EC

Motivation and Reward
System Management

Module Eight

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Learning Objectives

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.

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Schwepker Jr.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Learning Objectives

Explain the fundamental concepts in sales-expense 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.

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Schwepker Jr.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Setting the Stage

• Think about something you are motivated to do.
• What motivates you to do this?

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Motivation – Model 1

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

Intensity

Persistence

Direction

Motivation

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Motivation - Intensity

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

Motivation

Intensity

Persistence

Direction

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Motivation - Direction

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

Direction

Motivation

Intensity

Persistence

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Motivation - Persistence

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

Persistence

Motivation

Intensity

Direction

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Motivation Components – Model 2

Level of Effort

Satisfaction

Level of

Performance

Reward

Attainment

Job Task

Expectancy

Instrumentality

Valence

for reward

Motiviation

Personal, Organizational,

environmental variables

Personal, Organizational,

environmental variables

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Motivation: Intrinsic vs. Extrinsic

When doing the job is inherently motivating

Intrinsic

Extrinsic

When rewards such as pay and formal recognition act as motivators

Motivation

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Types of Sales Force Rewards

Intrinsic

Extrinsic

Motivation

Pay

Promotion

Sense of Accomplishment

Personal Growth Opportunities

Recognition

Job security

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Optimal Sales Force Reward System

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.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Straight Commission: Plan Variations

Commission base — volume or profitability

Commission rate — constant, progressive, or a combination

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

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

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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 pre-specified targets.

Regressive rates:

• Rates that decline at some predetermined point.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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.

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Schwepker Jr.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Sales Expenses

• 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

Controls used in the sales expense reimbursement process include:

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Additional Issues in Managing Salesforce Reward Systems

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

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Schwepker Jr.

Williams

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Guidelines for Motivating and Rewarding Salespeople

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

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

Use job design and redesign as motivational tools

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Schwepker Jr.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Guidelines for Motivating and Rewarding Salespeople

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

Concentrate on building the self-esteem of salespeople.

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

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Schwepker Jr.

Williams

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Sales Contests:
Recommended Guidelines

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

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Schwepker Jr.

Williams

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Sales Contests:
Recommended Guidelines

• Consider the positive effects of including nonselling personnel in sales contests.
  
• Use variety as a basic element of sales contests. Vary timing, duration, themes, and rewards.
  
• Ensure that sales contest objectives are clear, realistically attainable, and quantifiable to allow performance assessment.

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Sales Contest – Ethical Scenario

• Review “Prontco Sales Management Ethical Scenario”
• Discussion

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Preparation for Next Class

• Review “Prontco Sales Management Ethical Scenario”
• Review “Sales Contest Scenario”
• Be ready to discuss

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

WA3 Assignment (due 10/10)

• Review “Sales Contests: Recommended Guidelines” lecture material.
• In teams, design a sales contest (for PSLS4710) students.
• Competition among teams for extra credit points reward(s).
• Contest to support ESSPS (sales program) … see www.sales.utoledo.edu
• Sales contest to run from 10/15/2012 – 11/30/2012

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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

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Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

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