Question

The management of Ayiku and Son’s company limited, has expressed the need to review the compensation plan for the salesforce in your department because of some managerial issues that needs to be addressed. The straight commission in your opinion would be the best model to adopt under the present circumstances. As the Sales Manager, write a report to management explaining the model and identifying three (3) in each case when it is best used, its advantages and disadvantages

Answer 1

Answer) The straight commission plan is that Employees wont get a fixed salary but will only get a marginal percentage if commission upon the turnover of sales done by them. For example if an saleman sells $ 100,000 worth of goods , he/she would get maybe 5 or 10% which is $10,000.

This model of compensation is best used when

1-) When the company's products are not selling and the company has a limited capital to give salaries. So in this situation, the company do not have to pay anything fixed which causes a burden, instead to get commissions ,salesforce try harder to sell products.

2-) This model is best used when the Products are of premium quality because premium products generally take time to sell and has a greater profit margin. So, by this plan salesforce sell the products through their sources and as the profit margin is large, Companies can give a cut to Salesforce .

3-) This model is also best used at freelancing because as their is no fixed salary, Companies donot hire Employees. They can give such tasks to anyone with base expertise and the people can sell their products in their free time or as freelancing and earn some income.

Advantages of this model are as follows -

1-) Sky is the limit for income - As their is no boundary for people to earn. The more they sell ,the more income they get and the more revenue is generated by company.

2-) This model motivates Employees a lot to push themselves and work day and night to gain maximum profit.

3-) From a company's point of view, they dont have to incurr labour costs .

Disadvantages of this model -

1-) Builds enormous pressure on the Employees as their is no certainty of income and by this pressure, they may not perform at their best.

2-) High insecurity among team members . There will be very high insecurity and nervousness to outperform their collegeaus.This insecurity can lead to any harmfull consequences.

3-) Employees will only be focues on the revenue side and not to provide good customer service . This will create a negative impact on Company's image.

It took a lot of research to answer the questions.If you can help me with a upvote I would really appreciate it.

THANK YOU.