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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


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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


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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.


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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.


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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 companys 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.


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TABLE OF CONTENTS

DECLARATION ............ ............... .............. .............. .............. .............. ............... .............. ............. ..... ..... .....2

ACKNOWLEDGEMENT ............. .............. .............. .............. .............. ............... .............. ........... ...... ...... ....3

DEDICATION .............. .............. .............. ............... .............. .............. .............. .............. ............... ..... ..... ......4

TABLE OF CONTENTS ............. .............. ............... .............. .............. .............. .............. .............. ....... ..... ...6

DEFINITION OF TERMS AND VARIABLES ............. .............. .............. .............. .............. ......... ..... ..... ..8

CHAPTER ONE ............ ............... .............. .............. .............. .............. ............... .............. .............. ........ ..... ..9

INTRODUCTION ............. .............. .............. .............. ............... .............. .............. .............. ............ ..... ..... ....9

1.1 BACKGROUNDTOTHE STUDY....................................................................................................................... 91.2 STATEMENTOFTHE PROBLEM....................................................................................................................101.3 RESEARCH OBJECTIVES.............................................................................................................................11

1.3.1 General Objective.........................................................................................11

1.3.2 Specific Objectives..........................................................................................111.4 RESEARCH QUESTIONS..............................................................................................................................111.5 SIGNIFICANCEOFTHESTUDY...............................................................................................................111.6 SCOPEOFTHE STUDY...............................................................................................................................121.7 LIMITATIONSOFTHE STUDY....................................................................................................................... 12

CHAPTER TWO ............. ............... .............. .............. .............. .............. .............. ............... .............. ....... ....13

LITERATURE REVIEW ............... .............. .............. .............. .............. .............. ............... ............ ..... ...... .13

2.1 DEFINITIONOF COMMISSION......................................................................................................................132.2 COMMISSIONASANINCENTIVE...................................................................................................................132.3 WHYUSEINCENTIVES? .............................................................................................................................132.4 UNIQUENEEDSOF SALES INCENTIVE PLANS.................................................................................................142.5 SALES INCENTIVE PLANS...........................................................................................................................142.6 STRAIGHT SALARY PLAN.......................................................................................................................... 152.7 COMMISSION PLAN...................................................................................................................................162.8 COMBINATIONPLAN.................................................................................................................................. 172.9 COMMISSIONASAMOTIVATIONTOOL........................................................................................................... 19SUMMARYAND GAPSTOBEFILLEDBYTHE STUDY.............................................................................................20CONCEPTUAL FRAMEWORK..............................................................................................................................20

CHAPTER THREE ............ ............... .............. .............. .............. .............. ............... .............. .............. ........22

RESEARCH DESIGN AND METHODOLOGY ............. ............... .............. .............. .............. ........... .....22

3.1 INTRODUCTION........................................................................................................................................22

3.2 RESEARCH DESIGN..................................................................................................................................223.3 TARGET POPULATION................................................................................................................................ 223.5 DATA COLLECTION PROCEDURES............................................................................................................... 233.6 DATA ANALYSIS PROCEDURES..................................................................................................................23

CHAPTER FOUR .............. .............. .............. .............. ............... .............. .............. .............. ........ ..... ..... .....24

RESEARCH FINDINGS AND ANALYSIS ............. .............. .............. ............... .............. ..... ...... ...... ...... .24

4.0 INTRODUCTION. .......................................................................................................................................24


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4.1 DATA ANALYSIS .....................................................................................................................................244.2 RESULTSAND FINDINGS...........................................................................................................................244.3: TYPESOFCOMMISSIONS............................................................................................................................ 294.4: IMPACTOFCOMMISSIONONINDIVIDUALPERFORMANCE.................................................................................. 39SUMMARY OF THE FINDINGS ....................................................................................................... .....54

CHAPTER FIVE .............. ............... .............. .............. .............. .............. .............. ............... ............ ..... ...... .55

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ............ .............. ............... ............ ......55

5.1 EMPLOYEE PERCEPTIONSREGARDINGCOMMISSIONPAID.................................................................................555.2 IMPACTOFCOMMISSIONONINDIVIDUALPERFORMANCE.................................................................................. 575.3 THEEFFECTOFCOMMISSIONASAMOTIVATORONTHESALESPEOPLE................................................................585.4 CRITIQUEAND SUGGESTIONSFORFURTHER RESEARCH .................................................................................605.5 CONCLUSION............................................................................................................................................ 61

REFERENCES .............. .............. ............... .............. .............. .............. .............. .............. ........... ...... ...... .....62

APPENDIX 1: QUESTIONAIRE ............. ............... .............. .............. .............. .............. .............. ...... ...... .63

APPENDIX I: PROPOSED BUDGET .............. .............. ............... .............. .............. .............. .......... ..... ...70

APPENDIX II: WORK SCHEDULE .............. .............. .............. .............. ............... .............. ............ ..... ...71


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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 andreward loyal and efficient employees

Motivation inner state that energizes activities or moves andthat directs or channels behavior of a person toward goal.
http://en.wikipedia.org/wiki/SIPhttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/SIPhttp://en.wikipedia.org/wiki/Sales


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CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Safaricom, Ltd is a leading mobile networkoperator in Kenya. It was formed in 1997 as afully 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 theNairobi 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 andNakuru.

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/wiki/Mobile_networkhttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Telkom_Kenyahttp://en.wikipedia.org/wiki/Vodafonehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Mobitelea_Ventures_Limitedhttp://en.wikipedia.org/wiki/Mobitelea_Ventures_Limitedhttp://en.wikipedia.org/wiki/Nairobi_Stock_Exchangehttp://en.wikipedia.org/wiki/Nairobihttp://en.wikipedia.org/wiki/Mombasahttp://en.wikipedia.org/wiki/Kisumuhttp://en.wikipedia.org/wiki/Nakuruhttp://en.wikipedia.org/wiki/Westlandshttp://en.wikipedia.org/wiki/Zainhttp://en.wikipedia.org/w/index.php?title=Safaricom_Foundation&action=edit&redlink=1http://en.wikipedia.org/wiki/Mobile_networkhttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Telkom_Kenyahttp://en.wikipedia.org/wiki/Vodafonehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Mobitelea_Ventures_Limitedhttp://en.wikipedia.org/wiki/Mobitelea_Ventures_Limitedhttp://en.wikipedia.org/wiki/Nairobi_Stock_Exchangehttp://en.wikipedia.org/wiki/Nairobihttp://en.wikipedia.org/wiki/Mombasahttp://en.wikipedia.org/wiki/Kisumuhttp://en.wikipedia.org/wiki/Nakuruhttp://en.wikipedia.org/wiki/Westlandshttp://en.wikipedia.org/wiki/Zainhttp://en.wikipedia.org/w/index.php?title=Safaricom_Foundation&action=edit&redlink=1


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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

Todays business environment demands a new breed of incentive programs. Many

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

dont 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/http://www.merfield.com/


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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 ObjectivesHowever, 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-


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focusing momentum that centers on a trip, a service or a merchandise reward. Youll 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.


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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 abrokeroragent for his/herservice in facilitating a transaction, such as

the buying orselling ofsecurities orreal 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.yourdictionary .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.investorwords.com/1922/fee.htmlhttp://www.businessdictionary.com/definition/broker.htmlhttp://www.investorwords.com/154/agent.htmlhttp://www.businessdictionary.com/definition/service.htmlhttp://www.investorwords.com/5046/transaction.htmlhttp://www.businessdictionary.com/definition/selling.htmlhttp://www.investorwords.com/5954/securities.htmlhttp://www.investorwords.com/4057/real_estate.htmlhttp://www.investorwords.com/5030/trading.htmlhttp://www.investorwords.com/584/broker.htmlhttp://www.investorwords.com/4648/split.htmlhttp://www.investorwords.com/5454/charge.htmlhttp://www.investorwords.com/1473/discount_broker.htmlhttp://www.investorwords.com/2900/low.htmlhttp://www.investorwords.com/6664/service.htmlhttp://www.businessdictionary.com/definition/executing.htmlhttp://www.investorwords.com/5014/trade.htmlhttp://www.investorwords.com/2106/full.htmlhttp://www.investorwords.com/4201/research.htmlhttp://www.investorwords.com/2599/investment.htmlhttp://www.investorword.com/http://www.your/http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Contracthttp://www.wikipedia.com/http://www.fistfultalent.com/http://www.investorwords.com/1922/fee.htmlhttp://www.businessdictionary.com/definition/broker.htmlhttp://www.investorwords.com/154/agent.htmlhttp://www.businessdictionary.com/definition/service.htmlhttp://www.investorwords.com/5046/transaction.htmlhttp://www.businessdictionary.com/definition/selling.htmlhttp://www.investorwords.com/5954/securities.htmlhttp://www.investorwords.com/4057/real_estate.htmlhttp://www.investorwords.com/5030/trading.htmlhttp://www.investorwords.com/584/broker.htmlhttp://www.investorwords.com/4648/split.htmlhttp://www.investorwords.com/5454/charge.htmlhttp://www.investorwords.com/1473/discount_broker.htmlhttp://www.investorwords.com/2900/low.htmlhttp://www.investorwords.com/6664/service.htmlhttp://www.businessdictionary.com/definition/executing.htmlhttp://www.investorwords.com/5014/trade.htmlhttp://www.investorwords.com/2106/full.htmlhttp://www.investorwords.com/4201/research.htmlhttp://www.investorwords.com/2599/investment.htmlhttp://www.investorword.com/http://www.your/http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Contracthttp://www.wikipedia.com/http://www.fistfultalent.com/


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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. Thats 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. Salespersons 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 persons incentive is based on factors like

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

2.5 Sales Incentive PlansSales 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 (orSales Agent) to meet goals or metrics over a specific period of time,
http://www.daniweb.com/http://en.wikipedia.org/wiki/SIPhttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Metricshttp://www.daniweb.com/http://en.wikipedia.org/wiki/SIPhttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Metrics


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usually broken into a plan for a fiscal quarteror 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/wiki/Fiscal_quarterhttp://en.wikipedia.org/wiki/Fiscal_yearhttp://en.wikipedia.org/wiki/SIPhttp://en.wikipedia.org/wiki/Commissionhttp://en.wikipedia.org/wiki/Quotashttp://en.wikipedia.org/wiki/POShttp://en.wikipedia.org/wiki/MBOhttp://en.wikipedia.org/w/index.php?title=Base_salary&action=edit&redlink=1http://en.wikipedia.org/wiki/Fiscal_quarterhttp://en.wikipedia.org/wiki/Fiscal_yearhttp://en.wikipedia.org/wiki/SIPhttp://en.wikipedia.org/wiki/Commissionhttp://en.wikipedia.org/wiki/Quotashttp://en.wikipedia.org/wiki/POShttp://en.wikipedia.org/wiki/MBOhttp://en.wikipedia.org/w/index.php?title=Base_salary&action=edit&redlink=1


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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 customers sales force or

participating in national and local trade shows.

The main disadvantage is that pay isnt 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 companys sales costs are low.

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

ability too. If the person hasnt the sales skills then commissions wont 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


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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

employers 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.


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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)


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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 aperson (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 ofMaslow'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://www.daniweb.com/http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needshttp://en.wikipedia.org/wiki/Frederick_Herzberghttp://en.wikipedia.org/wiki/Empowermenthttp://en.wikipedia.org/wiki/Abraham_Maslowhttp://en.wikipedia.org/wiki/Douglas_McGregor_(business_theorist)http://en.wikipedia.org/wiki/Theory_X_and_theory_Yhttp://www.daniweb.com/http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needshttp://en.wikipedia.org/wiki/Frederick_Herzberghttp://en.wikipedia.org/wiki/Empowermenthttp://en.wikipedia.org/wiki/Abraham_Maslowhttp://en.wikipedia.org/wiki/Douglas_McGregor_(business_theorist)http://en.wikipedia.org/wiki/Theory_X_and_theory_Y


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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 StudyA 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

employee innovativeness, discipline, efficiency among others. Also if the commission

payment 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.


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Figure 2:1: Conceptual Framework

Affects

(Independent Variables) (Dependent Variable)

Source Researchers (2009)

Types of commissionsused

Commission effects on

performance

Motivation

ofsalespeople

Commission as anincentive tool


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CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

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

describes the study design, target population, sample design, data collection procedure

(instruments), 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.


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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 percentageswhich 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.


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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 thenrequested 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


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The results are presented beginning with the presentation of sample characteristics asshown 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 and45% female

Figure 2: Demographic Information about the Sample Gender


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

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


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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

Figure 3: Demographic Information about the Sample Age


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



Education Primary school 5 11

High school 22 50

College 14 32

University 3 7


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Table 3 indicates that 11% of the respondents had attained primary school level ofeducation, 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)

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)


Marital status

Married 24 55

Single 18 41

Divorced 2 4

Not indicated 0 0


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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) Ltdfor 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


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


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4.3: Types of commissions

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


Table 6 indicates that 54% of the respondents felt that the commissions paid was meantto reduce the number of sales people, 26% felt it was to a little or no extent and 20% wereaverage on the issue

Statement Great

extent

(%)

Some

extent

(%)

Average

(%)

Little

extent

(%)

No

extent

(%)

To reduce the number of sales people 10 44 20 10 16

Remove unqualified people in the salesjob

16 28 20 16 20

To establish effective structure forservice delivery 42 34 10 4 0

To cut down expenses 12 10 8 34 36

To motivate its work force to workharder and retain them

40 26 20 10 4

To ensure fair compensation foramount of products sold

42 40 6 8 4

To remove poor performers forperformance improvement

26 20 26 10 18

To create employment 32 30 30 8 0

To create room for better working

conditions

42 46 12 0 0

To ensure hard work and dedication toduty

50 50 0 0 0


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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 salespeople by the organization were meant to remove unqualified people from the sales jobwhile 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 deliverywhile 36% felt it was to a little or no extent while 20% were average on the issue


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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 salespeople by the organization were meant to cut down expenses while 8% felt it was to alittle 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 salespeople 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 theissue


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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 ofproducts sold while 12% felt it was to a little or no extent while 6% were average on theissueFigure 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 salespeople by the organization were meant to remove poor performers for performanceimprovement while 28% felt it was to a little or no extent while 26% were average on theissue


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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 salespeople by the organization were meant to create employment while 30% felt it was to alittle 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 salespeople by the organization were meant to create room for better working conditions while

12% were average on the issue


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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 peopleby the organization were meant to ensure hard work and dedication to dutyFigure 15: Respondents perception on the commissions paid- to ensure hard work

and dedication to duty



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Table 8: Respondent perception on the types of commissions paid in the

organization (N=44)

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 aspecific period of time in its commission arrangement while 10% were average on theissue and 8% felt it was to a little or no extentFigure 16: Respondent perception on the types of commissions paid in the

organization-Sales Incentive Plan


Statement Great

extent

Some

extent

Average Little

extent

No

extent

Sales Incentive Plan to motivate andcompensate sales people to meet goalsover a specific period of time

32 40 10 4 4

Straight Salary is used when serving andretaining existing accounts and to protect the income of new salesrepresentatives for a period of timewhile they are building up their salesclientele.

0 0 0 50 50

Sales Commission - A variation on piecerates and bonuses is the payment ofcommission, or pay calculated as apercentage 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 individualand group sales bonus programs

12 24 20 20 24

Retainer at first months thencommission only

42 34 12 8 4
http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Sales


36/71

Table 8 indicates that all the respondents that the organization did not use used StraightSalary plan in compensating its sales people which is usually meant for serving andretaining existing accounts and to protect the income of new sales representatives for aperiod 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 SalesCommission which is a variation on piece rates and bonuses or pay calculated as apercentage 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 salaryplus commission in remunerating its sales people while 90% felt it was to a little extentthis is probably due to sales manager who got this kind of compensation against the othersales people


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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 Salaryplus commission and bonuses in remunerating its sales people while 90% felt it was to alittle extent this is probably due to sales manager who got this kind of compensationagainst 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 usedCombination plan for both individual and group sales bonus programs in remunerating itssales people while 20% were average on the issue and 44% felt it was to a little or noextent


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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 aretainer salary at first months of the sales job then start paying commission only after theduration in remunerating its sales people while 12% were average on the issue and 12%felt it was to a little or no extentFigure 22: Respondent perception on the types of commissions paid in the

organization-Retainer salary at first months



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4.4: Impact of commission on individual performance

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

Effect GreatlyReduced(%)

Reducedto someextent (%)

Noeffect(%)

Improved/increased(%)

Greatlyimproved /increased(%)

Your job performance generally 8 4 30 28 30

Punctuality to workplace 12 10 24 20 34

Number of sales people remaining on dutyall the time

10 10 16 24 40

Sales people working for two or morecompeting 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 increasedtheir job performance generally while 30% felt that the commission had no effect to theirjob 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



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Table 9 indicates that 54% of the respondents felt that the commission paid had increasedtheir Punctuality to workplace while 24% felt that the commission had no effect toPunctuality to workplace and 22% felt that it had actually reduced their Punctuality toworkplaceFigure 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 increasedthe Number of sales people remaining on duty all the time while 16% felt that thecommission had no effect and 20% felt that it had actually reduced the Number of salespeople 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 increasedthe 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 actuallyreduced the Sales people working for two or more competing firms of Safaricom (K) Ltd


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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 increasedtheir Efficiency and effectiveness while 36% felt that the commission had no effect and14% 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 increasedtheir Personal responsibility while 16% felt that the commission had no effect and 20%felt that it had actually reduced their Personal responsibility


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Personal responsibility


Table 9 indicates that 60% of the respondents felt that the commission paid had increasedtheir personal discipline while 10% felt that the commission had no effect and 30% feltthat 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 increasedtheir personal accountability while 16% felt that the commission had no effect and 30%felt that it had actually reduced their personal accountability


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personal accountability


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

Loyalty to your boss



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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 extentmotivated by Bonus pay while 20% were average on the issue


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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 extentmotivated by Awards given for outstanding performance while 25% were average on theissueFigure 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 alittle or no extent


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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 GreatlyReduced(%)

Reducedto someextent (%)

Noeffect(%)

Improved/increased(%)

Greatlyimproved /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 30Personal 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 interms 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


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


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 noeffect on the issue and 35% felt it had reduced their Morale and teamworkFigure 37: Perception on effects of commission on respondent work life- Morale andteamwork


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


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



terms of Organization commitment due to commission paid, while 10% agreed there wasno 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 interms 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


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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 interms of Personal responsibility due to commission paid, while 16% agreed there was noeffect 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 interms 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


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

discipline



terms of personal accountability due to commission paid, while 16% agreed there was noeffect 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 interms 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


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

their Organization


Table 12: Safaricom (K) Ltd paypackage need for revision (N=44)

Variable Category Frequency ofresponses

%

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

Yes 40 90

No 4 10


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


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Figure 45: Safaricom (K) Ltd paypackage 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 givepotential 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 transparencyin the organization

70 30

Competition from other firms who offer more attractiveproducts

85 15

Poor management style e.g. grievance handlingprocedure

65 35

Low morale due to poor products development 55 45

Lack of confidence by customers due to poorperformance of the companys shares

68 32

Only working for survival 72 28

Long delays of salary and commission payments 12 88

Constant interruption of the companys network e.g. 78 22


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Mpesa service


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 companys shares, 72% Only working for survival, 12% felt it wasdue to Long delays of salary and commission payments and 78% felt it was due to

Constant interruption of the companys network e.g. Mpesa service

Figure 46: Factors that Impede the Performance of the sales people in Safaricom

(K) Ltd


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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 ofsales 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.


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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 paidThe 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


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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 salespeople 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 doesnt 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 isrepresenting. 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
http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Sales


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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


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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 dont 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


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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 k

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