Salesforce Control and Compensation System : A Game Theory Model Approach

The design of salesforce control and compensation system is crucial in salesforce management as it plays an important role in influencing ethics of salespeople. The performance of a sales organization is positively influenced by ethical behavior of sales people. To understand this relationship, this research applies game theory in the areas of salesforce control and compensation system. Research considers multiple equilibria in the game to identify optimal payoff and finds that a sales organization is better off with outcome control when sales people behave honestly as it has the highest payoff among all other possibilities. The propensity for sales people to make unethical choices can be reduced by designing an appropriate salesforce control system and a relevant compensation plan. Ethical behavior in sales organization can also be influenced by various organizational drivers such as ethical climate, code of ethics, hiring, selection and training process and ethical leadership. By such organizational influences, if a salesperson is motivated to act ethically by putting high efforts for building long term customer relationships, trust and loyalty, it results into a win-win situation for both sales people and the organization. Research has developed various models and payoff matrices to validate application of game theory in the field of salesforce compensation