Module Eight

Motivation and Reward

System Management

Learning Objectives

1.
2.
3.
4.

Explain the key components of motivation; intensity,

persistence, and direction.
Explain the difference between compensation
rewards and non-compensation rewards.
Describe the primary financial and non-financial
compensation rewards available to salespeople.
Describe salary, commission, and combination pay
plans in terms of their advantages and disadvantages.

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Module 8:
Motivation and Reward System Management

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Learning Objectives

5.
6.

7.

Explain the fundamental concepts in salesexpense reimbursement.

Discuss issues associated with sales contests,
equal pay for equal work, team compensation,
global compensation, and changing a reward
system.
List the guidelines for motivating and rewarding
salespeople.

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Motivation and Reward System Management

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MOTIVATING AND REWARDING:

DRIVING PRODUCT MIX SALES AT FEDEX
Faced with two important problems, shipping and logistics giant FedEx
determined that it needed a new compensation plan for its sales
organization. First, field salespeople and sales managers were
complaining about how confusing and unpredictable the pay program
was. According to Mark Jennings, director of sales planning and sales
variable compensation programs for FedEx, We had tweaked our plan
so many times that it became almost impossible for the salespeople to
understand. We were constantly hearing complaints that the plan wasnt
paying out in a timely manner, and the unpredictability on commissions
and bonuses was frustrating for the sales force. Second, due to
mergers and new product rollouts, FedExs 5,000-member sales force
needed a new pay plan that would motivate them to grow the overall
business, as well as grow a diverse product line (three products as
opposed to one). To solve the second problem, the company developed
and implemented a linked compensation design. Under this system,
salespeople have to reach specific targets on each of the three product
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lines
to
achieve
the
highest
bonuses
and
commissions.
A Trust-Based Approach
Motivation and Reward System Management
Schwepker Jr. Williams

MOTIVATING AND REWARDING:

DRIVING PRODUCT MIX SALES AT FEDEX
Previously, a salespersons commission and bonuses would be determined by
an average of sales across three lines. This resulted in the highest bonuses
and commissions being paid without target sales levels being reached within
each product line. In turn, the new compensation plan and communication
about it helped solve the first problem. To clear up confusion regarding the
compensation system, Jennings conducted a survey of the sales force to
determine how salespeople would like to receive information about
compensation plan changes. Having determined they wanted to learn about
changes from their managers, Jennings trained managers on the new program
and provided them with PowerPoint presentations to explain the plan to their
salespeople. According to Jennings, The adoption and comprehension of the
new program was dramatically improved because of the delivery method.
Salespeople are now clear what targets need to be reached for each product in
order to get the largest payout. The new compensation system appears to be a
huge success. Jennings claims that he rarely hears any questions or
complaints about the system anymore. The pay plan is now almost selfexplanatory and the predictability of the program has become a motivator for
our salesforce. We now have a better focus on selling product mix, and people
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are
actually
motivated
by
the
plan,
rather
than
frustrated
by
it.
A Trust-Based Approach
Motivation and Reward System Management
Schwepker Jr. Williams

Motivating and Rewarding:

Driving Product Mix Sales at
FedEx

1. What were the two primary problems

FedEx faced regarding compensation?

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Motivation and Reward System Management

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Motivating and Rewarding:

Driving Product Mix Sales at
FedEx

2. How did FedEx resolve the

two problems?

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Module 8:
Motivation and Reward System Management

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Motivation
The force within us that activates our behavior.
It is a function of three distinct components,
Intensity, Direction, and Persistence.

Motivation
Motivation

Intensity

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Direction

Persistence

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Motivation and Reward System Management

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

Motivation
Motivation

Intensity

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Direction

Persistence

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Motivation and Reward System Management

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

Motivation
Motivation

Intensity

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Direction

Persistence

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Motivation and Reward System Management

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

Motivation
Motivation

Intensity

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Direction

Persistence

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Motivation and Reward System Management

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Motivation: Intrinsic vs. Extrinsic

Motivation

Intrinsic
When doing
the job is
inherently
motivating

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Extrinsic
When rewards
such as pay
and formal
recognition act
as motivators

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Motivation and Reward System Management

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Two Basic Categories of Rewards

Compensation Rewards:
Those given in return for acceptable
performance or effort. They can include
nonfinancial compensation.

Non-Compensation Rewards:
Those beneficial factors related to the work
situation and well-being of each salesperson.

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Motivation and Reward System Management

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Optimal Sales Force Reward System

1.
2.

3.
4.

Provides an acceptable ratio of costs and sales

force output in volume, profit, or other objectives
Encourages specific activities consistent with the
firm's overall, marketing, and sales force objectives
and strategies
Attracts and retains competent salespeople, thereby
enhancing long-term customer relationships
Allows the kind of adjustments that facilitate
administration of the reward system.

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Optimal Sales Force Reward System

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Types of Sales Force Rewards

Motivation

Intrinsic
Sense of
Accomplishment

Pay
Job security

Personal Growth
Opportunities

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Extrinsic

Promotion
Recognition

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Financial Compensation:
Straight Salary
Advantages
- Salaries are simple to administer
- Planned earnings are easy to project.
- Salaries can provide control over salespeoples
activities, and reassignments are less of a problem.
- Salaries are useful when substantial development
work is required.

Disadvantages
- Salaries offer little incentive for better performance.
- Salary compression could cause perceptions of
inequity among experienced salespeople.
- Salaries represent fixed overhead.

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Module 8:
Motivation and Reward System Management

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Financial Compensation:
Straight Commission
Advantages
- Income is linked directly to desired results.
- Straight commission plans offer cost-control
benefits.

Disadvantages
- Straight commission plans contribute little to
company loyalty.
- Problems may also arise if commissions are not
limited by an earnings cap.

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Module 8:
Motivation and Reward System Management

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Straight Commission: Plan Variations

1. Commission base volume or profitability
2. Commission rate constant, progressive, or
a combination
3. Commission splits between two or more
salespeople or between salespeople and the
employer
4. Commission payout event when the order
is confirmed, shipped, billed, paid for, or some
combination of these events
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Module 8:
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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 prespecified targets.

Regressive rates:
Rates that decline at some predetermined point.

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Module 8:
Motivation and Reward System Management

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Financial Compensation:
Performance Bonuses
Advantages
- Organization can direct emphasis to what it
considers important in the sales area.
- Bonuses are particularly useful for tying rewards
to accomplishment of objectives.

Disadvantages
- 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.

Professional Selling:
A Trust-Based Approach

Module 8:
Motivation and Reward System Management

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Schwepker Jr. Williams

Professional Selling:
A Trust-Based Approach

Module 8:
Motivation and Reward System Management

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Schwepker Jr. Williams

Financial Compensation:
Combination Plans
Advantages
- Combination pay plans are flexible.
- They are also useful when the skill levels of the
salesforce vary.
- Combination pay plans are attractive to highpotential but unproven candidates for sales jobs.

Disadvantages
- 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.
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Module 8:
Motivation and Reward System Management

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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 salespeoples
ability to feel this a sense of accomplishment

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Module 8:
Motivation and Reward System Management

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Nonfinancial Compensation
Opportunity for Personal Growth:
Access to programs that allow for personal
development (e.g., tuition reimbursement,
leadership development seminars)

Recognition:
The informal or formal acknowledgement of a
desired accomplishment

Job Security:
A sense of being a desired employee that comes
from consistent exceptional performance
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Motivation and Reward System Management

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Nonfinancial Compensation

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Sales Expenses

Controls used in the sales expense

reimbursement process include:
1.
2.
3.
4.

A definition of which expenses are reimbursable

The establishment of expense budgets
The use of allowances for certain expenditures
Documentation of expenses to be reimbursed

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Motivation and Reward System Management

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Sales Expenses

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Additional Issues in Managing

Salesforce Reward Systems

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Sales Contests
Equal Pay
Team Compensation
Global Considerations
Changing the Reward System

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Sales Expense Report Form.

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Motivation and Reward System Management

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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.

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Module 8:
Motivation and Reward System Management

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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.

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Module 8:
Motivation and Reward System Management

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DOs of Global Compensation

Do involve reps from key countries

Do allow local managers to decide the mix
between base and incentive pay
Do use consistent performance measures
(results paid for) and emphasis on each
measure
Do allow local countries flexibility and
implementation
Do use consistent and indication and training
themes worldwide

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Module 8:
Motivation and Reward System Management

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DONTs of Global Compensation

Dont assign the planned centrally and dictate to

local countries
Dont create a similar framework for jobs with
different responsibilities
Dont require consistency on every performance
measure within the incentive plan
Dont assume cultural differences can be
managed through the incentive plan
Dont perceive without the support of senior
sales executives worldwide

Professional Selling:
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Module 8:
Motivation and Reward System Management

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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

Professional Selling:
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Module 8:
Motivation and Reward System Management

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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
salespeople.
6. Take a proactive approach to seeking out
motivational problems and sources of
frustration in the salesforce.

Professional Selling:
A Trust-Based Approach

Module 8:
Motivation and Reward System Management

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THANKS
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Module 8:
Motivation and Reward System Management

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