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08.IngramSM8Ch8.pptxMotivation and Reward System Management
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
1
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.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
2
Learning Objectives
Explain how to determine an appropriate financial compensation level.
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.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
3
Motivation
The force within us that activates our behavior.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
4
Motivation
Intensity
Direction
Persistence
Motivation – Intensity –
Intensity refers to the amount of mental and physical effort put forth by the salesperson.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
5
Motivation
Intensity
Direction
Persistence
Motivation – Direction –
The extent to which an individual determines and chooses efforts focused on a particular goal.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
6
Motivation
Intensity
Direction
Persistence
Motivation – Persistence –
The extent to which the goal-directed effort is put forth over time.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
7
Motivation
Intensity
Direction
Persistence
Motivation: Intrinsic vs. Extrinsic
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
8
2
Intrinsic
Extrinsic
When doing the job is inherently motivating
When rewards such as pay and formal recognition act as motivators
Two Basic Categories of Rewards
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
9
4
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
Provides an acceptable ratio of costs and sales force output in volume, profit, or other objectives. The salesforce must deliver value equal to or greater than the costs of doing so.
Encourages specific activities consistent with the firm's overall, marketing, and sales force objectives and strategies.
Attract and retain competent salespeople, thereby enhancing long-term customer relationships.
Reward salesperson performance based on measurable criteria that are easy to comprehend.
Allows the kind of adjustments that facilitate administration of the reward system. A clearly stated, reasonably flexible plan assists in the administration of the plan.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
10
6
Types of Sales Force Rewards
Pay
Job Security
Sense of Accomplishment
Personal Growth Opportunities
Recognition
Promotion
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
11
7
Financial Compensation: Straight Salary
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
12
8
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
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
13
8
Advantages
Strong incentive to perform
Disadvantages
Straight commission plans contribute little to company loyalty.
Straight commission plans offer cost-control benefits.
Problems may also arise if commissions are not limited by an earnings cap.
Income is linked directly to desired results.
Salary vs. Commission
The proportion of commission to total pay should be higher when: sales are driven more by the individual salesperson’s skills, efforts, and initiative than by other factors beyond the salesperson’s direct control (e.g., price, quality, company reputation, sales support).
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
14
Straight Commission: Plan Variations
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
15
8
Commission Base
Commission Rate
Commission Splits
Commission Payout Event
Volume or profitability
Constant, progressive, or a combination
Between two or more salespeople or between salespeople and the employer
When the order is confirmed, shipped, billed, paid for, or some combination of these events
Straight Commission: Rates
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
16
8
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
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
17
8
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
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
18
8
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 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
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
19
9
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
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
20
9
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:
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
21
10
Additional Issues in Managing Salesforce Reward Systems
Sales Contests
Equal Pay
Team Compensation
Global Considerations
Changing the Reward System
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
22
11
Sales Contests: Recommended Guidelines
Minimize potential motivation and morale problems by allowing multiple winners (do not set low expectations just so everyone can win. 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.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
23
11
Sales Contests: Recommended Guidelines
Consider the positive effects of including nonselling personnel in sales contests to help build teamwork.
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 and measurement of ROI.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
24
11
Sales Contests: Recommended Guidelines
Prior to the contest, publicize it to build interest and excitement.
Provide both public (e.g., at a special event or banquet) and private (e.g., personal letter from management) recognition to the winners
Encourage the winners to share their wining strategies with the salesforce.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
25
11
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 in implementation
Do use consistent communication and training themes worldwide
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
26
11
DON’Ts of Global Compensation
Don’t design the plan 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 proceed without the support of senior sales executives worldwide
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
27
11
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.
Provide adequate job information and ensure proper skill development for the salesforce.
Use job design and redesign as motivational tools
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
28
12
Guidelines for Motivating and Rewarding Salespeople
Concentrate on building the self-esteem of salespeople.
Take a proactive approach to seeking out motivational problems and sources of frustration in the salesforce.
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
29
12
Other Factors for Motivating and Rewarding Salespeople
Chapter 7: Motivation and Reward System Management
Ingram
LaForge
Avila
Schwepker Jr.
Williams
Sales Management: Analysis and Decision Making
30
12
Value Recruitment and Selection
Provide Information and Develop Skills
Attend to Job Design
Incorporate Individual Needs
Build Self-Esteem
Take a Proactive Approach
