374 33 Powerpoint-slides 13-Sales-Force-compensation Chapter 13 Sales Force Compensation

© Oxford University Press 2011

Chapter - 13Chapter - 13Sales Force Sales Force

CompensationCompensation


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


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.

3


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

4


Features of CompensationFeatures of CompensationManagement.Fairness.Motivation.Flexible.Competitiveness.Cost.

5


Factors Influencing Factors Influencing Compensation PlansCompensation PlansInternal factors.External factors.

6


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.

7


External FactorsExternal FactorsCompensation policies in the

industry.Legal conditions.Economic conditions.Market competition.Trade unions.Global considerations.

8


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.

9


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.

10


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


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.

12


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.

13


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.

14


Steps in Developing Steps in Developing Compensation PlansCompensation Plans

15


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

16


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.

17


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.

18


Methods of CompensationMethods of CompensationStraight salary.Straight commission.Combination plans

19


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


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.

21


Combination PlansCombination PlansSalary and commission.Salary and bonus.Salary plus commission and

bonus.

22


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

23


Compensation Schemes-Non Compensation Schemes-Non Financial ApproachFinancial ApproachPerks.Sales contests.

24


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.

25


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.

26

374 33 Powerpoint-slides 13-Sales-Force-compensation Chapter 13 Sales Force Compensation

Documents

Transcript of 374 33 Powerpoint-slides 13-Sales-Force-compensation Chapter 13 Sales Force Compensation