Page 135 - DMGT205_SALES_MANAGEMENT

Unit 9: Motivating and Compensating Sales Personal

Classification or Grading Notes

In this method jobs are graded in terms of job responsibility, skills required, supervision given
and received, exposure to unfavourable and hazardous working conditions and similar
characteristics. All jobs within a grade are treated alike for compensation.
Point System

It involves defining factors common to most jobs. The specific factors generally include mental
and physical skills, responsibility, supervision received and given, personality requirements
and minimum education required. Each factor is assigned a minimum and maximum number of
points, different ranges being associated in line with the relative importance of the factors. The
use of point values makes it possible to determine the gap or distance between job classes.
Factor Comparison Method

This method resembles the point system but is more complex. It utilises a scheme of ranking and
cross comparisons to minimise error from faulty judgement. A selected number of key jobs
typical of similar jobs throughout the company are evaluated. This is done by arranging them in
rank order, from highest to lowest for each factor. As a check against this judgemental evaluation,
the compensation money actually paid for each job are allocated to the factors, which
automatically establishes the relationship among jobs for each factor. The judgemental ranking
and the ranking by allocation of compensation are compared and differences are reconciled, or
else the jobs are removed from the key list. On this basis, money amounts assigned to the
several factors making up key jobs and additional jobs are evaluated and their monetary values
for each factor interpolated into the scale. This procedure is repeated until all jobs are evaluated.

9.9 Consider the Compensation Patterns in Community and Industry

Because compensation levels for sales personnel are related to external supply and demand
factors, it is important to consider the prevailing compensation patterns in the community and
the industries. Management needs answers to four questions.

1. What compensation systems are being used?
2. What is the average compensation for similar positions?
3. How are other companies doing with their plans?

4. What are the pros and cons of departing from industries or community patterns?
5. What calibre of salespersons are required to be effective as well as cost-efficient.

Determining Compensation Level

Management must determine the amount of compensation a sales person should receive on the
average. The compensation level might be set through individual bargaining or on an arbitrary
judgement basis. Management should ascertain whether the calibre of the present sales force
measures up to what the company would like to have. If it is too low, or if the company should
have lower-grade people than those currently employed, management should determine the
market value of the sales personnel of the desired grade.

Management weighs the worth of the individual person by estimating the sales and profit
money that would be lost if particular sales people resigned. Another consideration is the
compensation amount the company can afford to pay.

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