1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (1) 9 Motivation and Reward System...

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Copyright © 2000 by Harcourt, Inc. All rights reserved. (1)

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Module 9

Motivation and Reward System Motivation and Reward System ManagementManagement

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Motivation and Reward SystemsMotivation and Reward Systems• Motivation - Three Dimensions:

– Intensity• The amount of mental and physical effort put forth

by the salesperson

– Persistence• The salesperson's choice to expend effort over a

period of time

– Direction• The choice by salespeople of where their efforts will

be spent

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Motivation and Reward SystemsMotivation and Reward Systems

• Motivation - Three Dimensions

• The motivation task is incomplete unless salespeople's efforts are channeled in directions consistent with the overall strategic role of the salesforce within the firm– Self-motivation is the ideal

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Motivation and Reward SystemsMotivation and Reward Systems Intrinsic vs. Extrinsic Motivation

• Intrinsically Motivated– When doing the job is inherently rewarding

• Extrinsically Motivated– When rewards such as pay and formal

recognition act as motivators

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Motivation and Reward SystemsMotivation and Reward Systems Reward System Management

involves the selection and utilization of organizational rewards to direct salespeople's behavior toward the

attainment of organizational objectives

• Organizational Rewards – Those that are given in return for acceptable

performance or effort; financial or nonfinancial

• Non-Compensation Rewards – Factors related to the work situation and well-

being of each salesperson

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The Optimal Salesforce Reward The Optimal Salesforce Reward System System

• Balance of Organization, Individual, and Customer Needs

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• From the Organization's Perspective– Provide an acceptable ratio of costs and salesforce

output in volume, profit, or other objectives– Encourage specific activities consistent with the

firm's overall, marketing, and salesforce objectives and strategies

– Attract and retain competent salespeople, thereby enhancing long-term customer relationships

– Allow the kind of adjustments that facilitate administration of the reward system.

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• From the Organization's Perspective

• From Salesperson's Perspective– Expect to be treated equitably

– Desire stability with incentives

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• From the Organization's Perspective

• From Salesperson's Perspective

• From Customer's Perspective– Response to high pressure sales techniques

– Require increased service/quality

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Types of Salesforce RewardsTypes of Salesforce RewardsSix Most Popular Rewards

(Exhibit 9.1)

Pay

Promotion

Sense of Accomplishment

Personal Growth Opportunities

Recognition

Job Security

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Financial CompensationFinancial Compensation

• Straight Salary– Advantages of Salary Plans

• Easy to administer• Fixed costs facilitate the budgeting process• Enhanced customer loyalty• More control over nonselling activities

– Disadvantages of Salary Plans• No incentive to improve performance• Often based on seniority, not merit• A burden of firms in declining industries

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Financial CompensationFinancial Compensation• Straight Salary• Straight Commission

– 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 – Advantages of Commission Plans

• Income linked to results, therefore an incentive to improve results• Costs reduced during slow sales periods• Less operation capital required

– Disadvantages of Commission Plans• Less salesperson loyalty to company• Less control of nonselling activities

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Financial CompensationFinancial Compensation

• Straight Salary

• Straight Commission

• Performance Bonuses– Group or Individual– Typically for short-term objectives

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Financial CompensationFinancial Compensation• Straight Salary• Straight Commission• Performance Bonuses• Combination Plans (Salary plus Incentive)

– Financial-Compensation Mix– Advantages of Combination Plans

• Flexibility allows frequent reward of desired behavior• May attract high-potential recruits

– Disadvantages of Combination Plans• Complex to administer• May encourage crisis-oriented objectives

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Nonfinancial CompensationNonfinancial Compensation

• Opportunity for Promotion

• Sense of Accomplishment

• Opportunity for Personal Growth

• Recognition

• Job Security

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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

Expense Account Padding

Controls used in the sales-expense reimbursement process include:

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9 Additional Issues in Additional Issues in Managing Salesforce Managing Salesforce

Reward SystemsReward Systems• Sales Contests

• Equal Pay

• Team Compensation

• Global Compensation

• Changing the Reward System

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Guidelines for Motivating and Guidelines for Motivating and Rewarding SalespeopleRewarding 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. Provide adequate job information and assure proper skill development for the salesforce.

4. Use job design and redesign as motivational tools.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.

1 Copyright © 2000 by Harcourt, Inc. All rights reserved. (1) 9 Motivation and Reward System...

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