Experimental Investigation of Compensation Schemes and Management by Objectives in the Financial Service Industry: A Situational Judgment Test of Sales Orientation

The purpose of this study is to examine the impact of a variable compensation scheme and the management by objectives system by reflecting the tremendous changes in the Financial Service Industry. However, little empirical evidence is available on both the relationship between the financial incentives and target agreements and their effects on sales orientation, customer orientation and sales pressure/stress placed on salespeople after the past economic and financial crises. Unlike previous behaviour service research, this study used an experimental, control group design to examine the impact of the financial incentives and target agreements. In this survey, we apply the situational judgment test (SJT) method to the measurement of sales orientation, a construct defined as situated action. These tests have rarely been used to measure particular constructs. Subjects were randomly assigned to control and experimental groups. The treatment consisted of manipulations to the sales customer-salesperson interaction. The findings have implications for business practice in managing service encounters, employee empowerment and management of customers in context of financial retail advisory.