Propasal EDITED-Edit 2

THE IMPACT OF COMMISSION AS AN INCENTIVE ON THE MOTIVATION
OF CREDIT VENDORS: A CASE OF SAFARICOM COMPANY, KENYA
LIMITED
BY
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 ……………………
Signature ………………………………….. Date ……………………
Signature ………………………………….. Date ………………………
Signature ………………………………….. Date ……………………
This proposal has been submitted for examination with my approval as the university
supervisor.
Signature ………………………………….. Date ……………………

DR. ZAKAYO
Lecturer
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 company’s 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 compensation paid to protect

the income of new sales 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
Today’s business environment demands a new breed of incentive programs. Many

companies have already discovered that standard incentives of just a few years ago just
don’t 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. You’ll 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 Corp.
•A 5% increase in customer retention can increase lifetime profits from a customer by
75%, according to the Loyalty Effect by Frederick Reichheld.
•‘Reward and retention efforts can produce big dollar returns.’ That’s 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. Salesperson’s 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 person’s 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 customer’s sales force or
participating in national and local trade shows.
The main disadvantage is that pay isn’t 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 company’s sales costs are low.
Sales performance like any other performance is a product of not just motivation but of
ability too. If the person hasn’t the sales skills then commissions won’t 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
employer’s 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 Emphasis is on sales volume rather than on profits
2 Customer service after the sale is likely to be neglected
3 Earnings tend to fluctuate widely between good and poor periods of business and
turnover of trained sales employees tend to increase in poor periods.
4 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 A salary-plus-incentive compensation plan offers greater design flexibility and can
therefore be more readily set up to maximize company profits.
3 The plan can develop the most favorable ratio of selling expense to sales.
4 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
Motivation of sales people

Types of commissions
used
Commission effects on
performance
Commission as an
incentive tool
(Independent Variables) (Dependent Variable)

Source Researchers (2009)
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 24 55
Female 20 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
Table 2: Demographic Information about the Sample –Age (N=44)

Age 20-29 18 41
30-39 10 23
40-49 10 23
50-59 6 13
Not indicated 0 0
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
Table 3: Demographic Information about the Sample – Education (N=44)

Education Primary school 5 11
High school 22 50
College 14 32
University 3 7

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
Table 4: Demographic Information about the Sample (Marital status) (N=44)

Marital status
Married 24 55
Single 18 41
Divorced 2 4
Not indicated 0 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)
Table 5: Demographic Information about the Sample –Seniority (N=44)

Seniority
Less or equal to 3 years 22 50
3- 5 years 12 27
5- 10 years 10 23
More than 10 years 0 0
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

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
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
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
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
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
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
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
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
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
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
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

Table 8: Respondent perception on the types of commissions paid in the
organization (N=44)
extent extent extent extent
Sales Incentive Plan to motivate and 32 40 10 4 4
compensate sales people to meet goals
over a specific period of time
Straight Salary is used when serving and 0 0 0 50 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 0
rates and bonuses is the payment of
commission, or pay calculated as a
percentage of sales
salary plus commission 0 10 0 40 50
Salary plus commission and bonuses. 0 10 0 40 50
Combination plan for both individual 12 24 20 20 24

and group sales bonus programs
Retainer at first months then 42 34 12 8 4
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

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.
organization- Straight Salary plan
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
organization- Sales Commission
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
organization- salary plus commission
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
organization- Salary plus commission and bonuses
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
organization- Combination plan
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
organization- Retainer salary at first months

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 10 10 16 24 40
all the time
Sales people working for two or more 12 16 20 26 26
competing suppliers of Safaricom (K) Ltd
Efficiency and effectiveness 0 14 36 20 30
Personal responsibility 10 10 16 34 30
personal discipline 14 16 10 30 30
personal accountability 12 18 16 24 30
Loyalty to your boss 10 24 30 20 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

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 performance-
Punctuality to workplace
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
Number of sales people remaining on duty all the time
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
Number of Sales people working for two or more competing firms of Safaricom (K)
Ltd
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
Efficiency and effectiveness
their Personal responsibility while 16% felt that the commission had no effect and 20%
felt that it had actually reduced their Personal responsibility
Personal responsibility
their personal discipline while 10% felt that the commission had no effect and 30% felt
that it had actually reduced their personal discipline
personal discipline
their personal accountability while 16% felt that the commission had no effect and 30%
felt that it had actually reduced their personal accountability
personal accountability
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
Loyalty to your boss

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)
extent extent extent extent
Salary 45 25 30 0 0
Bonus pay 40 40 20 0 0
Awards 50 25 25 0 0
Commissions 24 20 20 16 20
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
motivated by Bonus pay while 20% were average on the issue
Bonus pay
motivated by Awards given for outstanding performance while 25% were average on the
issue
Awards given
motivated by Commissions while 20% were average on the issue and 36% felt it was to a
little or no extent
Commissions
Table 11: Perception on effects of commission on respondent work life (N=44)

Effect Greatly Reduced No Improved Greatly
Reduced to some effect / improved /
(%) extent (%) (%) increased increased
(%) (%)
Job motivation 10 8 12 40 30
Morale and teamwork 15 20 15 25 25
Job satisfaction 20 10 10 30 20
Organization commitment 32 28 10 15 15
Efficiency and effectiveness 0 14 36 20 30
Personal responsibility 10 10 16 34 30
personal discipline 14 16 10 30 30
personal accountability 12 18 16 24 30
Loyalty to your Organization 10 24 30 20 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
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
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
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 life-
Organization commitment
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
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
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
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
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
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 40 90
No 4 10
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
Figure 45: Safaricom (K) Ltd pay- package need for revision
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 66 34
Unrealistic high targets that lead to frustration 60 40
lack of advertisement tools like brochures to give 50 50
potential customers
Economic depression facing the market 65 35
No job security 82 18
Poor training of the sales people by the organization 75 25
Financial constraints, bureaucracy, lack of transparency 70 30
in the organization
Competition from other firms who offer more attractive 85 15
products
Poor management style e.g. grievance handling 65 35
procedure
Low morale due to poor products development 55 45
Lack of confidence by customers due to poor 68 32
performance of the company’s shares
Only working for survival 72 28
Long delays of salary and commission payments 12 88
Constant interruption of the company’s network e.g. 78 22
Mpesa service
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 company’s 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 company’s network e.g. Mpesa service
Figure 46: Factors that Impede the Performance of the sales people in Safaricom
(K) Ltd
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. Some factors of performance were influenced positively, others
negatively. Discussion on the results, findings and recommendations are provided in the
Next chapter.
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 doesn’t 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 don’t 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 Below 3 Years 3-5 years 5-10 years Above 10 years

Response
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 1 2 3 4 5
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
To what extend do you also think the types of commissions paid are based on the
following? (Tick as appropriate)
Statement 1 2 3 4 5
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
personal discipline
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
personal discipline
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 company’s shares
Only working for survival
Long delays of salary and commission payments
Constant interruption of the company’s 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: PROPOSED BUDGET
No. Item Amount
1 Traveling expenses Ksh.2,000
2 Stationery Ksh.1,500
3 Data Analysis Ksh.3,000
4 Printing and Photocopying Ksh.1,000
5 Subsistence Ksh.2,500
6 Miscellaneous Ksh.1,000
Total Ksh.10,000
APPENDIX II: WORK SCHEDULE
Year 2008/2009
Activity/Month Oct Nov Dec Jan Feb Mar Apr
Proposal Writing
Proposal Defense
Corrections and Questionnaire Pilot

study
Data Collection
Data Analysis
Report Writing and Submission
For those who don’t remember me,
These are samples of some pictures of me
It was nice working with you, God bless you guys.

Keep in touch 0721696345

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THE IMPACT OF COMMISSION AS AN INCENTIVE ON THE MOTIVATION

OF CREDIT VENDORS: A CASE OF SAFARICOM COMPANY, KENYA

RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE

Signature ………………………………….. Date ……………………

Signature ………………………………….. Date ……………………

Signature ………………………………….. Date ………………………

Signature ………………………………….. Date ……………………

Signature ………………………………….. Date ……………………

DEFINITION OF TERMS AND VARIABLES..........................................................................................8

1.1 BACKGROUND TO THE STUDY.......................................................................................................................9

2.1 DEFINITION OF COMMISSION......................................................................................................................13

RESEARCH DESIGN AND METHODOLOGY......................................................................................22

RESEARCH FINDINGS AND ANALYSIS..............................................................................................24

4.0 INTRODUCTION. .......................................................................................................................................24

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS...........................................................55

5.1 EMPLOYEE PERCEPTIONS REGARDING COMMISSION PAID.................................................................................55

APPENDIX I: PROPOSED BUDGET.......................................................................................................70

APPENDIX II: WORK SCHEDULE.........................................................................................................71

Sales Incentive Plan (SIP) is a business tool used to motivate and

Straight Salary compensation paid to protect

Combination plan compensation plan for both individual and

Straight commission an incentive system widely used in sales

Employee Incentives programs used to motivate, retain and

Motivation inner state that energizes activities or moves and

1.1 Background to the Study

1.2 Statement of the Problem

Today’s business environment demands a new breed of incentive programs. Many

1.3 Research Objectives

1.3.1 General Objective

1.3.2 Specific Objectives

1.4 Research Questions

1.5 Significance of the study

1.6 Scope of the Study

1.7 Limitations of the Study

2.1 Definition of Commission.

2.2 Commission as an incentive

2.3 Why use incentives?

2.4 Unique needs of Sales Incentive Plans.

2.5 Sales Incentive Plans

2.6 Straight Salary Plan

2.7 Commission Plan

Sales Commission - A variation on piece rates and bonuses is the payment of

2.8 Combination plan

Summary and Gaps to be filled by the Study

Motivation of sales people

(Independent Variables) (Dependent Variable)

RESEARCH DESIGN AND METHODOLOGY

3.2 Research Design

3.3 Target Population

3.5 Data Collection Procedures

3.6 Data Analysis Procedures

RESEARCH FINDINGS AND ANALYSIS

4.1 Data Analysis

Preliminary analysis procedures of cleaning, frequencies, consistency checks, and

4.2 Results and Findings

Table 1: Demographic Information about the Sample –Gender (N=44)

Source: Researchers (2009)

Figure 2: Demographic Information about the Sample –Gender

Source: Researchers (2009)

Table 2: Demographic Information about the Sample –Age (N=44)

Figure 3: Demographic Information about the Sample –Age

Source: Researchers (2009)

Table 3: Demographic Information about the Sample – Education (N=44)