Motivation by Commission Based Pay

4502 Words Oct 21st, 2012 19 Pages
Introduction:

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