SLIVER PRESS: BOOSTING MOTIVATION THROUGH THE COMPENSATION PLAN Sliver Press, a leading printing firm in Ghana, was concerned about complacency in its sales force. Although the existing compensation plan had been designed to spur new customer acquisitions, new customer growth had been flat for several years, and salespeople were resistant to pursuing new customers. “Do we have a motivation problem?” the CEO wondered. “Are our salespeople complacent?” A bonus plan was in place for new customer acquisitions, yet it was not working. Therefore, the CEO assumed his sales force was not extrinsically motivated by this component. However, the sales force was also not pursuing new customers on their own, so they did not seem to be intrinsically motivated either. The CEO was worried. ABC consultants partnered with Sliver Press to investigate the issue. The consultants discovered that the salespeople could, in fact, be motivated extrinsically. However, the compensation plan needed to be redesigned to effectively elicit the desired behaviours and properly reward performance. Sliver Press believed it provided clear direction through the compensation plan to grow new customer business by including new business measure on the commission rates. However, commissions were paid on a single metric of total revenue that included revenue from new and existing customers. Combining revenue allowed salespeople to maximise their incentive pay-outs by trading off the two sources against each other. Salespeople would essentially ask themselves, “Would I be better off pursuing opportunities with existing customers at one commission rate or new customers at a different, higher rate?” They were apparently going after existing customers, in part because the compensation plan gave them that option and never really required that they sell to new customers. A reward is only motivational when it is achievable and valued. The increased reward opportunity in Sliver Press’s original compensation plan had little impact on the behaviour of its sales force because it was more difficult to sell to new customers and it took months or even years for sales from new clients to reach peak levels. New sales leads were a lot harder to convert and very slow to ramp up, meaning the return on investment (ROI) for the salesperson—was too low to make the effort worthwhile. The solution to the problem had two components: i. Provide clearer direction ii. Provide more meaningful rewards The strategic direction was tweaked by carving out a specific component in the compensation plan that focused on new customers. Sliver Press also modified its reward structure to increase the upside opportunity for new customers and encourage growth over a longer time period. With these changes, the sales force began pursuing new clients more aggressively, demonstrating that they could be motivated extrinsically. a) What was the problem that Sliver Press faced with its sales force? (2 marks) b) What specific compensation methods would you have recommended to Sliver Press if you were the Managing Director of ABC consult? (3 marks) c) What step would be required to implement the solution provided to Sliver Press if you were the Managing Director of ABC consult? (10 marks) d) Discuss any five benefits that Sliver Press could derive from having an effective and efficient compensation system. (5 marks)
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