Are salespeople only motivated by money?

Are salespeople only motivated by money?

Introduction to Salespeople of Compensation

Sales management is achievement of an organisation’s sales goals in an effective and efficient manner through controlling and encouraging salesperson working as an individual (Oliver and Anderson 1994, 53-67). Salespeople are a company's ambassadors to the world. They actively promote the company and its products and services. They are the front line between the company and its customers, and are typically the driving force of revenues - top-line company growth (Wotruba 1991, 1-12). These employees have a direct impact on how the marketplace perceives their employer and its products.

Money is indeed a key driving force that motivates most sales people, and certainly for the more successful ones (Humphreys 2002, 487-502). On the contrary, while money may be the key driver for most sales people, it certainly is not the only one. Nevertheless, to motivate salespeople, sales managers must first understand the specific needs and desires driving individuals and then find the activities and rewards that satisfy those needs. Sales people are also motivated by a sense of achievement, and the more successful ones usually have large egos as well. Various studies emphasize on rewarding compensation in the form of money for motivating the egocentric salespeople For this matter, large number of sales organisations plans and implements numerous incentives plans for motivation and money is used as the motivating tool in most of them (Folkes 1988, 548-565)..

Types of Compensation

To develop and maintain a highly productive sales force, a business must formulate and administer a compensation plan that attracts, motivates, and retains the most effective individuals (Sales Compensation 2005). There are three basic compensation methods: straight salary, straight commission, or a combination of salary and commission and Table 1 (on page 3) lists the pros and cons of each.

In a straight salary compensation plan, salespeople are paid a specified amount per time period, regardless of selling effort. This sum remains the same until they receive a pay increase or decrease (Krishna K. 2007, 6-22). Though this method is easy to administer and affords salespeople financial security, it provides little incentive for salespeople to boost selling efforts (Ingram, LaForge and Avi 2009, 231).

In a straight commission plan, salespeople’s compensation is determined solely by sales for a given period. A commission may be based on single percentage of sales or on a sliding scale involving several sales levels and percentage rates (Hisrich and Jackson 1993, 232). While this method motivates sales-personnel to escalate their selling efforts, it offers them little financial security and it can be difficult for sales managers to maintain control over the sales force (Inés and Pedro 2011, 273-285).

For these reasons, many firms offer a combination compensation plan in which salespeople receive a fixed salary plus a commission based on sales volume. Some combination programs require that a salesperson exceed a certain sales level before earning a commission; others offer commissions for any level of sales. Research too indicates that higher commissions are the most preferred reward followed by pay increases (James M. and Karen E. 2006, 19-35).

As a result, sales managers must acknowledge that certain salespeople respond positively to fixed salary plans while others respond positively to incentive. In the past, managers might have relied on the salesperson to select the appropriate job for them.

Motivation is an inner state of need or desire that activates an individual to do something that will satisfy that need or desire. Motivation is derived from the need or desires internal to the individual such that others cannot motivate an individual but must manipulate environmental variables that may result in an increase or decrease of motivation (Boe 2011).  

In 1954, Abraham Maslow identified five classes of needs these included physiological needs, safety needs, love and belonging, esteem needs and self-actualisation. At lower levels of Maslow's hierarchy of needs, such as physiological needs, money is a motivator, however it tends to have a motivating effect on staff that lasts only for a short period (in accordance with Herzberg's two-factor model of motivation) (Sapru 2008, 224). These needs are based on basic needs concerned with survival, and must be satisfied before a person can go to the next level. A common misinterpretation of the hierarchy is that each need must be fully satisfied before a subsequent need arises. In fact an individual will probably have degrees or percentages of satisfaction at each level. Even though a person have gone to the next level, the prior level still can be a driving force for the person yet will be less significant than the present level. Sales manager can use Maslow’s theory to diagnose the system’s level of maturity for carrying out a particular problem and identifies a number of key needs for consideration in developing total reward policies. (3 Maslows Hierarchy of Needs n.d.)

Maslow’s needs approach has been considerably modified by Frederick Herzberg and his associates. Their research purports to find a two-factor theory of motivation, which is also known as intrinsic or extrinsic motivation. Herzberg’s theory was based on employee satisfaction (Vallabhaneni 2009, 384).The below is a list of the 6 factors or factors leading to satisfaction in the workplace.

A satisfied worker is motivated from within to work harder, and a dissatisfied employee is not self-motivated. Herzberg’s two factors are satisfiers and dissatisfiers. The factors giving rise to job satisfaction and motivation are distinct from the factors that lead to job dissatisfaction. Any feeling of satisfaction resulting from pay increases is likely to be short-lived compared with the long-lasting satisfaction from the work itself. Two-factor theory successfully makes a distinction between intrinsic motivation arising form the work itself and extrinsic motivation provided by the employer, e.g. pay that influences total reward decisions (Sandi J. 2008, 81).

Consequently, sales managers will depend on the situation and the compensation of the sales force to exercise their own individual judgement in deciding which motivation theory applies best for sales people.

 Intrinsic and Extrinsic Rewards

Although financial compensation is an important incentive, additional programs are necessary for motivating sales personnel. Effective sales force motivation is achieved through an organised set of activities performed continuously by the company’s sales management (Daft and Lane, The leadership experience 2008. 226). Subsequent to understanding what a sales person needs and wants, sales manager could do with designing a reward system to exert higher level of effort individually as well as motivate them to continue this behaviour (Beswick n.d.).

Rewards can be either intrinsic or extrinsic, system wide, or individual. An intrinsic reward is internal and under control of the individual, such as feelings of accomplishment, personal growth and development, enhanced self-esteem and personal worth(Cameron 2002, 70). Extrinsic rewards provided by employers in the form of pay will help to attract and retain employees such as recognition, promotion and, for limited period, may increase effort and minimize dissatisfaction. Figure 1 (on page 7) lists the classifications between intrinsic rewards and extrinsic rewards (Deci, Koestner and Ryan 1999, 627-668)

“People are motivated by both intrinsic and extrinsic rewards,” says Harvard Business School professor Brian Hall (Luecke and Hall 2006, 21). Most corporate reward systems are built around extrinsic rewards, since money is the one tangible and highly manipulable incentive that corporations can give. However, extrinsic incentives don’t necessarily make people work harder or better yet intrinsic rewards generally motivate best. Several studies have disqualified the idea of using money as a motivator because for them, money only cannot act as a motivating tool though salespeople appreciate financial incentives (Sansone and Harackiewicz 2003, 489).

All in all, money can be a huge motivator, but it often motivates the wrong behaviours, for example, encouraging people to cut ethical corners to earn a bonus or to game the reward system and it does not build commitment (Daft and Marcic 2011, 405). Money does not bring happiness to all salespersons even though if they are paid well. It also depends on an individual’s ability to produce quality work and their drive in achieving the sales goals and objectives. Managers should keep posted in the system so that they can fulfill a sales person’s wish and goal.

Conclusion

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. Moreover, human factors are the strongest motivational tools that a salesperson or any human would possess. When the desired needs are already achieved, a salesperson tends to look for other forms of motivation that will enhance their performance in sales. Therefore, paying a salesperson well may not be an indicator that it will produce a motivated salesperson.

Website references

3 Maslows Hierarchy of Needs. n.d.  http://www.examstutor.com/business/resources/studyroom/people_and_organisations/motivation_theory/3-maslowshierachyofneeds.php (accessed August 14, 2011).

Beswick, David. Management implications of the interaction. http://www.beswick.info/psychres/management.htm (accessed August 14, 2011).

Boe, John. The Art of Motivating Salespeople. 2011. http://www.johnboe.com/articles/motivate_salespeople.html (accessed August 14, 2011).

Sales Compensation. 2005. http://www.salary.com/advice/layouthtmls/advl_display_Cat14_Ser6_Par23.html (accessed August 14, 2011).

Book references

Cameron, Judy. (2002).                                                                                                            Rewards and Intrinsic Motivation: Resolving the Controversy. United State of America: British Library Catalouging,.

Daft, Richard L., and Dorothy Marcic. Richard L. Daft, Dorothy Marcic.(2011) United State of America: Cengage Learning. Inc.

Daft, Richard L., and Patricia G. Lane. (2008).

The leadership experience. Natorp Boulevard Mason: Thomson Corporation.

Hisrich, Robert D., and Ralph W. Jackson. (1993).                                                                         Selling and sales management . New York : Barron's Educational Series, Inc.

Ingram, Thomas N., Raymond W. LaForge, and Ramon A Avi. (2009)                  Sales Management: Analysis and Decision Making By. New York: M.E. Sharpe, Inc.

Krishna K., Havaldar. (2007) 

Sales and Distribution Management: Text and Cases . New Delhi : Tata McGraw-Hill.

Luecke, Richard, and Brian J. Hall. (2006).

Performance management: measure and improve the effectiveness of your employees. United State of America: Harvard Business School Publishing Corporation.

Sandi J., Davies. (2008)                                                                                                            Security Supervision and Management: The Theory and Practice of Asset Protection. burlington: Amorette Pedersen,.

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Administrative Theories And Management Thought 2Nd Ed. New Delhi: Prentice-Hall of India Private Limited.

Vallabhaneni, Devi. (2009)

What's Your MBA IQ?: A Manager's Career Development Tool. Devi Vallabhaneni: John Wiley & Sons, Inc., Hoboken, New Jersey.

Journal references

Deci, Edward L., Richard Koestner, and Richard M. Ryan. (1999)

"A Mete-Analytic Review of Experiments Examining the Effects of Extrinsic Rewards on Intrisic Motivation." Psychological Bulletin 125, no. 6: 627-668.

Folkes, Valerie S. (1988).    

"Recent Attribution Research in Consumer Behavior: A Review and New Directions." Journal of Consumer Research 14, no. 4: 548-565.

Humphreys, John H. (2002). "Transformational leader behavior, proximity and successful services marketing." Journal of Services Marketing 16, no. 6: 487-502.

Inés, Küster, and Canales Pedro. (2011).

"Compensation and control sales policies, and sales performance: the field sales manager's points of view." Journal of Business & Industrial Marketing 26, no. 4: 273-285.

James M., Pappas, and Flaherty Karen E. (2006).

"The moderating role of individual-difference variables in compensation research." Journal of Managerial Psychology, 21, no. 1: 19-35.

Oliver, Richard L., and Erin Anderson. (1994)               

"An Empirical Test of the Consequences of Behavior- and Outcome-Based Sales Control Systems." The Journal of Marketing 58, no. 4: 53-67.

Sansone, Carol, and Judith Harackiewicz. (2003).                                                             "Intrinsic and Extrinsic Motivation: The Search for Optimal Motivation." Educational Psychology Review 15, no. 3: 489.

Wotruba, Thomas R. (1991).

"The Evolution of Personal Selling." The Journal of Personal Selling and Sales Management 11, no. 3: 1-12.