FORMULATION AND IMPLEMENTATION OF FINANCIAL AND NON FINANCIAL INCENTIVE PLAN IN ABC TELEKOM
A Project Report Prepared By G.I. Nadeeshani
CCHRM /2015/NG/02/03
Course: Certificate Course in Human Resource Management August 2014
INSTITUTE OF PERSONNEL MANAGEMENT SRI LANKA (INC.)
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Contents
Acknowledgement
03
Executive summary
04
Background of the organization
05
Objective of the organization
06
Services and customers
07
Organizational Structure
09
Objective of the study
10
Review of Literature
11
Methodology
19
Analysis
20
Findings (key issues)
26
Recommendations
27
List of References
28
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Acknowledgement
I take this opportunity to sincerely thank the following personnel who helped me in numerous ways to do this project report and compl ete same successfully. First and foremost my sincere thanks go to further all lectures at IPM Sri Lanka for enhancing my knowledge in HRM. And also my special thanks to the Human Resources Department at ABC Telecom for professionally assisting me to complete this assignment. Furthermore I extend my thanks and gratitude two my parents, friends and colleagues who have provided sufficient information to complete my project and for giving me a helping hand throughout this task to keep one step ahead in my desired career of Human Resources Management. Finally many thanks to the staff at IPM for their support and advice given to me in preparing this project report.
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Executive Summary
The CCHRM project report was done on the field of Compensation Management of employees in an organization. The main focus was to identify how the process of incentives is carried out within an organization using number of different methods, steps and procedures in order to identify this process. The organization chosen was ABC Telecom one of Sri Lanka’s leading Telecom Telecom service providers. The studies were mainly conducted in the Human Resource Department where the process of compensation management is carried out. The inquiries were made through the respective managers in regard of the methods available to them were analyzed interviewing and a collection of data. According to the information provided by ABC Telecom it is clear that due to their well-planned incentive scheme they were able to achieve great success.
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INTRODUCTION
Background of the organization ABC Telecom
Type
:
Public
Founded
:
1992
Headquarters
:
Colombo, Sri Lanka
Industry
:
Telecommunications
Products
:
Voice Mobile Internet Satellite TV
ABC Telecom is a large telecommunication company operating within Sri Lanka. It currently operates ABC Mobile the country's largest mobile phone network. ABC is a subsidiary of Walker Tel Group and is listed on the Colombo stock exchange. The company is also a key player in the Internet service provision market through its internet arm. ABC also operates ABC TV, the country's premier direct to home satellite TV service. Furthermore having made an aggressive entry into the international services market, ABC Global has established itself as a premier provider of international services in Sri Lanka. ABC Telecom is a flagship investor under the aegis of the Board of Investment of Sri Lanka and has invested over 500 million U.S. Dollars towards the development of telecommunications infrastructure in Sri Lanka. ABC Telecom is the official Sri Lankan partner of the Vodafone mobile community.
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Objectives of the organization
Our Vision
To be the undisputed leader in the provision of multi-sensory connectivity resulting always, in the empowerment and enrichment of Sri Lankan lives and enterprises. Our Mission
To lead in the provision of technology enabled connectivity touching multiple human sensors and faculties, through committed adherence to customer-driven, responsive and flexible business processes, and through the delivery of quality service and leading edge technology unparalleled by any other, spurred by an empowered set of dedicated individuals who are driven by an irrepressible desire to work as one towards a common goal in the truest sense of the team spirit. Corporate Values
Total commitment to our customers. Dynamic and human-centered leadership. Commitment to task & excellence. Uncompromising integrity. Professionalism and accountability. Teamwork. Foremost respect for concern & care. Page 6 of 29
Services and Customers ABC Mobile Core Business
ABC Mobile has spearheaded the mobile industry in Sri Lanka since mid-90s, propelling it to a level of technology on par with the developed world. The company operates a USE/SEO and JTP network, supporting the very latest in multimedia and mobile Internet services, and also provides International Roaming facilities in over 200 destinations. ABC Mobile is the country's largest cellular network providing services to over 5 million customers across all provinces of the island. The company is also South Asia's first commercial 3.5G operator.
Supplementary Business
ABC Telecom has ventured into two main supplementary telecommunications related businesses based on licenses acquired from the Government of Sri Lanka.
Internet Business
ABC Internet was launched in 2001 with 2the primary intention of developing the IP infrastructure required for leadership in a convergent environment. While this objective has been achieved manifold, the company has also established a retail ISP – ISP – ABC ABC I which currently provides services to over 6,000 subscribers. International Business
ABC has been quick to capitalize on the liberalization of the International Telecommunications Sector in Sri Lanka. The International services of the company now include retail and wholesale voice services and IPLC services. Building on a rapid role out of services and global partnerships, International Services now account for 10% of the company’s PAT. ABC Satellite Television [ABC TV]
ABC TV is a Direct-to-Home Satellite Television Service operated by ABC Telekom. ABC TV features world class entertainment and the widest spectrum of channels with a special focus on News, Entertainment and Knowledge based programming. It supports a broad array of International content including CNN, BBC, HBO, Cinemax, AXN, ESPN, Discovery Channel; MTV and Cartoon Network, in addition to a wide portfolio of Sri Lankan television channels. ABC Satellite TV uses state of the art ABC Video Broadcasting through Satellite (DVB-S) technology, and aims to be a trend-setter in Digital Satellite Television Broadcasting in Sri Lanka. Page 7 of 29
ABC Broadband (ABCBN)
ABC Broadband Networks, a fully owned subsidiary of ABC Telekom, is an Internet Service Provider which provides CDMA, WiMAX and a public Wi-Fi network.
ABC CDMA
It recently commenced the provision of fixed wireless telephony services, with the launch of ABC CDMA. Currently , ABCCDMA has the lowest call charges among the CDMA providers in Sri Lanka. It provides 1800 minutes calls free within ABC CDMA C DMA network while calls to other networks are charged as Rs.2.00 per minute at anytime to any network. ABC CDMA has a good coverage throughout the island.
Organizational Organizational Structure
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1. Chairman 2. Chief executive officer 3. Chief coperate officer 4. Board of directors 5. Human resources manager I. Asst. human resources manager II. Human resources executive 6. IT manager I. Asst. IT manager 7. Finance manager I. Accountant II. Accounts executive 8. Customer service manager I. Asst. Customer service manager II. Customer service executive 9. Engineering manager I. Asst. Engendering manager 10. Research &Development manager I. Asst. Research & Development manager 11. Marketing manager I. Asst. marketing manager II. Marketing executive
12. Programme manager 13. Strategy manager 14. Operating manager 15. Senior vice president 16. Vice president OBJECTIVES OF THE STUDY
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Primary Objective o
To get a broad understanding of Variable pay / Incentive.
Secondary Objective To understand the importance of an effective incentive scheme. o o To understand the types of incentives available for an organization. To analyze the practical usage of theories for an effective incentive o scheme in achieving goals of an organization. To enhance my knowledge on and study about incentives. o Completion of this is a partial requirement of CCHRM. o
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REVIEW OF LITERATURE Introduction
Pay is not the central issue for attracting and retaining employees (although some will argue that it is). Pay is still important, but so are other issues. People rarely leave a job for money alone. Instead, they leave for career advancement, technical or career challenge, communication reasons (lack of appreciation by company, inability to have an impact at the company, etc.), or job security. Some employees who are money motivated, particularly sales people, and those who are significantly under-employed may leave for fo r money. Managing pay involves two main issues: 1. Controlling costs, and 2. Leveraging pay (getting the most "bang for the buck").
This is done by establishing an agile compensation and benefits system that track costs, helps ensure pay equity, is understood by employees, and keeps in touch with employee desires and what's popular in the market. Do people work harder if pay is tied down to performance? The answer appears to be yes under the right circumstances. People do spend more time working when offered incentives to do so, as opposed to simply receiving base pay for the hours worked. Employers apparently believe it too. Because a growing number are altering their traditional compensation programs to provide some part of employee’s pay in a variable fashion. Typically an employer bases a portion of the pay on how well the individual, team, organization performs. The percentage varies somewhat, but roughly two thirds of companies currently offer variable pay though individual incentives, around a third offer team incentives and over half offer organizational performance inc entives.
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Incentive… Incentive …
Incentive or variable pay is compensation linked to individual, team, and organizational performance. Incentive is a stimulus or a reason for producing action. Almost all of the human motivations can serve as incentive. (Earnest Dither) An incentive can be defined as a payment, concession, or an arrangement to encourage above average effort in work. Thus incentive is the bridge to gap the willingness to work and the capacity capacit y to work.
Objectives of incentives…
1) 2) 3) 4) 5) 6) 7)
Increase productivity Above Average Performance Moral booster Control tardiness &absenteeism Retention of competent employees Create job satisfaction Reduce grievances
Financial Incentives Incentives Non Financial Incentives Types of Incentive Systems
Incentive pay is employee compensation that varies with the organization's business performance. Variable compensation plans continue to increase in popularity. According Acco rding to a recent survey by Hewitt Associates, variable pay awards as a percentage of exempt payroll has increased steadily from 4% in 1990 to almost 10% in 2000. Some of this increase has been fueled by the popularity of hiring bonuses. The classic type of variable pay is sales commission in which the sales representative receives an award (usually expressed as a percentage of sales) for each sale. The more sales achieved, the higher the total commission income for the sales representative and Page 12 of 29
the higher the revenue and profits for the organization. On the other hand, if the sales representative doesn't sell anything, the organization doesn't earn any revenue, but they also don't have any commission expense. The sales representative doesn't have any commission income. Thus with variable pay systems the interests of the organization are closely linked to the interests of the individual employee. By contrast, the traditional base salary represents fixed compensation. Base salary is paid to employees regardless of how well the organization is performing. Variable compensation plans are rapidly growing in popularity. Their growth is driven by three factors: 1. Variable pay is counter-cyclical. It is more costly to the organization that is performing well; yet the organization that is performing well is better able to afford the expense. It is less costly when the business is not doing well and is less able to afford variable pay. In the past, organizations could only reduce employee compensation by reducing the number of employees (i.e. layoff). A variable pay system works well when the organization's business performance is equal to or better than the industry average. However, if your organization is performing poorly while the industry is doing well overall, then your employees' total compensation (variable plus fixed pay) will be less than other companies in the industry, which could lead to poor morale and/or increased turnover. 2. Variable pay links employee goals with the organization goals . If the organization performs well, then the employee will earn more income. Thus the employee and the organization have mutual interests. Here's where design of the variable pay system is important. To be optimally successful, the employee must understand how their individual performance can impact their variable pay (and therefore the company performance). This is called "line of sight". Line of sight improves as organizations reduce layers of management. 3. The employee is motivated to help the organization do well . The most effective variable pay systems have been those that have established team or business unit performance targets. Although the line of sight is better with individual goals than team goals, team goals have the advantage of peer influence, which can be a very strong motivator. On the other end of the continuum is company-wide goals (for a small organization, team goals and company goals are basically the same). These too can be effective, although the line of sight is less and therefore the motivation to achieve the goals may be less Financial Incentives
Any incentive which is in the form of cash or wealth is know as financial or monitory incentive. In other words any incentive that could be measured with money is considered a financial or monitory incentive. Some types of financial financial incentives;
Target incentive Commission on sales Bonus Page 13 of 29
Overtime payment and differential piece rate Differentiated piece rate
Let’s take Let’s take a close look at some main financial incentive types. Formal bonus or incentive plans are common and popular. These plans are typically available for upper management employees although participation in the plans is widening, especially as organizations remove layers of management. Current incentive plan participants include about two-thirds of middle managers, 25% to 50% 50 % of technical individual contributors, and 20% to 35% of non-technical individual contributors. The target formal bonus award is about 60% of o f the Chief Executive Officer's base salary, 25% to 50% of senior managers' base salary, 15% to 25% of middle managers' base salary, 10% to 20% of Senior Level Technical Contributors' salary, and 7% to 12% of other professionals' base salaries. The formal bonus award is typically t ypically paid on an annual basis. The size of the award is usually based on a combination of the participant's individual job performance, the business performance of the participant's division or department, and/or the performance of the entire company. Typical performance criteria includes profit before tax or operating profit, sales level or sales growth, and/or the achievement of specific company or division goals. A survey conducted by the American Compensation Association early in 2000 indicated that this was the top motivator for participants. Profit sharing plans are funded by the organization's profits based on a specified formula. The profit sharing pool is then allocated to employees by some means, usually as a percentage of their base salary. Profit sharing plans, like variable pay plans in general, are growing in popularity. Currently approximately 40% of companies offer profit sharing plans. A typical profit sharing award is 5% to 6% of employees' base salary. Lump sum merit awards provide financial recognition for an individual's job performance in lieu of merit-based salary increases. This is an effective way to provide financial recognition, especially to those individuals whose base salary is already relatively high. The lump sum merit award must be re-earned each year and is usually paid during an annual salary review period. Spot bonuses are also financial awards to provide recognition for an individual's work accomplishments. Typically these are paid immediately after a significant job performance event, unlike a lump sum merit award which is paid as a part of the annual salary review process. Gain sharing plans allow employees to share in productivity gains in accordance with a pre-determined formula. Typically the plans are established with participant involvement invo lvement and are typically designed for specific work groups, but company-wide programs also exist.
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Alternative pay is a term commonly used. It refers to alternative ways of paying people other than for their time, which is the most common method. Thus alternative pay plans generally include those listed above under incentive systems. Also included as an alternative pay system is skills-based pay or pay-for-knowledge . Under this pay system, an employee's compensation is based on the number of specified skills or tasks he or she has mastered Stock Plans
Stock plans are very popular. A mystique surrounds them, perhaps because a few people have gotten rich from stock options. Virtually all companies offer some type of stock plan to employees. The most common type of stock plan is the stock option plan . In a typical stock option plan, the employee is offered a specific number of shares which he/she can ex ercise (buy) at some specified time in the future. The price at which the employee can buy the stock is equal to the market price at the time the stock option was granted (grant price). The employee's gain is equal to the market value of the stock at the time it is exercised, less the grant price. If the market price of the stock remains the same or decreases relative to the grant price, then the stock option is worthless. Stock options are typically offered to managers, most technical individual contributors and about half of the other professionals. Smaller organizations offer stock options more widely, in some cases to all employees. Stock options provide companies with a long term incentive and retention tool . The recipients of stock options are motivated to help the company perform well, so the stock will appreciate in value (although there's a line of sight problem here for most participants). Because they must wait several years to receive the entire stock option grant, employees are motivated to remain with the company, as long as the stock value is increasing. Employee stock purchase plans are also popular . The stock purchase plan is typically available to all eligible employees in the company. Employees can purchase company stock through payroll deductions (typically up to 10% of pay) at a price that is below the market price (typically 85% of market price).
Health and welfare plans
Health and welfare plans typically cost organizations 8% to 10% of payroll. For as costly as these plans are, employees often take them for granted. To install health and insurance plans, use insurance brokers. In addition to helping install the plans, they can help negotiate contracts and administer the plans.
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Medical insurance is the most costly item in this category, equaling 7% to 8% of payroll. Typically companies provide 85% of the cost of employee medical care and 75% of dependent care. In the early 1990's, medical plan costs were increasing at an annual rate of more than 20%. In the past year annual medical cost increases have averaged only 3%, with many companies realizing a decrease in medical costs. Competition, in the form of physician and hospital networks, networks, and health maintenance organizations (HMO’s), has helped control costs. Medical plans with the most usage controls (restrictions on which providers members can use) are those with the most effective effective cost controls Life insurance equal to two times the employee's annual salary and AD&D (Accidental Death) insurance equal to two times the employee's annual salary are provided by the typical company. Supplemental life insurance plans and dependent life insurance plans are offered by approximately three-fourths of companies. These plans allow employees to purchase additional life insurance coverage through payroll deduction and at group rates, at little or no cost to the company Non Financial Incentives
Non financial incentives are also called non monitory incentives. Non financial incentives relates to social and physiological needs of the employee. Some of them are as follows;
Rewards and Recognition
Promotions
Enhanced responsibilities and challenge
Status and ranking
Training
Appreciation and Praise
Freedom for decision-making
Companies spend approximately 10% of payroll on paid time off plans. This is money well spent by the organization. Paid time off is highly valued, especially with today's time pressures on employees and their families. To the benefit of companies, paid time off often becomes on-call time, since employees understand that companies may need their services or consultation while they are away. Employees are often willing to provide the company this flexibility, especially if the company provides the same flexibility to employees. More than a third of companies have a formal policy that allows for flexible scheduling. Holidays are paid days-off provided to all employees in the company (the company closes). The average number of holidays provided is 10.5 per year. The seven holidays that virtually every company provides are New Years day, Memorial Day, Independence day, Labor day, Thanksgiving day, the day after Thanksgiving, and Christmas Day. The next most popular days are President's day da y and Christmas Eve day. Page 16 of 29
The number of vacation days granted to employees varies with years of service. Typically employees are granted 10 days of vacation per year upon hire, 15 days after five years of service, and 20 days da ys after 15 years of service. Sick pay is paid time-off for employee illness. Most companies also allow employees to use sick leave for the illness of a family member. Nine days per year is the average amount of sick leave granted. Short term disability plans or salary continuance plans are offered by over 70% of companies. Most of these companies provide salary continuance (continue to pay the employee's full salary) for the first month of disability, then a short term disability benefit that ranges from 60% to 70% of the employee's salary for up to three months of disability. Long term disability benefits are provided by almost all companies after an employee has been disabled for a period of time, typically three months. The benefit amount ranges from 60% to 70% of the employee's salary.
Advantages of financial incentives and non financial incentives .
Advantages of financial incentives People are generally motivated for money
Cash provides a sense of security in employees
As it could be measured with money, it becomes much more tangible than non financial incentives
Advantages of non financial incentives It satisfies social and physiological needs of employees
Financial incentives when used continuously loose its attractiveness as employees get used to it. But a non financial incentive remains more effective as it sparks to the heart of employees.
All employees are not motivated by money
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Designing and developing a successful incentive scheme
The aim of any incentive scheme should be to achieve a higher level of out put compared to what you achieve under normal circumstances. Hence good incentive schemes will stretch the employees towards their full capacity.
Targets should be stretched ones that demands mo re effort from the employees Targets should be clear, precise and achievable There should be a direct relationship employee sk ill& effort and out put Proper timing Geared to employees needs Communicate the rewards fully & clearly so that the emplo yees see their worth Ensure fairness Should be attractive enough to motivate employees.
Problems associated in developing incentive schemes
The challenge of developing a successful incentive scheme is to strike a balance between what the organization wants to achieve through the incentive scheme & ensuring it is attractive to the employees, managing the cost – benefit relationship of the scheme &ensuring the fairness of all employees You should be very careful that you avoid the following.
Rewarding under performance Punishing good performance
Essentials of a good incentive plan
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I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. XIII.
Suitable climate Information as to goals Simplicity Just and Equitable Flexible Attractive Economical Minimum guaranteed wages Grievance procedure Stability Comprehensive coverage Conductive to employees health and welfare Attainable standards
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ANALYSIS
Methodology: Methods I used to collect data can be categorized as follows. Primary data were collected through observations and interviews, visit to premises and informal discussions and questions. The interviews were open and in depth, sometimes in informal discussions. Apart from the executive management in Human Resources and Marketing department, further informal interviews and questions were held with selected employees. Observations and visit premises were used to gain the other inf ormation’s ormation’s about the organization which are relevant to understanding the incentive scheme. Secondary data was collected from ABC Telekom’s Annual Reports, other publications related to incentive scheme systems, Internet/web sites.
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Analysis: Motivating Sales People
Ultimately, your success is in the hands of your sales people. That’s why sales force motivation is so important. Motivating salespeople is the best way to boost your bottom line by increasing retention, advancing performance and reinforcing key behaviors that lead to success. A variety of sales force motivation techniques are available; determining the right strategy for you begins with understanding what motivates the diverse individuals who make up your sales force. Age and lifestyle and other factors come into play when defining how to motivate salespeople in an optimal way. You’ll want want a sales incentive program that both reflects your company values and offers enough choice to appeal to your entire organization. By motivating salespeople, you’ll create forward-focusing forward-focusing momentum that centers on a trip, a service or a merchandise rewar d. d. You’ll help people establish a tangible goal – one one that offers each sales person something to look forward to and focus on in the face of frustrations or obstacles. If you think sales people are motivated by money, think again. Of the eight motivators measured, the extent to which one is motivated by financial rewards, such as money and material possessions, ranks number five on the list. 1. Recognition/attention – The extent to which one values recognition for work well done; enjoyed being the center of attention 2. Control - The extent to which one prefers positions of leadership with control, like being in charge. 3. Money – Money – The extent to which one is motivated by financial rewards, such as money and material possessions. 4. Freedom - The extent to which one values personal freedom to make decisions and function independently. 5. Developing expertise – The extent to which one values becoming an expert in developing skills in their chosen field. 6. Affiliation - the extent to which one is motivated by interactions with other people. Enjoys helping and dealing with people 7. Security/stability - the extent to which one is motivated by stability and security of life and their career
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8. Achievement - the extent to which one is motivated by overcoming successful challenges: enjoys challenges for their own sake. The development of the motivations scale began with the research into existing literature concerning sales motivations and values, as well as more general theoretical frameworks of human motivation. In addition, existing measures of sales values and motivations were also reviewed. We al need to feel motivated to do our jobs well, but salespeople with tough targets and tight deadlines can require more motivation than most. In a profession notorious for its high turnover, incentives are a reason to stay. It is common knowledge that many sales people can calculate how much commission they have earned faster and more accurate than any super computer. Indeed, money is a key driving force that motivates most, and certainly for the more successful ones.
However, is money then the ONLY motivator, or are there anything else? If you were to ask anyone why they want to be one, there will usually be 3 answers: 1. for the money (of course); 2. Being able to directly link their efforts to tangible results; and 3. Having the (relative) independence and flexibility in their jobs As such, while money may be the key driver for most, it certainly is not the only one. They are also motivated by a sense of achievement, and the more successful ones usually have large egos as well. If we were to look deep into in to what motivates people, here are 2 factors that we need to consider: 1. Are the rewards attractive (or punishment severe) enough? 2. Am I able to achieve it? Avoiding Pain vs. Seeking Pleasure While making money is a great pleasure for many people, including sales people, some are first motivated by avoiding the punishment of NOT achieving their monthly, quarterly or annual sales targets. Hence, it's a very common practice for sales people to "hide" potential contracts to "save them for the next financial period", rather than to risk NOT meeting the sales targets for that period. Sales people are indeed masters of work flow optimization in this sense. However, this does not help you in getting results from your sales team, and sometimes deals may be lost due to the delays caused when sales people want to "save them for the next quarter".
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When companies use money as the only motivator, it is also a riskier proposition. There's nothing to prevent competitors to use the same motivator to entice your best people (along with your best customers) to defect. While there may be some non-competitive clauses in employment contracts, these are seldom enforceable, especially in Asia. Motivating the Sales Force without Using Money
In a nutshell, when people join the sales force, they may do so in the hopes of making more money. However, if you want to get them to perform to the next level of performance, you will need to improve their skills sk ills and abilities to achieve better results. In fact, management guru Ram Charan mentioned that if using incentives as the main means to get better performance from the sales team is an outdated approach If you find isolated cases of poor performance from your team, then perhaps these few bad hats are just making excuses not to work hard. However, if you find that poor performance is widespread and pervasive in your sales force, then you, as manager, are making THE excuse for not providing the necessary support and guidance for your people Your sales force -- and the revenue it brings in -- is the lifeblood of your business. When sales are up all is rosy; when they're down businesses wither and sometimes die. If your business relies on a team of salespeople to generate revenue, it's worth your time and effort to understand what motivates them. One effective way to motivate salespeople is with an incentive program, but devising one isn't as simple as defining a series of goals which, when met, reward people with a monetary payout. If money were the only ingredient for an incentive program, salespeople would simply sell more without additional incentives. Therefore, begin by understanding what each salesperson is hoping to achieve: Is to be the highest-selling person for the quarter? To best a personal sales record? A good incentive program must be understandable, measurable, and achievable. Any program that doesn't include all three of these critical components will quickly become confusing and therefore counterproductive. As a business owner or team manager, it's your job to state the sales incentive program in clear terms and put it in writing. Hold a meeting to make sure each member of o f your sales team understands it in its entirety. Next, make sure that you only reward measurable, monetary results. If you choose to measure profits, make sure you measure gross profits and not net profits, because net profits often contain hidden costs such as overhead.
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When it comes time to decide on what the reward will be, make sure it's in relation to the sales goal. Higher goals deserve higher rewards. An all expenses paid, seven-day trip for a family of four to the Caribbean might seem costly to you, but if its cost is a mere fraction of the generated sales, it will have paid for itself from increased revenue. Smaller rewards can include tickets to concerts or sporting events, extra vacation days, or restaurant gift certificates. Find out what each person's personal interests are and use that information to come up with creative ideas. Following are the methods ABC uses to motivate its sales team other than money:
Offering base salary in addition to commission. If you can, pay your sales force a
decent base salary in addition to their commission. Forcing them to work on commission alone can create stress, which leads to burnout and high turnover; whereas a balanced approach will help you retain top talent. Striking the right balance between a base salary and rate of commission can be a tricky undertaking, however. For example, while paying your salespeople a higher base salary will likely allow you to keep a closer eye on how they spend their time, a package that's more heavily dependent on commission may motivate them to spend more time pursuing strong leads instead of engaging in activities that don 't lend themselves to a high sales rate.
Offering competitive benefits. Your salespeople need to feel that you support them
and value what they bring to the table. One good way to show your appreciation is by providing each employee with a competitive benefits package that includes health insurance, a retirement plan such as a 401(k), and generous vacation and sick time.
Providing the right training. Investing in your employee's professional growth is
investing in your business, so provide your salespeople with the proper training and encourage them to attend tradeshows and seminars, take classes, and pursue other avenues of professional development.
Set achievable goals. Having concrete goals to aim for is essential to success, no
matter if it's in sales, sports, or education. But don't set your people up for failure by setting lofty goals that they cannot achieve.
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Maintain an open-door policy. If your salespeople don't feel they can air their
grievances with you, those grievances will fester and lower morale. Make yourself available for any salesperson that needs to check in from time to time to share concerns or ask for constructive feedback. Monetary incentive schemes at ABC Telekom Ltd.
ABC deals not only with GSM (mobile),it sells many other products such as ABC broad band, ABC TV, CDMA etc.Hence,the commission paid varies from product to product. Some of the commission schemes practiced is as follows:
Pool commission schemes
Example: 1% or 0.5 % of total sales (usually applicable for front line customer service staff)
Accumulative commission scheme
Example: first 10 items at 5%, next 15 items at 7.5%, all subsequent items at 10% commission
Bonus schemes
Example: Achievement of 100 connections entitles you to additional Rs xxx Example: first 10 items at 5%, next 15 items at 7.5%, all subsequent items at 10% commission
Pyramid commissions – applicable for heads and managers ,which is an over
riding commission scheme
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Allowances Sales people get the following benefits in addition to salary and commissions
Traveling allowance
Medical
Managers and above get the following benefits in addition to salary and commissions
Traveling allowance
Medical
Vehicle allowance
Fuel
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FINDINGS (KEY ISSUES)
Variable pay, traditionally called incentives, is additional compensation linked to individual, team, and/or organization performance. Effective incentive pay plans should recognize organization culture and resources, be clear and understandable, be kept current, tie incentives to performance, recognize individual differences, and identify plan payments separate from base pay. According to my project report i found that all issues have been successfully covered. ABC Telekom sales employees have their compensation tied to their performance on a number of sales related criteria. Their sales compensation plan mainly consists of monitory, non monitory incentives and benefits.
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RECOMMENDATIONS
The compensation paid to employees involved with sales and marketing is partly or entirely tied to individual sales performance. Better performing salespeople receive more total compensation than those selling less. Sales incentives are perhaps the most widely used individual incentive. Hence in addition to the generally offered basic incentive plan such as commission, bonus, medical, fuel, motor vehicles, health insurance, etc. I suggest that the following should also be considered as vital. Recommendations for Individual performance. Recognition awards are a type of program that recognizes individual employees for their performance or services. However when giving recognition awards, ABC Telekom should use specific examples to describe clearly how those receiving the awards were selected. Recommendations for team performance. One prominent organization wide incentive pat plan is Gain sharing, which provides rewards based on greater- than- expected gains in profit and/ or productivity. Recommendations for organizational performance. An employee stock ownership plan (ESOP) enables employees to gain ownership in the firm for which they work. And the feeling of higher internal moral and greatest attention to customer service. Recommendation for executive compensation. Perquisites (perks) are special executive benefits – usually usually noncash items. Perks helps tie executives to organizations and demonstrates their important to the companies. These visible symbols of status allow executives to be seen as “very important persons” (VIP) both inside and and outside their organizations. Some common executive perks: Transportation Company car or allowances First class air travel
Financial /legal car No / low interest loans Legal counseling Financial planning
Membership Country club Health club Luncheon club
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LIST OF REFERANCES
Human resources management 10th edition – edition – Robert Robert L. Mathis, John H. Jackson
By surfing the internet
Notes and lectures
An interview session session with HR Manager for ABC Telekom
An interview session with Marketing Manager for ABC Telekom
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