Variable compensation -- as an inducement to stimulate performance -- is an obvious tool for business, and the sales industry is legendary for its reliance on this type of carrot. But unfortunately most companies use it as a blunt cudgel, like putting with a three iron! And when businesses make changes because something appears to be broken, they often resort to informal polls at the water cooler, intuition, or the personal experiences of executives from earlier in their careers, as tools to guide decision-making. It is like choosing your next club on the golf course almost by random lottery, rather than basing decisions on well-tested algorithms and historical data.
Professors Ahearne has spent more than a decade building an arsenal of data mined from studies and controlled tests with Fortune 500 companies. He has developed some simple rules around segmenting the sales organization by performance levels and then adjusting variable compensation according to the needs and desires of each segment. A startlingly simple concept, “segmentation,” which is nearly ubiquitous in companies’ client facing distribution strategies, applies just as readily to sales force management.