Sales Rep Expenses Claim

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					     Module Eight

Motivation and Reward
System Management
Posters work
"Winners must have two things; definite goals and a burning desire to achieve them."
         Motivation and Rewards
              An Expert’s Viewpoint:
Optimus Solutions has a substantial motivation and reward
system. The sales reps receive a 10% - 25% commission
on every dollar of profit they generate. The more profit
sales reps generate, the more they earn. In addition, any
rep that reaches an aggressive, yet obtainable, annual
sales goal of $1 million during a 12-month period receives
a one-year lease on a Porsche 911.

         Motivation and Rewards
              An Expert’s Viewpoint:


The company’s system for motivating and rewarding its
salespeople has been very successful. Five people
qualified for the Porsche in 2000, and eight qualified in
2001. The company has grown to more than $100
million in revenues in just four years
The force within us that activates our behavior. It
is a function of three distinct components,
Intensity, Direction, and Persistence.


      Intensity      Direction    Persistence
         Motivation - Intensity

Intensity refers to the amount of mental and
physical effort put forth by the salesperson.


    Intensity      Direction    Persistence
           Motivation - Direction

The extent to which an individual determines and
chooses efforts focused on a particular goal.


       Intensity    Direction    Persistence
       Motivation - Persistence

The extent to which the goal-directed effort is
put forth over time.


     Intensity     Direction     Persistence
really motivate those people!

   Does more effort lead to a
  higher level of performance?

          Why not?
Motivation: Intrinsic vs. Extrinsic

 Intrinsic                Extrinsic
 When doing           When rewards
 the job is              such as pay
 inherently               and formal
 motivating           recognition act
 ever happen?          as motivators
 Two Basic Categories of Rewards

Compensation rewards:
 Those given in return for acceptable performance or
 effort. They can include nonfinancial compensation
 such as recognition and opportunities for growth and
Noncompensation rewards:
 Those beneficial factors related to the work situation
 and well-being of each salesperson. Provide
 adequate resources to do the job. Allowing the
 people control over their own activities.
Optimal Sales Force Reward System

1.   Provides an acceptable ratio of costs and sales
     force output in volume, profit, or other objectives
2.   Encourages specific activities consistent with the
     firm's overall, marketing, and sales force objectives
     and strategies
3.   Attracts and retains competent salespeople,
     thereby enhancing long-term customer
4.   Allows the kind of adjustments that facilitate
     administration of the reward system.
Types of Sales Force Rewards

Intrinsic                           Extrinsic
   Sense of                           Pay
                    Job security   Promotion
Personal Growth

         Financial Compensation:
             Straight Salary
   - Salaries are simple to administer
   - Planned earnings are easy to project.
   - Salaries can provide control over salespeople’s
     activities, and reassignments are less of a problem.
   - Salaries are useful when substantial development
     work is required.
   - Salaries offer little incentive for better performance.
   - Salary compression could cause perceptions of
     inequity among experienced salespeople.
   - Salaries represent fixed overhead.
      Financial Compensation:
        Straight Commission
  - Income is linked directly to desired results.
  - Straight commission plans offer cost-control
  - Straight commission plans contribute little to
    company loyalty.
  - Problems may also arise if commissions are not
    limited by an earnings cap. 2/3 of firms with salary
    plus bonus impose caps but only 1/3 of those using
    salary plus commission plans do
Straight Commission: Plan Variations

 1. Commission base — volume or profitability

 2. Commission rate — constant, progressive, or a

 3. Commission splits — between two or more
    salespeople or between salespeople and the

 4. Commission payout event — when the order is
    confirmed, shipped, billed, paid for, or some
    combination of these events
     Straight Commission: Rates

Constant rates:
  – Rates that remain unchanged over the pay period.
    Pay is linked directly to performance.

Progressive rates:
  – Rates that increase as salespeople reach pre-
    specified targets.

Regressive rates:
  – Rates that decline at some predetermined point.
   Outside reps and salespeople
Salespeople at Polyflex Film noted that after
 hitting quota they were eligible to receive
 an additional $20,000 on the next $1
 million sold (depending on years of service
 and base salary).
However, they were also aware that the
 company’s outside manufacturer’s reps
 would receive $50,000 for the same $1
 million sale, and they didn’t need to hit any
 sales quotas to receive it.
       Financial Compensation:
        Performance Bonuses
  - Organization can direct emphasis to what it
    considers important in the sales area.
  - Bonuses are particularly useful for tying rewards to
    accomplishment of objectives.
  - It may be difficult to determine a formula for
    calculating bonus achievement if the objective is
    expressed in subjective terms.
  - If salespeople do not fully support the established
    objective, they may not exert additional effort to
    accomplish the goal.
       Financial Compensation:
         Combination Plans
  - Combination pay plans are flexible.
  - They are also useful when the skill levels of the
    salesforce vary.
  - Combination pay plans are attractive to high-
    potential but unproven candidates for sales jobs.
  - Combination pay plans are more complex and
    difficult to administer.
  - A common criticism of combination pay plans is that
    they tend to produce too many salesforce objectives.
   Nonfinancial Compensation

Opportunity for Promotion:
  – The ability to move up in an organization along
    one or more career paths

Sense of Accomplishment:
  – The internal sense of satisfaction from
    successful performance
  – Sales managers should facilitate salespeople’s
    ability to feel this a sense of accomplishment
   Nonfinancial Compensation
Opportunity for Personal Growth:
  – Access to programs that allow for personal
    development (e.g., tuition reimbursement,
    leadership development seminars)

  – The informal or formal acknowledgement of a
    desired accomplishment

Job Security:
  – A sense of being a desired employee that
    comes from consistent exceptional performance
              Sales Expenses

Controls used in the sales expense
reimbursement process include:
1.   A definition of which expenses are reimbursable
2.   The establishment of expense budgets
3.   The use of allowances for certain expenditures
4.   Documentation of expenses to be reimbursed
Additional Issues in Managing
 Salesforce Reward Systems

•   Sales Contests
•   Equal Pay
•   Team Compensation
•   Global Considerations
•   Changing the Reward System
            Sales Contests:
        Recommended Guidelines

1. Minimize potential motivation and morale problems
   by allowing multiple winners. Salespeople should
   compete against individual goals and be declared
   winners if those goals are met.

2. Recognize that contests will concentrate efforts in
   specific areas, often at the temporary neglect of other
   areas. Plan accordingly.
          Sales Contests:
      Recommended Guidelines

3. Consider the positive effects of including nonselling
   personnel in sales contests.

4. Use variety as a basic element of sales contests.
   Vary timing, duration, themes, and rewards.

5. Ensure that sales contest objectives are clear,
   realistically attainable, and quantifiable to allow
   performance assessment.
    Guidelines for Motivating and
      Rewarding Salespeople

1. Recruit and select salespeople whose personal
   motives match the requirements and rewards of
   the job.

2. Attempt to incorporate the individual needs of
   salespeople into motivational programs.

3. Use job design and redesign as motivational tools
   Guidelines for Motivating and
     Rewarding Salespeople

4. Provide adequate job information and assure
   proper skill development for the sales force.

5. Concentrate on building the self-esteem of

6. Take a proactive approach to seeking out
   motivational problems and sources of
   frustration in the salesforce.
                  Easy Check
Law firm Akin & Smith requires its employees to
  check in and out from their desks at an electronic
  finger-sensor. This enables the firm to know
  exactly how long lunch breaks are for employees.
Such electronic tracking systems are becoming
  increasingly common. Advocates say this
  prevents employees from padding their work
  sheets and helps identify the few truly slothful
  workers. But critics claim that such intense
  monitoring of on-site presence can actually
  interfere with productivity, leaving less room for
  creativity and individual differences in the way
  people get their work done.
               Costs v Benefits
                Sales people in 2002

Level        Total Base salary Bonus + comm
• Executive. $136k    $90k        $46k
• Top perform $140k   $74k        $66k
• Mid-level   $ 83k  $50k         $33k
• Low-level   $ 56k   $37k        $19k

Average for all reps
•                $97k              $59k   $38k
Sales & Marketing Management May 2003
              Rewarding salespeople
• I've found salespeople fall into three categories. First,
  there are the hotshots -- the super salespeople who
  have all the answers, who claim to know more about
  your industry than you do, and who are impossible to
  teach or control. They thrive on commissions and don't
  want to be part of anyone's team.
• The second group consists of entrepreneurs, that is,
  salespeople who really want to be in business for
  themselves. They are also motivated by sales
  commissions, because they like to be independent and
  they aren't planning to stick around anyway. You may be
  able to convert some of them, but the majority will leave
  eventually and start their own companies. That is their
  destiny, and there's nothing you can do about it.
          Rewarding salespeople
• Then there's the third group, which is the
  largest -- people who do sales for a living simply
  because they like the work and they're good at
  it. They have no hidden agenda. They are
  motivated by the same things that motivate other
  employees. They just happen to sell. These
  people don't need to be on commission. Yes,
  they want to be compensated fairly, but they
  also want what most other people want -- to be
  part of a team. They want to belong.
• Inc, May 2003 | By: Norm Brodsky
          Rewarding salespeople
• So we start new salespeople with what they're
  used to: salary and commission. After two years,
  we know whom we want to keep. I'll then go to
  the person and say, "Listen, you've been here
  two years. We want you to be here forever. We'll
  buy out your commission and raise your salary,
  so you won't lose any income. In return, you'll
  get stability. Do you think you're going to have a
  good year? I'm willing to guarantee that you'll
  have a good year. And if you really do have a
  good year, I'll guarantee that next year will be
  even better. Inc, May 2003 | By: Norm Brodsky

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