The article by Madhani is focused on the ways in which game theory may be utilized to address one of the most important aspects of sales force compensation. The concept may be defined as an exploration of decisions that affect the outcomes of every party involved. The focus on interdisciplinary factors of human resources (HR) and marketing is crucial because many firms struggle with these areas at the moment. The author has conducted extensive research to support his arguments, but one of the limitations is that some sources can be viewed as quite outdated.
Central Point and Discussion
The central argument is that various models of game theory could be used by researchers to improve HR management. It is evident that decisions related to compensation have an enormous impact on the performance of the workforce. All of the variables must be measured and analyzed to ensure that the approach selected is the most efficient. All the firms are determined to minimize unnecessary expenses but are willing to increase the compensation if pros outweigh cons. Therefore, it is necessary to find the correct balance that would benefit the organization the most.
One of the biggest problems that many industries have to deal with is that salespeople are likely to make questionable decisions and set inappropriate priorities if they are only focused on the maximization of their profits. The issue is that they overlook the fact that this approach may be inefficient in the long-term and could hurt the company because opinions of consumers are vital. The author has developed the figure that highlights the impact a salesperson’s behavior has on customers (see Figure 1).
It is clear that efforts and ethical actions have a direct impact on the loyalty of clients and overall success of the firm (Madhani 80). Therefore, owners must develop a set of approaches that can be utilized to maximize such values. The author has also provided diagrams that help to keep track of the decisions and benefits for both parties. The technique is quite comprehensive, and may be adjusted based on compensation approaches used in the firm.
The current plan is to develop a particular framework based on the game theory that would guide the decisions related to sales force compensation within the organization. It is necessary to conduct a throughout analysis of the operations to identify limitations that could affect the implementation of the project. Moreover, the framework developed must be aligned with organizational objectives to ensure that possible complications are avoided.
The problem is that many individuals are only focused on immediate gains, and are not aware of the fact that achievement of organizational objectives would benefit them in the long-term.
It would be appropriate to hire an external professional that is experienced in this area, and he or she will guide the management team throughout the whole process. Internal specialists should also be trained, and the knowledge gained may be incredibly valuable. Monitoring is also paramount because it helps to avoid complications related to scheduling. It is necessary to conduct several assessments to determine if the implementation was successful and expenses are justified. Higher-ups are presented with a broad range of decisions, and it would be appropriate to base them on evidence.
One of the most important aspects that should be highlighted is that games will be repeated in real life most of the time, and both parties would have an opportunity to change their strategies on numerous occasions. It is noted that a salesperson may attempt to be dishonest if an opportunity to increase profits is present. However, one must acknowledge possible consequences of such actions. An employer may be able to punish an individual that shows unethical behavior if pieces of evidence suggest that the reduction in profits cannot be affected by external factors as much. It may be hard for a person to resist, but one should understand that being honest is the safest strategy.
Another difficulty that many owners must face is that it is impossible to monitor the behavior and actions of salespeople most of the time, and it is an enormous limitation because they lack the control over the situation. The author mentions that organizational culture affects the decisions of individuals, and this concept may also be applied to game theory. For instance, a salesperson is more likely to be dishonest when the environment in the organization is not supportive regardless of the compensation method. Therefore, a business should be interested in the minimization of such weaknesses.
Opinions and Suggestions
The owner must acknowledge the fact that such factors as loyalty, motivation, engagement, and others could have much bigger impact than expected. Therefore, it is not reasonable to focus only on compensation because it could hurt the business in the long-term. One of the problems is that every salesperson may require a unique approach, and it could complicate the operations. Another difficulty that the organization may have to deal with is that any changes to the compensation system may be met with resistance, and it could damage some of the operations. It is suggested that it is nearly impossible to make sales force honest in some situations, and it also should be viewed as a significant limitation because both sides cannot come up with an agreement that would satisfy the needs of both parties. Moreover, the author did not consider the combination of salary and a commission as an approach that could be used to motivate salespeople. The introduction of this option would complicate the situation, but the exploration of other possibilities related to game theory is of utmost importance.
The utilization of new technologies is of utmost importance in this case because it helps to keep track of the performance, and a manager may determine if expenses are justified or not. I think that the author should have provided the information about software programs because they make the process much easier and help to minimize unnecessary expenses. It would be appropriate to apply benchmarking in such situations to track the performance of salespeople and identify which strategies benefit the organization the most.
In summary, it is possible to state that the application of game theory to some of the areas of salesforce compensation is incredibly important for businesses that are actively developing, and it helps to reach best possible outcomes. The understanding of associated concepts is crucial, and would help the owner to make decisions that are the most efficient.
Overall, the owner may use game theory to make predictions and analyze available data. Flexibility is one of the most significant advantages of this approach because it is relatively easy to change conditions and variables. The comparison of various strategies helps to select the one that suits the organization the most.
Madhani, Pankaj M. “Salesforce Compensation: Game Theory.” The Australian SCMS Journal of Indian Management 7.4 (2010): 72-82. Print.