Sales Force Compensation: Frito Lay Company - Research Paper Example

 Sales Force Compensation: Frito Lay Company One of the key reasons that made Frito Lay focus on sales results, as a key indicator for job performance for route sales representatives is that since the company paid the employees on a commission basis depending on the number of snacks they sold, it was an adequate motivation for the employees to try to maximise their sales. Some of the features of the sales job that made it appropriate for a results based approach to job performance are that the number of sales that the employees make determines the amount of profits that the company will make. Secondly is that the payment mode of the job is on a commission basis depending on the number of sales that an individual makes. One of the advantages that accrue to Frito Lay in defining the performance of its route sales employees in terms of its behaviour is that it is able to concentrate on areas that will increase the sales depending on the route. However, a major disadvantage of this method in defining behaviour is that it makes it difficult to shift employees from one route to another due to the different behaviours that are required to make sale. In order to address these issues, a commission pay system should be modified to include a system of payment that is dependent on the timeliness of arrival for the high-volume route employees and the ability of low-volume route employees to negotiate for the ideal shelf space. Frito Lay emphasized on behaviour of the route employees in its research to increase its sales, however there are other dimensions that are equally important, such as the different abilities and educational levels of the employees, as they will determine how effectively they will be able to handle their duties. Overlooking these aspects of performance is bound to make the route employees unable to meet their targets, which lead to low pay, and the company will record low profits. 6 features of an effective total reward program One of the features of an effective employee reward program is that it should have clearly stated objectives that are easy and simple for all employees to understand (Armstrong & Stephens, 2005). This means that the reward scheme should have its objectives, which the employees should be well aware of before they enter into it, this will avoid misunderstanding between management and the employees when they come to claim their rewards. For instance, in the case of Frito Lay Company, the objective of the reward scheme among sales person would be to increase sales in supermarkets and self-services stores. Therefore, anyone participating in the reward scheme would need to ensure there is an increase of uptake of the company’s products in the targeted stores otherwise even if they increase sales in other places; the reward scheme would not apply. The second feature of an effective total reward program is that it should have the desirable job behaviours; this is to mean that the required job behaviours that will help the organization to meet it objectives should be communicated to the employees (Drake, Wong & Salter, 2007). This helps to motivate the employees to carry themselves in certain ways that the company wants and avoids the use of some unethical ways to win the rewards such as coercing people to buy the company’s products (Etchart-Vincent & l’Haridon, 2011). For instance, in the case of Frito Lay, the company desire was to increase the sale of its products depending on different routes where in the high volume routes the employees were required to arrive in time when they were likely to increase the number of sales. In the low volume routes, the sales persons were required to negotiate for the ideal shelf space with the attendants where their products would be more visible. This communication of how the employees were supposed to behave in order to meet the objectives helped them in avoiding undesirable behaviours that would be effective in the short run or which would make the company face legal lawsuits. The third feature is that the total reward schemes for employees should also have reliable performance measurement standards, which adequately measure job performance. Studies have shown that employees are not likely to respond to total reward schemes that do not measure job performance adequately, this is because they feel that they will not be adequately appreciated for their efforts, therefore, the reward measurement system should be able to quantify the performance of the employees adequately. For instance, in the case of Frito lay company, a commission pay system that measures the timeliness of employees in the high volume routes and ability to negotiate for the ideal shelf space in the low volume routes was the most ideal. This would be determined by the increase in sales since the timelier or skilled in negotiating the sales force is the more sale he will make which will translate to a high commission for him. The fourth feature is that rewards that are included in the reward scheme should be motivating to the employees, this does not mean that they need to be very expansive for them to be effective, but it is widely acknowledged that when employees are formally recognized for their efforts, they are more likely to put efforts in their work. For instance, a company that adopts a commission system of rewarding their customers is likely to attract more effort from the employees since, the higher their levels of performance, the more they will earn in monetary terms. However, apart from the commission that they earn on the volume of their sales, recognizing employees formally in the presence of their colleagues is likely to motivate them even more to achieve the companies objectives while at the same time challenging others to put more efforts in order for them to be recognized too. The fifth feature of an effective total reward scheme is that it should have defined guidelines in order for it to run smoothly and to ensure recognition it is given to the right people; that is all employees are treated fairly (Van De Meerendonk & Onderstal, 2010). A total reward scheme which has a target of increasing the performance of the company need to be fair for the employees to participate in it willingly, otherwise, if they deem it as unfair they are likely not to participate in it. For instance, in a company that pays its sales persons on commission basis, it should set clear guidelines on how and when the employee will get his commission. In addition, there should be clear guidelines on how the commission will be calculated, for instance, is the commission for any amount of good that a salesperson will sell or the commission will be paid when the sales person achieve a set target. The sixth feature of an effective total reward scheme is that it should be able to fit with other schemes to meet the company’s objectives (McCausland, Pouliakas & Theodossiou, 2005). For instance, a company like Frito Lay may have other reward schemes for its employees such as those regarding the quality of its products. Therefore, the two schemes should be able to interlock perfectly like a piece of puzzle and one scheme should not affect the effective of the other, otherwise the company will not be able to meet its objectives and goals. Behaviours targeted The sales force that is targeted by this compensation plan is divided in to two depending on the route that they use. In the high volume route, the behaviour that is targeted is punctuality since employees usually supply snacks to stores that are usually frequented by large numbers of potential customers and where sales are determined by the punctuality of the salespeople. In the second group, the behaviour targeted among thee low volume route employees who sell the snacks in areas where there are smaller numbers of potential customers is their ability to negotiate for the ideal shelf space, this the sales in this route depend on the visibility if the snacks therefore the commission that one will get will depend on the where the snacks are located.. Assessment of value proposition In regards to the compensation plan described in the first part of this paper, a value proposition is achieved for current and future employees by ensuring the employees who will be included in this scheme will have an opportunity to increase the amount of money that they earn through increasing their sales. However, since the scheme will involve two types of sales force with different probabilities of sales, the scheme will be adjusted such that the low volume route sales persons will not be disadvantaged compared to the high volume ones. In addition, the scheme will also help the employees develop other skills in an attempt to increase their sales; these skills may be relevant in future while advancing their careers. Assessment of Attractiveness Future salespeople will be attracted to this compensation plan because the amount of money that they earn will be directly proportional to their work, therefore they can earn more than the sales persons who are paid a standard salary. In addition, the sales persons are paid are trained on marketing skills which will be an advantage to incoming sales people since they will not have to pay for the training. References Armstrong, M., & Stephens, T. (2005). A handbook of employee reward management and practice. Buy now from Kogan Page. Drake, A. R., Wong, J., & Salter, S. B. (2007). Empowerment, motivation, and performance: Examining the impact of feedback and incentives on nonmanagement employees. Behavioral Research in Accounting, 19(1), 71-89. Etchart-Vincent, N., & l’Haridon, O. (2011). Monetary incentives in the loss domain and behavior toward risk: An experimental comparison of three reward schemes including real losses. Journal of Risk and Uncertainty, 42(1), 61-83. McCausland, W. D., Pouliakas, K., & Theodossiou, I. (2005). Some are punished and some are rewarded: a study of the impact of performance pay on job satisfaction. International Journal of Manpower, 26(7/8), 636-659. Van De Meerendonk, A., & Onderstal, S. (2010). If You Pay Peanuts: A Laboratory Experiment on Reward Schemes in Employment Service Contracting. Eur. J. Soc. Sec., 12, 272. Read More