Transcript 12 Motivation - Bob McDonald

Sales Management 12
Motivation and Rewards
Motivation: Intrinsic vs.
Extrinsic
Intrinsic
When doing
the job is
inherently
motivating
Extrinsic
When rewards
such as pay
and formal
recognition act
as motivators
Motivation
Two Basic Categories of
Rewards
Compensation rewards:
Those given in return for acceptable
performance or effort. They can include
nonfinancial compensation.
Noncompensation rewards:
Those beneficial factors related to the work
situation and well-being of each salesperson.
Types of Sales Force Rewards
_______
__ Sense of
Accomplishment
________
_
Pay
Job security
Personal Growth
Opportunities
Promotion
Recognition
Motivation
Aptitude:

Enduring personal _________that
determine individual’s overall ability to
perform a sales job

Variables
Intelligence
 Cognitive Abilities
 Verbal Intelligence
 Math Abilities
 Sales Aptitude

Personality
Enduring personal traits that reflect an
individual’s _________ _________to
situations encountered in the
environment.
 Variables

Responsibility
 Dominance
 Sociability
 Self-Esteem
 Creativity/Flexibility
 Need for Achievement/Intrinsic Rewards
 Need for Power/Extrinsic Rewards

Skill
Individual’s learned _________at
performing necessary tasks.
 NB: Skills can be trained!
 Variables

Vocational skills
 Sales Presentation skills
 Interpersonal skills
 General Management
 Vocational Esteem

Sales Role Perceptions

Role _________:

Role _________:

Role _________:
Knowing what is expected
Incompatible demands from
different role partners (firm, boss, customer, family)
Believe that they don’t know
what is expected, how they should meet expectations, or
how they will be evaluated & rewarded
Sales Role Perceptions II:
Consequences

Role Inaccuracy, Conflict, and
Ambiguity lead to:
Dissatisfaction
 Mental Anxiety
 Salesperson Turnover
 Absenteeism
 Poor Job Performance

Sales Role Perceptions III:
Improvement

Close (not stifling) supervision

Training

Salesperson experience

Include salesperson when establishing
expectations
Sales Quotas
 Goals
assigned to salespeople for
specific time period.
 Three
Purposes
 _________salespeople
 _________performance
 _________salespeople’s
effort
Problems with Quotas

Not apples/apples

Different levels of difficulty in territories
May be tough to apply to teams
 Can be expensive to establish
 If not done well, may focus efforts too
much in one area.

Characteristics of Good
Quotas
 _________
 Motivation
requires reasonable
chance of attainment
 Easy to _________
 Too complex  suspicion and mistrust
 _________
 Cover all criteria to avoid imbalance
Types of Quotas

Volume


Activity


Units, Dollars, Points
# cold calls, proposals, displays, service
calls, meetings, collections, demonstrations
Financial

Expenses, Gross Margins, Net Profit
How to Set Quotas

Volume
History
 Territory Potential


Activity


Sales reps and managers; sales reports;
research
Financial
Based on financial goals of firm
 Adjust to meet needs

Performance Criteria







Total Sales Volume; Increase over last year.
Percentage of Quota Attainment.
Selling Expenses; Decrease from last year.
Profitability of sales; Increase over last year
New Accounts
Improved administrative duties (paperwork)
Improvements in customer service
Rewards
Money: salary, bonus, commission
 Promotion
 Non-financial: (Contests, travel, prizes, etc.)
 Special Recognition (clubs, awards, etc.)
 Job security
 Feeling of self-fulfillment
 Feeling of worthwhile accomplishment
 Opportunity for personal growth and
development
 Opportunity for independent thought/action

Motivation
Motivation leads to effort.
 Effort leads to performance.
 What leads to motivation?

Motivation
Expectancy Theory
Expectancy
No
Yes
Instrumentality
No
Yes
High
Valence
Motivation
Low
Unmotivated
Expectancy Theory

Expectation


Instrumentality


_________ Reward
Valence


Effort  _________
Reward has _________
Must have all 3 to be motivated!
Expectation
Must expect that
effort will lead to
performance outcome
Practice ≠ Jimi
Studying = Knowledge
Instrumentality
Results must be
instrumental in
achieving reward
Valence
Low Valence
High Valence
Expectancy Theory in Sales

If I make ten cold calls/day, I will get 2-3
new customers per week, leading to higher
sales.

If I get 2-3 new customers/week and have
higher sales, I will make more
commi$$ion$.

I like money. I want to make more, so I
am motivated to make the cold calls.
Note: People have different values, so they are
motivated by different rewards.
Major Issues
People have different personal
characteristics and different valances for
various kinds of rewards.
 Ideally want to have unique
compensation program for each person.
 It ain’t gonna happ’n!!!!

Too complex to administer
 Question of fairness


Changes over time

Need to update continuously
Designing a Compensation
Plan

Compensation plan is intended to have the
sales force do what management wants,
how it wants it, and within the desired time.

First, need to decide what it is that
management wants.
Assessing Situation/Objectives
How are salespeople allocating time?
 How good are the current outcomes?
 Job Analysis
 Recruitment and selection
 Company records
 Company marketing & sales objectives
 Account management

What do you reward?
Performance outcomes
 Behaviors
 Need to align the sales forces’
objectives with that of the company.
 Can strive to achieve multiple
objectives, but not too many at once.
 Use mixed-incentive plan

Behaviors & Activities to Reward






Higher $ volume sales
Increase sales of more
profitable items
Push new products
Higher penetration:
products, customers
Larger average order
size
New customers







Service/Maintain
existing customers
Retain customers
Encourage team
cooperation
Balanced (full-line)
selling
Lower sales costs
Increase calls
Prompt paperwork
Valance
Need to determine what drives the
current sales force at this time.
 Survey
 Conjoint analysis


Managers don’t necessarily have an
accurate perception of their
salespeople’s valances for different
rewards.
Appropriate Compensation Mix
Determine gross amount necessary to
attract, retain, and motivate right type
of salespeople.
 Then allocate to salary, commission,
bonus, benefits, prizes.
 Varies with type of sales job, size of
company and sales force, and policies.
 What do competitors pay?
 Pay low, high, or average?

Dangers of Paying Too Much

Increases selling costs  lowers ______

Can cause _________and low
_________among non-sales employees
and managers

Not necessarily a motivator
Maslow
 Prospect Theory

Dangers of Paying Too Little

You get what you pay for.
Attract only weak people
 Leads to poor results


High turnover, especially among good
people. Only the less capable will stay.
Leads to higher costs for recruiting, and
training.
 Lost sales
 Managers always recruiting and hiring

Compensation Components

_________

_________

_________

_________

_________ _________
Compensation: Commission
Payment based on short-term results
 Usually a % of $ sales, or $/volume
 Direct link between performance and
payment
 Motivates high level of selling effort
 Encourages sales success

Compensation: Salary
Fixed sum of money paid at set intervals
 How most of the country is paid
 Function of experience, competence,
tenure, past performance
 Motivate effort on non-sales activities
 Adjust for differences in territory potential
 Motivate investment in long-term sale

Compensation: Incentive/Bonus
Additional commission tied to sales or
profitability (e.g. + 1% after
$2,000,000)
 Bonus for meeting or exceeding target
 Direct effort to strategic objectives
 Provide additional rewards to top
performers
 Encourage sales success

Compensation: Sales Contests
Encourage extra effort at specific shortterm objectives
 Can offer:

Cash
 Merchandise (TV, Car, Shopping, Golf, Dinner)
 Travel (Can also be a team building event)

Offer multiple opportunities for prizes
 Needs to be achievable to be motivating
 Cannot be too easy, or won’t be motivating

Compensation: Benefits
Health insurance, sometimes disability
and life insurance
 Pension plan
 Not everyone offers, especially if
contract (real estate agent) or
manufacturer’s rep
 Salespeople are then forced to buy
plans through professional associations
 Provides security, especially important

Compensation Plans

Straight Salary

Straight Commission

Combination Plan (most common)
Straight Salary
If non-short-term sales goals are
important
 If difficult to measure individual’s
contribution to the sales effort
(missionary, team selling)
 Provide salespeople with steady income
 Easy to manage and administer

$ not tied to performance
 Lowers/clouds instrumentality
 No motivation to perform

Straight Commission

Direct link between selling and reward

Motivating
Inherently fair: rewards to best performers
 Usually easy to compute/administer
 Vary directly with sales volume & $

Lose control over sales force
 No motivation for non-selling activities


Milk existing customers, no service
Unstable income, tough to predict
 Can establish draw, but may be deep hole

Combination Plans
Most common form of compensation
 Smaller commissions, but with base salary
 Can also offer bonuses for reaching target
(e.g. % of quota)
 Can manipulate (not often, or too much)
to motivate performance or activities
 Gives salespeople both security and
incentive to work hard and perform

Other Issues
Appropriate size of incentive/base (25%+)
 Incentive Ceiling: Arguments on both sides


When is a sale a sale?: order acceptance, allowances
or returns, shipment, payment?

Group incentive? Allocation? Can pay both
group and individual components: Linkages

How often to pay incentive? Monthly (52%),
Quarterly (24%), or Annually (21%)
Sales Contests
Clearly define and specify the objectives
 Have an exciting _________
 Have a ________ __________that
most/all salespeople can win a prize.
 _________prizes
 Promotion and follow through


_________sales
 Hurt _________& _________
 Necessary if good compensation plan?
Non-Financial Rewards
Promotion
 Career Development
 Valence declines with age
 Add perquisites (perks) with position:

Car
 Better working conditions (hours, facility)
 Compensation, Profit-sharing
