Module Eight
Motivation and Reward
System Management
Learning Objectives
1.
2.
3.
4.
Explain the key components of motivation;
intensity, persistence, and direction.
Explain the difference between compensation
rewards and non-compensation rewards.
Describe the primary financial and non-financial
compensation rewards available to salespeople.
Describe salary, commission, and combination
pay plans in terms of their advantages and
disadvantages.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Learning Objectives
5.
6.
7.
Explain the fundamental concepts in salesexpense reimbursement.
Discuss issues associated with sales contests,
equal pay for equal work, team compensation,
global compensation, and changing a reward
system.
List the guidelines for motivating and rewarding
salespeople.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Setting the Stage
Motivating and Rewarding: Driving
Product Mix Sales at FedEx
1. What were the two primary problems
FedEx faced regarding compensation?
2. How did FedEx resolve the two
problems?
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Motivation
The force within us that activates our behavior.
It is a function of three distinct components,
Intensity, Direction, and Persistence.
Motivation
Intensity
Professional Selling:
A Trust-Based Approach
Direction
Persistence
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Motivation - Intensity
Intensity refers to the amount of mental and
physical effort put forth by the salesperson.
Motivation
Intensity
Professional Selling:
A Trust-Based Approach
Direction
Persistence
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Motivation - Direction
The extent to which an individual determines
and chooses efforts focused on a particular
goal.
Motivation
Intensity
Professional Selling:
A Trust-Based Approach
Direction
Persistence
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Motivation - Persistence
The extent to which the goal-directed effort is
put forth over time.
Motivation
Intensity
Professional Selling:
A Trust-Based Approach
Direction
Persistence
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Motivation: Intrinsic vs. Extrinsic
Motivation
Intrinsic
When doing
the job is
inherently
motivating
Professional Selling:
A Trust-Based Approach
Extrinsic
When rewards
such as pay
and formal
recognition act
as motivators
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Two 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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Types of Sales Force Rewards
Motivation
Intrinsic
Sense of
Accomplishment
Personal Growth
Opportunities
Professional Selling:
A Trust-Based Approach
Extrinsic
Pay
Job
security
Promotion
Recognition
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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 experiences salespeople.
- Salaries represent fixed overhead.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
Additional Issues in Managing
Salesforce Reward Systems
•
•
•
•
•
Professional Selling:
A Trust-Based Approach
Sales Contests
Equal Pay
Team Compensation
Global Considerations
Changing the Reward System
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
DOs 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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
DON’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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams
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.
Professional Selling:
A Trust-Based Approach
Module 8:
Motivation and Reward System Management
Ingram
LaForge Avila
Schwepker Jr. Williams