THE IMPACT OF COMMISSION AS AN INCENTIVE ON THE MOTIVATION OF CREDIT VENDORS: A CASE OF SAFARICOM COMPANY, KENYA LIMITED

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RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF BACHELOR OF COMMERCE (HUMAN RESOURCES MANAGEMENT OPTION), DEPARTMENT OF COMMERCE SCHOOL OF BUSINESS KABARAK UNIVERSITY NOVEMBER 2008

DECLARATION This research proposal is our original work and has not been presented for the award of a degree in any other university/institution or for any other purpose. Signature .. Date

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This proposal has been submitted for examination with my approval as the university supervisor. Signature .. DR. ZAKAYO Lecturer Date

ACKNOWLEDGEMENT This project could never been achieved if not for the guidance and support of the following person: Foremost, a lot of gratitude to our supervisor Dr Zakayo lecturer in the School of Business, Kabarak University for his guidance and support and availability throughout the study. Same regards also goes to Safaricom (K) Ltd and its sales people in Nakuru municipality for their invaluable support during the data collection period. Also a lot of gratitude goes to our parents for paying our school fees and support through the course and also Kabarak University for giving us an opportunity to enroll in Bachelor of Commerce. Lastly we cannot forget our dear friends, classmates and everyone whose encouragement, positive critics and ideas made this project work a success. Your concern and love inspired us in a big way and our lives are enriched through you all. May the love and blessings of our almighty God abide with you.

DEDICATION This proposal is dedicated to our families, relatives, sponsor(s) and all well-wishers who have worked tirelessly to ensure that our requirements are met.

ABSTRACT
There is a need to know what motivates the sales force. Studies have been done on what motivates the sales force and it has been found out that different incentives affect the performance of salespeople. Safaricom Ltd is the leading mobile network operator in East Africa. This study was conducted through a case study organization, Safaricom (K) Ltd. The main objective of the study was to assess the effects of commission as an incentive on the motivation of salesperson in Safaricom (K) Ltd. The study uses primary data obtained through the questionnaires provided to Safaricom (K) Ltd sales people Nakuru Municipality. Chapter one gives the background information about Safaricom (K) Ltd, problem statement, objectives of the study stating on what the research intends to achieve, research questions to guide the researchers, significance of the research. Chapter two entails study done in the past on sales incentive plan, and procedure on designing of commission programs and how they affect sales people performance. It also includes summary and gaps to be filled by the study and the conceptual framework which indicates the variables relationship. Chapter three gives a preamble to the research design and methodology to be adopted, the research design, the target population of 150 sales people of Safaricom (K) Ltd in Nakuru Municipality employees, where the sample of 45 employees was obtained using convenience sampling. Data was collected using questionnaire method and analyzed using descriptive statistics. Chapter four gives the results and analysis of the data presented by use of both quantitative and qualitative analysis in form of frequency tables, pie charts and bar charts. The findings show that the commissions paid had differential effects on factors of motivation on the sales people. I.e. improved efficiency and effectiveness due to the companys reputation, increased competition from other firms, no timely change in the organization products, job insecurity, not satisfied with present salary packages and their ability to feel motivated to wok had not improved. Some factors of motivation were influenced positively, others negatively. Chapter five presents in depth discussion on the findings and gives recommendation on how Safaricom (K) Ltd can manage their sales force employees, sales people perceptions and attitude on the commission paid, improve employee motivation to enhance high performance of the sales force and also provides conclusions on the study, critiques of this type of study and suggestions for future research.

TABLE OF CONTENTS

DECLARATION............................................................................................................................................2 ACKNOWLEDGEMENT.............................................................................................................................3 DEDICATION................................................................................................................................................4 TABLE OF CONTENTS...............................................................................................................................6 DEFINITION OF TERMS AND VARIABLES..........................................................................................8 CHAPTER ONE.............................................................................................................................................9 INTRODUCTION..........................................................................................................................................9 1.1 BACKGROUND TO THE STUDY.......................................................................................................................9 1.2 STATEMENT OF THE PROBLEM....................................................................................................................10 1.3 RESEARCH OBJECTIVES.............................................................................................................................11

1.3.1 General Objective.........................................................................................11 1.3.2 Specific Objectives..........................................................................................11

1.4 RESEARCH QUESTIONS..............................................................................................................................11 1.5 SIGNIFICANCE OF THE STUDY...............................................................................................................11 1.6 SCOPE OF THE STUDY...............................................................................................................................12 1.7 LIMITATIONS OF THE STUDY.......................................................................................................................12 CHAPTER TWO..........................................................................................................................................13 LITERATURE REVIEW............................................................................................................................13 2.1 DEFINITION OF COMMISSION......................................................................................................................13 2.2 COMMISSION AS AN INCENTIVE...................................................................................................................13 2.3 WHY USE INCENTIVES? .............................................................................................................................13 2.4 UNIQUE NEEDS OF SALES INCENTIVE PLANS.................................................................................................14 2.5 SALES INCENTIVE PLANS...........................................................................................................................14 2.6 STRAIGHT SALARY PLAN..........................................................................................................................15 2.7 COMMISSION PLAN...................................................................................................................................16 2.8 COMBINATION PLAN..................................................................................................................................17 2.9 COMMISSION AS A MOTIVATION TOOL...........................................................................................................19 SUMMARY AND GAPS TO BE FILLED BY THE STUDY.............................................................................................20 CONCEPTUAL FRAMEWORK..............................................................................................................................20 CHAPTER THREE......................................................................................................................................22 RESEARCH DESIGN AND METHODOLOGY......................................................................................22 3.1 INTRODUCTION........................................................................................................................................22 3.2 RESEARCH DESIGN..................................................................................................................................22 3.3 TARGET POPULATION................................................................................................................................22 3.5 DATA COLLECTION PROCEDURES...............................................................................................................23 3.6 DATA ANALYSIS PROCEDURES..................................................................................................................23 CHAPTER FOUR........................................................................................................................................24 RESEARCH FINDINGS AND ANALYSIS..............................................................................................24 4.0 INTRODUCTION. .......................................................................................................................................24

4.1 DATA ANALYSIS .....................................................................................................................................24 4.2 RESULTS AND FINDINGS...........................................................................................................................24 4.3: TYPES OF COMMISSIONS............................................................................................................................29 4.4: IMPACT OF COMMISSION ON INDIVIDUAL PERFORMANCE..................................................................................39 SUMMARY OF THE FINDINGS............................................................................................................54 CHAPTER FIVE..........................................................................................................................................55 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS...........................................................55 5.1 EMPLOYEE PERCEPTIONS REGARDING COMMISSION PAID.................................................................................55 5.2 IMPACT OF COMMISSION ON INDIVIDUAL PERFORMANCE..................................................................................57 5.3 THE EFFECT OF COMMISSION AS A MOTIVATOR ON THE SALESPEOPLE................................................................58 5.4 CRITIQUE AND SUGGESTIONS FOR FURTHER RESEARCH .................................................................................60 5.5 CONCLUSION............................................................................................................................................61 REFERENCES.............................................................................................................................................62 APPENDIX 1: QUESTIONAIRE...............................................................................................................63 APPENDIX I: PROPOSED BUDGET.......................................................................................................70 APPENDIX II: WORK SCHEDULE.........................................................................................................71

DEFINITION OF TERMS AND VARIABLES Credit Vendor Commission incentive pay calculated as a percentage of sales Sales Incentive Plan (SIP) is a business tool used to motivate and

compensate a sales people to meet goals Straight Salary the income of new sales compensation paid to protect people for a period of time while they

are building up their sales clientele. Combination plan compensation plan for both individual and group sales bonus Straight commission an incentive system widely used in sales

jobs which is computed as a percentage of sales in units or money Employee Incentives programs used to motivate, retain and reward loyal and efficient employees Motivation inner state that energizes activities or moves and that directs or channels behavior of a person toward goal.

CHAPTER ONE
INTRODUCTION 1.1 Background to the Study Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc of the United Kingdom, the world's largest telecommunication company, acquired a 40% stake and management responsibility for the company. Telkom Kenya as a result owns a 60% stake in the company. As of May 17, 2006, Mr. Michael Joseph is the CEO. Recent reports appearing in the cross section of the press indicate that Vodafone Plc of UK only owns 35% and the remaining 5% is owned by a little known company, Mobitelea Ventures Limited. The reports have caused a stir which led to the summoning of its CEO Michael Joseph to appear before the PIC "Public Investment Committee", during which he denied knowing who the other shareholder is. It is widely believed that the former regime arm twisted Vodafone to shed off the 5% as a kickback to high ranking officials in the regime. Safaricom's initial public offering of stock, on the Nairobi Stock Exchange, closed in mid April 2008. Safaricom employs over 1500 people mainly stationed in Nairobi and other big cities like Mombasa, Kisumu, Nakuru and Eldoret in which it manages retail outlets. Currently, it has nationwide dealerships to ensure customers across the country have access to its products and services. As of October 2007, Safaricom boasts a subscriber base of approximately 8 million, most of whom are in the major cities - Nairobi, Mombasa, Kisumu and Nakuru. Its headquarters is located in Safaricom House, Waiyaki Way in Westlands, Nairobi. It has other offices in the city center in I&M building, Kenyatta Avenue ,on Kimathi Street and at Shankardass House - next to Kenya Cinema Moi Avenue. Its main rival is Zain Kenya. Safaricom has charitable functions where it helps the less fortunate in the society mostly through the Safaricom Foundation. (www.wikipedia.org/wiki/safaricom) Studies have shown that employees and management alike are dissatisfied with their compensation plans. Most employees see no connection between their performance and

their pay. And many managers find that their plans fail to motivate their staffs and that they end up overpaying poor performers. It seems to be getting more difficult to pay according to performance. It's especially tricky to reward individual successes because integrated team efforts have become more essential in meeting customers' needs. Many customers now make their buying decisions based on a vendor's overall capabilities, not because of a key individual's efforts. As a result, the piece-rate approach to compensation, born in the era of mass-production and standard products and services, doesn't work today. Paying by the sale doesn't coincide with trying to meet customers' expectations regarding quality, variety, unusual requests, and a total package. Traditional incentive plans also hinder pay-for-performance because they try to do something for everyone. They award across-the-board annual cost-of-living raises; they use performance appraisal systems that end up rating everyone a B+ or better; they apply a merit increase index with a narrow range such as 3% to 5%. These practices discourage high performance. ( www.merfield.com) Motivating a sales force can have long-lasting after effects. Participants become more engaged with their work, which is reflected in every customer contact, improving customer experience and loyalty. Further, sales team members who are engaged are likely to stay longer with their company, which creates a more experienced sales force. And when you include a travel component in your sales force motivation program, you get the added benefit of enabling top performers to share ideas and strategies.( www.maritz.com) 1.2 Statement of the Problem Todays business environment demands a new breed of incentive programs. Many companies have already discovered that standard incentives of just a few years ago just dont cut it with the customers as well as the workers in our continuously changing economy. The choice of incentives has to widely appeal to clients and employees wants or desires in order to measure up and get results that the organization is looking for. Evaluation of different theories of motivation will develop a pragmatic and practical outlook for motivating people. An employee can be taken as motivated if his behavior is marked by such positive characteristics as high productivity, better discipline, and higher punctuality. Indiscipline, turnover and absenteeism can be taken as signs of lack of motivation.

The Problem prompting this study to be carried out is that at the time of this study Safaricom (K) Ltd has many sales people since it captures a big market share in the industry in Kenya. Also because it pays its sales people on commission basis, the effect of commission as an incentive tool to motivate its sales force is not known since no written report (or very limited study) has been conducted on the same. Hence this study aims to find out the impact of commission on motivation of salespeople in Safaricom (K) Ltd, Nakuru Municipality. 1.3 Research Objectives

1.3.1 General Objective The general objective of this study is to assess the effects of commission as an incentive on the motivation of salesperson in Safaricom 1.3.2 Specific Objectives However, the study will specifically seek to: 1. To find out the different types of commissions available at Safaricom (K) Ltd. 2. To find out the effects of commissions on the performance of salespeople in Safaricom (K) Ltd. 3. To establish whether the commission plan used motivates the sales people in Safaricom (K) Ltd. 1.4 Research Questions 1. What are the types of commissions paid in Safaricom (K) Ltd? 2. What are the effects of commissions on the performance of sales people in Safaricom (K) Ltd? 3. Are the sales people in Safaricom (K) Ltd motivated as a result of the commission plans?

1.5 Significance of the study This study will be of significance to Safaricom (K) Ltd as an employer in making decision concerning its sales force performance. Since sales force is the most important factor of organization prosperity, there is a need to take into consideration the issues that affect sales people performance. By motivating salespeople, a manager creates forward-

focusing momentum that centers on a trip, a service or a merchandise reward. Youll help people establish a tangible goal one that offers each sales person something to look forward to and focus on in the face of frustrations or obstacles. (www.maritz.com). This project will be available at Safaricom (K) Ltd Nakuru Branch Academicians and other researchers, who may be inspired by this project, may conduct further research into other areas, such as of competition on sales people performance at Safaricom (K) Ltd. It will also assist policy makers to draw up effective policies in relation to compensation. 1.6 Scope of the Study

This research will be carried out at the Safaricom (K) Ltd Nakuru Municipality. This is because in the Safaricom (K) Ltd Nakuru Municipality it is more convenient for the researchers in terms of transport and also it forms a good representative of the sample needed for this study. 1.7 Limitations of the Study

Some of the possible hindrances to this research can be lack of enough finances, short time frame and none response. Also because of anxiety about the process, respondents may not be willing to give information because they fear rebuke from the organization. They may think the data collected from them may be used against them by competitors of the organization. The researchers can mitigate these limitations by seeking donor support from Kabarak University and personal savings. Also try to maximize on time frame and probe the respondents deeply into their feelings on the effects of the commission paid by the organization and their work motivation by explaining the benefits of the research to them and also assure no disclosure of respondents identity.

CHAPTER TWO LITERATURE REVIEW

2.1 Definition of Commission. Commissions are incentive pay calculated as a percentage of sales. (Gerbert Barry, 2007) A fee charged by a broker or agent for his/her service in facilitating a transaction, such as the buying or selling of securities or real estate. In the case of securities trading, brokers can be split into two broad categories depending on the commissions they charge. Discount brokers charge relatively low commissions, but provide no services beyond executing trades. Full service brokers charge higher commissions, but provide research and investment advisory services. (www.investorword.com) A fixed payment at regular intervals for services, esp. when clerical or professional. (www.your dictionary .com/salary) Commission (remuneration), a form of payment to an agent for services rendered. Commission may also be used for a type of contract for performance or creation of a specific work (www.wikipedia.com)

2.2 Commission as an incentive The word incentives bring up a variety of images in most people's minds. From "cash back" at the dealership to sales bonuses for getting more people to buy your products most people immediately go to the "sales" arena as if the only place incentives have a place is when pushing something.(www.fistfultalent.com)

2.3 Why use incentives? Here are some compelling reasons why you should consider using incentives: Knowledgeable and attentive employees account for 80% of the reasons consumers feel satisfied, according to a PNC Bank Corp. survey. Fewer than one in four American workers is working at full potential; half of all workers do no more than directly asked, and 75% of employees say they could be more effective in their jobs, according to the Public Agenda forum.

70% of unhappy customers abandon vendors because of poor service, according to the Forum 75%, according to the Loyalty Corp. Effect by Frederick Reichheld. A 5% increase in customer retention can increase lifetime profits from a customer by Reward and retention efforts can produce big dollar returns. Thats what the Incentive Federation found in a 2003 survey asking hundreds of businesses using incentive travel promotions 'Does Incentive Travel Improve Sales Productivity and By How Much?' What then can we conclude from these survey results? The bottom line is loyal customers and productive employees are the foundation of a successful business. But to continuously retain and motivate people can be a difficult challenge. Vacation and travel incentives, a proven motivator, will achieve this purpose (www.daniweb.com)

2.4 Unique needs of Sales Incentive Plans. Incentive systems for sales people are complicated by the wide differences in the type of sales jobs. Salespersons performance may be measured by the dollar volume off their sales. Other measures are the ability to promote new products or services and to provide various forms of customer service and assistance that do not provide immediate sales revenue.( Bohlander George,2000). Employers are increasingly link sales commission to strategic non-volume-based measures. Procter and Gamble measures and rewards its sales people (which it calls customer consultants) commissions based on their success in helping customers lower their inventories. At Siebel systems about 40% of each sales persons incentive is based on factors like customers reported satisfaction with the service. ( Dessler Gary, 2005)

2.5 Sales Incentive Plans Sales compensation plans typically rely heavily on incentives in the form of sales commissions. However, some salespeople get straight salaries most receive a combination of salary of salary and commissions. (Dessler Gary, 2005) A Sales Incentive Plan (SIP) is a business tool used to motivate and compensate a sales professional (or Sales Agent) to meet goals or metrics over a specific period of time,

usually broken into a plan for a fiscal quarter or fiscal year. A SIP is very similar to a commission plan, however a SIP can incorporate sales metrics other than goods sold(or value of goods sold), which is traditionally how a commission plan is derived. Sales metrics used in a SIP are typically in the form of sales quotas (sometimes referred to as POS Shipments), new business opportunities and/or MBOs (Management by Objective independent action of the sales professional and is usually used in conjunction with a base salary. SIPs are used to incentives sales professionals where total dollars sold is not a precise measure of sales productivity. This is usually due to the complexity or length of the sales process or where a sale is completed not by an individual but by a team of people, each contributing unique skills to the sales process. SIPs are used to encourage and compensate each member of the sales team as he/she contributes to the team's ability to sell. It is not uncommon for the members of such teams to be located in different physical locations (often working in different countries) and for the product introduction to happen in one location and the purchase of such a product to occur in another location. Sales Incentive plans are best managed by sales incentive management software package rather than using Excel. These programs are the most flexible way to manage sales incentive reporting and commission plan payments. It improves sales by increasing engagement, focusing performance and rewarding clients. Sales are improved by increasing engagement, focusing performance and rewarding results. Sales incentive management software packages solve headaches by accounting for the complex and changing relationships between sales people, managers, territories, products, and customers for multiple role-based plans over different time periods. (www.en.wikipedia/salary_commossion)

2.6 Straight Salary Plan Salary only approach is useful when serving and retaining existing accounts is being emphasized more than generating new sales and accounts. This approach is used to protect the income of new sales representatives for a period of time while they are building up their sales clientele. It is also used when both new and existing sales representatives have to spend considerate time learning about and selling customers new products and service lines.( Jackson H., 2000)

Straight Salary plan is a compensation plan which permits sales people to be paid for performing various duties that are not reflected immediately in their sales volume. (Bohlander G., 2000) Straight salary make particular sense when the main job involves account servicing such as developing and executing product training, programs for a customers sales force or participating in national and local trade shows. The main disadvantage is that pay isnt proportionate to results. This can constrict sales and de motivate potentially high performing salespeople. ( Dessler G., 2005) An organization that wants salespeople to concentrate on listening to customer and building relationships might want to attract a different kind of salesperson by offering more of the pay in the form of a salary. ( Gerhart Barry, 2007)

2.7

Commission Plan

Sales Commission - A variation on piece rates and bonuses is the payment of commission, or pay calculated as a percentage of sales. (Gerhart , 2007) Under commission plan sales people have the greatest incentive and there is a tendency to attract high performing salespeople who see that effect clearly leads to rewards. Commission plans pay salespeople for results. Sales costs are proportionate to sales rather than fixed and the companys sales costs are low. Sales performance like any other performance is a product of not just motivation but of ability too. If the person hasnt the sales skills then commissions wont produce sales. ( Dessler G., 2005) Straight commission is an incentive system widely used in sales jobs which is computed as a percentage of sales in units or money. Commissions are integrated into the pay given to sales workers in three common ways: Straight commission, salary plus commission and bonuses. In the straight commission system, a sales representative receives a percentage of the value of sales made, disadvantage of this is that sales representatives must sell to earn. This disadvantage can be especially pronounced when the product or service sold is one that requires a long lead time before purchasing decisions are made. Human Resource

perspective of commission is that only plans lead to unethical behavior of sales employees. For these reasons just mentioned, some employer can use draw system, in which sales representatives can draw advance payments against future commission checks. From the employers side, one of the risks in a draw system is that future commissions may not be large enough to repay the draw especially for a new or marginally successful salesperson. In addition, arrangements must be made for repayment of drawn amounts if an individual leaves organization before earning the draw in commission. ( Jackson H. John, 2000) According to Bohlander 2000, straight commission plan is a compensation plan based upon a % of sales for example, organizations that pay a straight commission based on total volume may use the following simple formulas: Total cash compensation = 2% * total volume OR Total cash compensation = 2% * total volume up to quota + 4% *vol. over quota. Research provides further insights into the pros and cons of sales commission. In this study, paying salespersons under maximizing contingent rewards conditions in other words where commissions accounted for 100% of pay was the situation for the highest turnover. Turnover was much lower when salespersons were paid combination of a base plus commissions. These findings suggested that 100% commission can drive higher sales by focusing strong willed salespersons on maximizing sales. ( Dessler G., 2005) However the straight commission plan is limited by the following: 1 2 3 4 Emphasis is on sales volume rather than on profits Customer service after the sale is likely to be neglected Earnings tend to fluctuate widely between good and poor periods of business and turnover of trained sales employees tend to increase in poor periods. Sales people are tempted to grant price concessions. (Bohlander G., 2000)

2.8 Combination plan Some sales organizations combine both individual and group sales bonus programs. In these programs a portion of the sales incentive is lined to attainment of group sales goals.

This approach encourages cooperation and team work for the sales persons to work together. ( Shashi K., 2004) Most companies pay salespeople a combination of salary and commissions, usually with a sizable salary component. Early studies suggested that the popular salary/commission split was 80% base salary and 20% incentives with 70/30 and 60/40 splits being the 2 nd and 3rd arrangements. An example can help illustrate the complexities of the typical combination plan. In company, the following 3-step formula is applies Step 1: Sales vol. up to $ 18,000 a month. Base salary plus 7% of gross profit plus 0.5% of gross sales. Step 2: Sales volume from $18,000 to $25,000 a month. Base salary plus 9% of gross profit plus 0.5% of gross sales. Step 3: over $25,000 a month base salary plus 10% of gross profit plus 0.5% of gross sales. Combination plan have pros and cons. They give salespeople a floor on their earnings, let the company specify what salary component is not tied to performance. However, the salary component is not tied to performance, so the employer is obviously trading away some incentive value. ( Dessler G., 2005) The following advantages indicate why the combination salary and commission plan is widely used: 1 The right kind of incentive compensation, if linked to salary the right propotion, has most of the advantage of both straight salary and straight commission forms of compensation. 2 3 4 A salary-plus-incentive compensation plan offers greater design flexibility and can therefore be more readily set up to maximize company profits. The plan can develop the most favorable ratio of selling expense to sales. The field sales force can be motivated to achieve specific company marketing objectives in addition to sales volume. ( Bohlander G., 2000)

2.9 Commission as a motivation tool Employee Incentives - To motivate, retain and reward loyal and efficient employees . (www.daniweb.com) You cannot teach a man anything new. You can only help him discover it within himself. Motive is a latin word motus which means move; causing to move: something within a person (need idea or emotion) that incites him to action. Traditional methods of motivation have become obsolete and ineffective, with the advancement in technology and industry. Understanding basic human need and aspiration is a pre- requisite before we begin any motivating effort. Evaluation of different theories of motivation will develop a pragmatic and practical outlook for motivating people. Motivation has been defined by Berelson and Steiner as an inner state that energizes activities or moves and that directs or channels behavior toward goal. An employee can be taken as motivated if his behavior is marked by such positive characteristics as high productivity, better discipline, and higher punctuality. Indiscipline, turnover and absenteeism can be taken as signs of lack of motivation. The motivated employee is an asset to the organization for which he works. The organization having motivated employees has much greater scope and is ready for adaptation, innovation, change and expansion. Motivation is a psychological process; it is a need satisfying process. Motivation is a function of several factors such as authority, power, and status and perks. We can identify a person as motivated person from his behavior of commitment, competence responsibility and sincerity. Motivation may be termed as the managerial functions of helping employees realize their motives. According to Victor H. Vroom motivation is the process of initiating and directing behavior( Shashi K., 2004) At lower levels of Maslow's hierarchy of needs, such as Physiological needs, money is a motivator, however it tends to have a motivating effect on staff that lasts only for a short period (in accordance with Herzberg's two-factor model of motivation). At higher levels of the hierarchy, praise, respect, recognition, empowerment and a sense of belonging are far more powerful motivators than money, as both Abraham Maslow's theory of motivation and Douglas McGregor's Theory X and theory Y (pertaining to the theory of leadership) demonstrate.

Maslow has money at the lowest level of the hierarchy and shows other needs are better motivators to staff. McGregor places money in his Theory X category and feels it is a poor motivator. Praise and recognition are placed in the Theory Y category and are considered stronger motivators than money.

Motivated employees always look for better ways to do a job. Motivated employees are more quality oriented. Motivated workers are more productive.

The average workplace is about midway between the extremes of high threat and high opportunity. Motivation by threat is a dead-end strategy, and naturally staff is more attracted to the opportunity side of the motivation curve than the threat side.

Summary and Gaps to be filled by the Study A key conclusion of this literature review is that the success or failure of an organization depends on the sales force. A well-planned and -managed incentive plan, which the sales people perceive as having been fairly and humanely administered, promotes trust and faith in management and in the future of the organization among these sales people and empowers them to provide improved service. The commission paid effects is of particular interest to the organization since they will be faced with a sales force at least partly motivated and dedicated to the organization. Effects that occur at the individual level are of special interest for this research, since its objective is to assess the effects of commission as an incentive on the motivation of salesperson in Safaricom (K) Ltd. Conceptual Framework The model of the study is determined in figure 2.1. It shows the independent variables; the types of commission plans, their effects on performance of sales people, commission as an incentive. The dependent variable is motivation of sales people. If the commission paid is perceived as being fair the result can be increased performance in terms of employee innovativeness, discipline, efficiency among others. Also if the commission payment is perceived to be unfairly conducted by the sales people it can result in reduced performance, lack of motivation, job insecurity and lack of morale and cooperation among others.

Figure 2:1: Conceptual Framework Affects

Types of commissions used

Commission effects on performance

Commission as an incentive tool

(Independent Variables) Source Researchers (2009)

(Dependent Variable)

Motivation of sales people

CHAPTER THREE RESEARCH DESIGN AND METHODOLOGY

3.1

Introduction

This chapter gives a preamble to the methodology adopted and used in this study; it describes the study design, target population, sample design, data collection procedure (instruments), and data analysis method.

3.2

Research Design

A descriptive research design was used in this study. According to Sharma 2002 descriptive statistics refers to the analysis and synthesis of data so that better description of the situation can be made and thereby promoting better understanding of facts .This design is considered appropriate in this study since it describes what is happening at present and the researchers only report what is happening as pertains the effects of commission as an incentive on the motivation of sales people at Safaricom (K) Ltd.

3.3

Target Population

The population of study comprised of Safaricom (K) Ltd sales people at Nakuru Municipality. Safaricom (K) Ltd has a sales force of 150 at Nakuru municipality whom this study targeted. A total of 45 respondents were used to collect data concerning this research. The researcher targeted this population because it is whom commissions is paid in form of compensation in their sales job and thus represented the actual area of interest in this study.

3.4

Sampling Design

For any meaningful and representative research, a sample of at least 10% is representative enough (Mugenda and Mugenda, 1999). In this study the researchers convenience sampling procedure so as to obtain the sample of the study. This method allows the researchers to obtain samples that are representatives of the population since it is too large to research on every element of it. It saves time, money and gives the researcher accurate solutions and answers in short time. Thus from the target population of 150 sales people, a sample of 45 was used.

3.5

Data Collection Procedures

The procedure used to collect data included questionnaires which were distributed to the respondents and time was given to them to complete them. Follow ups was also made to ensure success of the procedure. The main tool was questionnaires which consisted of open-ended questions and a few closed- ended questions. Secondary data was also used especially to determine issues concerning the variable relations.

3.6

Data Analysis Procedures

All data collected, was checked for completeness, coded and tabulated. It was then analyzed using descriptive statistics which included frequency tables and percentages which enable the researcher to draw conclusions and inferences drawn from the sample results to the population. Quantitative data was used to present the results in the form of percentage tables, pie charts and bar charts according to the objectives and research questions of the study.

CHAPTER FOUR RESEARCH FINDINGS AND ANALYSIS 4.0 Introduction.

This chapter presents the results of the data collected and further discusses these findings. It is divided into quantitative and qualitative analysis corresponding with the sections found in the questionnaires. The tables and figures in this chapter are derived from the findings of the study. Permission to do the research was obtained from the sales people of Safaricom (K) Ltd. In most cases, access was granted and the relevant sales people were also approached to fill in questionnaire and identify other selected sales people. The participants were then requested to fill in the questionnaire. The participants who did not have enough time out of work were allowed to complete the questionnaire at home. The instrument used in the research was pre-tested to improve their validity and reliability basing on the objectives of the study. Questionnaires were edited as soon as they were received to ensure completeness. Filling in questionnaires was voluntary and participants were assured of anonymity and confidentiality.

4.1 Data Analysis Preliminary analysis procedures of cleaning, frequencies, consistency checks, and debugging were done on the data obtained. This further improved the quality of the data collected. Further and detailed analysis was done using discriminant analysis. Only 44 / 45 questionnaires given out were returned, thus the analysis was done using 44 questionnaires received from the respondents. The next section shows the results.

4.2

Results and Findings

The results are presented beginning with the presentation of sample characteristics as shown in Table 4.1. Table 1: Demographic Information about the Sample Gender (N=44) Factors Category Frequency % Gender Male Female 24 20 55 45

Source: Researchers (2009) Table 1 indicates that the respondents was well constituted since it included 555 male and 45% female Figure 2: Demographic Information about the Sample Gender

Source: Researchers (2009) Table 2: Demographic Information about the Sample Age (N=44) Factors Category Frequency % Age 20-29 30-39 40-49 50-59 Not indicated 18 10 10 6 0 41 23 23 13 0

Source: Researchers (2009) Table 2 indicates that 41% of the respondents were aged between 20-29 years old, 23% aged between 30-39 and 40-49 and 13% were aged between 50-59 years old Figure 3: Demographic Information about the Sample Age

Source: Researchers (2009)

Table 3: Demographic Information about the Sample Education (N=44) Factors Category Frequency % Education Primary school High school College University 5 22 14 3 11 50 32 7

Source: Researchers (2009)

Table 3 indicates that 11% of the respondents had attained primary school level of education, 50% had attained high school education, 32% been to college level and 7% had university degrees Figure 4: Demographic Information about the Sample Education

Source: Researchers (2009) Table 4: Demographic Information about the Sample (Marital status) (N=44) Factors Category Frequency % Marital status Married Single Divorced Not indicated 24 18 2 0 55 41 4 0

Source: Research Data (2009) Table 4 indicates that 55% of the respondents were married, 41% were single and 4% were divorced Figure 5: Demographic Information about the Sample (Marital status)

Source: Research Data (2009) Table 5: Demographic Information about the Sample Seniority (N=44) Factors Category Frequency % Seniority Less or equal to 3 years 3- 5 years 5- 10 years More than 10 years 22 12 10 0 50 27 23 0

Source: Researchers (2009) Table 5 indicates that 50% of the respondents had been sales people of Safaricom (K) Ltd for less than or equal to 3 years, 27% for 3-5 years and 23% for 5-10 years Figure 6: Demographic Information about the Sample Seniority

Source: Researchers (2009)

4.3: Types of commissions Table 6: Respondents perception on the commissions paid (N=44) Statement Great Some Average Little No extent extent (%) extent extent (%) (%) (%) (%) To reduce the number of sales people 10 44 20 10 16 Remove unqualified people in the sales 16 28 20 16 20 job To establish effective structure for 42 34 10 4 0 service delivery To cut down expenses 12 10 8 34 36 To motivate its work force to work 40 26 20 10 4 harder and retain them To ensure fair compensation for 42 40 6 8 4 amount of products sold To remove poor performers for 26 20 26 10 18 performance improvement To create employment 32 30 30 8 0 To create room for better working 42 46 12 0 0 conditions To ensure hard work and dedication to 50 50 0 0 0 duty Source: Research Data (2009) Table 6 indicates that 54% of the respondents felt that the commissions paid was meant to reduce the number of sales people, 26% felt it was to a little or no extent and 20% were average on the issue

Figure 7: Respondents perception on the commissions paid- reduce the number of sales people

Source: Research Data (2009) Table 6 indicates that 76% of the respondents agreed that the commission paid to sales people by the organization were meant to remove unqualified people from the sales job while 4% felt it was to a little or no extent while 10% were average on the issue Figure 8: Respondents perception on the commissions paid- to remove unqualified people from the sales job

Source: Research Data (2009) Table 6 indicates that 44% of the respondents agreed that the commission paid to sales people by the organization were meant to establish effective structure for service delivery while 36% felt it was to a little or no extent while 20% were average on the issue

Figure 9: Respondents perception on the commissions paid- to establish effective structure for service delivery

Source: Research Data (2009) Table 6 indicates that 22% of the respondents agreed that the commission paid to sales people by the organization were meant to cut down expenses while 8% felt it was to a little or no extent while 70% were average on the issue Figure 10: Respondents perception on the commissions paid- to cut down expenses

Source: Research Data (2009) Table 6 indicates that 66% of the respondents agreed that the commission paid to sales people by the organization were meant to motivate its work force to work harder and retain them while 14% felt it was to a little or no extent while 20% were average on the issue

Figure 11: Respondents perception on the commissions paid- to motivate its work force to work harder and retain them

Source: Research Data (2009) Table 6 indicates that 82% of the respondents agreed that the commission paid to sales people by the organization were meant to ensure fair compensation for amount of products sold while 12% felt it was to a little or no extent while 6% were average on the issue Figure 12: Respondents perception on the commissions paid- to ensure fair compensation for amount of products sold

Source: Research Data (2009) Table 6 indicates that 46% of the respondents agreed that the commission paid to sales people by the organization were meant to remove poor performers for performance improvement while 28% felt it was to a little or no extent while 26% were average on the issue

Figure 13: Respondents perception on the commissions paid- to remove poor performers for performance improvement

Source: Research Data (2009) Table 6 indicates that 62% of the respondents agreed that the commission paid to sales people by the organization were meant to create employment while 30% felt it was to a little or no extent while 8% were average on the issue Figure 14: Respondents perception on the commissions paid- to create employment

Source: Research Data (2009) Table 6 indicates that 88% of the respondents agreed that the commission paid to sales people by the organization were meant to create room for better working conditions while 12% were average on the issue

Figure 15: Respondents perception on the commissions paid- to create room for better working conditions

Source: Research Data (2009) Table 6 indicates that all the respondents agreed that the commission paid to sales people by the organization were meant to ensure hard work and dedication to duty Figure 15: Respondents perception on the commissions paid- to ensure hard work and dedication to duty

Source: Research Data (2009)

Table 8: Respondent perception on the types of commissions paid organization (N=44) Statement Great Some Average Little extent extent extent Sales Incentive Plan to motivate and 32 40 10 4 compensate sales people to meet goals over a specific period of time Straight Salary is used when serving and 0 0 0 50 retaining existing accounts and to protect the income of new sales representatives for a period of time while they are building up their sales clientele. Sales Commission - A variation on piece 50 40 0 10 rates and bonuses is the payment of commission, or pay calculated as a percentage of sales salary plus commission 0 10 0 40 Salary plus commission and bonuses. 0 10 24 34 0 20 12 40 20 8

in the No extent 4 50

50 50 24 4

Combination plan for both individual 12 and group sales bonus programs Retainer at first months then 42 commission only

Table 8 indicates that 72% of the respondents agreed that the organization used Sales Incentive Plan aimed to motivate and compensate sales people to meet goals over a specific period of time in its commission arrangement while 10% were average on the issue and 8% felt it was to a little or no extent Figure 16: Respondent perception on the types of commissions paid in the organization- Sales Incentive Plan

Source: Research Data (2009)

Table 8 indicates that all the respondents that the organization did not use used Straight Salary plan in compensating its sales people which is usually meant for serving and retaining existing accounts and to protect the income of new sales representatives for a period of time while they are building up their sales clientele. Figure 17: Respondent perception on the types of commissions paid in the organization- Straight Salary plan

Source: Research Data (2009) Table 8 indicates that 90% of the respondents agreed that the organization used Sales Commission which is a variation on piece rates and bonuses or pay calculated as a percentage of sales in remunerating its sales people while 10 felt it was to a little extent Figure 18: Respondent perception on the types of commissions paid in the organization- Sales Commission

Source: Research Data (2009) Table 8 indicates that 10% of the respondents agreed that the organization used salary plus commission in remunerating its sales people while 90% felt it was to a little extent this is probably due to sales manager who got this kind of compensation against the other sales people

Figure 19: Respondent perception on the types of commissions paid in the organization- salary plus commission

Source: Research Data (2009) Table 8 indicates that 10% of the respondents agreed that the organization used Salary plus commission and bonuses in remunerating its sales people while 90% felt it was to a little extent this is probably due to sales manager who got this kind of compensation against the other sales people Figure 20: Respondent perception on the types of commissions paid in the organization- Salary plus commission and bonuses

Source: Research Data (2009) Table 8 indicates that 36% of the respondents agreed that the organization used Combination plan for both individual and group sales bonus programs in remunerating its sales people while 20% were average on the issue and 44% felt it was to a little or no extent

Figure 21: Respondent perception on the types of commissions paid in the organization- Combination plan

Source: Research Data (2009) Table 8 indicates that 76% of the respondents agreed that the organization used to pay a retainer salary at first months of the sales job then start paying commission only after the duration in remunerating its sales people while 12% were average on the issue and 12% felt it was to a little or no extent Figure 22: Respondent perception on the types of commissions paid in the organization- Retainer salary at first months

Source: Research Data (2009)

4.4: Impact of commission on individual performance Table 9: Impact of commission paid has affected on individual performance (N=44) Effect Greatly Reduced No Improved Greatly Reduced to some effect / improved / (%) extent (%) (%) increased increased (%) (%) Your job performance generally 8 4 30 28 30 Punctuality to workplace 12 10 24 20 34 Number of sales people remaining on duty all the time Sales people working for two or more competing suppliers of Safaricom (K) Ltd Efficiency and effectiveness Personal responsibility personal discipline personal accountability Loyalty to your boss Source: Research Data (2009) 10 12 0 10 14 12 10 10 16 14 10 16 18 24 16 20 36 16 10 16 30 24 26 20 34 30 24 20 40 26 30 30 30 30 16

Table 9 indicates that 58% of the respondents felt that the commission paid had increased their job performance generally while 30% felt that the commission had no effect to their job performance and 12% felt that it had actually reduced their job performance Figure 23: Impact of commission paid has affected on individual performance- job performance generally

Source: Research Data (2009)

Table 9 indicates that 54% of the respondents felt that the commission paid had increased their Punctuality to workplace while 24% felt that the commission had no effect to Punctuality to workplace and 22% felt that it had actually reduced their Punctuality to workplace Figure 24: Impact of commission paid has affected on individual performancePunctuality to workplace

Source: Research Data (2009) Table 9 indicates that 64% of the respondents felt that the commission paid had increased the Number of sales people remaining on duty all the time while 16% felt that the commission had no effect and 20% felt that it had actually reduced the Number of sales people remaining on duty all the time Figure 25: Impact of commission paid has affected on individual performanceNumber of sales people remaining on duty all the time

Source: Research Data (2009) Table 9 indicates that 52% of the respondents felt that the commission paid had increased the Number of Sales people working for two or more competing firms of Safaricom (K) Ltd while 20% felt that the commission had no effect and 28% felt that it had actually reduced the Sales people working for two or more competing firms of Safaricom (K) Ltd

Figure 26: Impact of commission paid has affected on individual performanceNumber of Sales people working for two or more competing firms of Safaricom (K) Ltd

Source: Research Data (2009) Table 9 indicates that 50% of the respondents felt that the commission paid had increased their Efficiency and effectiveness while 36% felt that the commission had no effect and 14% felt that it had actually reduced their Efficiency and effectiveness Figure 27: Impact of commission paid has affected on individual performanceEfficiency and effectiveness

Source: Research Data (2009) Table 9 indicates that 64% of the respondents felt that the commission paid had increased their Personal responsibility while 16% felt that the commission had no effect and 20% felt that it had actually reduced their Personal responsibility

Figure 28: Impact of commission paid has affected on individual performancePersonal responsibility

Source: Research Data (2009) Table 9 indicates that 60% of the respondents felt that the commission paid had increased their personal discipline while 10% felt that the commission had no effect and 30% felt that it had actually reduced their personal discipline Figure 29: Impact of commission paid has affected on individual performancepersonal discipline

Source: Research Data (2009) Table 9 indicates that 54% of the respondents felt that the commission paid had increased their personal accountability while 16% felt that the commission had no effect and 30% felt that it had actually reduced their personal accountability

Figure 30: Impact of commission paid has affected on individual performancepersonal accountability

Source: Research Data (2009) Table 9 indicates that 36% of the respondents felt that the commission paid had increased their Loyalty to your boss while 30% felt that the commission had no effect and 34% felt that it had actually reduced their Loyalty to your boss Figure 31: Impact of commission paid has affected on individual performanceLoyalty to your boss

Source: Research Data (2009)

4.5: The effect of commission as a motivator on the salespeople. Table 10: Respondents perception on how different motivators affect their performance (N=44) Statement Great Some Average Little No extent extent extent extent Salary Bonus pay Awards Commissions 45 40 50 24 25 40 25 20 30 20 25 20 0 0 0 16 0 0 0 20

Source: Research Data (2009) Table 10 indicates that 70% of the respondents agreed that they were to great extent motivated by salary while 30% were average on the issue
Figure 32: Respondents perception on how different motivators affect their performance-

salary

Source: Research Data (2009) Table 10 indicates that 80% of the respondents agreed that they were to great extent motivated by Bonus pay while 20% were average on the issue

Figure 33: Respondents perception on how different motivators affect their performanceBonus pay

Source: Research Data (2009) Table 10 indicates that 75% of the respondents agreed that they were to great extent motivated by Awards given for outstanding performance while 25% were average on the issue
Figure 34: Respondents perception on how different motivators affect their performanceAwards given

Source: Research Data (2009) Table 10 indicates that 44% of the respondents agreed that they were to great extent motivated by Commissions while 20% were average on the issue and 36% felt it was to a little or no extent

Figure 35: Respondents perception on how different motivators affect their performanceCommissions

Source: Research Data (2009) Table 11: Perception on effects of commission on respondent work life (N=44) Effect Greatly Reduced No Improved Reduced to some effect / (%) extent (%) (%) increased (%) Job motivation 10 8 12 40 Morale and teamwork 15 20 15 25 Job satisfaction 20 10 10 30 Organization commitment 32 28 10 15 Efficiency and effectiveness 0 14 36 20 Personal responsibility 10 10 16 34 personal discipline 14 16 10 30 personal accountability 12 18 16 24 Loyalty to your Organization 10 24 30 20 Source: Research Data (2009)

Greatly improved / increased (%) 30 25 20 15 30 30 30 30 16

Table 11 indicates that 70% of the respondents felt that their wok life had improved in terms of job motivation due to commission paid, while 12% agreed there was no effect on the issue and 18% felt it had reduced their job motivation

Figure 36: Perception on effects of commission on respondent work life- job motivation

Source: Research Data (2009) Table 11 indicates that 50% of the respondents felt that their wok life had improved in terms of Morale and teamwork due to commission paid, while 15% agreed there was no effect on the issue and 35% felt it had reduced their Morale and teamwork Figure 37: Perception on effects of commission on respondent work life- Morale and teamwork

Source: Research Data (2009) Table 11 indicates that 50% of the respondents felt that their wok life had improved in terms of Job satisfaction due to commission paid, while 10% agreed there was no effect on the issue and 30% felt it had reduced their Job satisfaction

Figure 38: Perception on effects of commission on respondent work life- Job satisfaction

Source: Research Data (2009) Table 11 indicates that 30% of the respondents felt that their wok life had improved in terms of Organization commitment due to commission paid, while 10% agreed there was no effect on the issue and 60% felt it had reduced their Organization commitment Figure 39: Perception on effects of commission on respondent work lifeOrganization commitment

Source: Research Data (2009) Table 11 indicates that 50% of the respondents felt that their wok life had improved in terms of Efficiency and effectiveness due to commission paid, while 36% agreed there was no effect on the issue and 14% felt it had reduced their Efficiency and effectiveness

Figure 40: Perception on effects of commission on respondent work life- Efficiency and effectiveness

Source: Research Data (2009) Table 11 indicates that 64% of the respondents felt that their wok life had improved in terms of Personal responsibility due to commission paid, while 16% agreed there was no effect on the issue and 20% felt it had reduced their Personal responsibility Figure 41: Perception on effects of commission on respondent work life- Personal responsibility

Source: Research Data (2009) Table 11 indicates that 60% of the respondents felt that their wok life had improved in terms of personal discipline due to commission paid, while 10% agreed there was no effect on the issue and 30% felt it had reduced their personal discipline

Figure 42: Perception on effects of commission on respondent work life- personal discipline

Source: Research Data (2009) Table 11 indicates that 54% of the respondents felt that their wok life had improved in terms of personal accountability due to commission paid, while 16% agreed there was no effect on the issue and 30% felt it had reduced their personal accountability Figure 43: Perception on effects of commission on respondent work life- personal accountability

Source: Research Data (2009) Table 11 indicates that 36% of the respondents felt that their wok life had improved in terms of Loyalty to their Organization due to commission paid, while 30% agreed there was no effect on the issue and 34% felt it had reduced their Loyalty to their Organization

Figure 44: Perception on effects of commission on respondent work life- Loyalty to their Organization

Source: Research Data (2009)

Table 12: Safaricom (K) Ltd pay- package need for revision (N=44) Variable Category Frequency of % responses Sales people response to if Safaricom (K) ltd pay package needs further revision Yes No Source: Research Data (2009) Table 12 indicates that 90% of the respondents felt that the Safaricom (K) ltd pay package needs further revision while 10% felt it was adequate probably it may be the sales managers perception against the sales people 40 4 90 10

Figure 45: Safaricom (K) Ltd pay- package need for revision

Source: Research Data (2009) Table 13: Factors that Impede the Performance of the sales people in Safaricom (K) Ltd (N=44) Factor Yes (%) No (%) Inadequate funding to look for new clients 80 20 Lack of motivation Unrealistic high targets that lead to frustration lack of advertisement tools like brochures to give potential customers Economic depression facing the market No job security Poor training of the sales people by the organization 66 60 50 65 82 75 34 40 50 35 18 25 30 15 35 45 32 28 88 22

Financial constraints, bureaucracy, lack of transparency 70 in the organization Competition from other firms who offer more attractive products Poor management style e.g. grievance handling procedure Low morale due to poor products development Lack of confidence by customers due to poor performance of the companys shares Only working for survival Long delays of salary and commission payments Constant interruption of the companys network e.g. 85 65 55 68 72 12 78

Mpesa service Source: Research Data (2009) Table 13 indicates that 80% of the respondents felt that factors that impede performance of their sales job was due to inadequate funding to look for new clients, 66% felt it was due to Lack of motivation, 60% due to Unrealistic high targets that lead to frustration, 50% due to lack of advertisement tools like brochures to give potential customers, 65% felt it was due to Economic depression facing the market, 82% felt it was due to no job security, 75% due to Poor training of the sales people by the organization, 70% due to Financial constraints, bureaucracy, lack of transparency in the organization, 85% due to Competition from other firms who offer more attractive products, 65% due to Poor management style e.g. grievance handling procedure, 55% due to Low morale due to poor products development, 68% due to Lack of confidence by customers due to poor performance of the companys shares, 72% Only working for survival, 12% felt it was due to Long delays of salary and commission payments and 78% felt it was due to Constant interruption of the companys network e.g. Mpesa service Figure 46: Factors that Impede the Performance of the sales people in Safaricom (K) Ltd

Source: Research Data (2009) SUMMARY OF THE FINDINGS In summary, Safaricom (K) Ltd commission paid on its sales force as incentive had differential effects on factors of performance. It was associated with increased number of sales people working concurrent with other competitors of Safaricom (K) Ltd. The majority of the participants reported no change in job attitudes, and a reasonable number of participants reported it had brought job insecurity. Participants reported that they were not satisfied with present salary packages and their ability to feel motivated to wok had not improved. Next chapter. Some factors of performance were influenced positively, others negatively. Discussion on the results, findings and recommendations are provided in the

CHAPTER FIVE
DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS This research was done to establish Safaricom (K) Ltd different types of commissions it pays to its salespeople, to find out the effects of commissions on the performance of salespeople and to establish whether the commission plan used motivates the sales people. The results indicated that commission as an incentive had both positive and negative effects on the factors in question. The results tend to show that the effects of commission as an incentive on the sales force depend of the factors under consideration. In addition, present research considered both short and long-term effects of commission paid. 5.1 Employee Perceptions regarding commission paid The discovery that commission paid had negative as well as positive effects among sales people of Safaricom (K) Ltd was supported by employee perceptions of the importance

of the commission plan process. This research found out that commission as an incentive was perceived differently by the respondents. Some saw it as negative, while others had positive perceptions about it. Majority felt that it was meant to reduce the number of sales people, Remove unqualified people in the sales job, establish effective structure for service delivery, cut down expenses, remove poor performers for performance improvement, while others were positive in that they felt it was motivate its work force to work harder and retain them, ensure fair compensation for amount of products sold, create employment, create room for better working conditions and to ensure hard work and dedication to duty. The fact that negative perceptions stem from the way the commission plan was designed and implemented is unquestionable. This is because the commission programmes used by the organization include Sales Incentive Plan which is used to motivate and compensate sales people to meet goals over a specific period of time. This time bound plan has disadvantage in that it has an element of uncertainty especially after that period expires, hence job insecurity creeps in. also the organization doesnt offer Straight Salary which is used when serving and retaining existing accounts and to protect the income of new sales representatives for a period of time while they are building up their sales clientele. This has an advantage in that majority of the sales people need some capital at the beginning of the job to cater for e.g. travelling expenses. Lack of this plan in designing the commission by the organization demoralizes the new sales people hence affect their perception of the organization. The organization uses Sales Commission which is calculated as a percentage of sales. This type has a big disadvantage in that at the beginning for one to make good sales, a sales person need to have a wide customer base which takes time to build. Thus at the beginning one earns little commission due to poor sales. Also the use of salary plus commission and also Salary plus commission and bonuses should be encouraged because this applies to the sales managers only in the organization who reap the commission through the sales force in the region he is representing. This often de-motivates the sales people to work harder as they perceive their effort benefit the managers. Another method in calculation of commission paid should be Combination plan for both individual and group sales bonus programs. This will encourage group sales and through

team work it improves the morale of the team members. Another method used is retainer at first months then commission only which is a good plan although only for a short period. This is because the sales people in this organization sale services to people and also through one prospect to another they are also marketing the organization. This marketing aspect is not compensated because the commission is based on sales volume alone. The recommendation here is that the retainer pay should remain constant in the working life of the sales person

Since such negative perceptions about commission paid are likely to have a serious impact on the performance of the sales person, the sales Managers should be sensitive to employee perceptions and work on them through seminars, counseling and public relations. Managers should study the negative perceptions with the view of changing them. These perceptions should also be noted by those who want to an effective pay package for sales people. Normally, tactics in handling compensation plans are important here. These include the involvement of the stakeholders in the process of formulating these compensation schemes, and giving information. Participation in decision-making ensures commitment to the remuneration package offered and forms a good incentive for their performance. The stakeholders should be given a chance to suggest how pay plans should be implemented. The rationale and criteria of commission plans to be used as incentive to sales person should be explained early in the process through improved public relations. This is how organizational motivation and effectiveness can be better managed. 5.2 Impact of commission on individual performance This has to do with how the commissions paid have affected individual performance. Majority of the respondents agreed that their job performance had improved generally although a big percentage felt that the commission had no effect at all and even others felt that it had actually reduced. This indicates the system is not fully motivating the work force it is meant to and a lot needs to be done. Others felt a slight improvement in Punctuality to workplace, remaining on duty all the time, Efficiency and effectiveness, Personal responsibility, personal discipline, personal accountability and Loyalty to your

boss though majority reported no effect at all on these work factors due to the commissions paid. Majority had even diversified their work into selling even competitors products to boost the compensation amount. This is not a welcome exercise that should continue. The company should start on compensation re-design. These exercises should offer compensation plans that are enriched, with appropriate load, and that even the sales job should have chances of promotion built into them. These will be motivating to the workers. The current commission plan was done without a clear policy on remuneration and motivational effect. Normally, research and evaluation exercises should have been done first, followed by restructuring and then implementation of the commission plan. Safaricom (K) Ltd should embark on operative and management training. Particularly, the sales managers should be trained in motivational procedures, performance appraisal and other aspects of human resource management. Results regarding organizational goals, mission and values are also supportive of compensation plans. The improvement in knowledge about these factors is likely to be translated into motivated work force and a fair compensation plan. 5.3 The effect of commission as a motivator on the salespeople. Regarding motivational factors majority of the respondent agreed that bonus pay was a big motivator for them followed by salary, then award and finally commissions. Commission being rated the least motivator is a clear indication on its effects on the occupational attitudes since it was the one implemented by this organization. Another aspect of quality of work life assessed was job insecurity. A high percentage of respondents reported job insecurity. This was due to the fact that the targets set are too high and unrealistic. The rationale and criteria for target set were not clear. Personnel decisions were largely subjective since they dont involve the sales people in setting the sales targets. In addition, the public relations function, as suggested earlier, should be improved to explain the importance of sales force in the organization and how to air their views. Regarding occupational attitudes, the majority of the respondents reported no change in motivation and morale, job satisfaction and organizational commitment. A majority of

participants reported these attitudes to be poor. This implies that, regarding these attitudes, the situation in the Safaricom (K) Ltd is still bad. It is hoped that if the recommendations of this study are implemented, positive changes in these attitudes will result. Most of the participants reported that commission effect as being average on their Morale and teamwork, Efficiency and effectiveness, Personal responsibility, discipline and accountability. Loyalty to the organization had reduced as majority opted to combine selling even competitors products to enhance their pay. Furthermore, a majority reported dissatisfaction with current salary packages hence need for its revision. In order to improve individual performance, Safaricom (K) Ltd should provide a living wage i.e. adequate funding for sales people to look for new clients, motivation, realistic targets which are achievable in the competitive industry, advertisement material to its sales people like brochures, job security, training, participative decision making style, competitive products, morale, reward creative ideas, make their shares gain value and also improve their network to avoid frequent interruption and failures. The ranked importance of motivational factors of sales people at the Safaricom (K) Ltd provides useful information for the organizations director and employees. Knowing how to use this information in motivating sales people is complex. The strategy for motivating sales people depends on which motivation theories are used as a reference point. If Hertzberg's theory is followed, management should begin by focusing on pay and job security (hygiene factors) before focusing on interesting work and full appreciation of work done (motivator factors). If Adams' equity theory is followed, management should begin by focusing on areas where there may be perceived inequities (pay and full appreciation of work done) before focusing on interesting work and job security. If Vroom's theory is followed, management should begin by focusing on rewarding (pay and interesting work) sales people effort in achieving organizational goals and objectives. Regardless of which theory is followed, interesting work and sales people pay appear to be important links to higher motivation of sales people. Options such as job enlargement, job enrichment, promotions, internal and external stipends, monetary, and non-monetary compensation should be considered. Job enlargement can be used (by managers) to make work more interesting (for sales people) by increasing the number and variety of activities performed. Job enrichment can used to make work more interesting and

increase pay by adding higher level responsibilities to a job and providing monetary compensation (raise or stipend) to sales people for accepting this responsibility. These are just two examples of an infinite number of methods to increase motivation of sales people at the Safaricom (K) Ltd. The key to motivating sales people is to know what motivates them and designing a motivation program based on those needs.

The rationale and criteria for compensation and motivational plans should be made clear right at the beginning. Managers should take caution not to use remuneration packages, as opportunities to punish employees they think are uncooperative or disobedient. Rather they should be objective in applying the criteria for pay. The process of compensation and incentive plans should be made as transparent as possible. The above measures coupled with increased skills in performance evaluation should reduce the problem of job insecurity. Existence of these problems further shows that some of the strategies for compensation as incentive did not work as hoped. Commission used as incentive in the organization had positive effects on some indicators of sales force performance and had negative effects on others.

5.4 Critique and Suggestions for Further Research Some problems hindered the validity of these findings. The first criticism concerns the problems with the self-report, in general. These can be flouted with biases. Objective measures like records and behavioural observation should be included in subsequent compensation effects on performance researches is recommended. The timing of measures is also important. This is because motivational factors have short and long term impacts. The effects of motivational factors obtained depend on when the measurements were taken. For this research on Safaricom (K) Ltd both short and long term effects were obtained. Another constraint is that generalization of present findings is limited to Safaricom (K) Ltd in Nakuru municipality and urban sales people in Kenya. Sales job is also done at the rural areas. Research focusing on effects of remuneration packages on sales people performance at the rural areas is recommended.

Another constraint was that more time was needed to get the required information from the sample. Lack of co-operation from managers is also likely. Because of anxiety about the process, employees may not be willing to give information. They may think the data collected would be used against them by the competitors. This is understandable because the phone industry is faced with stiff competition and any information regarding sales force is highly considered sensitive. Detailed explanation about the importance of research, assurance of anonymity and confidentiality were given including a cover letter from Kabarak University. Rejections and non-response are likely to be high and it was lucky that only 1 out of 45 questionnaires were not returned in this study. Environmental stability at the time of research is also important. Events the economic depression facing the world at the time of the research should be well considered. The researcher must be able to sense effects that are caused commission paid from those that happen due to other factors like economic recession like one faced during the time of the research. Present research gave a limited consideration to the objectives of commission paid as an incentive to sales people performance. To widen the scope, further research should consider whether the objective of providing a living wage has been met.

5.5 Conclusion Compensation plans is significant for all the stakeholders. It has different meanings to the various stakeholders. Commissions paid can be a harm or loss, threat or challenge. Harm or loss would concern those commission plans which are poorly implemented. Threat refers to potential harm or loss. This can be seen in the light of the perception of the sales force on the compensation plan. Some will remain under fear of job insecurity. Challenge refers to opportunities for growth, masterly or gain. Compensation plan therefore, is both an opportunity and challenge to organizational development and to the stakeholders. It is challenging to plan, implement and manage compensation schemes and its effects as incentives to the sales force. However, good commission schemes offers an opportunity to put right what had gone wrong with the Safaricom (K) Ltd in motivating its sales people. This stimulates organizational growth and development.

Commission as an incentive to the sales force has different outcomes depending on the timing, that is, whether the short term or long term impacts are the ones in question. The long-term effects will be realized only if a supportive compensation scheme develops. Therefore, a follow-up study on the development of a new compensation scheme for sales people in the Safaricom (K) Ltd is recommended. This will show if a new commission scheme which act as incentive and favourable of higher organizational performance has been created.

REFERENCES Armstrong (2001). Human Resource Management Practice, 18th Edition, Kogan Page Ltd. Bohlander G. (2002), Managing Human Resource, 12th Edition, Western College Publishing, United States Cole G.A. (2002). Personnel And Human Resource Management, 5th Edition, Biddles Ltd, New Delhi. Dessler Gray. (2005), Human Resource Management, 10 edition, Darling Kindersley Pvt Ltd India. Gerhart B, et al, (2007). Fundaments of Human Resource Management, 2nd Edition, Tata McGraw Hill Publishing Company, New Delhi Internet www.merifield.com,, www.daniweb.comwww.fistfultalent.comwww.wikipedia.comwww.maritz.com(www.wi kipedia.org/wiki/safaricom)

APPENDIX 1: QUESTIONAIRE THE IMPACT OF COMMISSION AS AN INCENTIVE ON THE MOTIVATION OF CREDIT VENDORS ( A CASE OF SAFARICOM COMPANY (K) LTD) Information collected from this questionnaire will be handled with high confidentiality and will strictly be used for academic purposes by the researchers. SECTION A What is your gender? Male Female

How old are you?.......................................years What is your highest level of education? University College High School

What is your marital status?

Married

Single

Divorced

How long have you worked as a sales person in Safaricom (K) ltd? (Tick as appropriate) Length Response Below 3 Years 3-5 years 5-10 years Above 10 years

Are you paid in commission basis? ......................................................................

SECTION B: TYPES OF COMMISSIONS To what extent do you think the commissions paid by Safaricom (K) Ltd to its sales people are based on the following statements? Statement To reduce the number of sales people Remove unqualified people in the sales job To establish effective structure for service delivery To cut down expenses To motivate its work force to work harder and retain them To ensure fair compensation for amount of products sold To remove poor performers for performance improvement To create employment To create room for better working conditions To ensure hard work and dedication to duty Where 1 Great extent, 2- Some extent, 3 Average, 4 Little extent and 5 No extent 1 2 3 4 5

To what extend do you also think the types of commissions paid are based on the following? (Tick as appropriate)

Statement Sales Incentive Plan to motivate and compensate a sales people to meet goals over a specific period of time Straight Salary is used when serving and retaining existing accounts and to protect the income of new sales representatives for a period of time while they are building up their sales clientele. Sales Commission - A variation on piece rates and bonuses is the payment of commission, or pay calculated as a percentage of sales salary plus commission Salary plus commission and bonuses. Combination plan for both individual and group sales bonus programs Retainer at first months then commission only

Where 1 Great extent, 2- Some extent, 3 Average, 4 Little extent and 5 No extent

SECTION C: IMPACT OF COMMISSION ON INDIVIDUAL PERFORMANCE 1. How do you think the commission paid has affected your job performance basing on the following areas (Tick as appropriate) Statement 1 2 3 4 5 Your job performance generally Punctuality to workplace Number of sales people remaining on duty all the time Sales people working for two or more competing suppliers of Safaricom (K) Ltd Efficiency and effectiveness

Personal responsibility personal discipline personal accountability Loyalty to your boss Where 1 Greatly Reduced, 2 Reduced to some extent, 3 , No effect 4 - Improved and 5 Greatly Improved

SECTION D: THE EFFECT OF COMMISSION AS A MOTIVATOR ON THE SALESPEOPLE. To what extend do you think the following motivate you to perform better? Statement 1 2 3 4 5 Salary Bonus pay Awards Commissions Where 1-Great extent, 2- Some extent, 3-average, 4-Less extent 5- No effect 2. To what extent do you think are the effects of commission on you on the following areas? Statement 1 2 3 4 5 Job motivation Morale and teamwork Job satisfaction Organization commitment Efficiency and effectiveness Personal responsibility

personal discipline personal accountability Loyalty to your Organization Where 1 Greatly Reduced, 2 Reduced to some extent, 3 , No effect 4 - Improved and 5 Greatly Improved Do you think the pay package of Safaricom (K) Ltd needs further revision? Yes No If yes, explain...................................................................................................................... ............................................................................................................................................... ......................................................................................................................... In the table below which factors do you think Impede the Performance of the sales people in Safaricom (K) Ltd? Factor Yes No Inadequate funding to look for new clients Lack of motivation Unrealistic high targets that lead to frustration lack of advertisement tools like brochures to give potential customers Economic depression facing the market No job security Poor training of the sales people by the organization Financial constraints, bureaucracy, lack of transparency in the organization Competition from other firms who offer more attractive products Poor management style e.g. grievance handling procedure Low morale due to poor products development Lack of confidence by customers due to poor performance of the companys shares Only working for survival Long delays of salary and commission payments Constant interruption of the companys network e.g. Mpesa service What other comments do you have regarding this study and may not have been covered?

............................................................................................................................................... ............................................................................................................................................... ............................................................................................................................................... ............................................................................................................................................... .... THANK YOU AND GOD BLESS YOU FOR YOUR TIME

APPENDIX I: No. 1 2 3 4 5 6 Item

PROPOSED BUDGET Amount Ksh.2,000 Ksh.1,500 Ksh.3,000 Ksh.1,000 Ksh.2,500 Ksh.1,000 Ksh.10,000

Traveling expenses Stationery Data Analysis Printing and Photocopying Subsistence Miscellaneous Total

APPENDIX II: Year Activity/Month Proposal Writing Proposal Defense

WORK SCHEDULE 2008/2009 Oct Nov Dec Jan Feb Mar Apr

Corrections and Questionnaire Pilot study Data Collection Data Analysis Report Writing and Submission For those who dont remember me,

These are samples of some pictures of me

It was nice working with you, God bless you guys. Keep in touch 0721696345