MOD-4: SALES FORCE MOTIVATION & COMPENSTION

DEFINE MOTIVATION
Motivation is an internal feeling and an energetic force within salespeople that drives them to behave in a
certain way. It produces goal-directed action harnesses human energy towards the goals of the sales
organization.

DEFINE COMPENSATION
 It refers to monetary benefits offered and provided to employees in return of the services they provide to
the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave
travel allowance, medical reimbursements, special allowances, bonus, PF/Gratuity, etc. They are given at
a regular interval at a definite time.
 Compensation Management is designing and implementing total compensation package with a
systematic approach to providing value to employees in exchange for work performance,
 Compensation is a systematic approach to providing monetary value to employees in exchange for work
performed.

WHAT THE OBJECTIVES IN COMPENSATION

 To recruit & retain qualified employees.
 To increase or maintain morale.
 To determine basic wage & salary.
 To reward for job performance
 Motivating talent for better performance

Retain the best talent: An employee would leave an organization if compensation levels fall. So, it is
essential to have a proper compensation panning to retain the best talents.
Ensure equity: Pay should always be equal the worth of the job of an employee. Employees doing similar
jobs should be paid equally and likewise, more qualified employees should be paid better.
Reward new ideas and behaviors: Pay should reward an employee’s loyalty, commitment towards work,
his experience, the amount of risk the job holds and the initiatives taken. When companies fail to reward
such contributions, employees will fall apart.
Cost control: Hiring cost should never be too high. The compensation planning should ensure that workers
are neither overpaid nor underpaid
Compliance: The compensation planning and management should invariably satisfy governmental
compliance of minimum wages, bonus, allowances, benefits etc. Synergetic product tour.
Entice the employees: Compensation should be high enough to attract the best talent in an organization. If
an organization wants the service of a competent employee, then the salaries must be high enough to
motivate them to apply and join you

WHAT ARE THE FACTORS IN THE MOTIVATION

1. Changes in marketing environment
2. the nature of the task,
3. the personality
4. the type of compensation plan
5. quality of management
6. Conflicting company objectives
7. Unique nature of the sales job
8. Separate motivational package
Nature of the job
 Nature of selling differs from company to company
 The clarity of the task given to sales people can affect their motivation level
 Task clarity is the degree to which there is a clear and positive relationship between exerting effort
and attaining results
 If a sales task is unclear, selling can be frustrating.
 In such a situation, the salesperson will not know where he or she stands and will not be able to
pinpoint the results of his or her own efforts.
Type of compensation plan
 Designing an effective sales compensation program, however, is a complex management assignment
 In general, incentive pay is a more effective motivator than straight salary.
 However, the true power of incentive pay surfaces when we take into account the nature of the sales
task
 If the sales task is unclear, the ability of an incentive to motivate is significantly diminished, which
suggests that a straight salary would be more practical and less problematic.
 Sales pay must not be seen as an isolated variable but as part of a system.
 In this system, on-the-job performance is influenced not only by the design of the pay plan but also by
characteristics of the sales task and the personality of the salespeople.
Quality of Management
Leadership and management also plays a vital role in the motivation of the sales staff
 Goal setting—Sets high but attainable performance standards for subordinates and other groups. Gives
responsibility and challenging assignments.
 Evaluation—Provides timely and frequent feedback to subordinates on their progress toward
established goals.
 Coaching—Assists the sales representative to identify training needs and areas for improvement,
particularly in regard to personal selling skills and time management. Structures opportunities for the
application of newly learned skills. Rewards improvements.
 Empathize—Shows personal concern and sensitivity to others. Develops constructive working
relationships with subordinates. Knows when to withdraw and let the salespeople try it on their own.
 Know-how—Demonstrates a thorough knowledge of personal selling and marketing. Keeps abreast of
events both inside and outside the organization that may affect the success of subordinates.

LIST OUT THE METHODS TO MOTIVATE SALES PERSON?

Common Tips to Motivate a Sales Team:
1. Create a clear sales plan
2. Implement performance-based incentives.
3. Coaching and training
4. Provide regular and useful sales meetings
5. Provide ample sales training
6. Set achievable goals
7. Empower your sales team
8. Establish a solid base salary in addition to their commissions and bonuses
9. Provide positive feedback and recognition
10. Celebrate the successes
11. Communicate frequently with your team and have an open door policy
12. Involve your sales team with setting quotas, sales plans, and sales goals
13. Set challenging goals
14. Motivate with significant bonuses
15. Established sales contests or sales games
16. Provide sophisticated sales tools, from the best CRM, to marketing support, to internal support
17. Spend time helping out on sales calls
18. Grant sales’ awards, such as sales person of the month or sales person of the year
19. Adjust compensation plans to increase motivation
20. Hire motivational speakers

Coaching and training

Coaching and training
sales staff can result in significant improvement in results. People respond to individual feedback on
performance. You may consider implementing one-on-one meetings on a monthly basis with all of your
salespeople, for example. This is where you can give praise when it’s due and help struggling salespeople
overcome challenges as well.

Implement performance-based incentives.

This is the most obvious of all motivational techniques. What you do and how well you do it determines how
much you will earn. It is a very simple concept. Keep in mind that performance based incentives are more
than just commission. The incentives need to be fair, openly communicated and not impossible to achieve.
Making the incentives grow in value as sales numbers increase will motivate the team to achieve even more.

Provide regular and useful sales meetings

sales meetings that are open, stimulating and provocative can be extremely motivating for your sales team.
Sales meetings give you the opportunity to build your team, train your sales staff, and share information that
is a strategic way to motivate your sales team. It is extremely important that your sales team feel comfortable
sharing openly and honestly in these meetings so that they are open forums of discussion. These meetings
should be full of energy not just an hour of reporting facts and figures. Make it fun

LIST OUT THE VARIOUS TYPES OF COMPENSATION PLANS?

Types of Compensation Plans
 Financial compensation
 Non financial compensation
Financial compensation plan
1. Straight Salary
2. Straight Commission
3. Combination Plan
Non financial compensation plan
1. Promotions
2. Recognition Programmes
3. Fringe Benefits
4. Expense Accounts
5. Perks
6. Sales Contests

Straight salary plan-

 It is simplest compensation plan. Salesperson receive fixed sums as regular intervals (usually each week or
month sometimes every 2 weeks), representing total payments for their services. Such plans are more
common among industrial- goods companies than among consumer- goods companies. Such plans are
engaged in trade selling.
 It’s a direct monetary reward paid for carrying out certain duties over a period of time.
 These jobs, in which selling amounts to mere order taking, abound in the wholesale & manufacturing
fields, where consumer necessities are distributed directly to retailers. It is also used for paying driver-
salesperson selling liquor & beverages, milk & bread, similarly distributed products.

Straight commission Plan-

 Every salesman is assigned a fixed quota. The commission is awarded on achievement of the
targeted quota. A fixed percentage of sales achieved over and above the target is also set. This type
of compensation scheme ensures a direct salary as well as an in-built motivation system
through incentives.
 The theory supports the individual sales personnel should be paid according to productivity. As sales
volume rises to different levels, the commission rates differ for different products, categories of
customers, or during selling seasons.
 This method is common in the clothing, textiles & shoe industries & in drug * hardware wholesaling.
Firms selling intangibles, such as insurance & investment securities, manufacturers of furniture, office
equipment & business machines also are frequent users of straight- commission plans.
Salary plus commission-
 Most sales compensation plans are combinations of salary & commission plans. By a judicious
blending of the two basic plans, management seeks both control & motivation. Actual results depend
upon management’s skills in designing & administering the plan.
 It is generally suggested for a company selling high value items with high profit margins. The
incentive here is based on profits earned. The selling expenses to sell a product may also be
large and this is incorporated in the profit sharing scheme as it acts as a control mechanism.

Non financial compensation

Promotion
Salespeople working in organizations for a longer period of time always look for higher job responsibility.
Majority of the salespeople need recognisation in the form of promotion for their success & commitment to
the organization.
Since there are fewer openings as one moves higher on the ladder, the management has to plan the promotion
plan in such a way that the higher positions seem worth aspiring & achievable to the salespeople.

Recognition – Most people appreciate being recognized for their accomplishments. Certainly, many sales
people are competitive and will enjoy the spotlight when they have done well. The recognition can be a big
shout out in front of the whole team or a simple pat on the back fro a job well done, but in any case, this is
one of the easiest and most powerful ways to reward your reps.

Fringe benefits- in addition to salary additional benefits like medical benefits, retirement benefits, vacation
benefits, sick leave, maternity leave, life insurance, & other form of motivational tools.

Perks- this are the special category of compensation available to the employees with some special status or
expertise in the company. They are based on the performance & have a higher motivational power than other
categories of the perks.
Status perk: office location, job title, parking space.
Financial perk: use of co vehicles, club membership, expenses of their support staff
Personal growth: paying for additional education & training programme.

Gifts and Prizes – Sales people love a good competition! Prizes such as trips, trinkets, gift certificates, gas
cards and dinner vouchers can create great incentives for reps to over-achieve.
Flex Hours – I have never been big on working hours, placing more emphasis on achieving goals. So for
the reps that meet or exceed targets, I have always given them the opportunity to work flex hours or take
some time off. This always proved to be a big motivator in spite of the fact that overachievers typically
aren’t interested in a whole lot of time off.

Training – If your organization is large enough you can offer the opportunity to be mentored by a senior
member of the team when someone meets their targets. This offers a unique chance for the motivated to
advance their career.

Status – Similar to recognition, formal achievement awards work very well for rewarding sales reps.
President’s Club is the typical program that companies set up to recognize sales achievement, however other
awards such as profit, customer wins, and customer service awards can also be useful in motivating positive
behavior and providing appreciated rewards to the sales reps.
Sales contests

EXPLAIN THE STEPS IN DESIGNING COMPENSATION PLAN

1. Review the sales job description. ...
2. Identify the plan objectives. ...
3. Identify controllable, measurable job elements. ...
4. Establish level of compensation. ...
5. Determine method of compensation
6. Implement the plan

WHAT IS THE NEED OR IMPORTANCE OF EVALUATION & APPRAISAL OF SALES FORCE?

 Evaluation is to measure the performance of sales persons.
 An important process which enhances the way organization is managed & provides recommendation
for further improvements.
 It is a critical function.
 It constitutes ‘comparing objectives with results.
 Provide feedback.
 Take steps to further improvement
 To monitor the performance & ensure that it is in alignment with corporate goals & objectives.
  To keep track on progress.
 To take decision regarding compensation, promotion & transfer.
 To determine the specific training & counseling needs of individual sales people & the overall sales
force.
 To provide information for effective human resource plan.
 To identify criteria that that can be used to recruit & select sales people in the future.
 To advise sales people of work expectations.
 To motivate sales people.
 To help sales people in setting career goal.
 To enhance communication between sales person & sales manager.
 To improve sales person performance.

WHAT ARE THE OBJECTIVES OF SALESPERSONS’PERFORMANCE EVALUATION

1. 1. To ensure that compensation and other reward disbursements are consistent with the actual
performance of the salesperson.
2. To identify sales people who can be promoted.
3. To identify sales people whose employment should be terminated and to supply evidence to support the
need for termination.
4. To determine the specific training and counseling needs of individual salespersons and the overall sales
force.
5. To provide information for effective human resource planning.
6. To identify criteria that can be used to recruit and select sales people in the future.
7. To advise sales people of work expectations.
8. To motivate salespersons.
9. To help sales people set career goals.
10. To improve salespersons’ performance

EXPLAIN THE PERFORMANCE EVALUATION METHODS

Graphic Rating/Checklist Methods
Graphic rating/checklist methods consist of approaches in which sales people are evaluated by using
some type of performance evaluation form. The performance evaluation form contains the criteria to be used
in the evaluation as well as some means to provide an assessment of how well each salesperson performed
on each criterion
 • Performance evaluation form
• Especially useful in evaluating behavioral and professional development criteria
• Good on most characteristics, especially job relatedness, standardization, practicality, and
comparability
• Disadvantage is providing evaluations that discriminate sufficiently
Ranking Methods
• Rank all salespeople according to relative performance on each performance criterion
• These methods force discrimination as to the performance of individual salespeople
• May be complex
• Rankings only reveal relative performance evaluation
Objective-Setting Methods
• In this there is Mutual setting of well-defined and measurable goals within a specified time period.
• Managing activities within the specified time period toward the accomplishment of the stated
objectives.
Behaviorally Anchored Rating Scales (BARS)
• This method Links behaviors to specific results
• Salespeople are used to develop performance results and critical behaviors
• Positive feedback about behaviors may be more effective than positive output feedback
•
EXPLAIN THE SALES FORCE PERFORMANCE EVALUATION AND CONTROL PROCEDURE
Step 1• Set policies on performance evaluation and control
Step 2• Decide the bases of salespeople’s performance and evaluation
Step 3• Establish performance standards
Step 4• Compare actual performance with Standards
Step 5• Review performance evaluation with Salespersons
Step 6• Decide sales management actions and control.
Set policies on performance evaluation and control
Several studies have generated information on general Policies followed by most sales organizations. Some
of these are as follows:
 Frequency of evaluation.
 Who conducts evaluation?
 Management by objectives.
 Sources of information.
Decide the bases of salespeople’s performance and evaluation
Before deciding on bases or criteria for performance evaluation of salespeople, a sales organization should
decide whether it will give importance to :
 Outcome/result-based viewpoint.
 Behavior/activity/effort-based viewpoint.
 Both outcome-based and behavior –based viewpoints.
Establish performance standards
 Performance standards are generally called sales quotas. Some companies call them as sales
objectives, sales goals, or sales targets. Setting performance standards is a difficult, but an important
task.
 Sales managers must ensure that performance standards are fair and reasonable. They should not be
too high or too low. After the standards of performance are established, it is equally important to
communicate the same to the salespeople.
Compare actual performance with Standards
 In this step, the individual salespersons actual performance is measured and then compared with the
predetermined performance standards.
 Sales managers can use different methods for measuring the performance of salespeople. For this,
various types of rating forms or evaluation methods are used .
Performance evaluation methods:
1) Graphic rating scale. 2) ranking 3) behaviorally anchored rating scale (BARS).4) management by
objectives (MBO).5) descriptive statements

Review performance evaluation with salespersons

The following guidelines are useful when reviewing, performance –
 First performance criteria or bases should be discussed.
 The sales person should be asked to review his or her own performance.
 The sales manager should present his view on salesperson’s review performance.
 Mutual agreement on the performance must be established.
EXPLAIN THE PERFORMANCE EVALUATION STRATEGIES
2 types of performance evaluation strategies
1. Quantitative performance standards
2. Qualitative performance standards
Qualitative
 Territory management
 Personality traits
 Sales skills
Quantitative
 Sales volume
 Selling expense ratio
 Average call per day
 Sales orders
 Gross profits obtained from new customers

WHAT ARE THE FACTORS AFFECTING COMPENSATION PLAN

 NATURE OF SALES JOB
 NATURE OF PRODUCT
 ADVERTISING ACTIVITIES
 FINANCIAL CAPACITY
 CLASS OF SALESMEN

WHAT ARE THE ESSENTIAL FEATURES OR REQUIREMENT OF SOUND COMPENSATION

PLAN
 Secure Income - The plan should provide a living wage preferably in the form of a secure income.
 Fit with the overall scheme of things - The Compensation plan should fit in with the organization's
overall motivational programme. There should not be any conflict between other motivational factors
such as the intangible feeling of belonging with the overall sales team.
 Fair - Plan should be based on equal pay for equal work (performance).  Sales personnel should not
be penalized for factors beyond their control.

 Simplicity - A compensation plan should be simple to understand and follow so that Sales Executives
can calculate their own earnings.

 Adjustments - A sales compensation plan should adjust to changes in performance, as and when that
happens.
 Economical - Lastly, the compensation plan should be economical to administer and should support
the overall objectives of an organisation.