Consider two successful sales companies. One company pays its salespeople a low

Question

Consider two successful sales companies. One company pays its salespeople a low base salary and a high commission, whereas the other pays its salespeople a high base salary plus a very small commission. Assume that both companies are paying their salespeople in an optimal manner. Then, the difference in their compensation schemes might be attributed to the following:

A. Sales revenues in one of the firms exhibit much more dispersion than in the other firm.
B. Salespersons in one of the firms are more risk averse than salespersons in the other firm.
C. Sales revenues in one of the firms are more affected by factors outside employees control than in the other firm.
D. All of the above.

Explanation / Answer

D. All of the above.

A. Sales revenues in one of the firms exhibit much more dispersion than in the other firm. More depedence of sales revenue on the volume of sale, will make a company to issue higher variable pay(comissiosn)

B. Salespersons in one of the firms are more risk averse than salespersons in the other firm. Risk avert employees seek a higher fixed pay and low comossion..
C. Sales revenues in one of the firms are more affected by factors outside employees control than in the other firm.
D. All of the above.
All these factors are responsible for taking decisions regarding the compensation.

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