Module Eight

Motivation and Reward System Management

Learning Objectives

1. 2.

3.
4.

Explain the key components of motivation; intensity, persistence, and direction. Explain the difference between compensation rewards and non-compensation rewards. Describe the primary financial and non-financial compensation rewards available to salespeople. Describe salary, commission, and combination pay plans in terms of their advantages and disadvantages.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Learning Objectives

5. 6.

7.

Explain the fundamental concepts in salesexpense reimbursement. Discuss issues associated with sales contests, equal pay for equal work, team compensation, global compensation, and changing a reward system. List the guidelines for motivating and rewarding salespeople.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Setting the Stage

Motivating and Rewarding: Driving Product Mix Sales at FedEx
1. What were the two primary problems FedEx faced regarding compensation?

2. How did FedEx resolve the two problems?

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Motivation
The force within us that activates our behavior. It is a function of three distinct components, Intensity, Direction, and Persistence.

Motivation

Intensity

Direction

Persistence

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Motivation - Intensity
Intensity refers to the amount of mental and physical effort put forth by the salesperson.

Motivation

Intensity

Direction

Persistence

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Motivation - Direction
The extent to which an individual determines and chooses efforts focused on a particular goal.

Motivation

Intensity

Direction

Persistence

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Motivation - Persistence
The extent to which the goal-directed effort is put forth over time.

Motivation

Intensity

Direction

Persistence

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Motivation: Intrinsic vs. Extrinsic

Intrinsic
When doing the job is inherently motivating

Motivation

Extrinsic
When rewards such as pay and formal recognition act as motivators

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Two Basic Categories of Rewards

Compensation Rewards:
Those given in return for acceptable performance or effort. They can include nonfinancial compensation.

Non-Compensation Rewards:
Those beneficial factors related to the work situation and well-being of each salesperson.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Optimal Sales Force Reward System

1.
2.

3. 4.

Provides an acceptable ratio of costs and sales force output in volume, profit, or other objectives Encourages specific activities consistent with the firm's overall, marketing, and sales force objectives and strategies Attracts and retains competent salespeople, thereby enhancing long-term customer relationships Allows the kind of adjustments that facilitate administration of the reward system.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Types of Sales Force Rewards

Intrinsic
Sense of Accomplishment Personal Growth Opportunities

Motivation

Extrinsic
Pay

Job security

Promotion
Recognition

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Financial Compensation: Straight Salary

Advantages
- Salaries are simple to administer - Planned earnings are easy to project. - Salaries can provide control over salespeoples activities, and reassignments are less of a problem. - Salaries are useful when substantial development work is required.

Disadvantages
- Salaries offer little incentive for better performance. - Salary compression could cause perceptions of inequity among experiences salespeople. - Salaries represent fixed overhead.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Financial Compensation: Straight Commission

Advantages
- Income is linked directly to desired results. - Straight commission plans offer cost-control benefits.

Disadvantages
- Straight commission plans contribute little to company loyalty. - Problems may also arise if commissions are not limited by an earnings cap.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Straight Commission: Plan Variations

1. Commission base volume or profitability 2. Commission rate constant, progressive, or a combination 3. Commission splits between two or more salespeople or between salespeople and the employer 4. Commission payout event when the order is confirmed, shipped, billed, paid for, or some combination of these events
Professional Selling: A Trust-Based Approach Module 8: Motivation and Reward System Management Ingram LaForge Avila Williams

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Straight Commission: Rates

Constant rates:
Rates that remain unchanged over the pay period. Pay is linked directly to performance.

Progressive rates:
Rates that increase as salespeople reach prespecified targets.

Regressive rates:
Rates that decline at some predetermined point.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Financial Compensation: Performance Bonuses

Advantages
- Organization can direct emphasis to what it considers important in the sales area. - Bonuses are particularly useful for tying rewards to accomplishment of objectives.

Disadvantages
- It may be difficult to determine a formula for calculating bonus achievement if the objective is expressed in subjective terms. - If salespeople do not fully support the established objective, they may not exert additional effort to accomplish the goal.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Financial Compensation: Combination Plans

Advantages
- Combination pay plans are flexible. - They are also useful when the skill levels of the salesforce vary. - Combination pay plans are attractive to highpotential but unproven candidates for sales jobs.

Disadvantages
- Combination pay plans are more complex and difficult to administer. - A common criticism of combination pay plans is that they tend to produce too many salesforce objectives.
Ingram LaForge Avila Williams

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Schwepker Jr.

Nonfinancial Compensation
Opportunity for Promotion:
The ability to move up in an organization along one or more career paths

Sense of Accomplishment:
The internal sense of satisfaction from successful performance Sales managers should facilitate salespeoples ability to feel this a sense of accomplishment

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Nonfinancial Compensation
Opportunity for Personal Growth:
Access to programs that allow for personal development (e.g., tuition reimbursement, leadership development seminars)

Recognition:
The informal or formal acknowledgement of a desired accomplishment

Job Security:
A sense of being a desired employee that comes from consistent exceptional performance
Professional Selling: A Trust-Based Approach Ingram LaForge Avila Williams

Module 8: Motivation and Reward System Management

Schwepker Jr.

Sales Expenses

Controls used in the sales expense reimbursement process include:

1. 2. 3. 4. A definition of which expenses are reimbursable The establishment of expense budgets The use of allowances for certain expenditures Documentation of expenses to be reimbursed

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Additional Issues in Managing Salesforce Reward Systems

Sales Contests Equal Pay Team Compensation Global Considerations Changing the Reward System

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Sales Contests: Recommended Guidelines

1. Minimize potential motivation and morale problems by allowing multiple winners. Salespeople should compete against individual goals and be declared winners if those goals are met. 2. Recognize that contests will concentrate efforts in specific areas, often at the temporary neglect of other areas. Plan accordingly.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Sales Contests: Recommended Guidelines

3. Consider the positive effects of including nonselling personnel in sales contests. 4. Use variety as a basic element of sales contests. Vary timing, duration, themes, and rewards. 5. Ensure that sales contest objectives are clear, realistically attainable, and quantifiable to allow performance assessment.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

DOs of Global Compensation

Do involve reps from key countries Do allow local managers to decide the mix between base and incentive pay Do use consistent performance measures (results paid for) and emphasis on each measure Do allow local countries flexibility and implementation Do use consistent and indication and training themes worldwide
Ingram LaForge Avila Williams

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Schwepker Jr.

DONTs of Global Compensation

Dont assign the planned centrally and dictate to local countries Dont create a similar framework for jobs with different responsibilities Dont require consistency on every performance measure within the incentive plan Dont assume cultural differences can be managed through the incentive plan Dont perceive without the support of senior sales executives worldwide
Ingram LaForge Avila Williams

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Schwepker Jr.

Guidelines for Motivating and Rewarding Salespeople

1. Recruit and select salespeople whose personal motives match the requirements and rewards of the job. 2. Attempt to incorporate the individual needs of salespeople into motivational programs.
3. Use job design and redesign as motivational tools

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.

Guidelines for Motivating and Rewarding Salespeople

4. Provide adequate job information and assure proper skill development for the sales force. 5. Concentrate on building the self-esteem of salespeople. 6. Take a proactive approach to seeking out motivational problems and sources of frustration in the salesforce.

Professional Selling: A Trust-Based Approach

Module 8: Motivation and Reward System Management

Ingram

LaForge Avila Williams

Schwepker Jr.