Case
SALES FORCE INCENTIVES AT SERVICE SALES CORPORATION
INDUSTRY :-
AREA :PRODUCTION & OPERATIONS MANAGEMENT
ORGANIZATION :-
LENGTH :22
LUMS No :03-844-2011-1
PUBLICATION YEAR : 2011
ABSTRACT:
Service Sales Corporation (SSC) is the largest Shoe Retail organization in Pakistan. Since its incorporation in 1959 it has had a sales force incentive plan that had a low monthly salary (less than 10% of take-home) and an equal share of 2.5 – 3% of the shop sales. Added to the basic (fixed) salary and commission was also the house rent. The organization went through many changes in its Supply Chain Management starting 2001, when a new COO, Omer Saeed, took over. Post-2005 there was a major increase in sales and the number of shops, and a decrease in the number of salesmen per shop; with a net effect that some salesmen were drawing a compensation of Rs 25,000 - 30,000 per month (standard salesmen salaries in smaller shops was Rs 8,000 per month). Consequent to this rise in sales force compensation, and other issues that were arising primarily due to misalignment of incentives, some managers proposed a Sales force Rationalization (SFR) plan. This plan included a drastic decrease in the variable component of compensation (90% to 10%), and required all new salesmen to be hired on the new plan. This case introduces students to issues in compensation system and human resource management in a retailing organization. Students learn that designing sales force incentives is a mix of common sense, detailed calculations, benchmarking against market practices, and human behaviour.