374 33 powerpoint-slides 13-sales-force-compensation chapter 13 sales force compensation
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© Oxford University Press 2011
Chapter - 13Chapter - 13Sales Force Sales Force
CompensationCompensation
© Oxford University Press 2011
Learning ObjectivesLearning Objectives Understand the concept, definition, and types of compensation
Explain the basic features of sales force compensation plan
Comprehend the factors affecting the compensation plan designed for a sales force
Understand the insights of requirements and the aims of the compensation plan
Understand the characteristics of sales force compensation plan from strategic perspectives
Understand the steps in developing the compensation plan
Recognize different methods of compensation and their advantages and disadvantages
Explain the role of non-financial compensation for sales force motivation
Understand the strategic compensation system2
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Definition of Definition of CompensationCompensationAgarwala (2007) defined
compensation as the sum total of all forms of payments and rewards provided to the employees for performing tasks to achieve organizational objectives.
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Organizational RewardsOrganizational RewardsIngram et al. (2007) categorize
organizational rewards into two categories:◦Compensation rewards
Financial Non-financial
◦Non-compensation rewards Non-monetary like healthy job
environment
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Features of CompensationFeatures of CompensationManagement.Fairness.Motivation.Flexible.Competitiveness.Cost.
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Factors Influencing Factors Influencing Compensation PlansCompensation PlansInternal factors.External factors.
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Internal FactorsInternal FactorsFinancial ability.Compensation policies.Recruitment and selection policy.Promotional policy.Job descriptions.Job evaluation.Employer’s designation and
position.Employee’s relative contribution.
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External FactorsExternal FactorsCompensation policies in the
industry.Legal conditions.Economic conditions.Market competition.Trade unions.Global considerations.
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Aims of a Good Aims of a Good Compensation PlanCompensation PlanTo increase enthusiasm and
motivation.To instill a sense of commitment.To inject an atmosphere of team
spirit.To develop a stable sales force.To retain efficient sales force.To co-ordinate and control sales
force.To attract efficient sales people.
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Aims of a Good Aims of a Good Compensation PlanCompensation PlanTo increase the loyalty of sales
force.To increase quality of interaction
with customer.To improve the sense of
confidence of customer on the sales force.
To create a dedicates sales force.
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Characteristics of a Good Characteristics of a Good Compensation PlanCompensation PlanConsistent with position and job
description.Decides right compensation
befitting the position.Acts as a catalyst to improve
productivity.Provides satisfaction and security to
sales force.Improves financial health of all
stakeholders.11
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Characteristics of a Good Characteristics of a Good Compensation PlanCompensation PlanDoes not distract the team spirit
and group cohesion.Generates hearty and cordial
relations.Simple to understand.Flexible so that changes can be
incorporated.Variable component has direct
relationship with performance.
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Characteristics of a Good Characteristics of a Good Compensation PlanCompensation PlanHelps in retention of efficient sales
force.In sync with sales and profit
objectives.Acceptable to both salespeople and
employers.Generates positive correlation
between compensation and motivation and motivation and performance.
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Characteristics of a Good Characteristics of a Good Compensation PlanCompensation PlanProvides direction for individual
goal fulfillment.Enhances job involvement and
commitment.Increases sense of belongingness
of salespeople.Acts within the contours of
strategic marketing plans.
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Steps in Developing Steps in Developing Compensation PlansCompensation Plans
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Review Job DescriptionReview Job DescriptionStarting point of developing a
compensation plan.Consider importance and volume
of the jobs listed in the job description.
Consider education and experience.
Accurate job evaluation
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Establish Compensation Establish Compensation ObjectivesObjectivesBring equity in apportionment of
remunerations.Goal-directed.Should not be rigid.Should fulfill salesperson’s
personal goals.Pivotal aspects of objectives are:
Operations. Control. Measurability.
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Establish Compensation Establish Compensation LevelsLevelsRight compensation for a group of
salespeople belonging to a common rank.
Fix an appropriate level for senior and junior salespeople.
Wide discrimination should be avoided.
Salespeople should be made aware of fixed part, variable part, deferred part of the compensation plan.
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Methods of CompensationMethods of CompensationStraight salary.Straight commission.Combination plans
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Straight SalaryStraight SalaryAdvantages
Sense of security. Stability of income. Resists high turnover of sales people. Simple to understand.
Disadvantages Restrains additional initiative. Selling expenses not related to sales
volume. Equal treatment to high and low
performing employees.20
© Oxford University Press 2011
Straight CommissionStraight CommissionAdvantages
Great motivator. Differentiates high and low performers. Provides unlimited opportunity to earn. Selling costs related to sales volumes.
Disadvantages Loss of control. Salespeople focus on easy selling items. Salespeople lack sense of belongingness. No/little attention to after-sales service.
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Combination PlansCombination PlansSalary and commission.Salary and bonus.Salary plus commission and
bonus.
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Compensation Schemes-Non Compensation Schemes-Non Financial ApproachFinancial ApproachCareer advancement through
promotion.Recognition.Selling expenses.Fringe benefits.
Medical benefits. Retirement benefits. Company stock options. Leave travel concessions. Paid vacations
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Compensation Schemes-Non Compensation Schemes-Non Financial ApproachFinancial ApproachPerks.Sales contests.
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Strategic Compensation Strategic Compensation System (SCS)System (SCS)SCS has been defined as the
right selection of the compensation tool, developing it in line with the compensation objectives and application of it with an aim to attain broad strategic pursuits of the compensation.
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Goals of SCSGoals of SCSTo distribute compensations equitably.To design compensation packages that
fulfill personal and organizational goals.
To correlate performance and compensation.
To put control whenever performance deviates from benchmarks.
To reward employees who achieve set standards.
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