THE IMPACT OF SALES INCENTIVES ON SALES PERFORMANCE IN AN ORGANIZATION A CASE STUDY OF RED STAR EXPRESS PLC

Abstract

Ideally, businesses have operated primarily within the ambit of her countries in which they were registered. However, today’s globalized world, survive, she must compete more frequently across international borders. For example, the US fast food giant McDonald’s earned 66% of its 2009 revenues overseas. Corporate icons General Electric and IBM received their revenues internationally at 54% and 64% respectively (Newman, 2011). Operating in international markets adds complexity and challenges that can lead to strategic mistakes in dealing with customers, employees and suppliers. Red star express PLC is a multinational company saddle with the responsibity of service delivery document management and e-commerce which requires borderless operation to ensure return on investment.  Business functions such as supply chain manufacturing, marketing, sales, and distribution are thus increasingly being handled at a global level (Pagell, Katz & Sheu, 2005). Globalization frequently requires businesses to navigate cultural differences.

CHAPTER ONE

1.0 INTRODUCTION

In every organization, profitability is the major driving force as this is the primary purpose of doing business. The objective of profitability is tied to the efficiency of the sale force, as every organization either sells goods or services. For a service driven organization like Red Star Express the importance of a viable sales force cannot be overemphasize. Though there has been a lot research on sales promotion, but little attention has been given to sales incentives which is the back bone of this study.

• Background of the study

Given a set of performance objectives, management must determine the most effective combination of methods to motivate their sales people to achieve their objectives. Motivational tools could be financially based rewards or nonfinancial rewards. Managers often assume that financial incentives are the best motivators and that developing a good compensation package is the only thing they must do to motivate their sales force. However, some firms, regardless of their size or position in their industries, follow a deliberate policy of offering their sales people opportunities to earn both financial and nonfinancial incentives. Whereas other firms assume that money is not always the best motivator. Today, few managers actually carry out necessary surveys when designing motivation programs because they presumably believe they know their sales people’s needs and desires well enough. Yet, when salespeople’s actual valences for rewards have been compared with their manager’s perceptions of those valences, the manager’s perceptions sometimes turn out to be very inaccurate. For example, in Nnabuko and Uduji (2008), top sales executives believed that their recognition program (nonfinancial reward) was an important reward in the eyes of the salespeople in the brewing firms in Nigeria. But in a subsequent survey of other salespeople’s actual valences in the pharmaceutical firms, it was discovered that they rated recognition as the least attractive of seven alternative rewards (Nwosu and Uduji, 2009). Rather than offering rewards that managers think their sales people find attractive, it could well worth the time and effort to conduct a study of salespeople’s actual valences for rewards before designing a motivation program for a firm. Therefore, studies that investigated the determinant of salesforce effectiveness can provide senior sales managers with important insights and contribute towards filling an important gap in the literature. Hence, the purpose of this study is to examine the importance of selected reward factors in improving the overall effectiveness of sales organisations in Nigeria. Identification of these factors that have an impact on overall effectiveness can serve as a benchmark against which firms can compare and evaluate their own criteria. Establishing benchmarks is important both for comparisons among different reward elements within the motivation mix of the firm, as well as between firms and its competitors. External comparisons can provide useful clues about profitability and market share. Internal comparisons of performance measures have the additional benefits of differentiating among the reward variables that competing for the firm’s scarce resources. To compete in today‟s global markets, organizations strive to deliver their products (physical) and services (intangible) in both an efficient and effective manner. In service supply chain, human labour forms a significant component of the value delivery process and physical handling of a product leads to standardized and centralized procedures and controls in manufacturing supply chains, (Sengupta et al 2008). The focus of efficiencies in service supply chains is on management of capacity, flexibility of resources, information flows, service performance and cash flow management. Critical factors are demand management, customer relationship management and supplier relationship management in manufacturing supply chains and service supply chains. Sales force in any company – big or small, manufacturing or service, are charged with generating product sales from assigned customer accounts in independent territories. However, the evolving selling environment today is much more complex, demanding significant changes in performance metrics, goals, control and compensation Relative to other functions within today’s organizations, sales leaders and their sales forces are uniquely focused on driving performance in every minute, hour, day, month and quarter of the business year. To do otherwise is to sacrifice sales and profits, and to diminish the satisfaction of customers, which can lead to the poor performance of the entire business and failure to deliver satisfactory returns for shareholders. As a result of this hyper-performance orientation, sales incentive plans receive a great deal of attention and are subject to constant review, helpful suggestions and nitpicking from within the sales organization and from the entire company. The focus on performance and the attention given to design decisions is entirely appropriate, of course, and it creates an insatiable need for checking plan assumptions and for new thinking that can lead to productive adjustments, creative changes and occasional redesign. With this in mind, this article oers data from our “2011 Sales Incentive Report: Cross-industry Plan Design” and when combined with our experiences, a strong foundation for compensation and incentive plan practitioners, sales leaders, and others interested business professionals. Ultimately, our goal is to communicate and reinforce a wide range of best practices that can lead to higher levels of performance and an appropriate return on sale incentive investments. From year to year, these basic incentive plan design components generally do not change significantly. Industry players tend to get them right, and stick to what works. However, our experience indicates that companies can get in trouble when role definitions change, often as the result of new strategies that try to get different results and subsequently need different behaviors from well-established positions. Examples include asking service or training positions to drive sales, or requiring “hunters” to become “farmers,” or vice versa. As the basic requirements of the job change, plan designers often adjust the mix of base and variable pay, and perhaps change the overall structure from bonus to commission. Or the position’s compensation plan may shift to a sales incentive plan (SIP) where it previously was not. Trouble often comes in two favors. Being unfamiliar with sales plan practices for fundamentally different roles, compensation practitioners often fail to design appropriate plan components. But even if they get it right, a larger issue often emerges—that sales staff often may not have the right competencies, skills or interest in changing behaviors. In these cases, the “personal DNA” of individuals has a much greater effect than incentive plan design, and it can be a mistake of monumental proportions to assume that variable incentives will drive change in the workforce. Employee engagement, customer dissatisfaction and change fatigue can all occur, and cause massive disruptions of organizational effort and business results.

• STATEMENT OF THE PROBLEM

Customer’s satisfaction is becoming more cumbersome and demanding every passing day as a result of different trend and innovation as business has outgrown the orthodox way of business as usual. The target market requires better goods, services and quick and reliable support than they had in the past. The sales force in the field who should have some wealth of knowledge and experience about the products, market, competitors, industry trends, do not seem to be active and effective as exemplified by failure to keep business promises, giving incorrect information to customers, and poor customer relationship management. This has become burdensome to the sale manager as divers measure has been put in place to ensure the effectiveness of sales personnel. It is against this backdrop that the researcher decides to investigate the impact of sales incentive on sales performance in an organization with emphasis on Red Star Express Plc.

• OBJECTIVE OF THE STUDY

The main objective of the study is to ascertain the impact of sales incentives on sales performance in an organization; but to aid the completion of the study, the researcher intend to achieve the following specific objective;

1. To ascertain whether sales incentive has an effect on sales drive positively
2. To investigate if there is any relationship between sales incentives and sales performance

• To investigate the impact of sales incentive on the performance of the sales force

1. To draw conclusion and proffer possible recommendations on how sales incentive influences sales revenue of Red Star Express Plc.
   • SCOPE OF THE STUDY

The scope of the study covers the impact of sales incentives on sales performance in and organization with emphasis on Red Star Express Plc. Due to time and cost constraints however it was not possible to conduct a national census of the target population to achieve this objective.  It was therefore necessary to identify a sample of individuals that could be used to achieve this goal.  As the researcher, this study was developed with the aim to determine the effectiveness of sales incentive as a driving force to increase in sales volume. Besides, there includes references to various secondary sources such as published articles, magazines, other eminent published researches on similar topic, marketing and business journals, annual report etc. for the authentic and reliable support information to achieve the objectives of this research.

• RESEARCH QUESTIONS

To aid the successful completion of the study, the following research questions were formulated by the researcher;

1. Does sales incentive has an effect on sales drive positively?
2. Is there any relationship between sales incentives and sales performance?

• Does sales incentive has an impact on the performance of the sales force
  • JUSTIFICATION

The profitability and efficiency of every organization lies in the effectiveness of her sales force. Most service driven organization has the personnel and the technical know-how, but availability of effective and efficient sales force has prohibited the organization from attaining her full potentials. More so, the exorbitant cost of labor has also added insult to injury on the subject matter.

As part of my requirement for the award of Bachelor of science degree (B.SC) in business administration, this study is carried out to ascertain the impact of sales incentives on sale performance in an organization with emphasis on Red Star Express.

1.5 AREA OF ACADEMIC ENDEAVOUR

Motivation is very important for the success of every company be it manufacturing or service companies. Everybody in the organization need to be motivated. The purpose of motivating subordinates is to get them achieve objectives (results) that help the organization. The following contributions to the existing knowledge were made from the researcher’s fieldwork, it was found that redundancy, imposed recruitment, setting of jaw breaking-targets, seizure of managerial support and so on, are the major challenges in manufacturing and service companies in Nigeria. The sales force motivational tools which will help the manufacturing and service companies to achieve their objectives and improve on their sales force performances includes financial support –salary increase commission, compensation, bonus, organizational support training, profit sharing, wage, team building workshops, regular promotion, insurance scheme.

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