Are Salespeople only motivated by money?
Introduction of Salespeople Compensation
Sales
management is relevant to great knowledge by reason of its sensitive kind of controlling and
encouraging salesperson working as an individual. Employing human beings as a
communication channel involves management problems that are generally discussed
in the research on literature on organizational and human behaviour (Barton A. Weitz 2003). However, many exclusive problems happen in managing salesforce
because salespeople work in the field without close supervision, their outputs
are readily clear, and compensation is often closely tied to sales outputs (Barton A. Weitz 2003).
Money is indeed
a key driving force that motivates most sales people, and certainly for the
more successful ones. However, is money then the only motivator, or is there
anything else? As such, while money may
be the key driver for most sales people, it certainly is not the only
one. Sales people are also motivated by a sense of achievement, and the
more successful ones usually have large egos as well (Ng 2008). Enhanced ego drives among salespeople cause difficulty for sales managers for
motivating them to perform the tasks they are responsible for (Ng 2008). For this matter, large number of sales organizations plan
and implement numerous incentive plans for motivation and money is
used as the motivating tool in most of them.
Comparing Compensation Plan
Disregarding
the “fringe benefit” and “expense reimbursement” elements, there are only three
basic types of compensation plans: straight salary, straight commission and a
combination of salary and variable elements (Kumar 2004).
Straight-salary plan. It is a direct monetary
rewards paid for performing certain duties over a period of time. It is related
to a unit of time rather than to work accomplished. Firms formerly using the
straight-salary have tended to combine a basic salary with a variable element
thus switching to combination plans. However, it is the logical compensation
plan when new sales recruit that cannot sell enough under a commission to earn
a decent income. It is used in situations where the company wants to enter a
new geographical territory or sell a new line of products (Jobber and
Lanchaster 2009).
Advantages
From
management’s standpoints: -
o Because of their basic
simplicity and compared with straight-commission plans, accounting costs are
lower in straight-salary plans which are economical to administer.
o The straight-salary plan
provides strong financial control over sales personnel and management can
direct their activities along the most productive lines.
o If sales personnel prepare
detailed reports, follow-up leads, or perform other time-consuming tasks, they
cooperate more fully.
From
sales personnel: -
o Stability of income
provides freedom from financial uncertainties inherent in other plans.
Disadvantages
o Since there are no direct
monetary incentives, many salespeople do only an average rather than an
outstanding job.
o As the selling expense is
fixed, it is difficult to adjust to changing conditions.
Straight-commission plan. It is based on the theory
that individual sales personnel should be paid according to productivity. It is
assumed that as sale volume is the best productivity measure, it can be used as
the sole measure. It is commonly used for compensating salespeople heavily when
the selling job requires extensive missionary work. It is worthy of serious
consideration when the company financial position is not strong (Jobber and
Lanchaster 2009).
Advantages
o It provides maximum direct
monetary incentive for the salesperson to strive for high-level volume. The
salesperson is paid more than he/she would most salary plans and low producers
are not likely to be over-compensated.
o It is characterized by
great flexibility. By revising commission rates applying to different products,
it is possible to stimulate sales personnel to emphasize those with the highest
gross margins.
Disadvantages
o It provides little
financial control over salespeople’s activities.
o Unless differential
commission rates are used, sales personnel push the easiest-to-sell low-margin
items and neglect harder-to-sell high-margin items.
Rewards, according to most
motivational psychologists, have a central role in guiding behavior (Weiner
1980). Rewards related to a work environment often are conceptualized as being
of two types, intrinsic and extrinsic (Lawler 1973).The level of intrinsic
orientation in salespeople is related to the extent to which they find their
work, the task of selling, inherently interesting and rewarding; the level of
extrinsic orientation is related to the extent to which they treat their work
as a means for obtaining external rewards, such as money, recognition, and promotion
(Weitz and Sujan 1986). Intrinsic and extrinsic reward orientations are
conceptualized as two dimensions along which rewards can be assessed rather
than polar extremes on one dimension. Salespeople can be oriented toward either
reward dimensions or neither (Switzky and Haywood 1974). People who are
intrinsically oriented are interested in the work itself and try to achieve
mastery in their area of interest (Pittman, Emery, and Boggiano 1983). They
refrain from using reutilized methods to perform their job (Condry 1977).
Instead they attempt to be creative by looking for different and more
appropriate ways for achieving success (Amabile 1983).
Further,
intrinsically oriented people have little trouble accepting failures because
they view failures as natural occurrences en route to solutions (Condry and
Chambers 1978). They simply gather information from their failures that enable
them to approach the problem in a somewhat different way (Arnabile 1983). Thus,
intrinsically oriented salespeople are likely to be motivated to learn more
about selling by varying their behavior from customer to customer in an attempt
to adapt effectively to customer needs. Adaptive sales behavior is unlikely to
be related to the level of extrinsic orientation among salespeople. An
extrinsic orientation focuses the attention of salespeople on the outcomes of
their work. Thus, they concentrate on achieving success by using a few simple, "tried
and tested" methods of selling (Pittman, Emery, and Boggiano 1983). They
are not interested in experimenting because their concern is with working
toward success in what they consider to be the most certain way possible (Condry
and Chambers 1978).
Motivation is the
encouragement to do something: this is a result of our individual needs being
satisfied (or met) so that people have inspiration to complete the task (Motivation in the Workplace
2010). There are short-term motivators and there are long-term
motivators. There are also different levels and sides to motivation. There are
three theories in particular which are pertinent to the motivation of
salespeople (Rind n.d.). The first is Maslow’s need hierarchy which led to McGregor’s
Theory X and Theory Y and the last theory is Herzberg’s Motivation – Hygiene
Theory.
Maslow’s
hierarchy of needs consists of
five levels of needs to be satisfied. The model suggests that as people satisfy
needs on one level, they progress to the next level of needs as motivation for
their behaviour (Jobber
and Lanchaster 2009). It
is only unsatisfied needs which can influence behaviour, not the satisfied
needs.
Under Maslow’s Hierarchy, money
would be recognized within the safety category (or a base need for behaviour) (Rind n.d.). When people have money they feel secure, because they have a
resource they need to survive. According to Maslow, once that need is fulfilled,
people move to the next level for motivation (Rind n.d.). In this case, money itself is no longer a motivator because that
need has been satisfied. It highlights the perhaps obvious point that a
satisfied need is not a motivator of behaviour. The theory also implies that
what may act as a motivator for one salesperson may not be effective with
another. This follows from the likelihood that different salespeople will have
different combination of needs.
Douglas McGregor took the
work Maslow did with the hierarchy of needs and grouped it into two theories on
how people view human behaviour at work and organizational life (Rind n.d.). McGregor called this Theory
X and Theory Y; Theory X is focused on the “lower order” needs and Theory Y
focuses on the “higher order” needs identified by Maslow (Rind n.d.).
McGregor suggests that
management could use either theory to motivate employees but that the better
results would stem from meeting the Theory Y needs. Theory X states that “management’s
role is to force and control employees because people seek security above all
else and people have inherent dislike for work and will avoid it whenever
possible (Rind n.d.).” On the other hand, Theory Y states that “management’s role is
to develop the potential in employees and help them to release that potential
towards common goals since people will exercise self direction if they are
committed (Rind n.d.).”
McGregor’s theories show
security is what people seek. If as a manager he runs his organization under
Theory X, he would agree that money is a motivator for his employees. He would
agree that in order to get the most out of his workforce he should pay them
more. If he manages under Theory Y, money may be a part of his business but is
not what drives his employees to achieve.
The last theory that would
be discussing is Herzberg’s motivation –
Hygiene Theory. This theory focuses on the factors causing job satisfaction
and the factors causing job dissatisfaction, and that they are different (Rind n.d.). Herzberg called the satisfiers – motivators and dissatisfiers –
hygiene factors (Darmon 1974). Hygiene factors are in sense maintenance factors
that are necessary to avoid dissatisfaction but they do not provide
satisfaction.
Motivation factors lead to
positive mental health and challenge people to grow, but at the same time do
not lead to dissatisfaction. The below is a list of the 6 factors or factors
leading to satisfaction in the workplace.
Hygiene factors
can lead to job dissatisfaction. When hygiene factors are either not present or
not sufficient employees feel dissatisfied. However, they in turn do not lead
to satisfaction when they are present. For instance an employees work
conditions. If he has favorable work conditions, it does not motivate him to
work harder and bring satisfaction into his job but he is comfortable, so there
is no dissatisfaction with his position. Look at how money works, if a
salesperson gets a raise for the job he is doing, it does not motivate him to
work harder. At the same time if he did not get the raise he wanted or needed,
he becomes dissatisfied with his position or management.
Money or an
employee’s salary is a hygiene factor. It is a biological need because people
need money for food, water and shelter. Money becomes a drive for all people
because of this truth. It will give a short run of motivation because people
need it to survive, but only the intrinsic or motivation factors can determine
job satisfaction or no satisfaction. If this theory holds true, the manager
should provide the hygiene factors to avoid employee dissatisfaction, but also
must provide the intrinsic factors to the job itself in order to satisfy his
employees. Overall, this theory recognizes that true motivation comes from
within a person and not from external factors. The external factors will just
dissatisfy and discourage employees if they unfavorable.
Conclusion
All three theories studied
show that money is a biological need; it is something every person needs to
sustain modern life. All of these theories show that money is a short term
motivator. If people do not have money,
which causes them to go hungry, they will be motivated to take any job to fill
that basic need. Once that need is met, it no longer motivates them to grow in
their career; it does not drive them to go above and beyond the bar set for
their current position. As a long term motivator,
money loses its power over time and cannot be considered one. Because once the basic needs of an individual
are met they move to other factors to motivate themselves: respect,
relationships, advancement and satisfaction. Money is a necessity, and if it is
not present people may become dissatisfied with their jobs, but at the same
time it will not motivate the individual to take the next steps in their
current career. Employers cannot just pay employees more in order to get the
most out of them, but they need to bring other factors to the workplace in
order to motivate employees to give their all.
In my opinion, money is
not the only element in motivating a salesperson to do or drive an individual
to do a job well. Motivation comes in different forms and that it is not
necessary to get motivated with just money. In this century that we are living
in, money could be one of the best forms of motivation that a salesperson would
desire best, but it does not apply to all salespeople. Different salespersons
will have different types of motivational needs based on their needs and goals
to a certain task or job. So, money alone cannot work for achieving
everything.
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