proposal

THE IMPACT OF COMMISSION AS AN INCENTIVE ON THE MOTIVATION

OF CREDIT VENDORS: A CASE OF SAFARICOM COMPANY, KENYA

LIMITED

BY

RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF THE DEGREE OF BACHELOR OF

COMMERCE (HUMAN RESOURCES MANAGEMENT OPTION),

DEPARTMENT OF COMMERCE

SCHOOL OF BUSINESS

KABARAK UNIVERSITY

NOVEMBER 2008

DECLARATION

This research proposal is our original work and has not been presented for the award of a

degree in any other university/institution or for any other purpose.

Signature ………………………………….. Date ……………………

Signature ………………………………….. Date ……………………

Signature ………………………………….. Date ………………………

Signature ………………………………….. Date ……………………

This proposal has been submitted for examination with my approval as the university

supervisor.

Signature ………………………………….. Date ……………………

DR. ZAKAYO

Lecturer

ACKNOWLEDGEMENT

This project could never been achieved if not for the guidance and support of the

following person: Foremost, a lot of gratitude to our supervisor Dr Zakayo lecturer in the

School of Business, Kabarak University for his guidance and support and availability

throughout the study.

Same regards also goes to Safaricom (K) Ltd and its sales people in Nakuru municipality

for their invaluable support during the data collection period. Also a lot of gratitude goes

to our parents for paying our school fees and support through the course and also

Kabarak University for giving us an opportunity to enroll in Bachelor of Commerce.

Lastly we cannot forget our dear friends, classmates and everyone whose encouragement,

positive critics and ideas made this project work a success. Your concern and love

inspired us in a big way and our lives are enriched through you all. May the love and

blessings of our almighty God abide with you.

DEDICATION

This proposal is dedicated to our families, relatives, sponsor(s) and all well-wishers who

have worked tirelessly to ensure that our requirements are met.

ABSTRACT

There is a need to know what motivates the sales force. Studies have been done on what

motivates the sales force and it has been found out that different incentives affect the performance

of salespeople. Safaricom Ltd is the leading mobile network operator in East Africa. This study

was conducted through a case study organization, Safaricom (K) Ltd. The main objective of the

study was to assess the effects of commission as an incentive on the motivation of salesperson in

Safaricom (K) Ltd. The study uses primary data obtained through the questionnaires provided to

Safaricom (K) Ltd sales people Nakuru Municipality.

Chapter one gives the background information about Safaricom (K) Ltd, problem statement,

objectives of the study stating on what the research intends to achieve, research questions to

guide the researchers, significance of the research.

Chapter two entails study done in the past on sales incentive plan, and procedure on designing of

commission programs and how they affect sales people performance. It also includes summary

and gaps to be filled by the study and the conceptual framework which indicates the variables

relationship.

Chapter three gives a preamble to the research design and methodology to be adopted, the

research design, the target population of 150 sales people of Safaricom (K) Ltd in Nakuru

Municipality employees, where the sample of 45 employees was obtained using convenience

sampling. Data was collected using questionnaire method and analyzed using descriptive

statistics.

Chapter four gives the results and analysis of the data presented by use of both quantitative and

qualitative analysis in form of frequency tables, pie charts and bar charts. The findings show that

the commissions paid had differential effects on factors of motivation on the sales people. I.e.

improved efficiency and effectiveness due to the company’s reputation, increased competition

from other firms, no timely change in the organization products, job insecurity, not satisfied with

present salary packages and their ability to feel motivated to wok had not improved. Some

factors of motivation were influenced positively, others negatively.

Chapter five presents in depth discussion on the findings and gives recommendation on how

Safaricom (K) Ltd can manage their sales force employees, sales people perceptions and attitude

on the commission paid, improve employee motivation to enhance high performance of the sales

force and also provides conclusions on the study, critiques of this type of study and suggestions

for future research.

TABLE OF CONTENTS

DECLARATION............................................................................................................................................1

ACKNOWLEDGEMENT.............................................................................................................................2

DEDICATION................................................................................................................................................3

TABLE OF CONTENTS...............................................................................................................................5

DEFINITION OF TERMS AND VARIABLES..........................................................................................7

CHAPTER ONE.............................................................................................................................................8

INTRODUCTION..........................................................................................................................................8

1.1 BACKGROUND TO THE STUDY................................................................................................................81.2 STATEMENT OF THE PROBLEM...............................................................................................................91.3 RESEARCH OBJECTIVES.................................................................................................................10

1.3.1 General Objective.........................................................................................101.3.2 Specific Objectives..........................................................................................10

1.4 RESEARCH QUESTIONS...................................................................................................................101.5 SIGNIFICANCE OF THE STUDY........................................................................................................101.6 SCOPE OF THE STUDY....................................................................................................................111.7 LIMITATIONS OF THE STUDY..........................................................................................................11

CHAPTER TWO..........................................................................................................................................12

LITERATURE REVIEW............................................................................................................................12

2.1 DEFINITION OF COMMISSION.........................................................................................................122.2 COMMISSION AS AN INCENTIVE.....................................................................................................122.3 WHY USE INCENTIVES?..................................................................................................................122.4 UNIQUE NEEDS OF SALES INCENTIVE PLANS.................................................................................132.5 SALES INCENTIVE PLANS...............................................................................................................132.6 STRAIGHT SALARY PLAN...............................................................................................................142.7 COMMISSION PLAN........................................................................................................................152.8 COMBINATION PLAN.............................................................................................................................162.9 COMMISSION AS A MOTIVATION TOOL...........................................................................................18SUMMARY AND GAPS TO BE FILLED BY THE STUDY.................................................................................19CONCEPTUAL FRAMEWORK.......................................................................................................................19

CHAPTER THREE......................................................................................................................................21

RESEARCH DESIGN AND METHODOLOGY......................................................................................21

3.1 INTRODUCTION..............................................................................................................................213.2 RESEARCH DESIGN........................................................................................................................213.3 TARGET POPULATION.....................................................................................................................213.4 SAMPLING DESIGN........................................................................................................................223.5 DATA COLLECTION PROCEDURES..................................................................................................223.6 DATA ANALYSIS PROCEDURES......................................................................................................22

CHAPTER FOUR........................................................................................................................................23

RESEARCH FINDINGS AND ANALYSIS..............................................................................................23

4.0 INTRODUCTION.....................................................................................................................................234.1 DATA ANALYSIS..................................................................................................................................234.2 RESULTS AND FINDINGS................................................................................................................234.3: TYPES OF COMMISSIONS......................................................................................................................274.4: IMPACT OF COMMISSION ON INDIVIDUAL PERFORMANCE...................................................................37SUMMARY OF THE FINDINGS............................................................................................................52

CHAPTER FIVE..........................................................................................................................................53

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS...........................................................53

5.1 EMPLOYEE PERCEPTIONS REGARDING COMMISSION PAID...................................................................535.2 IMPACT OF COMMISSION ON INDIVIDUAL PERFORMANCE..............................................................555.3 THE EFFECT OF COMMISSION AS A MOTIVATOR ON THE SALESPEOPLE.........................................565.4 CRITIQUE AND SUGGESTIONS FOR FURTHER RESEARCH...............................................................585.5 CONCLUSION..................................................................................................................................59

REFERENCES..............................................................................................................................................60

APPENDIX 1: QUESTIONAIRE...............................................................................................................61

APPENDIX I: PROPOSED BUDGET..............................................................................................67

APPENDIX II: WORK SCHEDULE....................................................................................................68

DEFINITION OF TERMS AND VARIABLES

Credit Vendor

Commission incentive pay calculated as a percentage of sales

Sales Incentive Plan (SIP) is a business tool used to motivate and compensate

a sales people to meet goals

Straight Salary compensation paid to protect the income of new sales

people for a period of time while they are building up their sales clientele.

Combination plan compensation plan for both individual and group sales bonus

Straight commission an incentive system widely used in sales jobs which is

computed as a percentage of sales in units or money

Employee Incentives programs used to motivate, retain and reward loyal and efficient employees

Motivation inner state that energizes activities or moves and that directs or channels behavior of a person toward goal.

http://en.wikipedia.org/wiki/Sales

http://en.wikipedia.org/wiki/SIP

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a

fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc of the

United Kingdom, the world's largest telecommunication company, acquired a 40% stake

and management responsibility for the company. Telkom Kenya as a result owns a 60%

stake in the company. As of May 17, 2006, Mr. Michael Joseph is the CEO. Recent

reports appearing in the cross section of the press indicate that Vodafone Plc of UK only

owns 35% and the remaining 5% is owned by a little known company, Mobitelea

Ventures Limited. The reports have caused a stir which led to the summoning of its CEO

Michael Joseph to appear before the PIC "Public Investment Committee", during which

he denied knowing who the other shareholder is. It is widely believed that the former

regime arm twisted Vodafone to shed off the 5% as a kickback to high ranking officials

in the regime. Safaricom's initial public offering of stock, on the Nairobi Stock Exchange,

closed in mid April 2008.

Safaricom employs over 1500 people mainly stationed in Nairobi and other big cities like

Mombasa, Kisumu, Nakuru and Eldoret in which it manages retail outlets. Currently, it

has nationwide dealerships to ensure customers across the country have access to its

products and services.

As of October 2007, Safaricom boasts a subscriber base of approximately 8 million, most

of whom are in the major cities - Nairobi, Mombasa, Kisumu and Nakuru.

Its headquarters is located in Safaricom House, Waiyaki Way in Westlands, Nairobi. It

has other offices in the city center in I&M building, Kenyatta Avenue ,on Kimathi Street

and at Shankardass House - next to Kenya Cinema Moi Avenue.

Its main rival is Zain Kenya.

Safaricom has charitable functions where it helps the less fortunate in the society mostly

through the Safaricom Foundation.

(www.wikipedia.org/wiki/safaricom)

Studies have shown that employees and management alike are dissatisfied with their

compensation plans. Most employees see no connection between their performance and

http://en.wikipedia.org/w/index.php?title=Safaricom_Foundation&action=edit&redlink=1

http://en.wikipedia.org/wiki/Zain

http://en.wikipedia.org/wiki/Westlands

http://en.wikipedia.org/wiki/Nakuru

http://en.wikipedia.org/wiki/Kisumu

http://en.wikipedia.org/wiki/Mombasa

http://en.wikipedia.org/wiki/Nairobi

http://en.wikipedia.org/wiki/Nairobi_Stock_Exchange

http://en.wikipedia.org/wiki/Mobitelea_Ventures_Limited

http://en.wikipedia.org/wiki/Mobitelea_Ventures_Limited

http://en.wikipedia.org/wiki/United_Kingdom

http://en.wikipedia.org/wiki/Vodafone

http://en.wikipedia.org/wiki/Telkom_Kenya

http://en.wikipedia.org/wiki/Kenya

http://en.wikipedia.org/wiki/Mobile_network

their pay. And many managers find that their plans fail to motivate their staffs and that

they end up overpaying poor performers.

It seems to be getting more difficult to pay according to performance. It's especially

tricky to reward individual successes because integrated team efforts have become more

essential in meeting customers' needs. Many customers now make their buying decisions

based on a vendor's overall capabilities, not because of a key individual's efforts.

As a result, the piece-rate approach to compensation, born in the era of mass-production

and standard products and services, doesn't work today. Paying by the sale doesn't

coincide with trying to meet customers' expectations regarding quality, variety, unusual

requests, and a total package.

Traditional incentive plans also hinder pay-for-performance because they try to do

something for everyone. They award across-the-board annual cost-of-living raises; they

use performance appraisal systems that end up rating everyone a B+ or better; they apply

a merit increase index with a narrow range such as 3% to 5%. These practices discourage

high performance. ( www.merfield.com)

Motivating a sales force can have long-lasting after effects. Participants become more

engaged with their work, which is reflected in every customer contact, improving

customer experience and loyalty. Further, sales team members who are engaged are likely

to stay longer with their company, which creates a more experienced sales force. And

when you include a travel component in your sales force motivation program, you get the

added benefit of enabling top performers to share ideas and strategies.( www.maritz.com)

1.2 Statement of the Problem

Today’s business environment demands a new breed of incentive programs. Many

companies have already discovered that standard incentives of just a few years ago just

don’t cut it with the customers as well as the workers in our continuously changing

economy. The choice of incentives has to widely appeal to clients’ and employees’ wants

or desires in order to measure up and get results that the organization is looking for.

Evaluation of different theories of motivation will develop a pragmatic and practical

outlook for motivating people. An employee can be taken as motivated if his behavior is

marked by such positive characteristics as high productivity, better discipline, and higher

punctuality. Indiscipline, turnover and absenteeism can be taken as signs of lack of

motivation.

http://www.merfield.com/

The Problem prompting this study to be carried out is that at the time of this study

Safaricom (K) Ltd has many sales people since it captures a big market share in the

industry in Kenya. Also because it pays its sales people on commission basis, the effect

of commission as an incentive tool to motivate its sales force is not known since no

written report (or very limited study) has been conducted on the same. Hence this study

aims to find out the impact of commission on motivation of salespeople in Safaricom (K)

Ltd, Nakuru Municipality.

1.3 Research Objectives

1.3.1 General Objective

The general objective of this study is to assess the effects of commission as an incentive

on the motivation of salesperson in Safaricom

1.3.2 Specific Objectives

However, the study will specifically seek to:

1. To find out the different types of commissions available at Safaricom (K) Ltd.

2. To find out the effects of commissions on the performance of salespeople in

Safaricom (K) Ltd.

3. To establish whether the commission plan used motivates the sales people in

Safaricom (K) Ltd.

1.4 Research Questions

1. What are the types of commissions paid in Safaricom (K) Ltd?

2. What are the effects of commissions on the performance of sales people in

Safaricom (K) Ltd?

3. Are the sales people in Safaricom (K) Ltd motivated as a result of the commission

plans?

1.5 Significance of the study

This study will be of significance to Safaricom (K) Ltd as an employer in making

decision concerning its sales force performance. Since sales force is the most important

factor of organization prosperity, there is a need to take into consideration the issues that

affect sales people performance. By motivating salespeople, a manager creates forward-

focusing momentum that centers on a trip, a service or a merchandise reward. You’ll help

people establish a tangible goal – one that offers each sales person something to look

forward to and focus on in the face of frustrations or obstacles. (www.maritz.com). This

project will be available at Safaricom (K) Ltd Nakuru Branch

Academicians and other researchers, who may be inspired by this project, may conduct

further research into other areas, such as of competition on sales people performance at

Safaricom (K) Ltd. It will also assist policy makers to draw up effective policies in

relation to compensation.

1.6 Scope of the Study

This research will be carried out at the Safaricom (K) Ltd Nakuru Municipality. This is

because in the Safaricom (K) Ltd Nakuru Municipality it is more convenient for the

researchers in terms of transport and also it forms a good representative of the sample

needed for this study.

1.7 Limitations of the Study

Some of the possible hindrances to this research can be lack of enough finances, short

time frame and none response. Also because of anxiety about the process, respondents

may not be willing to give information because they fear rebuke from the organization.

They may think the data collected from them may be used against them by competitors of

the organization. The researchers can mitigate these limitations by seeking donor support

from Kabarak University and personal savings. Also try to maximize on time frame and

probe the respondents deeply into their feelings on the effects of the commission paid by

the organization and their work motivation by explaining the benefits of the research to

them and also assure no disclosure of respondents’ identity.

CHAPTER TWO

LITERATURE REVIEW

2.1 Definition of Commission.

Commissions are incentive pay calculated as a percentage of sales. (Gerbert Barry, 2007)

A fee charged by a broker or agent for his/her service in facilitating a transaction, such as

the buying or selling of securities or real estate. In the case of securities trading, brokers

can be split into two broad categories depending on the commissions they charge.

Discount brokers charge relatively low commissions, but provide no services beyond

executing trades. Full service brokers charge higher commissions, but provide research

and investment advisory services. (www.investorword.com)

A fixed payment at regular intervals for services, esp. when clerical or professional.

(www.your dictionary .com/salary)

Commission (remuneration), a form of payment to an agent for services rendered.

Commission may also be used for a type of contract for performance or creation of a

specific work

(www.wikipedia.com)

2.2 Commission as an incentive

The word incentives bring up a variety of images in most people's minds. From "cash

back" at the dealership to sales bonuses for getting more people to buy your products -

most people immediately go to the "sales" arena as if the only place incentives have a

place is when pushing something.(www.fistfultalent.com)

2.3 Why use incentives?

Here are some compelling reasons why you should consider using incentives:

•Knowledgeable and attentive employees account for 80% of the reasons consumers feel

satisfied, according to a PNC Bank Corp. survey.

•Fewer than one in four American workers is working at full potential; half of all workers

do no more than directly asked, and 75% of employees say they could be more effective

in their jobs, according to the Public Agenda forum.

http://www.fistfultalent.com/

http://www.wikipedia.com/

http://en.wikipedia.org/wiki/Contract

http://en.wikipedia.org/wiki/Commission_(remuneration)

http://www.your/

http://www.investorword.com/

http://www.investorwords.com/2599/investment.html

http://www.investorwords.com/4201/research.html

http://www.investorwords.com/2106/full.html

http://www.investorwords.com/5014/trade.html

http://www.businessdictionary.com/definition/executing.html

http://www.investorwords.com/6664/service.html

http://www.investorwords.com/2900/low.html

http://www.investorwords.com/1473/discount_broker.html

http://www.investorwords.com/5454/charge.html

http://www.investorwords.com/4648/split.html

http://www.investorwords.com/584/broker.html

http://www.investorwords.com/5030/trading.html

http://www.investorwords.com/4057/real_estate.html

http://www.investorwords.com/5954/securities.html

http://www.businessdictionary.com/definition/selling.html

http://www.investorwords.com/5046/transaction.html

http://www.businessdictionary.com/definition/service.html

http://www.investorwords.com/154/agent.html

http://www.businessdictionary.com/definition/broker.html

http://www.investorwords.com/1922/fee.html

•70% of unhappy customers abandon vendors because of poor service, according to the

Forum Corp.

•A 5% increase in customer retention can increase lifetime profits from a customer by

75%, according to the Loyalty Effect by Frederick Reichheld.

•‘Reward and retention efforts can produce big dollar returns.’ That’s what the Incentive

Federation found in a 2003 survey asking hundreds of businesses using incentive travel

promotions 'Does Incentive Travel Improve Sales Productivity and By How Much?'

What then can we conclude from these survey results?

The bottom line is loyal customers and productive employees are the foundation of a

successful business. But to continuously retain and motivate people can be a difficult

challenge. Vacation and travel incentives, a proven motivator, will achieve this purpose

(www.daniweb.com)

2.4 Unique needs of Sales Incentive Plans.

Incentive systems for sales people are complicated by the wide differences in the type of

sales jobs. Salesperson’s performance may be measured by the dollar volume off their

sales. Other measures are the ability to promote new products or services and to provide

various forms of customer service and assistance that do not provide immediate sales

revenue.( Bohlander George,2000).

Employers are increasingly link sales commission to strategic non-volume-based

measures. Procter and Gamble measures and rewards its sales people (which it calls

“customer consultants”) commissions based on their success in helping customers lower

their inventories.

At Siebel systems about 40% of each sales person’s incentive is based on factors like

customers’ reported satisfaction with the service. ( Dessler Gary, 2005)

2.5 Sales Incentive Plans

Sales compensation plans typically rely heavily on incentives in the form of sales

commissions. However, some salespeople get straight salaries most receive a

combination of salary of salary and commissions. (Dessler Gary, 2005)

A Sales Incentive Plan (SIP) is a business tool used to motivate and compensate a sales

professional (or Sales Agent) to meet goals or metrics over a specific period of time,

http://en.wikipedia.org/wiki/Metrics




http://www.daniweb.com/

usually broken into a plan for a fiscal quarter or fiscal year. A SIP is very similar to a

commission plan, however a SIP can incorporate sales metrics other than goods sold(or

value of goods sold), which is traditionally how a commission plan is derived. Sales

metrics used in a SIP are typically in the form of sales quotas (sometimes referred to as

POS Shipments), new business opportunities and/or MBOs (Management by Objective

independent action of the sales professional and is usually used in conjunction with a

base salary.

SIPs are used to incentives sales professionals where total dollars sold is not a precise

measure of sales productivity. This is usually due to the complexity or length of the sales

process or where a sale is completed not by an individual but by a team of people, each

contributing unique skills to the sales process. SIPs are used to encourage and

compensate each member of the sales team as he/she contributes to the team's ability to

sell. It is not uncommon for the members of such teams to be located in different physical

locations (often working in different countries) and for the product introduction to happen

in one location and the purchase of such a product to occur in another location.

Sales Incentive plans are best managed by sales incentive management software package

rather than using Excel. These programs are the most flexible way to manage sales

incentive reporting and commission plan payments. It improves sales by increasing

engagement, focusing performance and rewarding clients. Sales are improved by

increasing engagement, focusing performance and rewarding results. Sales incentive

management software packages solve headaches by accounting for the complex and

changing relationships between sales people, managers, territories, products, and

customers – for multiple role-based plans over different time periods.

(www.en.wikipedia/salary_commossion)

2.6 Straight Salary Plan

Salary only approach is useful when serving and retaining existing accounts is being

emphasized more than generating new sales and accounts. This approach is used to

protect the income of new sales representatives for a period of time while they are

building up their sales clientele. It is also used when both new and existing sales

representatives have to spend considerate time learning about and selling customers new

products and service lines.( Jackson H., 2000)

http://en.wikipedia.org/w/index.php?title=Base_salary&action=edit&redlink=1

http://en.wikipedia.org/wiki/MBO

http://en.wikipedia.org/wiki/POS

http://en.wikipedia.org/wiki/Quotas

http://en.wikipedia.org/wiki/Commission


http://en.wikipedia.org/wiki/Fiscal_year

http://en.wikipedia.org/wiki/Fiscal_quarter

Straight Salary plan is a compensation plan which permits sales people to be paid for

performing various duties that are not reflected immediately in their sales volume.

(Bohlander G., 2000)

Straight salary make particular sense when the main job involves account servicing such

as developing and executing product training, programs for a customer’s sales force or

participating in national and local trade shows.

The main disadvantage is that pay isn’t proportionate to results. This can constrict sales

and de motivate potentially high performing salespeople. ( Dessler G., 2005)

An organization that wants salespeople to concentrate on listening to customer and

building relationships might want to attract a different kind of salesperson by offering

more of the pay in the form of a salary. ( Gerhart Barry, 2007)

2.7 Commission Plan

Sales Commission - A variation on piece rates and bonuses is the payment of

commission, or pay calculated as a percentage of sales. (Gerhart , 2007)

Under commission plan sales people have the greatest incentive and there is a tendency to

attract high performing salespeople who see that effect clearly leads to rewards.

Commission plans pay salespeople for results. Sales costs are proportionate to sales

rather than fixed and the company’s sales costs are low.

Sales performance like any other performance is a product of not just motivation but of

ability too. If the person hasn’t the sales skills then commissions won’t produce sales.

( Dessler G., 2005)

Straight commission – is an incentive system widely used in sales jobs which is

computed as a percentage of sales in units or money. Commissions are integrated into the

pay given to sales workers in three common ways: Straight commission, salary plus

commission and bonuses.

In the straight commission system, a sales representative receives a percentage of the

value of sales made, disadvantage of this is that sales representatives must sell to earn.

This disadvantage can be especially pronounced when the product or service sold is one

that requires a long lead time before purchasing decisions are made. Human Resource

perspective of commission is that only plans lead to unethical behavior of sales

employees.

For these reasons just mentioned, some employer can use draw system, in which sales

representatives can draw advance payments against future commission checks. From the

employer’s side, one of the risks in a draw system is that future commissions may not be

large enough to repay the draw especially for a new or marginally successful salesperson.

In addition, arrangements must be made for repayment of drawn amounts if an individual

leaves organization before earning the draw in commission. ( Jackson H. John, 2000)

According to Bohlander 2000, straight commission plan is a compensation plan based

upon a % of sales for example, organizations that pay a straight commission based on

total volume may use the following simple formulas:

Total cash compensation = 2% * total volume

OR

Total cash compensation = 2% * total volume up to quota + 4% *vol. over quota.

Research provides further insights into the pros and cons of sales commission. In this

study, paying salespersons under maximizing contingent rewards conditions in other

words where commissions accounted for 100% of pay was the situation for the highest

turnover. Turnover was much lower when salespersons were paid combination of a base

plus commissions. These findings suggested that 100% commission can drive higher

sales by focusing strong willed salespersons on maximizing sales. ( Dessler G., 2005)

However the straight commission plan is limited by the following:

1 Emphasis is on sales volume rather than on profits

2 Customer service after the sale is likely to be neglected

3 Earnings tend to fluctuate widely between good and poor periods of business and

turnover of trained sales employees tend to increase in poor periods.

4 Sales people are tempted to grant price concessions.

(Bohlander G., 2000)

2.8 Combination plan

Some sales organizations combine both individual and group sales bonus programs. In

these programs a portion of the sales incentive is lined to attainment of group sales goals.

This approach encourages cooperation and team work for the sales persons to work

together. ( Shashi K., 2004)

Most companies pay salespeople a combination of salary and commissions, usually with

a sizable salary component. Early studies suggested that the popular salary/commission

split was 80% base salary and 20% incentives with 70/30 and 60/40 splits being the 2 nd

and 3rd arrangements.

An example can help illustrate the complexities of the typical combination plan. In

company, the following 3-step formula is applies

Step 1: Sales vol. up to $ 18,000 a month. Base salary plus 7% of gross profit plus 0.5%

of gross sales.

Step 2: Sales volume from $18,000 to $25,000 a month. Base salary plus 9% of gross

profit plus 0.5% of gross sales.

Step 3: over $25,000 a month base salary plus 10% of gross profit plus 0.5% of gross

sales.

Combination plan have pros and cons. They give salespeople a floor on their earnings, let

the company specify what salary component is not tied to performance. However, the

salary component is not tied to performance, so the employer is obviously trading away

some incentive value. ( Dessler G., 2005)

The following advantages indicate why the combination salary and commission plan is

widely used:

1 The right kind of incentive compensation, if linked to salary the right propotion, has

most of the advantage of both straight salary and straight commission forms of

compensation.

2 A salary-plus-incentive compensation plan offers greater design flexibility and can

therefore be more readily set up to maximize company profits.

3 The plan can develop the most favorable ratio of selling expense to sales.

4 The field sales force can be motivated to achieve specific company marketing

objectives in addition to sales volume.

( Bohlander G., 2000)

2.9 Commission as a motivation tool

Employee Incentives - To motivate, retain and reward loyal and efficient employees .

(www.daniweb.com)

“You cannot teach a man anything new. You can only help him discover it within

himself”.

Motive is a latin word “motus” which means move; causing to move: something within a

person (need idea or emotion) that incites him to action.

Traditional methods of motivation have become obsolete and ineffective, with the

advancement in technology and industry. Understanding basic human need and aspiration

is a pre- requisite before we begin any motivating effort.

Evaluation of different theories of motivation will develop a pragmatic and practical

outlook for motivating people. Motivation has been defined by Berelson and Steiner as an

‘inner state that energizes activities or moves and that directs or channels behavior

toward goal’. An employee can be taken as motivated if his behavior is marked by such

positive characteristics as high productivity, better discipline, and higher punctuality.

Indiscipline, turnover and absenteeism can be taken as signs of lack of motivation.

The motivated employee is an asset to the organization for which he works. The

organization having motivated employees has much greater scope and is ready for

adaptation, innovation, change and expansion.

Motivation is a psychological process; it is a need satisfying process. Motivation is a

function of several factors such as authority, power, and status and perks. We can identify

a person as ‘motivated person’ from his behavior of commitment, competence

responsibility and sincerity. Motivation may be termed as ‘the managerial functions of

helping employees realize their motives’. According to Victor H. Vroom ‘motivation is

the process of initiating and directing behavior’( Shashi K., 2004)

At lower levels of Maslow's hierarchy of needs, such as Physiological needs, money is a

motivator, however it tends to have a motivating effect on staff that lasts only for a short

period (in accordance with Herzberg's two-factor model of motivation). At higher levels

of the hierarchy, praise, respect, recognition, empowerment and a sense of belonging are

far more powerful motivators than money, as both Abraham Maslow's theory of

motivation and Douglas McGregor's Theory X and theory Y (pertaining to the theory of

leadership) demonstrate.

http://en.wikipedia.org/wiki/Theory_X_and_theory_Y

http://en.wikipedia.org/wiki/Douglas_McGregor_(business_theorist)

http://en.wikipedia.org/wiki/Abraham_Maslow

http://en.wikipedia.org/wiki/Empowerment

http://en.wikipedia.org/wiki/Frederick_Herzberg

http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs


Maslow has money at the lowest level of the hierarchy and shows other needs are better

motivators to staff. McGregor places money in his Theory X category and feels it is a

poor motivator. Praise and recognition are placed in the Theory Y category and are

considered stronger motivators than money.

Motivated employees always look for better ways to do a job.

Motivated employees are more quality oriented.

Motivated workers are more productive.

The average workplace is about midway between the extremes of high threat and high

opportunity. Motivation by threat is a dead-end strategy, and naturally staff is more

attracted to the opportunity side of the motivation curve than the threat side.

Summary and Gaps to be filled by the Study

A key conclusion of this literature review is that the success or failure of an organization

depends on the sales force. A well-planned and -managed incentive plan, which the sales

people perceive as having been fairly and humanely administered, promotes trust and

faith in management and in the future of the organization among these sales people and

empowers them to provide improved service. The commission paid effects is of particular

interest to the organization since they will be faced with a sales force at least partly

motivated and dedicated to the organization. Effects that occur at the individual level are

of special interest for this research, since its objective is to assess the effects of

commission as an incentive on the motivation of salesperson in Safaricom (K) Ltd.

Conceptual Framework

The model of the study is determined in figure 2.1. It shows the independent variables;

the types of commission plans, their effects on performance of sales people, commission

as an incentive. The dependent variable is motivation of sales people. If the commission

paid is perceived as being fair the result can be increased performance in terms of em-

ployee innovativeness, discipline, efficiency among others. Also if the commission pay-

ment is perceived to be unfairly conducted by the sales people it can result in reduced

performance, lack of motivation, job insecurity and lack of morale and cooperation

among others.

Figure 2:1: Conceptual Framework

Affects

(Independent Variables) (Dependent Variable)

Source Researchers (2009)

Types of commissions used

Commission effects on performance

Mot

ivat

ion

of

sale

s p

eop

le

Commission as an incentive tool

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

This chapter gives a preamble to the methodology adopted and used in this study; it de-

scribes the study design, target population, sample design, data collection procedure (in-

struments), and data analysis method.

3.2 Research Design

A descriptive research design was used in this study. According to Sharma 2002

descriptive statistics refers to the analysis and synthesis of data so that better description

of the situation can be made and thereby promoting better understanding of facts .This

design is considered appropriate in this study since it describes what is happening at

present and the researchers only report what is happening as pertains the effects of

commission as an incentive on the motivation of sales people at Safaricom (K) Ltd.

3.3 Target Population

The population of study comprised of Safaricom (K) Ltd sales people at Nakuru

Municipality. Safaricom (K) Ltd has a sales force of 150 at Nakuru municipality whom

this study targeted. A total of 45 respondents were used to collect data concerning this

research. The researcher targeted this population because it is whom commissions is paid

in form of compensation in their sales job and thus represented the actual area of interest

in this study.

3.4 Sampling Design

For any meaningful and representative research, a sample of at least 10% is

representative enough (Mugenda and Mugenda, 1999). In this study the researchers’

convenience sampling procedure so as to obtain the sample of the study. This method

allows the researchers to obtain samples that are representatives of the population since it

is too large to research on every element of it. It saves time, money and gives the

researcher accurate solutions and answers in short time. Thus from the target population

of 150 sales people, a sample of 45 was used.

3.5 Data Collection Procedures

The procedure used to collect data included questionnaires which were distributed to the

respondents and time was given to them to complete them. Follow ups was also made to

ensure success of the procedure. The main tool was questionnaires which consisted of

open-ended questions and a few closed- ended questions. Secondary data was also used

especially to determine issues concerning the variable relations.

3.6 Data Analysis Procedures

All data collected, was checked for completeness, coded and tabulated. It was then

analyzed using descriptive statistics which included frequency tables and percentages

which enable the researcher to draw conclusions and inferences drawn from the sample

results to the population. Quantitative data was used to present the results in the form of

percentage tables, pie charts and bar charts according to the objectives and research

questions of the study.

CHAPTER FOUR

RESEARCH FINDINGS AND ANALYSIS

4.0 Introduction.

This chapter presents the results of the data collected and further discusses these findings.

It is divided into quantitative and qualitative analysis corresponding with the sections

found in the questionnaires. The tables and figures in this chapter are derived from the

findings of the study.

Permission to do the research was obtained from the sales people of Safaricom (K) Ltd.

In most cases, access was granted and the relevant sales people were also approached to

fill in questionnaire and identify other selected sales people. The participants were then

requested to fill in the questionnaire. The participants who did not have enough time out

of work were allowed to complete the questionnaire at home.

The instrument used in the research was pre-tested to improve their validity and

reliability basing on the objectives of the study. Questionnaires were edited as soon as

they were received to ensure completeness. Filling in questionnaires was voluntary and

participants were assured of anonymity and confidentiality.

4.1 Data Analysis

Preliminary analysis procedures of cleaning, frequencies, consistency checks, and

debugging were done on the data obtained. This further improved the quality of the data

collected. Further and detailed analysis was done using discriminant analysis. Only 44 /

45 questionnaires given out were returned, thus the analysis was done using 44

questionnaires received from the respondents. The next section shows the results.

4.2 Results and Findings

The results are presented beginning with the presentation of sample characteristics as shown in Table 4.1.

Table 1: Demographic Information about the Sample –Gender (N=44)

Source: Researchers (2009)

Table 1 indicates that the respondents was well constituted since it included 555 male and 45% female

Figure 2: Demographic Information about the Sample –Gender


Table 2: Demographic Information about the Sample –Age (N=44)


Table 2 indicates that 41% of the respondents were aged between 20-29 years old, 23% aged between 30-39 and 40-49 and 13% were aged between 50-59 years old

Factors Category Frequency %

Gender Male 24 55

Female 20 45


Age 20-29 18 41

30-39 10 23

40-49 10 23

50-59 6 13

Not indicated 0 0

Figure 3: Demographic Information about the Sample –Age


Table 3: Demographic Information about the Sample – Education (N=44)

Source: Researchers (2009)Table 3 indicates that 11% of the respondents had attained primary school level of education, 50% had attained high school education, 32% been to college level and 7% had university degreesFigure 4: Demographic Information about the Sample – Education


Table 4: Demographic Information about the Sample (Marital status) (N=44)


Education Primary school 5 11

High school 22 50

College 14 32

University 3 7

Source: Research Data (2009)

Table 4 indicates that 55% of the respondents were married, 41% were single and 4% were divorcedFigure 5: Demographic Information about the Sample (Marital status)


Table 5: Demographic Information about the Sample –Seniority (N=44)


Table 5 indicates that 50% of the respondents had been sales people of Safaricom (K) Ltd for less than or equal to 3 years, 27% for 3-5 years and 23% for 5-10 years

Figure 6: Demographic Information about the Sample –Seniority


Marital status

Married 24 55

Single 18 41

Divorced 2 4

Not indicated 0 0


Seniority

Less or equal to 3 years 22 50

3- 5 years 12 27

5- 10 years 10 23

More than 10 years 0 0


4.3: Types of commissions

Table 6: Respondents perception on the commissions paid (N=44)Statement Great

extent (%)

Some extent (%)

Average (%)

Little extent (%)

No extent (%)

To reduce the number of sales people 10 44 20 10 16Remove unqualified people in the sales job

16 28 20 16 20

To establish effective structure for service delivery

42 34 10 4 0

To cut down expenses 12 10 8 34 36To motivate its work force to work harder and retain them

40 26 20 10 4

To ensure fair compensation for amount of products sold

42 40 6 8 4

To remove poor performers for performance improvement

26 20 26 10 18

To create employment 32 30 30 8 0To create room for better working conditions

42 46 12 0 0

To ensure hard work and dedication to duty

50 50 0 0 0

Source: Research Data (2009)Table 6 indicates that 54% of the respondents felt that the commissions paid was meant to reduce the number of sales people, 26% felt it was to a little or no extent and 20% were average on the issue

Figure 7: Respondents perception on the commissions paid- reduce the number of sales people


Table 6 indicates that 76% of the respondents agreed that the commission paid to sales people by the organization were meant to remove unqualified people from the sales job while 4% felt it was to a little or no extent while 10% were average on the issueFigure 8: Respondents perception on the commissions paid- to remove unqualified people from the sales job


Table 6 indicates that 44% of the respondents agreed that the commission paid to sales people by the organization were meant to establish effective structure for service delivery while 36% felt it was to a little or no extent while 20% were average on the issue

Figure 9: Respondents perception on the commissions paid- to establish effective structure for service delivery


Table 6 indicates that 22% of the respondents agreed that the commission paid to sales people by the organization were meant to cut down expenses while 8% felt it was to a little or no extent while 70% were average on the issueFigure 10: Respondents perception on the commissions paid- to cut down expenses


Table 6 indicates that 66% of the respondents agreed that the commission paid to sales people by the organization were meant to motivate its work force to work harder and retain them while 14% felt it was to a little or no extent while 20% were average on the issue

Figure 11: Respondents perception on the commissions paid- to motivate its work force to work harder and retain them


Table 6 indicates that 82% of the respondents agreed that the commission paid to sales people by the organization were meant to ensure fair compensation for amount of products sold while 12% felt it was to a little or no extent while 6% were average on the issueFigure 12: Respondents perception on the commissions paid- to ensure fair compensation for amount of products sold


Table 6 indicates that 46% of the respondents agreed that the commission paid to sales people by the organization were meant to remove poor performers for performance improvement while 28% felt it was to a little or no extent while 26% were average on the issue

Figure 13: Respondents perception on the commissions paid- to remove poor performers for performance improvement


Table 6 indicates that 62% of the respondents agreed that the commission paid to sales people by the organization were meant to create employment while 30% felt it was to a little or no extent while 8% were average on the issueFigure 14: Respondents perception on the commissions paid- to create employment


Table 6 indicates that 88% of the respondents agreed that the commission paid to sales people by the organization were meant to create room for better working conditions while 12% were average on the issue

Figure 15: Respondents perception on the commissions paid- to create room for better working conditions


Table 6 indicates that all the respondents agreed that the commission paid to sales people by the organization were meant to ensure hard work and dedication to duty Figure 15: Respondents perception on the commissions paid- to ensure hard work and dedication to duty


Table 8: Respondent perception on the types of commissions paid in the organization (N=44)Statement Great

extentSome extent

Average Little extent

No extent

Sales Incentive Plan to motivate and compensate sales people to meet goals over a specific period of time

32 40 10 4 4

Straight Salary is used when serving and retaining existing accounts and to protect the income of new sales representatives for a period of time while they are building up their sales clientele.

0 0 0 50 50

Sales Commission - A variation on piece rates and bonuses is the payment of commission, or pay calculated as a percentage of sales

50 40 0 10 0

salary plus commission 0 10 0 40 50

Salary plus commission and bonuses. 0 10 0 40 50

Combination plan for both individual and group sales bonus programs

12 24 20 20 24

Retainer at first months then commission only

42 34 12 8 4


Table 8 indicates that 72% of the respondents agreed that the organization used Sales Incentive Plan aimed to motivate and compensate sales people to meet goals over a specific period of time in its commission arrangement while 10% were average on the issue and 8% felt it was to a little or no extent Figure 16: Respondent perception on the types of commissions paid in the organization- Sales Incentive Plan




Table 8 indicates that all the respondents that the organization did not use used Straight Salary plan in compensating its sales people which is usually meant for serving and retaining existing accounts and to protect the income of new sales representatives for a period of time while they are building up their sales clientele.Figure 17: Respondent perception on the types of commissions paid in the organization- Straight Salary plan


Table 8 indicates that 90% of the respondents agreed that the organization used Sales Commission which is a variation on piece rates and bonuses or pay calculated as a percentage of sales in remunerating its sales people while 10 felt it was to a little extentFigure 18: Respondent perception on the types of commissions paid in the organization- Sales Commission


Table 8 indicates that 10% of the respondents agreed that the organization used salary plus commission in remunerating its sales people while 90% felt it was to a little extent this is probably due to sales manager who got this kind of compensation against the other sales people

Figure 19: Respondent perception on the types of commissions paid in the organization- salary plus commission


Table 8 indicates that 10% of the respondents agreed that the organization used Salary plus commission and bonuses in remunerating its sales people while 90% felt it was to a little extent this is probably due to sales manager who got this kind of compensation against the other sales peopleFigure 20: Respondent perception on the types of commissions paid in the organization- Salary plus commission and bonuses


Table 8 indicates that 36% of the respondents agreed that the organization used Combination plan for both individual and group sales bonus programs in remunerating its sales people while 20% were average on the issue and 44% felt it was to a little or no extent

Figure 21: Respondent perception on the types of commissions paid in the organization- Combination plan


Table 8 indicates that 76% of the respondents agreed that the organization used to pay a retainer salary at first months of the sales job then start paying commission only after the duration in remunerating its sales people while 12% were average on the issue and 12% felt it was to a little or no extent Figure 22: Respondent perception on the types of commissions paid in the organization- Retainer salary at first months


4.4: Impact of commission on individual performance

Table 9: Impact of commission paid has affected on individual performance (N=44)

Effect Greatly Reduced(%)

Reduced to some extent (%)

No effect (%)

Improved/ increased (%)

Greatly improved / increased(%)

Your job performance generally 8 4 30 28 30

Punctuality to workplace 12 10 24 20 34

Number of sales people remaining on duty all the time

10 10 16 24 40

Sales people working for two or more competing suppliers of Safaricom (K) Ltd

12 16 20 26 26

Efficiency and effectiveness 0 14 36 20 30

Personal responsibility 10 10 16 34 30

personal discipline 14 16 10 30 30

personal accountability 12 18 16 24 30

Loyalty to your boss 10 24 30 20 16


Table 9 indicates that 58% of the respondents felt that the commission paid had increased their job performance generally while 30% felt that the commission had no effect to their job performance and 12% felt that it had actually reduced their job performanceFigure 23: Impact of commission paid has affected on individual performance- job performance generally


Table 9 indicates that 54% of the respondents felt that the commission paid had increased their Punctuality to workplace while 24% felt that the commission had no effect to Punctuality to workplace and 22% felt that it had actually reduced their Punctuality to workplaceFigure 24: Impact of commission paid has affected on individual performance- Punctuality to workplace


Table 9 indicates that 64% of the respondents felt that the commission paid had increased the Number of sales people remaining on duty all the time while 16% felt that the commission had no effect and 20% felt that it had actually reduced the Number of sales people remaining on duty all the timeFigure 25: Impact of commission paid has affected on individual performance- Number of sales people remaining on duty all the time


Table 9 indicates that 52% of the respondents felt that the commission paid had increased the Number of Sales people working for two or more competing firms of Safaricom (K) Ltd while 20% felt that the commission had no effect and 28% felt that it had actually reduced the Sales people working for two or more competing firms of Safaricom (K) Ltd

Figure 26: Impact of commission paid has affected on individual performance- Number of Sales people working for two or more competing firms of Safaricom (K) Ltd


Table 9 indicates that 50% of the respondents felt that the commission paid had increased their Efficiency and effectiveness while 36% felt that the commission had no effect and 14% felt that it had actually reduced their Efficiency and effectivenessFigure 27: Impact of commission paid has affected on individual performance- Efficiency and effectiveness


Table 9 indicates that 64% of the respondents felt that the commission paid had increased their Personal responsibility while 16% felt that the commission had no effect and 20% felt that it had actually reduced their Personal responsibility

Figure 28: Impact of commission paid has affected on individual performance- Personal responsibility


Table 9 indicates that 60% of the respondents felt that the commission paid had increased their personal discipline while 10% felt that the commission had no effect and 30% felt that it had actually reduced their personal disciplineFigure 29: Impact of commission paid has affected on individual performance- personal discipline


Table 9 indicates that 54% of the respondents felt that the commission paid had increased their personal accountability while 16% felt that the commission had no effect and 30% felt that it had actually reduced their personal accountability

Figure 30: Impact of commission paid has affected on individual performance- personal accountability


Table 9 indicates that 36% of the respondents felt that the commission paid had increased their Loyalty to your boss while 30% felt that the commission had no effect and 34% felt that it had actually reduced their Loyalty to your bossFigure 31: Impact of commission paid has affected on individual performance- Loyalty to your boss


4.5: The effect of commission as a motivator on the salespeople.

Table 10: Respondents perception on how different motivators affect their performance (N=44)

Statement Great extent

Some extent

Average Little extent

No extent

Salary 45 25 30 0 0

Bonus pay 40 40 20 0 0

Awards 50 25 25 0 0

Commissions 24 20 20 16 20


Table 10 indicates that 70% of the respondents agreed that they were to great extent motivated by salary while 30% were average on the issueFigure 32: Respondents perception on how different motivators affect their performance- salary


Table 10 indicates that 80% of the respondents agreed that they were to great extent motivated by Bonus pay while 20% were average on the issue

Figure 33: Respondents perception on how different motivators affect their performance- Bonus pay


Table 10 indicates that 75% of the respondents agreed that they were to great extent motivated by Awards given for outstanding performance while 25% were average on the issueFigure 34: Respondents perception on how different motivators affect their performance- Awards given


Table 10 indicates that 44% of the respondents agreed that they were to great extent motivated by Commissions while 20% were average on the issue and 36% felt it was to a little or no extent

Figure 35: Respondents perception on how different motivators affect their performance- Commissions


Table 11: Perception on effects of commission on respondent work life (N=44)

Effect Greatly Reduced(%)

Reduced to some extent (%)

No effect (%)

Improved/ increased (%)

Greatly improved / increased(%)

Job motivation 10 8 12 40 30

Morale and teamwork 15 20 15 25 25

Job satisfaction 20 10 10 30 20

Organization commitment 32 28 10 15 15

Efficiency and effectiveness 0 14 36 20 30

Personal responsibility 10 10 16 34 30

personal discipline 14 16 10 30 30

personal accountability 12 18 16 24 30

Loyalty to your Organization 10 24 30 20 16


Table 11 indicates that 70% of the respondents felt that their wok life had improved in terms of job motivation due to commission paid, while 12% agreed there was no effect on the issue and 18% felt it had reduced their job motivation

Figure 36: Perception on effects of commission on respondent work life- job motivation


Table 11 indicates that 50% of the respondents felt that their wok life had improved in terms of Morale and teamwork due to commission paid, while 15% agreed there was no effect on the issue and 35% felt it had reduced their Morale and teamworkFigure 37: Perception on effects of commission on respondent work life- Morale and teamwork


Table 11 indicates that 50% of the respondents felt that their wok life had improved in terms of Job satisfaction due to commission paid, while 10% agreed there was no effect on the issue and 30% felt it had reduced their Job satisfaction

Figure 38: Perception on effects of commission on respondent work life- Job satisfaction


Table 11 indicates that 30% of the respondents felt that their wok life had improved in terms of Organization commitment due to commission paid, while 10% agreed there was no effect on the issue and 60% felt it had reduced their Organization commitmentFigure 39: Perception on effects of commission on respondent work life- Organization commitment


Table 11 indicates that 50% of the respondents felt that their wok life had improved in terms of Efficiency and effectiveness due to commission paid, while 36% agreed there was no effect on the issue and 14% felt it had reduced their Efficiency and effectiveness

Figure 40: Perception on effects of commission on respondent work life- Efficiency and effectiveness


Table 11 indicates that 64% of the respondents felt that their wok life had improved in terms of Personal responsibility due to commission paid, while 16% agreed there was no effect on the issue and 20% felt it had reduced their Personal responsibilityFigure 41: Perception on effects of commission on respondent work life- Personal responsibility


Table 11 indicates that 60% of the respondents felt that their wok life had improved in terms of personal discipline due to commission paid, while 10% agreed there was no effect on the issue and 30% felt it had reduced their personal discipline

Figure 42: Perception on effects of commission on respondent work life- personal discipline


Table 11 indicates that 54% of the respondents felt that their wok life had improved in terms of personal accountability due to commission paid, while 16% agreed there was no effect on the issue and 30% felt it had reduced their personal accountabilityFigure 43: Perception on effects of commission on respondent work life- personal accountability


Table 11 indicates that 36% of the respondents felt that their wok life had improved in terms of Loyalty to their Organization due to commission paid, while 30% agreed there was no effect on the issue and 34% felt it had reduced their Loyalty to their Organization

Figure 44: Perception on effects of commission on respondent work life- Loyalty to their Organization


Table 12: Safaricom (K) Ltd pay- package need for revision (N=44)

Variable Category Frequency of responses

%

Sales people response to if Safaricom (K) ltd pay package needs further revision

Yes 40 90

No 4 10


Table 12 indicates that 90% of the respondents felt that the Safaricom (K) ltd pay package needs further revision while 10% felt it was adequate probably it may be the sales managers’ perception against the sales people

Figure 45: Safaricom (K) Ltd pay- package need for revision


Table 13: Factors that Impede the Performance of the sales people in Safaricom (K) Ltd (N=44)

Factor Yes (%) No (%)

Inadequate funding to look for new clients 80 20

Lack of motivation 66 34

Unrealistic high targets that lead to frustration 60 40

lack of advertisement tools like brochures to give potential customers 50 50

Economic depression facing the market 65 35

No job security 82 18

Poor training of the sales people by the organization 75 25

Financial constraints, bureaucracy, lack of transparency in the organization

70 30

Competition from other firms who offer more attractive products 85 15

Poor management style e.g. grievance handling procedure 65 35

Low morale due to poor products development 55 45

Lack of confidence by customers due to poor performance of the company’s shares

68 32

Only working for survival 72 28

Long delays of salary and commission payments 12 88

Constant interruption of the company’s network e.g. Mpesa service 78 22


Table 13 indicates that 80% of the respondents felt that factors that impede performance

of their sales job was due to inadequate funding to look for new clients, 66% felt it was

due to Lack of motivation, 60% due to Unrealistic high targets that lead to frustration,

50% due to lack of advertisement tools like brochures to give potential customers, 65%

felt it was due to Economic depression facing the market, 82% felt it was due to no job

security, 75% due to Poor training of the sales people by the organization, 70% due to

Financial constraints, bureaucracy, lack of transparency in the organization, 85% due to

Competition from other firms who offer more attractive products, 65% due to Poor

management style e.g. grievance handling procedure, 55% due to Low morale due to

poor products development, 68% due to Lack of confidence by customers due to poor

performance of the company’s shares, 72% Only working for survival, 12% felt it was

due to Long delays of salary and commission payments and 78% felt it was due to

Constant interruption of the company’s network e.g. Mpesa service

Figure 46: Factors that Impede the Performance of the sales people in Safaricom (K) Ltd


SUMMARY OF THE FINDINGS

In summary, Safaricom (K) Ltd commission paid on its sales force as incentive had

differential effects on factors of performance. It was associated with increased number of

sales people working concurrent with other competitors of Safaricom (K) Ltd. The

majority of the participants reported no change in job attitudes, and a reasonable number

of participants reported it had brought job insecurity. Participants reported that they were

not satisfied with present salary packages and their ability to feel motivated to wok had

not improved. Some factors of performance were influenced positively, others

negatively. Discussion on the results, findings and recommendations are provided in the

Next chapter.

CHAPTER FIVE

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

This research was done to establish Safaricom (K) Ltd different types of commissions it

pays to its salespeople, to find out the effects of commissions on the performance of

salespeople and to establish whether the commission plan used motivates the sales

people. The results indicated that commission as an incentive had both positive and

negative effects on the factors in question. The results tend to show that the effects of

commission as an incentive on the sales force depend of the factors under consideration.

In addition, present research considered both short and long-term effects of commission

paid.

5.1 Employee Perceptions regarding commission paid

The discovery that commission paid had negative as well as positive effects among sales

people of Safaricom (K) Ltd was supported by employee perceptions of the importance

of the commission plan process. This research found out that commission as an incentive

was perceived differently by the respondents. Some saw it as negative, while others had

positive perceptions about it. Majority felt that it was meant to reduce the number of sales

people, Remove unqualified people in the sales job, establish effective structure for

service delivery, cut down expenses, remove poor performers for performance

improvement, while others were positive in that they felt it was motivate its work force to

work harder and retain them, ensure fair compensation for amount of products sold,

create employment, create room for better working conditions and to ensure hard work

and dedication to duty.

The fact that negative perceptions stem from the way the commission plan was designed

and implemented is unquestionable. This is because the commission programmes used

by the organization include Sales Incentive Plan which is used to motivate and

compensate sales people to meet goals over a specific period of time. This time bound

plan has disadvantage in that it has an element of uncertainty especially after that period

expires, hence job insecurity creeps in. also the organization doesn’t offer Straight Salary

which is used when serving and retaining existing accounts and to protect the income of


new sales representatives for a period of time while they are building up their sales

clientele. This has an advantage in that majority of the sales people need some capital at

the beginning of the job to cater for e.g. travelling expenses. Lack of this plan in

designing the commission by the organization demoralizes the new sales people hence

affect their perception of the organization. The organization uses Sales Commission

which is calculated as a percentage of sales. This type has a big disadvantage in that at

the beginning for one to make good sales, a sales person need to have a wide customer

base which takes time to build. Thus at the beginning one earns little commission due to

poor sales. Also the use of salary plus commission and also Salary plus commission and

bonuses should be encouraged because this applies to the sales managers only in the

organization who reap the commission through the sales force in the region he is

representing. This often de-motivates the sales people to work harder as they perceive

their effort benefit the managers.

Another method in calculation of commission paid should be Combination plan for both

individual and group sales bonus programs. This will encourage group sales and through

team work it improves the morale of the team members. Another method used is retainer

at first months then commission only which is a good plan although only for a short

period. This is because the sales people in this organization sale services to people and

also through one prospect to another they are also marketing the organization. This

marketing aspect is not compensated because the commission is based on sales volume

alone. The recommendation here is that the retainer pay should remain constant in the

working life of the sales person

Since such negative perceptions about commission paid are likely to have a serious

impact on the performance of the sales person, the sales Managers should be sensitive to

employee perceptions and work on them through seminars, counseling and public

relations. Managers should study the negative perceptions with the view of changing

them. These perceptions should also be noted by those who want to an effective pay

package for sales people. Normally, tactics in handling compensation plans are important

here. These include the involvement of the stakeholders in the process of formulating

these compensation schemes, and giving information. Participation in decision-making

ensures commitment to the remuneration package offered and forms a good incentive for

their performance. The stakeholders should be given a chance to suggest how pay plans

should be implemented. The rationale and criteria of commission plans to be used as

incentive to sales person should be explained early in the process through improved

public relations. This is how organizational motivation and effectiveness can be better

managed.

5.2 Impact of commission on individual performance

This has to do with how the commissions paid have affected individual performance.

Majority of the respondents agreed that their job performance had improved generally

although a big percentage felt that the commission had no effect at all and even others felt

that it had actually reduced. This indicates the system is not fully motivating the work

force it is meant to and a lot needs to be done. Others felt a slight improvement in

Punctuality to workplace, remaining on duty all the time, Efficiency and effectiveness,

Personal responsibility, personal discipline, personal accountability and Loyalty to your

boss though majority reported no effect at all on these work factors due to the

commissions paid.

Majority had even diversified their work into selling even competitors products to boost

the compensation amount. This is not a welcome exercise that should continue. The

company should start on compensation re-design. These exercises should offer

compensation plans that are enriched, with appropriate load, and that even the sales job

should have chances of promotion built into them. These will be motivating to the

workers. The current commission plan was done without a clear policy on remuneration

and motivational effect. Normally, research and evaluation exercises should have been

done first, followed by restructuring and then implementation of the commission plan.

Safaricom (K) Ltd should embark on operative and management training. Particularly,

the sales managers should be trained in motivational procedures, performance appraisal

and other aspects of human resource management. Results regarding organizational

goals, mission and values are also supportive of compensation plans. The improvement in

knowledge about these factors is likely to be translated into motivated work force and a

fair compensation plan.

5.3 The effect of commission as a motivator on the salespeople.

Regarding motivational factors majority of the respondent agreed that bonus pay was a

big motivator for them followed by salary, then award and finally commissions.

Commission being rated the least motivator is a clear indication on its effects on the

occupational attitudes since it was the one implemented by this organization.

Another aspect of quality of work life assessed was job insecurity. A high percentage of

respondents reported job insecurity. This was due to the fact that the targets set are too

high and unrealistic. The rationale and criteria for target set were not clear. Personnel

decisions were largely subjective since they don’t involve the sales people in setting the

sales targets. In addition, the public relations function, as suggested earlier, should be

improved to explain the importance of sales force in the organization and how to air their

views.

Regarding occupational attitudes, the majority of the respondents reported no change in

motivation and morale, job satisfaction and organizational commitment. A majority of

participants reported these attitudes to be poor. This implies that, regarding these

attitudes, the situation in the Safaricom (K) Ltd is still bad. It is hoped that if the

recommendations of this study are implemented, positive changes in these attitudes will

result.

Most of the participants reported that commission effect as being average on their Morale

and teamwork, Efficiency and effectiveness, Personal responsibility, discipline and

accountability. Loyalty to the organization had reduced as majority opted to combine

selling even competitors products to enhance their pay. Furthermore, a majority reported

dissatisfaction with current salary packages hence need for its revision. In order to

improve individual performance, Safaricom (K) Ltd should provide a living wage i.e.

adequate funding for sales people to look for new clients, motivation, realistic targets

which are achievable in the competitive industry, advertisement material to its sales

people like brochures, job security, training, participative decision making style,

competitive products, morale, reward creative ideas, make their shares gain value and

also improve their network to avoid frequent interruption and failures.

The ranked importance of motivational factors of sales people at the Safaricom (K) Ltd

provides useful information for the organizations director and employees. Knowing how

to use this information in motivating sales people is complex. The strategy for motivating

sales people depends on which motivation theories are used as a reference point. If

Hertzberg's theory is followed, management should begin by focusing on pay and job

security (hygiene factors) before focusing on interesting work and full appreciation of

work done (motivator factors). If Adams' equity theory is followed, management should

begin by focusing on areas where there may be perceived inequities (pay and full

appreciation of work done) before focusing on interesting work and job security. If

Vroom's theory is followed, management should begin by focusing on rewarding (pay

and interesting work) sales people effort in achieving organizational goals and objectives.

Regardless of which theory is followed, interesting work and sales people pay appear to

be important links to higher motivation of sales people. Options such as job enlargement,

job enrichment, promotions, internal and external stipends, monetary, and non-monetary

compensation should be considered. Job enlargement can be used (by managers) to make

work more interesting (for sales people) by increasing the number and variety of

activities performed. Job enrichment can used to make work more interesting and

increase pay by adding higher level responsibilities to a job and providing monetary

compensation (raise or stipend) to sales people for accepting this responsibility. These are

just two examples of an infinite number of methods to increase motivation of sales people

at the Safaricom (K) Ltd. The key to motivating sales people is to know what motivates

them and designing a motivation program based on those needs.

The rationale and criteria for compensation and motivational plans should be made clear

right at the beginning. Managers should take caution not to use remuneration packages,

as opportunities to punish employees they think are uncooperative or disobedient. Rather

they should be objective in applying the criteria for pay. The process of compensation

and incentive plans should be made as transparent as possible. The above measures

coupled with increased skills in performance evaluation should reduce the problem of job

insecurity. Existence of these problems further shows that some of the strategies for

compensation as incentive did not work as hoped. Commission used as incentive in the

organization had positive effects on some indicators of sales force performance and had

negative effects on others.

5.4 Critique and Suggestions for Further Research

Some problems hindered the validity of these findings. The first criticism concerns the

problems with the self-report, in general. These can be flouted with biases. Objective

measures like records and behavioural observation should be included in subsequent

compensation effects on performance researches is recommended.

The timing of measures is also important. This is because motivational factors have short

and long term impacts. The effects of motivational factors obtained depend on when the

measurements were taken. For this research on Safaricom (K) Ltd both short and long

term effects were obtained.

Another constraint is that generalization of present findings is limited to Safaricom (K)

Ltd in Nakuru municipality and urban sales people in Kenya. Sales job is also done at the

rural areas. Research focusing on effects of remuneration packages on sales people

performance at the rural areas is recommended.

Another constraint was that more time was needed to get the required information from

the sample. Lack of co-operation from managers is also likely. Because of anxiety about

the process, employees may not be willing to give information. They may think the data

collected would be used against them by the competitors. This is understandable because

the phone industry is faced with stiff competition and any information regarding sales

force is highly considered sensitive. Detailed explanation about the importance of

research, assurance of anonymity and confidentiality were given including a cover letter

from Kabarak University. Rejections and non-response are likely to be high and it was

lucky that only 1 out of 45 questionnaires were not returned in this study.

Environmental stability at the time of research is also important. Events the economic

depression facing the world at the time of the research should be well considered. The

researcher must be able to sense effects that are caused commission paid from those that

happen due to other factors like economic recession like one faced during the time of the

research.

Present research gave a limited consideration to the objectives of commission paid as an

incentive to sales people performance. To widen the scope, further research should

consider whether the objective of providing a living wage has been met.

5.5 Conclusion

Compensation plans is significant for all the stakeholders. It has different meanings to

the various stakeholders. Commissions paid can be a harm or loss, threat or challenge.

Harm or loss would concern those commission plans which are poorly implemented.

Threat refers to potential harm or loss. This can be seen in the light of the perception of

the sales force on the compensation plan. Some will remain under fear of job insecurity.

Challenge refers to opportunities for growth, masterly or gain. Compensation plan

therefore, is both an opportunity and challenge to organizational development and to the

stakeholders. It is challenging to plan, implement and manage compensation schemes

and its effects as incentives to the sales force. However, good commission schemes

offers an opportunity to put right what had gone wrong with the Safaricom (K) Ltd in

motivating its sales people. This stimulates organizational growth and development.

Commission as an incentive to the sales force has different outcomes depending on the

timing, that is, whether the short term or long term impacts are the ones in question. The

long-term effects will be realized only if a supportive compensation scheme develops.

Therefore, a follow-up study on the development of a new compensation scheme for sales

people in the Safaricom (K) Ltd is recommended. This will show if a new commission

scheme which act as incentive and favourable of higher organizational performance has

been created.

REFERENCES

Armstrong (2001). Human Resource Management Practice, 18th Edition, Kogan Page

Ltd.

Bohlander G. (2002), Managing Human Resource, 12th Edition, Western College

Publishing, United States

Cole G.A. (2002). Personnel And Human Resource Management, 5th Edition, Biddles

Ltd, New Delhi.

Dessler Gray. (2005), Human Resource Management, 10 edition, Darling Kindersley Pvt

Ltd India.

Gerhart B, et al, (2007). Fundaments of Human Resource Management, 2nd Edition, Tata

McGraw Hill Publishing Company, New Delhi

Internet www.merifield.com,,

www.daniweb.com www.fistfultalent.com www.wikipedia.com www.maritz.com (www.wi

kipedia.org/wiki/safaricom)

http://www.maritz.com/

http://www.wikipedia.com/

http://www.fistfultalent.com/


http://www.merifield.com/

APPENDIX 1: QUESTIONAIRE

THE IMPACT OF COMMISSION AS AN INCENTIVE ON THE MOTIVATION

OF CREDIT VENDORS

( A CASE OF SAFARICOM COMPANY (K) LTD)

Information collected from this questionnaire will be handled with high confidentiality

and will strictly be used for academic purposes by the researchers.

SECTION A

What is your gender? Male Female

How old are you?.......................................years

What is your highest level of education?

University College High School

What is your marital status?

Married Single Divorced

How long have you worked as a sales person in Safaricom (K) ltd? (Tick as appropriate)

Length Below 3 Years 3-5 years 5-10 years Above 10 years

Response

Are you paid in commission basis? ......................................................................

SECTION B: TYPES OF COMMISSIONS

To what extent do you think the commissions paid by Safaricom (K) Ltd to its sales

people are based on the following statements?

Statement 1 2 3 4 5

To reduce the number of sales people

Remove unqualified people in the sales job

To establish effective structure for service delivery

To cut down expenses

To motivate its work force to work harder and retain them

To ensure fair compensation for amount of products sold

To remove poor performers for performance improvement

To create employment

To create room for better working conditions

To ensure hard work and dedication to duty

Where 1 – Great extent, 2- Some extent, 3 – Average, 4 – Little extent and 5 – No

extent

To what extend do you also think the types of commissions paid are based on the

following? (Tick as appropriate)

Statement 1 2 3 4 5

Sales Incentive Plan to motivate and compensate a sales people

to meet goals over a specific period of time

Straight Salary is used when serving and retaining existing

accounts and to protect the income of new sales representatives

for a period of time while they are building up their sales

clientele.

Sales Commission - A variation on piece rates and bonuses is the

payment of commission, or pay calculated as a percentage of

sales


salary plus commission

Salary plus commission and bonuses.

Combination plan for both individual and group sales bonus

programs

Retainer at first months then commission only

Where 1 – Great extent, 2- Some extent, 3 – Average, 4 – Little extent and 5 – No

extent

SECTION C: IMPACT OF COMMISSION ON INDIVIDUAL PERFORMANCE

1. How do you think the commission paid has affected your job performance basing on the following areas (Tick as appropriate)Statement 1 2 3 4 5

Your job performance generally

Punctuality to workplace

Number of sales people remaining on duty all the time

Sales people working for two or more competing suppliers of Safaricom (K) LtdEfficiency and effectiveness

Personal responsibility

personal discipline

personal accountability

Loyalty to your boss

Where 1 – Greatly Reduced, 2 – Reduced to some extent, 3 –, No effect 4 - Improved and 5 – Greatly Improved

SECTION D: THE EFFECT OF COMMISSION AS A MOTIVATOR ON THE SALESPEOPLE.To what extend do you think the following motivate you to perform better?

Statement 1 2 3 4 5

Salary

Bonus pay

Awards

Commissions

Where 1-Great extent, 2- Some extent, 3-average, 4-Less extent 5- No effect

2. To what extent do you think are the effects of commission on you on the following areas?Statement 1 2 3 4 5

Job motivation

Morale and teamwork

Job satisfaction

Organization commitment

Efficiency and effectiveness

Personal responsibility

personal discipline

personal accountability

Loyalty to your Organization

Where 1 – Greatly Reduced, 2 – Reduced to some extent, 3 –, No effect 4 - Improved and 5 – Greatly Improved

Do you think the pay package of Safaricom (K) Ltd needs further revision? Yes No

If yes, explain..............................................................................................................................................................................................................................................................................................................................................................................................

In the table below which factors do you think Impede the Performance of the sales people in Safaricom (K) Ltd?

Factor Yes No

Inadequate funding to look for new clients

Lack of motivation

Unrealistic high targets that lead to frustration

lack of advertisement tools like brochures to give potential customers

Economic depression facing the market

No job security

Poor training of the sales people by the organization

Financial constraints, bureaucracy, lack of transparency in the organization

Competition from other firms who offer more attractive products

Poor management style e.g. grievance handling procedure

Low morale due to poor products development

Lack of confidence by customers due to poor performance of the company’s shares

Only working for survival

Long delays of salary and commission payments

Constant interruption of the company’s network e.g. Mpesa service

What other comments do you have regarding this study and may not have been covered?................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................

THANK YOU AND GOD BLESS YOU FOR YOUR TIME

APPENDIX I: PROPOSED BUDGET

No. Item Amount

1 Traveling expenses Ksh.2,000

2 Stationery Ksh.1,500

3 Data Analysis Ksh.3,000

4 Printing and Photocopying Ksh.1,000

5 Subsistence Ksh.2,500

6 Miscellaneous Ksh.1,000

Total Ksh.10,000

APPENDIX II: WORK SCHEDULE

Year 2008/2009

Activity/Month Oct Nov Dec Jan Feb Mar Apr

Proposal Writing

Proposal Defense

Corrections and Questionnaire Pilot study

Data Collection

Data Analysis

Report Writing and Submission

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