Motivating and Rewarding Salespeople：中国经济管理大学 MBA课堂笔记《销售管理：塑造未来的领导者》
Motivating and Rewarding Salespeople
中国经济管理大学 MBA课堂笔记《销售管理：塑造未来的领导者》
中国经济管理大学/中國經濟管理大學
Motivating and Rewarding Salespeople
Learning Objectives:
After completing this chapter, your students should be able to:
Summarize how motivation has been conceptualized and how the contributions of past studies can be incorporated into managerial activities.
Explain the different models of motivation and how sales managers can utilize them.
Identify generational differences in motivation and how to adapt motivational approaches for each group.
Describe how managers can utilize different motivational elements available to sales organizations.
Distinguish different situations in which financial and nonfinancial rewards should be used to motivate salespeople.
Illustrate how compensation systems can be utilized to address different motivational needs.
Introducing the Chapter:
Students are used to a ‘one-size-fits-all’ approach in many situations, including most classrooms. Most good sales managers would tell you, in terms of motivating and rewarding members of their sales force, that model won’t work. A critical skill that new sales managers need to develop is the ability to understand what rewards are valued by each member of their sales force. What motivates one person won’t necessarily motivate another. As an opening discussion, consider asking students what non-cash rewards they most appreciate from past employers and see how dissimilar they are.
Part of the challenge to understanding what motivates individuals is recognizing what motivates members of different generations. This chapter examines the background experiences and values of four generations and how it affects their behavior in the work environment. Some students may have already had an opportunity to manage older individuals and can share some of their (awkward) experiences.
The second half of this chapter examines rewarding salespeople. An opening question for this section would probe what rewards the ideal employer – or even some currently recruiting on your campus would offer. The old conceptualization of ‘compensation and benefits’ was fine for the 1960’s; 21st century sales managers need to utilize a Total Rewards program. Salespeople want more than money or a retirement program; they want a work-life balance and opportunities for career and personal development. Employers that can offer such programs can have a competitive advantage over other employers if they can provide them.
Chapter Outline:
I. What Motivates Salespeople?
A. One of the toughest jobs of a new sales manager is trying to understand what motivates each member of their sales force.
B. Intrinsic motivation factors are rewarding because a person finds doing the activity a reward in itself.
C. Extrinsic motivation factors are external to the job and activities are done in order to obtain a monetary or physical reward, a social reward or to avoid punishment.
D. Content approaches to understanding motivation focus on identifying different needs. All approaches offer contributions that a sales manager can apply (See Exhibit 12.1). These approaches include:
1. Maslow’s Hierarchy of Needs
2. McClelland’s Needs Approach
3. Herzberg’s Motivation-Hygiene or Two-Factor Approach
E. Process Approaches to understanding motivation focus on the process of what someone does, for how long, and at what level of intensity. All approaches offer contributions that a sales manager can apply (See Exhibit 12.2). These approaches include:
1. Adam’s Equity Theory
2. Expectancy Theory
II. Generational Motivational Issues
A. Young sales managers will manage reps from four generational groups. Each group has been shaped by historical influences and personal experiences. As a result members of each group are motivated by different drives and rewards at work.
B. Matures were raised during the Depression and WWII. They are loyal and reliable workers. Matures want respect and titles that reflect their importance.
C. Baby Boomers were raised during periods of economic prosperity and social consciousness. They work long hours and struggle to balance their family lives. They value promotions, leadership and public recognition.
D. Generation X’ers were likely raised by parents who both worked. X’ers place a high value of family over work. They prefer independence over teamwork. They value changing work opportunities and flexibility in the work environment.
E. Millennials were raised during periods of economic and technological change. They prefer a work/life balance. They value flexibility in their work environment.
III. The Dos and Don’ts of Motivating Your Sales Representatives – Tips for a New Sales Manager
A. Hire motivated sales reps.
B. Show trust in your sales reps.
C. Capitalize on the unique strengths of each member of the sales force.
D. Empower sales people to make their own decisions.
E. Ensure that you offer rewards that are valued by all members of your sales force.
F. Develop or remove deadbeats.
G. Identify people who have reached a plateau in their career and find new ways to challenge them.
IV. Financial and Nonfinancial Rewards
A. There are many types of rewards both financial and non-financial to offer reps. No two reps will likely value the same rewards.
V. The Components of a Reward Program
A. A Total Rewards Program includes all of the options a sales manager should utilize to reward performance rather than just compensation and benefits. Programs need to be designed to address different situations. Consideration should be given to the following influences.
1. The Marketplace Environment which includes market and industry factors and practices.
2. The Organizational Culture which impacts the rewards a firm offers its salespeople.
3. The Business Strategies a firm uses will influence how rewards are achieved.
4. The Total Reward Strategy involves using five different types of rewards (i.e., compensation, benefits, work-life, performance recognition and development and career opportunities).
B. Compensation can be awarded using three different formats:
1. Base salary is a fixed amount of compensation often used with new hires and positions requiring high levels of customer contact. Provides stability but offers no incentive for above average work.
2. Variable (or Incentive) pay will change depending upon a sales rep’s performance. It may include several different components:
a) A bonus is a lump sum of cash to reward efforts within a prescribed time period.
b) Stock options are designed to encourage a long-term commitment.
c) Team-based pay is designed to reward group productivity.
d) A commission is a percentage of the price of the product or service that salespeople receive for their selling efforts.
(1) A progressive plan increases the percentage of a commission a rep may receive with each additional sale.
(2) A regressive plan decreases the percentage of a commission a rep may receive with each additional sale.
3. Combination Plans include a salary and incentive component. It provides both a stable salary and an incentive for superior work.
a) A draw is an advance on an incentive plan that allows a rep to receive income at the present time, but it will be repaid with income from a future sale.
C. Benefits provide different forms of security to members of the sales force. They represent 40 percent of a firm’s payroll cost.
1. Legally required programs include Social Security, workers’ compensation unemployment insurance, and family and medical leave programs.
2. Retirement or pension benefit programs provide additional income after a rep retires.
3. Paid time off includes benefits such as pay during vacations, holidays, and sick days when the rep is not working.
D. Work-Life Rewards programs help sales reps find a balance between their work and life while they are away from work.
1. Workplace flexibility programs are designed to help reps schedule where and when they work.
2. Leaves of absence programs allow reps paid time off for births, adoptions, and sabbaticals.
3. Health and wellness programs focus on maintaining or improving the health and fitness levels of salespeople.
4. Community involvement programs compensate sales reps for time they serve as volunteers.
5. Care for dependents programs provide support for employees with childcare or dependent needs.
E. Recognition Programs are greatly impacted by the sales manager. They can be informal (e.g., gift card) or very formal (e.g., top sellers recognition at a vacation destination).
1. Cash
2. Travel
3. Plaques and awards
4. Recognition dinners
5. Gifts/Merchandise
6. Gift cards
7. Sales promotion incentive funds (SPIFs) are often available to retail sales people.
F. Expense Accounts although not often thought of as a benefit, should be considered more of a neutral factor in a reward system.
1. Unlimited plans cover all sales costs.
2. Per diem plans cover a certain amount per day.
3. Limited plans cover up to a certain amount for each expense, each day.
G. Personal Development and Career Opportunities help reps explore new growth opportunities
1. Learning opportunities can range from graduate education to personal training sessions at a facility specializing in developing corporate athletes.
2. Sales meetings are unique learning opportunities for sales reps that cover educational and motivational issues.
VI. Summary
A. Sales managers need to recognize what factors motivate each member of their sales force.
B. Sales managers may manage sales reps from several generations. Sales managers need to understand the differences between the groups and strive to satisfy the motivational needs of each.
C. Because the values of salespeople reflect their generational background, members of the sales force may not place the same value on rewards. A total rewards program looks beyond traditional rewards such as compensation and benefits and includes more work/life balance programs.
Questions and Problems:
1. What intrinsic and extrinsic factors motivate you as a student? What intrinsic and extrinsic factors do you think would motivate you as a salesperson? What about as a sales manager?
Responses to these three questions will run the gamut from intrinsic factors such as, ‘It makes me feel good about myself,’ or “It will make my parents feel good,’ to those focused on extrinsic factors, ‘It will allow me to earn more money.’
Be sure to look for any changes between what (might) motivate them as a student, salesperson, and a sales manager. One might expect more intrinsic motivational factors in play as a sales manager.
2. As a sales manager, how can you apply the findings of the content approaches? How can you apply the findings of the process approaches? Which do you think makes the most significant contributions and why?
Content approaches help identify the factors that make up motivation. Sales managers can apply these approaches by ensuring that the factors are being used as rewards and as reinforcements for members of their sales force. Process approaches help understand how sales reps are motivated. Sales managers can apply these approaches by being attentive to reps comments on fairness of rewards, understanding the value of different rewards and helping improve their performance that leads to rewards. (For more detailed information see Exhibits 12.1 and 12.2)
3. Sales manager Gretchen Anderson recalls a “ride-along” with one of her sales representatives, Bill, who consistently struggled to reach his quota. They reached their first destination at 10:50 a.m., and Bill said, “Let’s eat some lunch.” The two had lunch, met the client at 1 p.m., and were done at 1:20 p.m. Bill then told Gretchen he had no other sales calls planned. “I started early today, so I’m knocking off when we get back,” Bill told her. In terms of equity theory, describe what is going on from Tom’s perspective and from Gretchen’s perspective. If you were Gretchen, how would you handle this situation?
Equity theory proposes that a sales rep weighs their perceived inputs and outcomes in comparison to others and decides if their effort/reward equation is equitable or fair. They then re-align their efforts to be rewarding. Bill might justify his efforts as being fair based on what his compensation is. He might see his efforts as being of high value and therefore he only needs to put in limited time. If he were rewarded more, it would justify him working more. Gretchen might think that he would be compensated more if he worked more.
Gretchen should ask open ended questions about how fair or equitable Bill considers his compensation plan. In addition, she should try to understand Bill’s perspective, that is, how his input/output ratio compares with others. It may be that Bill has incomplete information about others or that he clearly values his inputs at a higher level than others might.
4. Given the information below, what insights do you have about the following representatives and what is or isn’t motivating them?
2007 Sales | 2008 Sales | 2009 Sales | Comments | |
Dustin | $80,000 | $86,000 | $94,500 | Three years of experience; named outstanding trainee three years ago |
Jessica | $104,000 | $111,000 | $119,000 | Ten years of experience; three years in the $100,000 Club and also had a baby! |
Deborah | $109,000 | $103,000 | $97,500 | Twenty years of experience; 2009 is the first time the rep didn’t make the $100,000 Club in ten years |
Dustin’s performance has improved every year. He would appear to be very motivated. Jessica’s performance also looks very good, a great performer. Because of Jessica’s latest child, the child the sales manager may need to include more work/life balance rewards. Deborah has been a good performer, and no doubt still is. Her trend line show that sales have slipped over the past three years. The sales manager should investigate whether Deborah has reached a career plateau and needs new challenges or is just facing other tasks that take her away from work, e.g., caring for a family member.
5. As a sales manager, what are some behaviors and actions you would try to use to motivate your personnel?
Sales managers should try to understand each sales rep’s drives and motivations, as well as their perspective of their total rewards. Other suggested behaviors would include hiring motivated sales reps, showing trust in sales reps, capitalizing on the unique strengths of each member of the sales force, empowering sales people to make their own decisions, ensuring that the rewards offered valued by all members of the sales force, and either developing or removing dead beats from the sales force.
6. The intent behind a COLA is to help salespeople who live in and work in high-cost locations. Find an online cost-of-living calculator or use the one at http://cgi.money.cnn.com/tools/costofliving/costofliving.html. Compare the living costs in Minneapolis–St. Paul, Raleigh–Durham, North Carolina, and Dallas–Fort Worth and San Francisco. Which area has the highest and lowest cost of living? Compare these costs with a small city near you. How much (or less) would you need to earn as a sales representative in order to move from one locale to another? Consider two members of the sales force that are producing identical results. Is it fair that one sales representative living in a large metropolitan area is compensated more than another one living in a smaller town just because the costs of living in one location are higher than the other?
Encourage students to use several online cost of living calculators in responding to this. Generally they will find that the cost of living in San Francisco is nearly double that of Minneapolis. The COL in Raleigh is about 7% less than that of Minneapolis. While the COL in Fort Worth is almost 20% less than Minneapolis.
The discussion of fairness should spur a healthy discussion. Without paying the high-cost of living cities more, why would they want to work there? In this case, if their salaries were identical, the Fort Worth reps would have almost double the buying power of the San Francisco rep. Why would anyone want to do anything but visit San Francisco, if geographic costs of living allowances weren’t in place?
7. Some students have doubts about being able to support themselves under an incentive-only system. What advice would you offer them?
It’s true that an incentive-only system may be difficult for a new sales person (look at many insurance companies and their high rates of turnover). Students can support themselves under an incentive system but need to consider several factors. Recommendations might include: making sure that you receive excellent sales training that prepares you to start selling once you are in the field; starting out in a system that has a salary component that is gradually replaced by incentives; working in a field with a shorter sales cycle as opposed to a field that has a long sales cycle; working with a company that allows a draw against future income.
8. Which three work-life programs do you find most attractive? Which three do you think someone your parents’ age would find most attractive? What about your grandparents’ age?
Answers will reflect students’ preferences and their familiarity with the needs of other generations (see Exhibit 12.6 for a list of possible options). Students typically include compensation and paid vacations, some may mention recognition. People their parents’ age may find health and life insurance, compensation and retirement programs, as most attractive. People their grandparents’ age may find health insurance, retirement programs and some workplace flexibility programs as most attractive. Each of the above categories includes a wide range of more specific programs. Encourage students to be specific in identifying their choices.
9. If you were to hold a sales contest and offer a trip as an award, what location would you pick? For each generation, identify a location that you believe they would find particularly motivating and explain why.
This question should generate some interesting discussion and reveal some interesting perspectives. They may range from Extreme Adventure Trips to Hawaii to Niagara Falls. Watch for any stereotyping.
10. What type of performance recognition program would motivate you the most? The least?
No doubt students will have varying opinions about the value of public recognition. Some may find it very motivating, whereas others won’t. Be sure to get the students to share what their employers do to offer recognition and what their perspective on those practices are.
11. Some sales managers give cash cards worth about $25 each to their sales representatives when they perform a new skill. What do you think the pros and cons of this practice are?
Rewarding new or correct behaviors with $25 cash cards may come across two ways. From the positive perspective it is a small acknowledgement (positive reinforcement) that they are doing the right thing. On the negative side, some might perceive it a cheap replacement for a higher compensation package – or some might interpret it with more of a psychological viewpoint (like the training of an animal).
12. How could a recognition program for marketing students work within your college’s business-education department? What would you use as motivators if you had an unlimited budget? What if your budget were $250?
Your department/school may already be doing many things that might be mentioned, including: plaques and awards, cash awards, recognition at various banquets, school newsletters or marquis. Many of these are of nominal cash value. Student suggestions will run the continuum. Your discussion might include a query if, or at what point might some intrinsic motivators change to become extrinsic motivators.
Answers for Chapter Caselets:
Caselet 12.1
Adjusting Your Compensation Plan to Motivate Your Sales Representatives
Pelican Pharmaceutical Company is having difficulty retaining quality, experienced salespeople. The problem started three years ago when the patent for the firm’s most popular drug expired, and other low-cost drug producers began manufacturing and selling similar drugs under generic names. Pelican has a board of directors that is fiscally conservative and believes in rewarding sales performance based only on profitability. So, as the firm’s sales slumped, so did the incomes of Pelican’s sales representatives and sales managers. The new sales manager, Frank, has been struggling with motivation and reward issues for a sales force that is again failing to make its yearly sales quota.
Pelican provides both its sales representatives and sales managers with modest salaries, company cars, and full benefits, which are some of the best in the industry. The company pays commissions based on salespeople surpassing their previous year’s sales totals. An escalating reward system kicks in once a sales representative achieves 80 percent of his or her sales quota. However, the average salesperson at Pelican is only achieving 75 percent of his or her sales quota, which means the person earns no commission. Those who do earn bonuses are usually only a few percentage points over quota, so their commission checks are marginal. The sales quotas were set by Pelican’s board of directors and are based on the company’s overall operations, overhead, and the return the company’s shareholders expect.
Frank is very concerned about the downward spiral he is seeing in his sales force. He thinks changing the commission structure by reducing sales goals 10 percent would help solve the problem.
Questions
1. What problems do you anticipate Frank will run into when he presents his revised commission structure plan to Pelican’s board of directors?
After years as a market leader, they appear to be slow in adjusting to the realities of their current market position. Their practice of exceeding last year’s goals should be rethought.
2. If Pelican were a low-cost, generic pharmaceutical company, how would you as a sales manager reward and motivate sales representatives?
With this perspective the focus would shift to requiring large amounts of sales to generate profitability. While many of the same practices would hold, attention would focus more on firms capable of buying large amounts. As sales volume increases, more importance should be shifted toward profitability.
3. What other motivational tools could Frank have used to retain and motivate employees other than adjusting the sales quota downward?
Perhaps a shift of focus to some of Pelicans other viable drugs may have helped improve sales reps bottom line. Management should consider identifying the value of their total rewards package (since we are told their benefits are some of the best) in light of the lost commissions. Other suggestions may come from shifting from the compensation categories to non-compensation categories total rewards categories.
4. Identify other areas within the company that will be affected if Frank’s plan is approved by the board of directors?
If they haven’t already, production should certainly take note. Anyone involved in budgeting would need to be aware of the impact of reduced sales. Research and product development personnel should be aware of the need for new products to introduce to the market. Those in charge of administering the compensation system (i.e., Human Resources) will need to know.
5. Do you feel the company should have adjusted its commission structure before the patent for its best-selling drug expired? Is it fair to penalize the sales force with lower commissions for an outside competitive factor they cannot control? Explain your answer.
Most forward looking organizations would have seen the economic impact of the drug patent expiring. The delay in adjusting the commission has and will continue to cost the company in terms of sales force turnover and lost sales.
Some may note that the sales force may have benefited for years with an easy sale. With no competitors the sales force, no doubt, had years of easy picking. Some may say that things are just evening up now.
Caselet 12.2
Which is Better: A Market Share-Based Incentive System or a Revenue-Based Incentive System?
Phil Lehman, a very successful salesperson, started working for Lextron Corporation right out of college. Phil has been with Lextron, a major manufacturer of sterilized medical equipment, for over 10 years. During his first 10 years with the company, he won numerous sales awards, was a sales dollar leader in most product categories, and never missed his sales quota, which increased by approximately 10 percent each year.
Lextron’s customers are major hospitals and medical centers across the country. The company currently has a 40 percent market share in the
Two years ago Phil’s wife, Marcia, who is a physician, had an opportunity to take a new position in Milwaukee, Wisconsin. The position would have enabled her to do more research, which is one of her passions. Coupled with this offer was the fact that both Phil and Marcia are from the Milwaukee area. Thus, Phil’s company agreed to transfer him to the Milwaukee territory, which had recently opened up.
The move back to Milwaukee started out great. Phil’s wife enjoyed her new job, and he worked hard making new contacts in the medical community. He opened up six new major accounts in his first year and another three in his second year. However, Phil was running out of new account prospects. He figured he had doubled his market share since he started working in Milwaukee, and he speculated that his products were in 80 percent of the hospitals and clinics within his territory. Despite his hard work, he was making less money in commissions and not winning sales contests like he did when he was in Atlanta.
Mark Green, a regional sales manager for Lextron, is Phil’s direct supervisor. Mark has agreed to visit Phil in his territory to discuss a pressing issue Phil has not yet disclosed to him. At lunch Phil asks Mark several questions about his sales performance over the past two years. Mark praises Phil for doing an excellent job and encourages him to keep up the good work.
Phil then asks Mark why he is not being compensated for his efforts. Mark is puzzled. He tells Phil he is paid on a commission like every other sales representative in the country. Phil then lays out the compensation he received in Atlanta for capturing just 40 percent of the market and the compensation he receives now in Milwaukee for capturing 80 percent of the market―double what he had in Atlanta.
Questions
1. How do you think Mark Green should react to Phil’s argument about market share and compensation? (Remember, he just told Phil he was doing an excellent job.)
He should be concerned that a rep with a great performance record doesn’t believe he is being rewarded fairly and should move quickly to investigate what can be done.
2. Do you believe Phil has been fairly compensated since his move to Milwaukee? What other compensation programs could the company have put in place to avoid this situation?
Phil voluntarily moved to Milwaukee and the economic and geographic conditions of the market place could of have been investigated before he made the move. Because he now has a smaller market and thus fewer opportunities to achieve the volume he did in Atlanta, his sales volume will be less. It should be noted that he has secured a significantly higher share of the market while in Milwaukee. Some consideration should be given to awards and commissions being based on share of the market or a combination of share and volume. Sales to new customers should also be considered. Decreasing commissions based on volume will bring howls of dissatisfaction to current reps. Lextron might consider adapting their commission structure depending upon the market.
3. Should Lextron Corporation consider changing its commission structure from one that is revenue-based to one that is market-share based? If so, how might this affect the firm’s other territories? Explain your answer.
Yes, there should be some consideration for a change in commission structure. However, the change might negatively impact reps in large markets if it were based solely on market share.
4. How do you think the size and speed of growth in a metropolitan area like Atlanta affect commissioned salespeople with territories in areas such as this? What about commissioned salespeople with territories with shrinking population bases, such as Milwaukee?
The rapid growth of the area no doubt, contributed to some easier selling – or at least more opportunities – as noted above. Those working in shrinking population areas have limited choices. Commissions might be calculated higher for new sales. Some consideration to including more geographic territory (assuming there is area outside of the metro without a rep) could be explored. If available, there might be some consolidation of the product line and reps might be given new lines of products to sell.
5. Should the territory Phil was working in Atlanta have been split in two―to allow Lextron to capture more market share and keep the market share of different territories around the country and the compensation associated with on par with one another?
Lextron probably should have considered a split. Phil in fact might be accused of going for the low hanging fruit (the easy sales) and avoiding the more difficult, least profitable customers. (And who could blame him?)
6. Should the existing salesperson in a territory that is to be split receive any additional compensation of future lost wages because their territory is going to be smaller? Explain your answer.
Assuming that the business involves repeat sales, most would agree that the rep who earned the business, and is now losing it, should receive some compensation for these lost sales. Most companies will handle this by offering the past rep a decreasing amount of profits from their past sales. Sales from these clients may be shared between the past and current rep for a limited period of time.
Role Play:
BioIDs
BioIDs specializes in incorporating biometrics (such as fingerprints, retinal scans, body measurements, and so forth) into ID cards so that a person’s identification can be immediately verified. They have experienced rapid growth due to marketplace factors. Government organizations have been the company’s largest segment. Selling to them is often a long process that involves a large number of people in a buying center. Salespeople have to be prepared to work with multiple people and be available on short notice to work with buying committees. Sale people like to work for BioIDs because they are known for their outstanding total rewards programs.
Two reps, who have been successful in the past, are struggling to achieve their threshold goals. It could be assumed that both reps are being distracted because of recent crises at their homes (i.e., an elderly parent moved in with one and the other recently gave birth to a child who has some complications). Despite each rep’s efforts, their results will have an economic impact (i.e., lost bonuses) on all reps in their district.
Assignment:
Split into pairs. One of you is the sales manager for District Six and the other the regional manager. Both of you stand to lose $10,000 in bonuses, and other sales representatives in District Six will lose $4,000 in bonuses if the goals aren’t met. In situations such as these, the national sales manager will request an action plan for the future. Outline the plan the two of you will propose to the national sales manager to improve sales. What types of reward programs might you propose?
This role play can be adapted to three people with the third being the national sales manager. Discussions should reflect an understanding of the pressures being placed on these two members of the sales force. Students should consider many of the programs available in the work-life balance area in their discussions. It might be beneficial to consider listing recommendations as having both short-term and long-term impact. Be sure that the discussion addresses the impact of the lost bonus on the other reps. Recall that many reps were attracted to BioIDs because of the opportunities. If other reps believe that their future includes more lost bonuses due to these family issues, some will no doubt consider leaving your sales force.
Self-Assessments:
In your copy of Sales Management, you will find an Access Code Card. By using this code at www.pearsonhighered.com/tanner, you will gain access to the SAL program. Students will find an Access Code Card in their copy of the book as well.
IC1 – What Motivates Me?
This instrument was developed in conjunction with one of the early content approaches to motivation and is similar to Maslow’s Hierarchy of Needs approach. The ERG approach considers three sets of motivators (needs): existence needs are focused on physiological and safety needs, relatedness needs are focused on social and external esteem needs, and growth needs are focused on actualization and internal esteem needs. A low score for a set of needs implies that the need is substantially satisfied, whereas a high score implies the need is not satisfied. As much as possible, sales managers should work to help sales reps achieve unsatisfied needs.
IC3 – What Rewards Do I Value Most?
This respondent rates the value of 10 different rewards, ranging from pay to friendly coworkers, in this assessment. The developers recommend comparing what the respondent values with what their company offers. Fewer disparities in scores implies a better fit between employee and employer. When sales managers know what rewards are most meaningful to their reps they are in a much better position to help their reps achieve them, than those who don’t know what their reps value.
Using Videos:
Go to the website with videos from Selling Power and consider the two videos selected for this chapter. Listed below are potential ways to introduce each video and questions you might consider to encourage further discussion after you have viewed the videos. To access the videos go to www.pearsonhighered.com/tanner.
How to Create a Compensation Plan Ron Conlin, Centive
Mr. Conlin is from Centive, a compensation system software provider. His discussion includes how compensation plans work within his company as well as with those sales organizations who are his customers. The discussion addresses three factors that companies need to consider when they are developing a compensation program. These factors are: 1. Identifying the corporate objectives (e.g., revenue based, market share, geographic expansion, product introduction), 2. Identifying what activities are required in the different sales jobs (i.e., some jobs are more development focused while others are more customer service), 3 Deciding what metrics will be used to reward people.
Here are some questions you could ask the class to look for and consider:
1. How many metrics should companies include in the compensation plan? What metrics does Mr. Conlin’s company, Centive, use in developing their compensation plan?
2. Based on what he sees with Centive clients, how often do they change their compensation plans?
3. What does he consider a typical compensation pay plan? (Answer: 50% salary/50% commission).
Winning Sales Incentives Mary Luckey, Maritz Incentives
Maritz Incentives is a company that helps design and implement sales incentives (aka contests). The video starts with an example of one popular sales incentive program, “Run through the warehouse”. Mary Luckey describes the value of using non-cash awards to help elicit extra effort from the sales force.
The basics for implementing a successful sales incentive program are quickly detailed. They include: 1. Defining the goal of the program (e.g., increase sales, increase distribution, etc.), 2. Making sure the sales force has the required training and product available needed to achieve the goal, 3. Communicating how the program works to the sales force, 4. Running the program, and lastly, 5. Measuring the effectiveness of the program (i.e., Did the program achieve its goal?).
She notes that multi-generational sales forces need a variety of incentives, not just those that have worked in the past.
Here are some questions you could ask the class to look for and consider:
1. Why are sales incentives important?
2. What is the recommended process for planning a sales incentive program?
3. What percent of sales incentive programs fail and what is a common reason for their failure?
4. What is a common mistake made by sales managers?
Full Case Recommendations:
The Pacific Medical Supply Company (PMSC) case discusses the recent growth of a small company largely due to the efforts of one outstanding salesperson. During her three year tenure at the company she has worked hard and her efforts have been rewarded. Unfortunately, she now is receiving some negative comments from fellow (jealous) sales people and customer service personnel. Her boss has always maintained a distant, laize-faire approach with the sales force, which is likely contributing to the issues at hand. The case addresses issues of compensation and (lack of) other forms of rewards as well as management style.
1. Are people like Nicole born to be natural salespeople? Or can good sales managers help them become better salespeople? Is there a way Jim might enlist Nicole to help PMSC in this regard?
It might argued, that some people are naturally more outgoing and this helps them be more comfortable in a sales setting. Obviously, good sales managers can help develop their sales people and this should tie into a discussion about how they can do so. The consideration of Nicole as a new sales manager should allow for a good discussion on the pros and cons of moving her into more of a management position.
2. Can you find the flaw in PMSC sales commission structure that might be adversely affecting its lower performers? How, as a sales manager, would you change the plan to better motivate them?
Several flaws might be indentified in their commission structure. It is progressive and tends would tend to reward large sales to the detriment of smaller accounts. Additionally it appears to be based solely on one factor, sales volume. Some consideration should be given to adding additional factors to their commission system. (See 3 below.)
3. Should the profit margin of the product play a role in the commission structure? What if a salesperson predominantly sold products with an 80 percent profit margin? Should the person be paid more than someone who predominantly sold products with a 40 percent margin?
Profit margins would be a good addition to the commission structure. The higher margin products should receive greater rewards.
4. In your opinion, what should Jim do to try to retain and motivate Nicole?
Jim’s style has allowed his sales force great independence. It may however be catching up with him by the fact he has several sub-performing sales people. Nicole and other high achieving sales personnel may find the motivational power of some rewards, in this case compensation, to be less fulfilling over time. Jim needs to find out what else motivates her (and this case provides likes of details about what does) and offer it.
Cannon Associates is another possibility for a case for this chapter. In this case, there is conflict between an inside and outside sales force that need to be working together. Discussion of this case should include topics such a total rewards plan, team selling and managerial styles.
Other In-class Exercises:
Interesting Websites on Rewards
The Hay Group is a compensation and benefits consulting firm. Visit its website at
Hay Group - http://www.haygroup.com/ . The website typically posts commentary on current national topics of interest. Its ‘Press Center’ and ‘Training’ sections provide interesting insights and some free podcasts and vodcasts on a wide range of current trends and topics (e.g. Emotional Intelligence: What it is and how can you benefit from it? to Economic crisis; reward management advice for weathering the downturn).
WorldatWork is a nonprofit organization for those involved with rewarding employees. It has a wealth of information including white papers and blogs at its website http://worldatwork.org. While some of the site is limited to members only, a large portion is available for review. You might consider assigning students the task of identifying new trends in different areas, e.g., sales compensation, benefits, work-life, performance and recognition, and development and career opportunities.
In terms of development and career opportunities, students (and some instructors!) have an interest in the notion of being a ‘Corporate Athlete’. Human Performance Institute - http://www.energyforperformance.com/index.html is one firm that can help sales reps achieve this status. They offer programs in managing your health and focusing your energies while leading a busy business schedule. The website provides interesting free profiles that can be used to check your style and level of energy.
Maritz Incentives was highlighted in one of the chapter’s videos. Their website http://www.maritzincentives.com/ describes some of their products and services that can support a sales manager.
Class exercise – Design a reward system.
If the class had a contest – (e.g., best grade, paper, discussion, simulation score, current news report, etc.) ask students how they would you like to be rewarded? Some possible options might be extra points, public recognition, a day off, a free meal (with or without the instructor) or merchandise.
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