Absolute vs Relative Performance II

It wouldn't matter if the sales rep that generated $1MM missed his or her budget by 30%, was down 20% in sales from the prior year, lost 200 basis points of margin, and had sales in only 2 out of 10 of the company's product categories... 

From a compensation perspective, absolute performance means more is better.  A sales rep that generates $1MM in gross margin would earn more than a sales rep that generated $900K in gross margin using an absolute measuring approach, such as a straight commission program that pays 15% of gross margin dollars.  

It wouldn't matter if the sales rep that generated $1MM missed his or her budget by 30%, was down 20% in sales from the prior year, lost 200 basis points of margin, and had sales in only 2 out of 10 of the company's product categories while the sales rep that generated $900K in gross margin was up 25% from the prior year, beat their budget by 10%, increased gross margin percentage, and had sales balanced throughout the company's product categories.  None of this would matter because in absolute terms, $1MM is better than $900K.

ACTION POINT: Understand that absolute performance make everything but the the total GP irrelevant.