Sales ch 8.ppt

Motivation and Reward System Management

Motivation and Reward System Management

Module Eight

Ingram LaForge Avila

Schwepker Jr. WilliamsProfessional Selling:A Trust-Based Approach

Module 8:Motivation and Reward System Management

Learning ObjectivesLearning Objectives

1. Explain the key components of motivation; intensity, persistence, and direction.

2. Explain the difference between compensation rewards and non-compensation rewards.

3. Describe the primary financial and non-financial compensation rewards available to salespeople.

4. Describe salary, commission, and combination pay plans in terms of their advantages and disadvantages.




Learning ObjectivesLearning Objectives

5. Explain the fundamental concepts in sales-expense reimbursement.

6. Discuss issues associated with sales contests, equal pay for equal work, team compensation, global compensation, and changing a reward system.

7. List the guidelines for motivating and rewarding salespeople.




MOTIVATING AND REWARDING:DRIVING PRODUCT MIX SALES AT FEDEX


Faced with two important problems, shipping and logistics giant FedEx determined that it needed a new compensation plan for its sales organization. First, field salespeople and sales managers were complaining about how confusing and unpredictable the pay program was. According to Mark Jennings, director of sales planning and sales variable compensation programs for FedEx, “We had tweaked our plan so many times that it became almost impossible for the salespeople to understand. We were constantly hearing complaints that the plan wasn’t paying out in a timely manner, and the unpredictability on commissions and bonuses was frustrating for the sales force.” Second, due to mergers and new product rollouts, FedEx’s 5,000-member sales force needed a new pay plan that would motivate them to grow the overall business, as well as grow a diverse product line (three products as opposed to one). To solve the second problem, the company developed and implemented a linked compensation design. Under this system, salespeople have to reach specific targets on each of the three product lines to achieve the highest bonuses and commissions.






Previously, a salesperson’s commission and bonuses would be determined by an average of sales across three lines. This resulted in the highest bonuses and commissions being paid without target sales levels being reached within each product line. In turn, the new compensation plan and communication about it helped solve the first problem. To clear up confusion regarding the compensation system, Jennings conducted a survey of the sales force to determine how salespeople would like to receive information about compensation plan changes. Having determined they wanted to learn about changes from their managers, Jennings trained managers on the new program and provided them with PowerPoint presentations to explain the plan to their salespeople. According to Jennings, “The adoption and comprehension of the new program was dramatically improved because of the delivery method.” Salespeople are now clear what targets need to be reached for each product in order to get the largest payout. The new compensation system appears to be a huge success. Jennings claims that he rarely hears any questions or complaints about the system anymore. “The pay plan is now almost self-explanatory and the predictability of the program has become a motivator for our salesforce. We now have a better focus on selling product mix, and people are actually motivated by the plan, rather than frustrated by it.”




1. What were the two primary problems FedEx faced regarding compensation?

Motivating and Rewarding: Driving Product Mix Sales at

FedEx




2. How did FedEx resolve the two problems?

Motivating and Rewarding: Driving Product Mix Sales at

FedEx




MotivationMotivation

The force within us that activates our behavior. It is a function of three distinct components, Intensity, Direction, and Persistence.

Intensity PersistenceDirection





Motivation - IntensityMotivation - Intensity

Intensity refers to the amount of mental and physical effort put forth by the salesperson.

PersistenceDirection


Intensity




Motivation - DirectionMotivation - Direction

The extent to which an individual determines and chooses efforts focused on a particular goal.






Motivation - PersistenceMotivation - Persistence

The extent to which the goal-directed effort is put forth over time.






Motivation: Intrinsic vs. ExtrinsicMotivation: Intrinsic vs. Extrinsic

When doing the job is inherently motivating

Intrinsic ExtrinsicWhen rewards

such as pay and formal

recognition act as motivators

Motivation




Two Basic Categories of RewardsTwo Basic Categories of Rewards

Compensation Rewards:

Those given in return for acceptable performance or effort. They can include nonfinancial compensation.

Non-Compensation Rewards:Those beneficial factors related to the work situation and well-being of each salesperson.




Optimal Sales Force Reward System Optimal Sales Force Reward System

1. Provides an acceptable ratio of costs and sales force output in volume, profit, or other objectives

2. Encourages specific activities consistent with the firm's overall, marketing, and sales force objectives and strategies

3. Attracts and retains competent salespeople, thereby enhancing long-term customer relationships

4. Allows the kind of adjustments that facilitate administration of the reward system.




Optimal Sales Force Reward System Optimal Sales Force Reward System




Types of Sales Force RewardsTypes of Sales Force Rewards

Intrinsic ExtrinsicMotivation

Pay

Promotion

Sense of Accomplishment

Personal Growth Opportunities Recognition

Job security




Financial Compensation:Straight Salary

Financial Compensation:Straight Salary

Advantages- Salaries are simple to administer- Planned earnings are easy to project.- Salaries can provide control over salespeople’s

activities, and reassignments are less of a problem.- Salaries are useful when substantial development

work is required.

Disadvantages- Salaries offer little incentive for better performance.- Salary compression could cause perceptions of

inequity among experienced salespeople.- Salaries represent fixed overhead.




Financial Compensation:Straight Commission

Financial Compensation:Straight Commission

Advantages- Income is linked directly to desired results.

- Straight commission plans offer cost-control benefits.

Disadvantages- Straight commission plans contribute little to

company loyalty.

- Problems may also arise if commissions are not limited by an earnings cap.




Straight Commission: Plan VariationsStraight Commission: Plan Variations

1. Commission base — volume or profitability

2. Commission rate — constant, progressive, or a combination

3. Commission splits — between two or more salespeople or between salespeople and the employer

4. Commission payout event — when the order is confirmed, shipped, billed, paid for, or some combination of these events




Straight Commission: RatesStraight Commission: Rates

Constant rates:– Rates that remain unchanged over the pay period.

Pay is linked directly to performance.

Progressive rates:– Rates that increase as salespeople reach pre-

specified targets.

Regressive rates:– Rates that decline at some predetermined point.




Financial Compensation:Performance Bonuses

Financial Compensation:Performance Bonuses

Advantages- Organization can direct emphasis to what it

considers important in the sales area.- Bonuses are particularly useful for tying rewards

to accomplishment of objectives.

Disadvantages- It may be difficult to determine a formula for

calculating bonus achievement if the objective is expressed in subjective terms.

- If salespeople do not fully support the established objective, they may not exert additional effort to accomplish the goal.







Financial Compensation:Combination Plans

Financial Compensation:Combination Plans

Advantages- Combination pay plans are flexible.- They are also useful when the skill levels of the

salesforce vary.- Combination pay plans are attractive to high-

potential but unproven candidates for sales jobs.

Disadvantages- Combination pay plans are more complex and

difficult to administer.- A common criticism of combination pay plans is

that they tend to produce too many salesforce objectives.




Nonfinancial CompensationNonfinancial Compensation

Opportunity for Promotion:– The ability to move up in an organization along one

or more career paths

Sense of Accomplishment:– The internal sense of satisfaction from successful

performance

– Sales managers should facilitate salespeople’s ability to feel this a sense of accomplishment





Opportunity for Personal Growth:– Access to programs that allow for personal

development (e.g., tuition reimbursement, leadership development seminars)

Recognition:– The informal or formal acknowledgement of a

desired accomplishment

Job Security:– A sense of being a desired employee that comes

from consistent exceptional performance








Sales ExpensesSales Expenses

1. A definition of which expenses are reimbursable

2. The establishment of expense budgets

3. The use of allowances for certain expenditures

4. Documentation of expenses to be reimbursed

Controls used in the sales expense reimbursement process include:




Sales ExpensesSales Expenses




Additional Issues in Managing Salesforce Reward Systems

Additional Issues in Managing Salesforce Reward Systems

• Sales Contests• Equal Pay• Team Compensation• Global Considerations• Changing the Reward System




Sales Expense Report Form.Sales Expense Report Form.




Sales Contests:Recommended Guidelines


1. Minimize potential motivation and morale problems by allowing multiple winners. Salespeople should compete against individual goals and be declared winners if those goals are met.

2. Recognize that contests will concentrate efforts in specific areas, often at the temporary neglect of other areas. Plan accordingly.






3. Consider the positive effects of including nonselling personnel in sales contests.

4. Use variety as a basic element of sales contests. Vary timing, duration, themes, and rewards.

5. Ensure that sales contest objectives are clear, realistically attainable, and quantifiable to allow performance assessment.




DOs of Global CompensationDOs of Global Compensation

• Do involve reps from key countries• Do allow local managers to decide the mix

between base and incentive pay• Do use consistent performance measures

(results paid for) and emphasis on each measure

• Do allow local countries flexibility and implementation

• Do use consistent and indication and training themes worldwide




DON’Ts of Global CompensationDON’Ts of Global Compensation

• Don’t assign the planned centrally and dictate to local countries

• Don’t create a similar framework for jobs with different responsibilities

• Don’t require consistency on every performance measure within the incentive plan

• Don’t assume cultural differences can be managed through the incentive plan

• Don’t perceive without the support of senior sales executives worldwide




Guidelines for Motivating and Rewarding Salespeople


1. Recruit and select salespeople whose personal motives match the requirements and rewards of the job.

2. Attempt to incorporate the individual needs of salespeople into motivational programs.

3. Use job design and redesign as motivational tools






4. Provide adequate job information and assure proper skill development for the sales force.

5. Concentrate on building the self-esteem of salespeople.

6. Take a proactive approach to seeking out motivational problems and sources of frustration in the salesforce.




THANKSTHANKS

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Sales ch 8.ppt

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