salesmgmt-compensationandcontrol

8/7/2019 SalesMgmt-compensationandcontrol

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Sales Force-CompensationBins M Mathew


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Topics :-Sales compensation S ales&Dist Mgmt Dr. S .L

Gupta


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Sound compensation

Motivation Performance, efficiency

Realize larger sale

Stability to sales seasonal fluctuations

Controlling performance

Recruitment, training and motivation CTC

Agrarian economy to developed economy


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Hertzbergs Tw o factor Th eory

In India compensation is a h ygiene / motivator ?

Dissatisfiers: - (Hygiene) Extrinsic ( maintenance ) Company policy, administration, supervisions, relationshipswith supervisors, working conditions, salary , relationship withpeers, personal life, relationship with subordinates, status,security

Only aware of these when they are missing

Motivators: - Intrinsic ( Job content ) Achievement, recognition, nature of the work itself,

responsibility, opportunities for advancement and growth Things that make you want to work


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R esearc h EvaluationR esearc h Evaluation

Pay structure

Security

Complements

Rewards in motivating the sales people

Importance of the set of motivators varies with demographic variable, position in the organisation


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O bjectives of Sales compensation plan

To attract qlty sales force

Improve productivity level of SP

Optimizing the sales effort (Sales x expenses)

Reduces attrition

Better image projection

If you throw peanuts you get monkeys


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Ch aracteristics of an effective compensationplan

S h ould address s h ort-term and long-term issues of SP

Fixed component and regular flo w

Compensation plan linked to performance & effort

Future orientation

Based on equity and equality

S h ould not be complex

Control

Participatory met h od

Compensation based on :- industry rate, nature of job, difficulty involved in realizing sales, ability and experience


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Factors influencing t h e design of a compensation planF inancial ability of the firm to pay

-additional increments w.r.t higher profit marginsPull strategies

-S ales people order taker

-S ales person order giver

-Demand x S upplyNew product launches

-Pus h strategy (exp and qualified force)

Nature of the product

-B2B, B 2C

- Unit price of product, Premium products

Govt rules and regulations


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Factors influencing Special company needs and problems

Increase marketing effectiveness-Overemphasize low margin items & neglect more profitable

products

Smaller order problem

Point-of-purchase displays


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Compensation F inancial Reward

- Non financial Reward

Types of compensation plan

Salary

Non-financial compensation Higher order needs

Disposable income = (Salary tax)

Spendable income ( TAKE-HOME ) = (Disposable savings)

( current spending )

The level of reward, the type of reward, the method of implementation and reinforcement of the reward system are significant in attracting talent to the

organisation


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Financial R e ward SystemFinancial compensation Plans

Straight Salary Plan

- S implest methods (17% use )

- Pay cheque weekly/monthly

- Bulk of Non selling task , Order taking

- B2B, B2C- S alary + increment plan

- S alary + allowance plan

- S uccess depends on supervision

F ixed component + Variable component + Expenses + F ringe benefits

(Basic support) (Commission)

(Profit sharing) / (Bonus)

(Reimbursement)

HPCL, BPCL, ONGC , B2B


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Financial R e ward System

Straight Salary Plan +Situational factors

-Team involved in sales Performance ?-Pharmaceutical industry O.C, missionary

-S ales realized with sales support staff ( demo, inst, main ,supp )

- Pull strategy ?

- Fixed component inversely proportionate to selling effort

- Cash cows

- S ervice

- Economic downturns, seasonal business

M.R, (Relationship x transactional)


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Straight Salary Plan - factors

-lacks motivational effects

-not challenging hard working sales person

- hard burden to control

- prospecting and long term relationship building neglected

Context for straight salary ;- Routine selling jobs

Extensive missionary and educational selling jobs

Lengthy presales and post sales service and negotiations


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Financial R e ward SystemStraight Commission Plan

-Compensation linked directly to performance

-risk compensation plan- Fixed or sliding rate (slabs for level of sales)- Weeding out- flat rate commission, Progressive / regressive rate of com. Differential- Aggressive sale operations

Progressive commission Plan

-Each quarter the progressive commission rate5% on first Rs. 20,000 = Rs. 1,0007% on next Rs. 80,000 = Rs. 5,60010% on everything over 1,00,000 = Rs. 3,000 (10% of rest)

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The sales person sales of Rs. 1,30,000 = Rs. 9,600

Highly exp SP

(PRODUCTIVITY )


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Straight commission Plan + factors-rewards linked to ones own performance

-Control sales

Straight commission Plan - factors-no loyalty to organisation, less organised-price discounting - pressurize-easy-to-sell low-margin products- demotivated in down turns

-Administrative cost high-complex pattern

Highly exp SP

Regressive commission Plan

-Each quarter the progressive commission rate

10% on first Rs. 20,0007% on next Rs. 80,0005% on everything over 1,00,000


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Financial R e ward SystemBonus and incentives

-S upplemental for above average performanceCustomer satisfaction

Customer retention

Adding new customers

New product

outstanding collection of overdue

-incentives tied to sales quota

Salary + incentive Plan (C ombination Plan)-S traight salary + variable proportion

-60%salary + 30% commission + 10% bonus + incentives- flex plan

+ factorsSecurity of fixed income

Control + motivation

Recession not likely to lose all income


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Drawing account and commission plan

-Drawing account credits the commission- Draw permissible limit Credit balance, debit balance

Allied methods- Equity holding of the company earned share

- S pecial remuneration plan-non selling activities

- Expense allowance plan

+ factors

Expenses can be checked

Assurance of regular income

Sales mans performance & market situations

- factors

Pressure for increasing comm. F or efficient and exp sale people

Concern to sell easy-tosell items


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Point based incentives

Upto 80% achievement of sales plan - Nil

81-90% of the achievement - 8 points



101-110% - 24 points

115% onwards - 30 points

Value per point Rs. 200 per point

A salesman achieving 115% of the sales plan

30 points x Rs. 200 = Rs. 6,000


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N on-Financial Compensation

Promotions

h ig h er job responsibility Motivational tool Job enric h ment +

Recognition Programmes

medallions, C rorepati , Informal recognitionF ringe Benefits

medical benefitsretirement benefits

Life insuranceStock optionPaid vacationSick leaveML/ PL

Employment benefits


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N on-Financial Compensation

Expenses accounts

reimburse expenses prevent padding 3 expense plans -- company pay

Expenses quota- SP pay ( SP are paid straig h t commission )

- company partially pay

Perks

Special status employeeStatus perks , Financial perks , Personal growt h perks

Office locationJob titleParking space

C ompany ve h icleDomestic h elpC lub members h ip

Training


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Evaluation / control of Sales Force

Performance Test effectiveness of the sales programme

PE R FORMAN CE A PP RA IS AL

Th e evaluation of t h e performance of a salesperson by t h emgmt of an organisation in relation to some objectiveattribute of t h e job

-Ensure effective administration

-S election for promotion, rewards, termination. Other recognition

Development aspect :- performance, strengthening job skills, counseling,training


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Types of Judgment for evaluating SalesPerformance

Relative method ( overall performance )1) Compare performance with other

Rank order from Best - Worst

2) Group evaluation

Top three-middle bracket- lower set

No clarity on how big or small the difference are, no information

Measured against peers

Absolute method ( specific performance )

1) Performance measured in sales volume, market share / revenue

Diff in evaluation standards between mgrs, Diff selling situation

Measures are objective , measured against performance


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Focus of t h e measureTrait based ( personal traits )

Decisiveness, reliability, energy, loyalty ( subjective )

Describing a salesperson

Outcome based ( result of selling process )

amount of sales, no of product/units/volumes

profitability, cost/ sales

MBO

Results at any costs

Qnty affect Qlty of service

Rely on internal documentation

Call reports, PO, Financial documents

Computerised Performance Monitoring

Behaviour based ( be h aviour )


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Focus of t h e measureBehaviour based ( be h aviour-selling Activity )

Product knowledge, presentation qlty,closing ability, service performed,number of active accounts, relationshipno. of calls/dayno of working days/period of time


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Performance ratingR ating forms :-

Uniform and consistent parameters of evaluationToo general, Judgmental bias

Please rate t h e salespeople on t h e basis of t h e scale given belo w

1. 2. 3. 4. 5.

(strongly disagree) (Strongly agree)

a . O rganise h is call plan ( )

b . L isten w ell ( )

c . Does h is h ome w ork ( )

d . Writes reports regularly ( )

e . Keeps update customer information ( )

Rating forms


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Performance rating

Forced c h oice scales ( Inventory of adjectives for evaluation )

Essay writing

For eac h pair of adjectives, place a tick mark in t h e most descriptive column next

to t h e adjective t h at best describes t h e sales person you are evaluating Pairs A djectives Weig h ts . M ost descriptive .

a . A lw ays criticizes, never praises - 3 ( )

Carries out orders by passing on t h e 0 ( )

responsibility to ot h ers

b . Kno w s t h e job and performs w ell 3 ( )

Plays no favorites 1 ( )

c . Understands t h e customers problem 3 ( )

Hardly cares for customers 1 ( )


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Performance rating

Be h avioural O bservation scale (significant job incidents )


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Call Report periodic accounts (time prospecting, demonstration & follow-up)A ssigning client to ne w recruits

Forcasting composite met h od

Performance rating


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Performance rating

Silent Call M onitoring Scores

- Greeting

- Ascerting customer needs and demands

- Courtesy

- Communication and listening skills


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Weekly activity Report (Unusual events and incidents )

Price wars, new competitor, push money

Changes in purchase practice, change in decision makers

Performance rating

Market environment


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Performance rating

Customer S atisfaction S urveys :-random or periodic

mass mailing questionnaires

e.g : - Airlines


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Performance rating

Combination plan of evaluation:-

Outcome & Behaviour based rating models


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Performance appraisal conduction

Primary evaluator - Immediate supervisor (promotion and pay revision)

S elf appraisal

-S

ales person

Formal Performance Development Review


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Performance appraisal conduction

Biases- inflate or deflate performance rating

- conscious

+ve or -ve- unconscious


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Performance appraisal Individual vs Team

Multifunctional teams- ROLE RE S ULT MATRIX

Position Developing a new business Servicing existing customer

K ey Account mgr

Regional Sales Mgr

Application engg.

C ustomer service staff

Installation and Qlty engg.

Financial staff.

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