Sales commission

Salespeople will receive a 7 per cent commission on all sales up to their monthly quota, 10 per cent commission on sales up to 10 per cent above their quota, and 15 per cent on all sales over the monthly quota if total sales are greater than 10 per cent above the monthly quota. If the quota is exceeded by 25 per cent, that salesperson will receive 12.5 per cent commission on all sales for the month.

It was necessary to determine the appropriate rates through a feasibility study to ensure that the company could in fact afford such a scheme. The increasing rates suggested offer incentives to produce more. The greater the results, the greater the reward.

It is also important that salespeople know exactly what the consequences are of performing, or not performing.

Rewards are based on the amount of effort put into the job, and consequently on the results of those efforts. Rewards are given based on percentage increases in sales rather than total sales volume. This is more equitable to the salespeople in low-volume areas.

The commission structure is one of continuous reinforcement. Motivation occurs because salespeople will earn proportionately more from their increased effort. Low-quota salespeople do not have to sell as much to obtain their greater commission rates and will therefore have a greater incentive to sell.

The base vacation time will be one week a year. Additionally, each salesperson can earn up to three more weeks a year. The year is divided into three 4 month periods. At the end of each 4 month period, one month is chosen at random. All salespeople who surpass their sales quota for that month by 15 per cent will receive an extra week of vacation.

The vacation plan offers both continuous and intermittent reinforcement. Reinforcement is continuous because the salesperson has a better chance of getting the reinforcement (one week's vacation) if the quota is exceeded by 15 per cent. It is intermittent in that the salesperson has a chance to get the reinforcement if the target is reached once, but he or she is not guaranteed the vacation unless the target is reached all four months. That is the reason the month is chosen randomly. The salesperson does not know which month will be selected and is therefore motivated to exceed the target in all four months.

The plan is equitable in that it is based on performance rather than seniority. Salespeople who have been with the company only a short period of time still can accumulate four weeks of paid vacation.

Each of the sales districts will be ranked based on sales volume. When an opening arises in a particular district, each salesperson in an area that produced less volume than the one with the opening will be considered a candidate for the open position.

Promotion is based on merit. The company looks at the extent to which each salesperson, over the previous two years, exceeded or failed to meet his or her monthly quota. An increase of 10 per cent over quota would rate a plus ten; failing to meet the quota by 8 per cent would rate a negative eight. After the monthly ratings are added up, the salesperson with the highest positive figure will be offered the job.

If that person refuses the promotion, it will be offered to the next highest net producer. Thus, promotion is based not on seniority but on the ability to produce consistently over one's own quota. This adds incentive for the more junior salespeople.

Rewards here are intermittent in that they occur only as openings appear and are based on a sustained level of high performance over a two-year period.

The life insurance coverage for each salesperson will be the same. Pension benefits will vary depending on the individual's sales volume. A certain percentage of each person's commission will be deducted from the paycheck each month. This amount will be matched by the company and put into a pension fund account. The higher the salesperson's sales volume, the higher the pension benefits upon retirement.

All valid expenses will be paid. This will encourage salespeople who have to travel farther or work harder to build sales volume.

Any salesperson who fails to meet his or her quota by more than 10 per cent over any six-month period will be brought before a review board to explain the deficiency. If the board determines that the salesperson is not at fault, no action will be taken. If it is determined that it is the fault of the salesperson, that person is put on probation for six months.

At the end of the probation, the performance for the previous year is calculated. If the sales generated are more than 5 per cent below quota, the salesperson is demoted, switching positions with the employee who replaces him or her based on the promotion procedure already described.

At the end of the next year, if the performance of the demoted salesperson is more than 10 per cent less than the quota for that year, the salesperson will be fired.

The review board is a punisher. It works on a fixed-ratio basis, as the salesperson must consistently underproduce for six months before he or she is called before it. The punishment consists of verbal reprimands in addition to the more serious embarrassment of having to explain his or her lack of performance. Salespeople the review board demotes are likely to resign rather than face the loss of income and prestige. The process also acts as a deterrent against poor performance.