Sales-force compensation is number one problem confronting every sales management. Compensation, here, stands for the monetary and non-monetary reward given by the firm to, its sales-force in return for the services rendered. Though, compensation stands for contractual payments, there can be non-contractual and ad-hoc payments.
If sales-force recruitment and the training create and develop the manpower needs, the compensation aspect cares for its maintenance in the organisation for longer period.
Significance of compensation:
Sales-force compensation is very important because, it directly affects not only the sales costs and the profits but, more significantly, the attitude, interest and the behaviour of salesmen and the nature of their task.
Perhaps, the most difficult task is how to reconcile the conflicting objectives of low sales costs and higher profits on one hand and adequate, attractive earnings with security, on the other.
In that sense, no compensation plan is perfect that meets the needs of management in all respect satisfactorily and sales-force wholeheartedly. At the best, it is the compromise between the two extremes. However; we cannot underestimate a compensation plan that pays well its sales-force.
1. To attract best salesmen
Gifted, talented and high calibre salesmen are available only at higher rewards, both monetary and non-monetary. Pay more and get the best. In fact, cheap is costlier. Therefore, costlier is qualitative.
2. To keep sales-force contented
There is direct link between the payment made to the salesmen and their satisfaction. A person is supposed to perform his duties, look at his job well when he is contented or satisfied. Satisfaction being a state of mind depends on what he gets in monetary and non-monetary forms for his job or the efforts put in.
3. To have longing loyalty
The aim of personnel management is not just to build competent sales-force but have a pool of selected persons expected to serve life-time for the nourishment and nourishment of the selling house.
Loyal and trust-worthy staff makes the organization rich, dependable and successful. Good pay-masters can expect this.
4. To have sound employer-employee relations
Bickering, misunderstandings and drags arise mostly due to money matter partial or ill- treatment. The wheels of sales organisation must not squeak. One such wheel is sales-force that can be kept in kilt if paid well and treated well. It is the sound compensation plan that greases the squeaking wheel for frictionless working.
Level of sales-force compensation stands for what should be the reasonable compensation for the efforts of the sales-force. Level of compensation is significant to both the employers and the employees.
It is but natural that sales-force expects higher rewards for its efforts and the management is intended to pay lesser amount. The actual level of compensation lies between what the companies intends to pay and the sales- force expects to receive.
However, care must be taken to see that each compensation level is neither too high nor too low for both the extremes are dangerous and undesirable. Higher compensation blunts the sales-staff and makes then complacent and not prepared to move up the higher positions; it also creates good deal of heart-burning.