Sales Force Compensation Plan – Toyota

Sales Force and its Compensation Plan Research Paper Instructions

For companies that have a mission of selling, a major objective is to motivate the salespeople. While that are many factors that go into motivating these people, one of the primary factors is the compensation plan that describes how they will be rewarded. Research a large organization’s sales force and its compensation plan.

Write a six to seven (6-7) page paper in which you:

In order to motivate the sales force to produce the highest number of clients, describe six (6) features of an effective total rewards program.
Describe the behaviors of the sales force that are targeted with the compensation plan.
Assess how a value proposition is achieved for current and future employees in the plan you have outlined.
Based upon the type of plan you have created, indicate how attracted you think future salespeople may be to this plan.
Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic resources.

The specific course learning outcomes associated with this assignment are:

Define total rewards and describe the advantages of a total rewards approach.
Analyze an organization’s strategy, workforce, operating environment, and key stakeholders to identify critical factors in designing a total rewards strategy.
Use technology and information resources to research issues in total rewards.
Write clearly and concisely about total rewards using proper writing mechanics

Toyota Sales Force and its Compensation Plan Research Paper

During the designing of sales force compensation (SFC) plans, managers consider their salespeople’s pay, incentive-salary mixes, performance measures, and payout-performance relationships. The SFC plan for Toyota is hinged on several considerations, including the need to afford its salespeople particular life-work advantages, promotion of salespeople’s personal relationships, and staff retention. Toyota views the plan as a tool for promoting its competitive advantages especially in the global automobile market (Economist Intelligence Unit, 1984; Osono, Shimizu & Takeuchi, 2008). This paper explores the different features of effective SFC plans and the use of the plans in modifying salespersons’ behaviors.

Features that Make a Total Rewards Program (TRP) effective

Managements, including Toyota’s management, enjoy substantial discretion in the designing of TRPs and the related systems. They commence the process of designing the systems by executing sales forecasts, which establish the suitable ranges for the compensation packages of individual salespersons. The forecasts give pointers to the different ways of keeping individual salespersons motivated (Cichelli, 2010; Kumar, 2011). In designing an effective TRP, a manager ought to ensure that it has the features that define TRPs that are deemed effective. The features are competitive basic salary, incentive, benefits, life-work balance, career development, and recognition of performance.

When a prospective employee is seeking for a job, he or she is quite particular on the salary he or she expects depending on his or her experience, performance, and qualifications. Salaries constitute a significant drive for anyone seeking to be employed, particularly in the contemporary economy. High wages, as well as salaries, help employers attract and keep hold of competent along with qualified employees. The wages, as well as salaries, assist employees in taking care of their elementary needs, enhancing own social along with economic statuses, and keeping them engaged and focused on their job (Osono, Shimizu & Takeuchi, 2008). When an employer ties salary increments on employee performance, employees work increasingly smart and hard to qualify for higher and higher salaries. Salespeople’s performances are influenced directly by their attitudes, which are closely linked to the salaries that their employees afford them.

Almost all employees are keen on the incentive compensations offered by own employers. Some of the incentives offered to employees by employers are commissions and bonuses. These two incentives have structures that are distinct from the structures of the related base salaries. The structures and values of the incentives are dependent on the products being sold, especially on the products (Commerce Clearing House, 1980; Donnolo, 2013; Osono, Shimizu & Takeuchi, 2008). At Toyota, salespersons’ incentives bear structures that allow for their usage as tools for motivating them to optimize their productivity. When employees are offered bonuses along with commissions that are tied to own performances, the employees are highly likely to work rather hard to qualify for them. Staff bonuses along with commissions help companies expand their customer pools according to Gunasekaran, Krishnadevarajan and Lawrence (2012).

Benefits are a core component of every effective TRP. Employers offers staffs and their families benefits that focus on cushioning them from financial distress commonly. The benefits include retirement saving plans along with health insurance. Notably, some companies allow individual employees to determine the amount of benefits that they qualify by increasing the corresponding to personal contributions to particular benefit plans for increased protection (Cichelli, 2010; Kumar, 2011).

Different employers provide their employees with different life-work advantages, or programs. The programs are hinged on the thinking that the environment within an employee works increases his or her productivity if it offers favorable, or healthy, equilibrium between his or her personal time and work time. Employers boost staff morale by creating atmospheres, or environments, that recognize and are sensitive to the needs of employees, especially the need to have work routines that leave them enough time to get sufficient rest and be with and take care of their close personal relations. Some of the programs that employers put in place to afford their staff particular life-work advantages are provision of fitness facilities, provision of childcare facilities, nutritional counseling programs, financial counseling programs, family days, workshops for reducing staff stress levels, and health screenings.

Employees commonly work hard when they realize that their employers are keen on recognizing their performances. Employers should put in place staff performance recognition systems and awards, including team and peer recognition awards. Employees are considered for the awards by their coworkers (Cichelli, 2010; Kumar, 2011; Osono, Shimizu & Takeuchi, 2008). Those who are singled by their peers to take up the awards experience significant morale boosts and work on ways on enhancing their exceptional performances further. The awards are usually given out regularly in staff appreciation luncheons. The awards let workers know that their employers are aware of their performance levels. Some employers prefer awarding workers after realizing particular goals.

Career development is a key component of the contemporary TRP (Commerce Clearing House, 1980; Donnolo, 2013). Employers, including Toyota, support the professional development, or growth, of their staff members to foster staff loyalty and enhance their competencies. Some of the programs offered by employers in support of the development include technology training, mentoring programs, professional seminars, and tuition assistance. These assist staff members grow in own careers and motivates them significantly. They assist staff members become well-versed with emerging technologies that are relevant to their workplaces. At Toyota, management training is the most visible staff career development program.

Toyota offers management training programs that elementarily focus developing its employees’ leadership competencies like inspiring loyalty in followers, inspiring innovation, and inspiring creativity. Every Toyota employee is sponsored for a management training lasting a minimum of 6.8 hours yearly. In the training, the employee learns diverse non-cognitive skills, as well as soft-skills, that improve his or her engagement to Toyota by being let into its history and organizational persuasions. As the loyalty of the employee to Toyota goes up, his or her capability of relating the company’s history and organizational interests increase. The employee increasingly appreciates why he or she should execute assignments at the company in particular ways, which support the actualization of the interests. Over the years, the management training offered by Toyota has proved effective in promoting values such as staff orientation, inclusion, passion, and loyalty (Cichelli, 2010; Economist Intelligence Unit, 1984; Osono, Shimizu & Takeuchi, 2008).

The Sales Force Behaviors Targeted by Toyota’s Sales Force Compensation Plan

Toyota’s SFC plan seeks to incentivize diverse sales team behaviors, especially the ones that affect its bottom-line. First, the plan provides that the sales team should receive compensation depending in the number of automobile units that they sell to incentivize to persuade them reduce unit prices to grow the sold volumes. To most of the company’s salespersons, reducing unit prices comes off as the swiftest way of gaining extra volume, and, hence, commissions.

Second, Toyota’s SFC plan provides for the listing of product prices that customers buy off from and provides for a standard structure for offering discounts to incentivize salespersons seek to grow the volumes they move. This design of the plan provides a sales environment in which volume-linked incentives have an optimum utility owing to the appropriate documentation of the allowed discount structure. The plan incentivizes salespersons aggressively to bring in more and more volume because the structure thwarts undesirable sale force behaviors relating to price discounts (Cichelli, 2010; Kumar, 2011).

Third, Toyota’s SFC plan neither allows for the customization of pricing nor room for individualized ultimate price negotiation with each customer to promote sales force accountability and ensure predictable closure of specific sales. Finally, the plan does not allow for the driving of SFC by both volume objectives and margin percentage objectives simultaneously since that would give rise to contradictory interests, which may occasion internal conflicts among the company’s salespersons.

Attainment of Value Proposition for Staff in Toyota’s Sales Force Compensation Plan

Toyota’s SFC plan is aimed at not only rewarding performance but also motivating salespersons attain particular goals. In the plan, Toyota comes off as appreciating its sales force’s value proposition (Economist Intelligence Unit, 1984; Osono, Shimizu & Takeuchi, 2008). It comes off as keen on attaining the value propositions of its current, as well as prospective, salespersons. The company does not view the salespersons as valuing money only. Rather, it views the salespersons as valuing other reward programs such as recognition and autonomy in addition to the monetary compensation that they get (Cichelli, 2010; Kumar, 2011). The company regularly carries out sales force surveys and interviews that help it appreciate the degree to which the SFC should be extrinsic reward-oriented and the forms of rewards holding the heaviest impact.

The company has over the years incorporated diverse elements in the plan to help attain the value propositions of the force (Economist Intelligence Unit, 1984). The elements include staff performance recognition, providing the sales force with different life-work advantages, or programs, and career development via management training (Osono, Shimizu & Takeuchi, 2008). While Toyota remains keen on minimizing salesperson absenteeism, it provides employees with particular leave facilities along with related life advantages, which favor the company’s interests rather than working against them (Economist Intelligence Unit, 1984; Osono, Shimizu & Takeuchi, 2008). Toyota employees, unlike those working for many other companies, recognize their employer as allowing them marked liberty to take authorized time for personal obligations and family (Osono, Shimizu & Takeuchi, 2008). Towards that end, the company promotes a support environment and stresses that personal obligations extend clear of work boundaries.

As noted earlier, Toyota offers management training programs that elementarily focus developing its employees’ leadership competencies like inspiring loyalty in followers, inspiring innovation, and inspiring creativity (Osono, Shimizu & Takeuchi, 2008). In the training, employees learn diverse non-cognitive skills, as well as soft-skills, that improve their engagement to Toyota by being let into its history and organizational persuasions. As the loyalty of the employees to Toyota goes up, their capability of relating the company’s history and organizational interests increase (Economist Intelligence Unit, 1984; Osono, Shimizu & Takeuchi, 2008).

Attractiveness of the Plan to Future Salespeople

Future salespeople will be markedly attracted to Toyota’s SFC plan. That is because their motivations and needs will be comparable to those of the present-day salespeople. The plan will offer the salespeople sufficient intrinsic, as well as extrinsic, motivation as it does to the present ones.

Conclusion

Different companies have diverse sales force compensation (SFC) metrics for determining the mixes of commissions, bonuses, salaries, and other factors for optimizing their sales forces’ productivities. In designing an effective TRP, a manager ought to ensure that it has the features that define TRPs that are deemed effective. The features are competitive basic salary, incentive, benefits, life-work balance, career development, and recognition of performance. Toyota’s SFC plan seeks to incentivize diverse sales team behaviors, especially the ones that affect its bottom-line. The plan’s structure thwarts undesirable sale force behaviors relating to price discounts.

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