increase in variable costs along with an increase in fixed cost. Compensation strategy thus affects the firm’s cash flow, operating leverage, and breakeven points. The research posits that there is an optimal balance of variable versus fixed compensation costs that maximizes the economy value added (EVA) of the firm.
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This page is a summary of: Sales Employees Compensation: An Optimal Balance Between Fixed and Variable Pay, Compensation & Benefits Review, July 2009, SAGE Publications,
DOI: 10.1177/0886368709331449.
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