Discuss the Types of Compensation Programs and Plans Available to Marilyn to Motivate and Retain Her Existing Staff

Alexa Traynor

Stefan Litz

BSAD363

Monday November 13, 2017

Question #2

Discuss the types of Compensation programs and plans available to Marilyn to motivate and retain her existing staff:

There are several different types of compensation programs and plans that can be considered. Oftentimes, we distinguish one program from another based on the industry/position that we are considering. There are three factors as to why we typically use incentives for sales people; tradition, the unsupervised nature of this work and the assumption that incentives are needed to motivate sales people. As we delve into Marilyn’s situation, we are focusing on the incentives for salespeople. Salespeople are usually compensated through the combination of salary and commissions. The three types of compensation programs and plans that will motivate and retain her employees are salary plans, commission plans and combination plan.

Firstly, we will explore the salary plan. This is when an employee is paid a fixed salary, with the occasional incentive (bonus), but it is not built into the plan. There are several reasons why a lot tend to use this; it works well when the main sales objective is to find new clients, or when the sales person is mostly involved in account servicing. Typically, this is the case when there are technical products for sales (aerospace and equipment transportation industries). The salary plan is beneficial for employers because it allows them to have a predictable sales expense. It makes it simple to relocate and reassign sales people, thus, increasing the level of loyalty amongst sales staff. Another value that this plan presents us with is that it encourages the salesperson to focus on the customers experience as opposed to making the sale. This prioritizes the cultivating long term customers. On the other hand, there are a few drawbacks to this plan. Primarily; salary plans do not depend on results. Oftentimes, the increase of an individual’s salary is ties to seniority- rather than performance. This can be demotivating and discouraging for high performing, low seniority employees who notice that seniority is the only variable being rewarded.

Secondly, we will consider a commission plan. A commission plan is defined as a method to pay sales people that is in direct proportion to their sales. Results are the only thing that is being rewarded. There are several pros for this plan- sales people have the greatest incentive to work hard, and increase sales, which will benefit them and the bottom line of the company. It will attract high performing sales people who believe they are guaranteed to be rewarded based on their effort. The firm’s selling investment is also reduced as their sales costs are not fixed. It is very easy to understand and compute. Conversely, this promotes the employees focus on making sales on high volume items, thus, neglecting the products that are harder to sell. Furthermore, with these larger gaps and variances in income amongst coworkers can lead to the feeling that the system in place is equitable. It also encourages sales people to neglect a lot of their other duties and focus solely on their larger accounts. This pay plan is also very reactive to the state of the economy. This can be seen as a positive or a negative thing- pay is often in in excess in boom times and very low in recessions.