Incentive Plans Every Sales Organization Term Paper

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It is also worth considering that the effectiveness of a team-based incentive plan is dependent on the size of the team. Some companies will utilize an organization-wide incentive plan. Such plans can be too far removed from individual performance to be an effective motivational tool. For example, if a company with national scope has an incentive plan that is also national in scope, it can be difficult for employees in a particular region to see the impact of their work on the firm's total productivity.

The decision of which of these plan types is more desirable will be dependent on a number of factors, including the independence of the sales force, the degree of cooperation that is required to generate a sale and the degree to which the members of the sales force may potentially cannibalize one another in the course of their work. If there is high risk of cannibalization, then an individual incentive plan would need to be structured in such a way that this does not occur. A team-based plan may be appropriate to ensure that the sales force is at its most efficient collectively. If there is little risk of cannibalization and the sales force members can handle the sales task with relative independence, then an individual plan may be more appropriate.

The types of incentives offered will also serve to orient sales force behavior.

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This concept relates to the direction of the incentives. The incentives are always tied to an objective or a set of objectives. In choosing the objectives, the company must determine what behaviors it most wishes to reward. For example, if the sales organization has two products -- one a high profit but low volume and the other high volume low profit -- then the sales force may be equally motivated by a profit-oriented plan. However, if the objective is not net profit but operating profit, then the sales force would be specifically oriented towards sales of the high profit, low volume product. Similarly, if the incentive is based on revenue, the sales force may choose to emphasize the low-hanging fruit (low profit high margin product), particularly as the incentive measurement period end draws near.

Management needs to structure its incentive plans in such a manner as to produce the most desirable set of outputs. Only when the most desirable outputs are known can the incentive plan be put into place that best orients the sales staff. Incentive plans can be intrinsic or extrinsic; they can be individual, team-based or a combination thereof, and incentive plans can orient the sales force towards the maximization of any quantifiable objective that management desires.

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