Session 8

Compensation & Motivation

 Compensation
3 basic questions drive successful
compensation programs:
1. Which method is most appropriate for
motivating specific selling activities?
2. How much of a salesperson’s total
compensation should be through
incentives?
3. What is the right mix of financial / non-
financial compensations?
 Compensation
Compensation is based on expectancy model. It
should try to adjust pay levels to
performance. Steps in designing a
compensation plan are:
• Define the sales job – evaluate job
descriptions & specifications
• Compare patterns in community and industry
• Determine the compensation level – value of
person, affordability, break-even for every job.
• Also see what is the average salary at the
same level in the organization.
 Compensation Plans
Various compensation plans are applied:
• Direct– Fixed salary, incentives.
• Indirect – Salary + commission, full
commission, salary + profit sharing
• Non Financial– Training, awards, contests,
recognition
• Expenses - Conveyance, TA/DA,
communication
• Various other time-bound incentives
• Fringe benefits
 (contd.)
• Straight salary
1) to motivate people to achieve objectives other
than short-run sales goals and
2) individual’s impact on sales volume is difficult
to measure.
• Example - missionary sales person, educating
the customers, relationship building activities,
technical products, projects (long gestation
period), sales-cum-service staff (non-selling
tasks are higher), delivery boys, order takers.
• Reward only at the time of reviews.
 Contd.
• Straight commission – employee more
like an agent (co. selling intangibles/
services or high value sales). Less
administrative control and conformity
to policies.

• Combination.
 Popularity of compensation plans
Product / service St. salary St. comm. Combi.
Consumer 19.9% 15.1% 64.9%
products
Consumer 26.6 17.1 56.3
services
Ind. products 17.1 7.3 75.6
Ind. services 18.4 5.7 75.8
Office products 12.1 11.1 76.8
Office services 17.1 11.4 71.5
 Factors influencing design of
compensation
• PLC- introduction, growth, maturity,
decline
• Demographic factors – 20-28 (high risk,
high gain), 28-35 (fixed + variable), 35+
(stability, straight fixed salary)
• Role of sales in marketing strategy of
the company.
• Competitive practices.
 Which aspects of job to be
rewarded
• Sell a greater overall • Open new accounts
value • Maintain existing
• Focus on more business
profitable products • Reduce customer T/O
• Push new products • Achieve full-line (range)
• Push selected seasonal selling
items • Increase number of
• Achieve higher degree calls made
of market penetration • Administrative
• Increase average order discipline
size
 Motivation
Getting people to work towards the
achievement of objectives. To help win
commitment of sales team.
Need for giving motivation to sales persons-
• Inherent nature of the job
• Role conflict
• Monotony in some situations
• Working alone
 Motivation – the Psychological
Process
Individual’s choice to:
1. Initiate action on a certain task
2. Expend a certain amount of effort on that
task
3. Persist in expending effort over a period
of time
Expectancy Theory
• The psychological determinants of motivation

7-12
 Bases for Motivation
• Expectancies – perceived linkages between
more effort and improved performance
• Instrumentalities – perceived relationship
between improved performance and increased
rewards
• Valence for rewards – perceived intrinsic value
of the rewards
 Theories of Motivation
• A H Maslow’s Hierarchy

• Need hierarchy

• A satisfied need is no longer a motivator but

the next level gains in potency. Money
ceases to be a long lasting motivator after
first 2 levels.
 Theories of Motivation
• Fredrick Herzberg 2 factors theory

• Absence of dissatisfaction is not

satisfaction

• 1st three levels of Maslow are hygiene

factor. Fulfilling of hygiene factors –
neutral point (fair day’s work).
 Theories of Motivation
• David McClelland Achievement-
Motivation theory – If a person keeps
on thinking about how to accomplish
something unusual & important, he has
a high need for achievement.
 (contd.)
Apart from monitory incentives, non-
monitory tools are
• personal meeting,
• clarity of job profile
• sales contests, conferences,
reinforcement, leadership style, freedom,
recognition, persuasion etc.
 Motivational Tools in a Motivational Mix
Financial Non Financial
• Financial compensation plan • Promotion
• Salary • Sense of accomplishment
• Commission/Incentive • Personal growth
• Bonus opportunities
• Fringe benefits • Recognition
• Combination • Job security
• Sales contests • Sales meetings
• Sales training programmes
• Job enrichment
• Supervision
• Financial compensation is the most widely used tool of
motivation, as salespeople give highest value to it
 Zig Ziglar on Motivation
• Critics say that motivation does not stick.
So neither does bathing. That’s why it is
recommended everyday.
 Personal Characteristics Affecting
Motivation
• Satisfaction with current rewards
• Demographic variables
• Job experience
• Psychological variables
– Personality traits
– Attribution of meaning to performance
• Model of the determinants of a salesperson’s performance
 6.3

• Components of job
satisfaction
Role Conflict and Ambiguity

Inaccurate
Role Perceptions
Role Conflict

Role
Perceptions

Role Ambiguity

Consequences

6-23
 Conflict and Ambiguity
• Different role perceptions mean different
expectations
• Role ambiguity plagues many salespeople in
some aspect of their job
• Salespeople often perceive conflict between
company policies or expectations and customer
demands
Psychological Consequences of Conflict and
Ambiguity
• Salesperson becomes the “person in the middle”
with conflicting expectations
• Perceived lack of necessary information causes
loss of confidence
• Perceived role conflict and role ambiguity affect
job satisfaction
 Behavioral Consequences of Conflict and
Ambiguity
• Dysfunctional behavior
• Increased turnover
• Satisfaction and performance correlate
positively
 Managing Conflict and Ambiguity

• Experience reduces role conflict

• Increased voice in role definition reduces role
conflict
• Input in evaluation standards reduces ambiguity
• Close supervision reduces ambiguity
• Close supervision can increase conflict
• Sales Career Path
 Career Stages and Motivation
• Exploration – lack of assurance
• Establishment – selection of selling as an
occupation and desire for career success
• Maintenance – seeking to retain present
position, high status, and achievement
• Disengagement – preparation for retirement and
possible loss of self-identity
 Career stages of salespersons
• Exploration stage
Effective tools – good training, supportive
supervision, recognition, acceptance in team,
monetary rewards
• Establishment stage
Effective tools – recognition, promotions
• Maintenance stage
Effective tools – high status, respect from peers
and superiors
• Disengagement stage
Effective tools – neither high-order nor low-order
rewards motivate them
 Plateauing
• Early disengagement
• Causes
– Lack of a clear career path
– Boredom
– Failure to manage the person effectively
• Solutions
– Clearly defined career path
– Promotions within sales force
– Job environment
 Plateauing – on a lighter note
• When you realize how little inefficient
salesmen produce, you wonder what they
will retire, or are they already retired and
don’t know it?

• It has been said that some inept salesmen

die at the age of 30, but remain on the
payroll and are not buried until they reach
the age of 60.
 Solutions for the Plateaued Salesperson

• Talk with salesperson about problem

• Discuss reasons and possible solutions
• Conduct motivations sessions
• Manage, lead and communicate
• Cut / increase salesperson’s responsibilities
• Assign to a new territory
• Provide time off