Question

Using Expectancy Theory, explain why a commission based incentive plan seems to work for a sales position.

Answer 1

Expectancy theory given by Victor Vroom explains Motivation theory through three terms: Expectancy, Instrumentality and valence. Expectancy refers to expectation that performance of a particular task will lead to cetain outcome; Instrumentality refers to extent of belief that performance will lead to certain outcome and valence refers to value that an individual attaches to the outcome.

Why commission based incentive plan work using Expectancy theory:

1.Sales personnel strive for increasing sales when they believe that enhancing their sales will lead to better commission.To ensure high expectancy employees must be clearly communicated the nature and process of commission.

2. High expectancy results in belief that this performance will lead to being qualified for commission.

3. Valence ensures that employees who hold financial incentives as important will strive for enhanced sales in lieu of commission.