Motivation by Commission Based Pay

4502 Words Oct 21st, 2012 19 Pages

In today’s competitive environment, companies are constantly striving to survive and grow by pushing their sales department to grow sales and in turn their bottom line. As a great motivational tool, most companies that rely stronly on their sales force will use incentives contracting such as commission based pay.

According to Washington (2009) , commisions are “a form of variable pay by which staff earn a cut of the income they create for their employer”. As a result, the company directly links its perfomance to those of its sales staff so that their income is dependent on the company’s sucess.

According to Interest and Octaviani (2009), a selling agent has two direct tasks: (1) prospecting for customers and (2)
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The author continues to argue that commissions are a great way to “ inject sales motivation into the workforce”( Meyer, 2010) but too many companies fear that it will detract from customer service and customer relationship. In fact, when a customer accepts a product or service that is offered through aggresive selling, the customer satisfaction level actually improves because the firm was able to offer a product or service, the customer did not know he/she needed it ( Meyer, 2010). Anticpating customer wants and needs before they themselves are aware of it is the true key way in building an effective sales force.

Caruth (2006) argues that by having a commission based pay, a company is able to motivate their sales staff to exert more effort for every customer they try to service. That may not necerssrily mean it will result in a closed sale as over aggresiveness can lead the customer to get frusrated and see the whole experience in a negative way.

Nevertheless, it also benefits the company by improving their human resources prcatices in recruitment. An organization that uses commission based pay is likely to attract results-oriented sales personnel “who value a high earnings potential and the freedom of action that may come with it” ( Caruth, 2006). As a result an organization can have a competotive advantage by using commission based pay in recruiting top talent. Straight commission plans tend to quickly eliminate incompetent sales
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