1、Compensation Management of Commissioned Sales Employees Motivating employees in the private and public sectors can be a difficult task. Fortunately, the private sector has the ability to offer compensation plans to sales employees that involve competitive incentives. Before companies are able to off
2、er incentives to their employees they need to decide which is the best fit and the most manageable for them. Many compensation plans can become too costly for companies. Companies need to be able to manage compensation of commissioned sales employees in a way that will maximise profit and motivate e
3、mployees to produce. Companies can design their own compensation plan or they can contract out to a consulting firm that specialises in compensation management of commissioned sales employees. Each sales organisation is different, but all share common needs in their reward plans. Sales compensation
4、has new ideas and changes every year. None of these new ideas are a real change from existing best practices. In all organisations, sales executives (by their nature) all want the new commission plan, so organisations need to be careful in reviewing methodologies to identify the real value-added vs.
5、 the marketing hype (Rodeghero, 2002). Compensation management can mean many things to different organisations. The root word for compensation is compensate, which means to reward or to pay (Websters Dictionary, 1991:85). When one talks about compensation management of commissioned sales employees,
6、the words incentive, motivation, goals and performance arise. All of these are aspects of compensation plans. Before an organisation can create a compensation plan, it needs to find out what will motivate employees to perform at higher levels. The easiest way to do this is to simply ask employees wh
7、at they want. Once an organisation finds out what is most important to their employees, the organisation can start putting together a compensation plan that satisfies every one. Usually an organisations main goal is to increase productivity and profit, while reducing costs and making employees happy
8、. Most employees in an organisation are paid a base salary or hourly wage, which is easily manageable. But, almost every organisation in the world has a sales force. Sales employees need to be compensated in a way that will motivate them to produce high amounts of revenue. This article will focus on
9、 some different types of compensation plans that organisations can implement, as well as some examples of organisations that are already managing certain types of compensation plans. This article will also suggest ways to manage these compensation plans for commissioned sales employees , discuss whe
10、ther they are effective or ineffective among commissioned sales employees and which is the best way to manage compensation plans of commissioned sales employees. Managing Different Types of Compensation Plans There are many types of compensation plans for commissioned sales employees. Organisations
11、have implemented new compensation plans as well as continued with older compensation plans. Depending on the organisation, each compensation plan should be specific to each employee. The first compensation plan I would like to discuss is that of a base salary with extra commission coming from attain
12、ment of goals. Currently the Orange County Register uses this compensation plan to motivate its sales employees to produce. Each sales associate is given a base pay and an opportunity to make an unlimited amount of money through commission. The Orange County Register has many different media product
13、s in which, all sales employees sell advertising space in many different publications. Each product has a certain percentage of the sale that the sales employee can make in commission. Each employee is given a goal that is commensurate with his or her performance from the previous year. The sales em
14、ployee does not receive commissions on each product sold for the month unless 100% of the goal has been met. The goal of this plan is to motivate employees to hit 100% of their goal so that they will make more money. Each year the goal is met, the sales employees goal is set higher the next year bas
15、ed on how high their revenue was the year before. This is all very well until the goals of the sales employees become outrageous and unattainable. Sales employees at the Orange County Register have found a way to manipulate the goal setting process. The sales employees stop selling once they pass th
16、eir goal by about 5%. This is done so that the goal for the next year will be only about 5 to 10% higher than the previous year, thus enabling the sales employee to meet their goal again and make more money. One sales employee that I interviewed at the Orange County Register said that he passed his
17、goal by 80% one year and made a huge amount of money in commissions, but the next year his goal was so high he could not reach it. According to Chris Raitz, this caused him to hardly make any money that year because he was unable to meet his goal. Managers need to recognise this and implement some k
18、ind of standard for goal setting. Each sales employee should be expected to reach their goal and pass it by 15% each year. Even if the sales employees pass their goal by 16%, the company is getting more productivity out of them each year for each product the Orange County Register has. The sales emp
19、loyee should be given a higher commission if he/she were to surpass their goal by a higher percentage. The next example of a compensation plan has been implemented by an organisation called MacArthur Associates. This company has adopted a compensation plan that does not offer any type of commissions
20、. MacArhur Associates is a technical recruiting firm that specializes in placing high quality computer programmers into jobs with Fortune 500 companies. This organisation prides itself in its compensation plan because they believe that it makes their employees feel comfortable from month to month ev
21、en when their numbers are low. This organisations compensation plan consists of starting each sales associate out at a base pay. Each month the sales employee is required to close four deals. When this is completed, the sales employee receives a raise of $6,000 onto their yearly salary. This sounds
22、like a great compensation plan, but what about that employee that is unable to make four deals in one month. Let us say that this sales employee has only been able to do three a month. The organisation should set up a plan that is specific to the employee. The employees performance should be measure
23、d each month and he/she should have goals set that are attainable by that employee. This organisation should use the new trend in incentive pay plans, which is to direct incentives to specific classes of employees (Abbott, Kleiner: 16). The organisation should start new sales employees at the lowest
24、 level and should have to only make one deal in their first month and their salary should only be increased by $1000. Next, when the sales employee can do two deals in a month he/she should be moved up to the next class of sales employees and have their salary increased by $2000. This should continu
25、e into three deals a month for $3000, four deals a month for $4000, etc. This makes the goals attainable and gives the sales employee a reason to build his or her skills and increase productivity for the organisation. With the amount of money that the organisation brings in from deals closed by its
26、sales employees, it should be able to reduce costs by adjusting its compensation plan for commissioned sales employees. The last example of a compensation plan for commissioned sales employees is that of a real estate agent. In most real estate organisations, the sales employees are on a commission
27、only salary. According to Stephen Mendoza of Corona Realty, the real estate agents only make money when they sell a house. When they do sell the house, the organisation gets a certain percentage of the sale of the house. This commission pay scale can be good because it really drives the sales employ
28、ee to produce. If there is no production from the sales employee then he/she will not make any money to live on. Most employees understand when they go to work for a real estate organisation that they will not receive a base pay to live on. It takes a certain type of person to work in this type of a
29、 compensation plan. The compensation plan of a real estate organisation makes it easy to manage motivation and performance of sales employees. These type of employees are the Theory Y employees of MacGregors Theory X and Theory Y study. Theory Y employees are those who are committed to achieving est
30、ablished objectives. The rewards they seek for achieving these objectives are those that satisfy needs for self-respect and personal improvement (Kleiner & Peter son: 24). These type of employees are much easier to manage than those of Theory X who need to be coerced, con trolled, directed or threat
31、ened with punishment in order to produce satisfactory results (Kleiner & Peter son: 23). Sales employees on a straight commission compensation plan will achieve their goals because they want to, not because they were offered an extra incentive to do so. They do not want to be controlled by others, they want to establish their own goals and objectives to obtain. Management Research News 28 : 2 10（ 2005） University of WisconsinMilwaukee doi: 10.1108/01409170510785048,available online at http:/ Christopher J. Shipley Emerald Group Publishing Limited
