Module Eight
Motivation and Reward
System Management
Posters work
"Winners must have two things; definite goals and a burning desire to achieve them."
Motivation and Rewards
An Expert’s Viewpoint:
Optimus Solutions has a substantial motivation and reward
system. The sales reps receive a 10% - 25% commission
on every dollar of profit they generate. The more profit
sales reps generate, the more they earn. In addition, any
rep that reaches an aggressive, yet obtainable, annual
sales goal of $1 million during a 12-month period receives
a one-year lease on a Porsche 911.
Action
Motivation and Rewards
An Expert’s Viewpoint:
Result
The company’s system for motivating and rewarding its
salespeople has been very successful. Five people
qualified for the Porsche in 2000, and eight qualified in
2001. The company has grown to more than $100
million in revenues in just four years
Motivation
The force within us that activates our behavior. It
is a function of three distinct components,
Intensity, Direction, and Persistence.
Motivation
Intensity
Direction
Persistence
Motivation - Intensity
Intensity refers to the amount of mental and
physical effort put forth by the salesperson.
Motivation
Intensity
Direction
Persistence
Motivation - Direction
The extent to which an individual determines and
chooses efforts focused on a particular goal.
Motivation
Intensity
Direction
Persistence
Motivation - Persistence
The extent to which the goal-directed effort is
put forth over time.
Motivation
Intensity
Direction
Persistence
really motivate those people!
Does more effort lead to a
higher level of performance?
Why not?
Motivation: Intrinsic vs. Extrinsic
Intrinsic
Extrinsic
When doing
the job is
inherently
motivating
ever happen?
When rewards
such as pay
and formal
recognition act
as motivators
Motivation
Two Basic Categories of Rewards
Compensation rewards:
Those given in return for acceptable performance or
effort. They can include nonfinancial compensation
such as recognition and opportunities for growth and
promotion.
Noncompensation rewards:
Those beneficial factors related to the work situation
and well-being of each salesperson. Provide
adequate resources to do the job. Allowing the
people control over their own activities.
Optimal Sales Force Reward System
1.
2.
3.
4.
Provides an acceptable ratio of costs and sales
force output in volume, profit, or other objectives
Encourages specific activities consistent with the
firm's overall, marketing, and sales force objectives
and strategies
Attracts and retains competent salespeople,
thereby enhancing long-term customer
relationships
Allows the kind of adjustments that facilitate
administration of the reward system.
Types of Sales Force Rewards
Intrinsic
Sense of
Accomplishment
Extrinsic
Pay
Job security
Personal Growth
Opportunities
Promotion
Recognition
Motivation
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
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. 2/3 of firms with salary
plus bonus impose caps but only 1/3 of those using
salary plus commission plans do
Straight 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: 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 prespecified targets.
Regressive rates:
– Rates that decline at some predetermined point.
Outside reps and salespeople
Salespeople at Polyflex Film noted that after
hitting quota they were eligible to receive
an additional $20,000 on the next $1
million sold (depending on years of service
and base salary).
However, they were also aware that the
company’s outside manufacturer’s reps
would receive $50,000 for the same $1
million sale, and they didn’t need to hit any
sales quotas to receive it.
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
Advantages
- Combination pay plans are flexible.
- They are also useful when the skill levels of the
salesforce vary.
- Combination pay plans are attractive to highpotential 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 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
Nonfinancial Compensation
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 Expenses
Controls used in the sales expense
reimbursement process include:
1.
2.
3.
4.
A definition of which expenses are reimbursable
The establishment of expense budgets
The use of allowances for certain expenditures
Documentation of expenses to be reimbursed
Additional Issues in Managing
Salesforce Reward Systems
•
•
•
•
•
Sales Contests
Equal Pay
Team Compensation
Global Considerations
Changing the Reward System
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.
Sales Contests:
Recommended Guidelines
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.
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
Guidelines for Motivating and
Rewarding Salespeople
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.
Easy Check
Law firm Akin & Smith requires its employees to
check in and out from their desks at an electronic
finger-sensor. This enables the firm to know
exactly how long lunch breaks are for employees.
Such electronic tracking systems are becoming
increasingly common. Advocates say this
prevents employees from padding their work
sheets and helps identify the few truly slothful
workers. But critics claim that such intense
monitoring of on-site presence can actually
interfere with productivity, leaving less room for
creativity and individual differences in the way
people get their work done.
Costs v Benefits
Sales people in 2002
Level
Total Base salary Bonus + comm
• Executive. $136k
$90k
$46k
• Top perform $140k
$74k
$66k
• Mid-level
$ 83k
$50k
$33k
• Low-level
$ 56k
$37k
$19k
Average for all reps
•
$97k
$59k
Sales & Marketing Management May 2003
$38k
Rewarding salespeople
• I've found salespeople fall into three categories. First,
there are the hotshots -- the super salespeople who
have all the answers, who claim to know more about
your industry than you do, and who are impossible to
teach or control. They thrive on commissions and don't
want to be part of anyone's team.
• The second group consists of entrepreneurs, that is,
salespeople who really want to be in business for
themselves. They are also motivated by sales
commissions, because they like to be independent and
they aren't planning to stick around anyway. You may be
able to convert some of them, but the majority will leave
eventually and start their own companies. That is their
destiny, and there's nothing you can do about it.
Rewarding salespeople
• Then there's the third group, which is the
largest -- people who do sales for a living simply
because they like the work and they're good at
it. They have no hidden agenda. They are
motivated by the same things that motivate other
employees. They just happen to sell. These
people don't need to be on commission. Yes,
they want to be compensated fairly, but they also
want what most other people want -- to be part
of a team. They want to belong.
• Inc, May 2003 | By: Norm Brodsky
Rewarding salespeople
• So we start new salespeople with what they're
used to: salary and commission. After two years,
we know whom we want to keep. I'll then go to
the person and say, "Listen, you've been here
two years. We want you to be here forever. We'll
buy out your commission and raise your salary,
so you won't lose any income. In return, you'll
get stability. Do you think you're going to have a
good year? I'm willing to guarantee that you'll
have a good year. And if you really do have a
good year, I'll guarantee that next year will be
even better. Inc, May 2003 | By: Norm Brodsky