1. Compensation & Motivation
Session 7-8
Compensation & Motivation

2. Sales Force Compensation Plans
Compensation is defined as all monetary payments and benefits used to remunerate employees for their performance.
As extrinsic rewards, compensation plans and financial packages are recognized as the greatest motivator of salespeople.

3. Compensation 3 basic questions drive successful compensation programs:
Which method is most appropriate for motivating specific selling activities?
How much of a salesperson’s total compensation should be through incentives?
What is the right mix of financial / non-financial compensations?

4. Compensation
Compensation is based on expectancy model. It should try to adjust pay levels to performance. Steps in designing a compensation plan are:
Define the sales job – evaluate job descriptions & specifications
Compare patterns in community and industry
Determine the compensation level – value of person, affordability, break-even for every job.
Also see what is the average salary at the same level in the organization.

5. Features of Good Compensation Plans
Standpoint of the firm
control
over how
salespeople
allocate their
time
economic
balancing of
sales costs
and
sales results
motivational
for
salespeople to
increase effort
simple
to administer and
explain, and
flexible to adjust
Features of good
compensation
plans
income
regularity
reward for
superior
performance
fairness
Standpoint of sales representatives

6. Compensation Plans Various compensation plans are applied:
Direct– Fixed salary, incentives.
Indirect – Salary + commission, full commission, salary + profit sharing
Non Financial– Training, awards, contests, recognition
Expenses - Conveyance, TA/DA, communication
Various other time-bound incentives
Fringe benefits

7. (contd.) Straight salary
1) to motivate people to achieve objectives other than short-run sales goals and
2) individual’s impact on sales volume is difficult to measure.
Reward only at the time of reviews.

8. When Is Straight Salary Best ?
team selling situations
long negotiating periods
mixed promotional situations
during learning periods
missionary selling
special conditions (for example, introducing a new line of products, opening up new territories, calling on new customer accounts)

9. Examples for straight salary jobs
missionary sales person, relationship building activities, technical products, projects (long gestation period), sales-cum-service staff (non-selling tasks are higher), delivery boys, order takers.

10. Contd.
Straight commission – employee more like an agent (co. selling intangibles/ services or high value sales). Less administrative control and conformity to policies.
Combination.

11. When Is Straight Commission Best ?
strong incentives needed
selling costs need close control
Personal selling effort more important

12. When to Use Different Combination Plans
Salary plus commissions
when management wants to get high sales without sacrificing customer service
for new salespeople, since it provides more security than straight commission
Salary plus bonus
for achieving long-run objectives, such as selling large installations or product systems or achieving a desired customer mix

13. When to Use Different Combination Plans
Salary plus commission plus bonus
for seasonal sales and frequent inventory imbalances
when management wants to focus on certain products or customers
Commission plus bonus
for team-based efforts, in which some salespeople call on central buyers or buying committees

14. Combination Plan Advantages
greatest flexibility and control
provides security plus incentive
allows frequent, immediate reinforcement of desired behaviors

15. Combination Plan Disadvantages
can be complex and difficult to understand
can be expensive to administer
likely to fail if not carefully developed

16. Popularity of compensation plans
Product / service
St. salary
St. comm.
Combi.
Consumer products
19.9%
15.1%
64.9%
Consumer services
26.6
17.1
56.3
Ind. products
7.3
75.6
Ind. services
18.4
5.7
75.8
Office products
12.1
11.1
76.8
Office services
11.4
71.5

17. Factors influencing design of compensation
PLC- introduction, growth, maturity, decline
Demographic factors – (high risk, high gain), (fixed + variable), 35+ (stability, straight fixed salary)
Role of sales in marketing strategy of the company.
Competitive practices.

18. Which aspects of job to be rewarded
Sell a greater overall value
Focus on more profitable products
Push new products
Push selected seasonal items
Achieve higher degree of market penetration
Increase average order size
Open new accounts
Maintain existing business
Reduce customer T/O
Achieve full-line (range) selling
Increase number of calls made
Administrative discipline

19. Trends in Sales Compensation
tying sales compensation plan to productivity and retention
including customer satisfaction in the sales compensation plan
adjusting international sales compensation plans to meet local conditions
commission for sales managers

20. Motivation
Getting people to work towards the achievement of objectives. To help win commitment of sales team.
Need for giving motivation to sales persons-
Inherent nature of the job
Role conflict
Monotony in some situations
Working alone

21. Motivation – the Psychological Process
Individual’s choice to:
Initiate action on a certain task
Expend a certain amount of effort on that task
Persist in expending effort over a period of time
Expectancy Theory

22. The psychological determinants of motivation
7-22

23. Bases for Motivation
Expectancies – perceived linkages between more effort and improved performance
Instrumentalities – perceived relationship between improved performance and increased rewards
Valence for rewards – perceived intrinsic value of the rewards

24. Theories of Motivation
A H Maslow’s Hierarchy
Need hierarchy
A satisfied need is no longer a motivator but the next level gains in potency. Money ceases to be a long lasting motivator after first 2 levels.

25. Theories of Motivation
Fredrick Herzberg 2 factors theory
Absence of dissatisfaction is not satisfaction
1st three levels of Maslow are hygiene factor. Fulfilling of hygiene factors – neutral point (fair day’s work).

26. Theories of Motivation
David McClelland Achievement-Motivation theory – If a person keeps on thinking about how to accomplish something unusual & important, he has a high need for achievement.

27. (contd.) Apart from monitory incentives, non-monitory tools are
personal meeting,
clarity of job profile
sales contests, conferences, reinforcement, leadership style, freedom, recognition, persuasion etc.

28. Motivational Tools in a Motivational Mix
Financial
Non Financial
Financial compensation plan
Salary
Commission/Incentive
Bonus
Fringe benefits
Combination
Sales contests
Promotion
Sense of accomplishment
Personal growth opportunities
Recognition
Job security
Sales meetings
Sales training programmes
Job enrichment
Supervision
Financial compensation is the most widely used tool of motivation, as salespeople give highest value to it

29. Zig Ziglar on Motivation
Critics say that motivation does not stick. So neither does bathing. That’s why it is recommended everyday.

30. Personal Characteristics Affecting Motivation
Satisfaction with current rewards
Demographic variables
Job experience
Psychological variables
Personality traits
Attribution of meaning to performance

31. Model of the determinants of a salesperson’s performance

32. 6.3
Components of job
satisfaction

33. Role Conflict and Ambiguity
Inaccurate
Role Perceptions
Role Conflict
Role Perceptions
Role Ambiguity
Consequences
6-33

34. Conflict and Ambiguity
Different role perceptions mean different expectations
Role ambiguity plagues many salespeople in some aspect of their job
Salespeople often perceive conflict between company policies or expectations and customer demands

35. Psychological Consequences of Conflict and Ambiguity
Salesperson becomes the “person in the middle” with conflicting expectations
Perceived lack of necessary information causes loss of confidence
Perceived role conflict and role ambiguity affect job satisfaction

36. Behavioral Consequences of Conflict and Ambiguity
Dysfunctional behavior
Increased turnover
Satisfaction and performance correlate positively

37. Managing Conflict and Ambiguity
Experience reduces role conflict
Increased voice in role definition reduces role conflict
Input in evaluation standards reduces ambiguity
Close supervision reduces ambiguity
Close supervision can increase conflict

38. Sales Career Path

39. Career Stages and Motivation
Exploration – lack of assurance
Establishment – selection of selling as an occupation and desire for career success
Maintenance – seeking to retain present position, high status, and achievement
Disengagement – preparation for retirement and possible loss of self-identity

40. Career stages of salespersons
Exploration stage
Effective tools – good training, supportive supervision, recognition, acceptance in team, monetary rewards
Establishment stage
Effective tools – recognition, promotions
Maintenance stage
Effective tools – high status, respect from peers and superiors
Disengagement stage
Effective tools – neither high-order nor low-order rewards motivate them

41. Plateauing Early disengagement Causes Solutions
Lack of a clear career path
Boredom
Failure to manage the person effectively
Solutions
Clearly defined career path
Promotions within sales force
Job environment

42. Plateauing – on a lighter note
When you realize how little inefficient salesmen produce, you wonder what they will retire, or are they already retired and don’t know it?
It has been said that some inept salesmen die at the age of 30, but remain on the payroll and are not buried until they reach the age of 60.

43. Solutions for the Plateaued Salesperson
Talk with salesperson about problem
Discuss reasons and possible solutions
Conduct motivations sessions
Manage, lead and communicate
Cut / increase salesperson’s responsibilities
Assign to a new territory
Provide time off