Allocating territories to salespersons
Due to a retirement, sales manager has territories to allocate to the continuing salespersons. The manager cannot change the compensation scheme which pays salespersons based on the number of territories, not on sales. The manager does have sales records for all salespersons since their starting date. Salespersons have been fired for relatively poor sales records and other information indicating poor performance over an extended period. Others quit from time to time. New salespersons are sometimes hired to replace them.
Several of the continuing salespersons ask for one or more of the available territories.
Should the manager allocate these territories based on sales in the most recent period?
About sales commissions, Milgrom and Roberts remind us (p. 397) "if the sales force is a potentially important source of information about customers and competitors, paying commissions may cause them to focus excessively on sales and to ignore information gathering." Likewise, the "same sort of problems arise when the sales force is expected to provide customer education and after-sale service."
The same could said about allocating territories based on sales in the most recent period. The answer probably is that the territories should be based on seniority, our proxy for merit in this case.
This may find application in non-profit employment settings as well.
Due to a retirement, sales manager has territories to allocate to the continuing salespersons. The manager cannot change the compensation scheme which pays salespersons based on the number of territories, not on sales. The manager does have sales records for all salespersons since their starting date. Salespersons have been fired for relatively poor sales records and other information indicating poor performance over an extended period. Others quit from time to time. New salespersons are sometimes hired to replace them.
Several of the continuing salespersons ask for one or more of the available territories.
Should the manager allocate these territories based on sales in the most recent period?
About sales commissions, Milgrom and Roberts remind us (p. 397) "if the sales force is a potentially important source of information about customers and competitors, paying commissions may cause them to focus excessively on sales and to ignore information gathering." Likewise, the "same sort of problems arise when the sales force is expected to provide customer education and after-sale service."
The same could said about allocating territories based on sales in the most recent period. The answer probably is that the territories should be based on seniority, our proxy for merit in this case.
This may find application in non-profit employment settings as well.
posted by John B. Chilton at 3/13/2005 02:57:00 PM
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