Outdoor Sporting Products
Outdoor Sporting Products, Inc. Executive Summary The compensation plan for salespeople at Outdoor Sporting should be changed to reflect the company?s long-term strategy and success. The compensation/incentive plan is not effective as proven by the company?s flat sales despite a growing market for outdoor sporting products.
Other pertinent facts/issues: 1. McDonald strongly believes that each salesperson should be earning $50,000/year.
2. Salespeople currently tend to sell close to home, neglecting the further accounts.
3. Performance is weakly correlated to years of service (except for Campbell). Thus, incentives should not be tied to years of service.
Problems under the current compensation plan: 1. Annual earnings of the company?s salespeople are below industry average.
2. The thresholds for commission pay ($0-300K, $300-500K, $500-1000K) are too large to motivate salesmen to strive to reach the next level.
3. Per diem and traveling expenses are drawn against commission (de-motivator).
4. Sales increase awards award on percentage, which is more motivating to low-volume salesmen than high-volume salesmen.
5. Salespeople have to wait one year to become eligible for the awards, which is a big de-motivating factor for recruiting new, good salespeople.
6. Guarantees result in poor salespeople being retained.
The Comptroller?s plan does not solve major problem of the large sales thresholds. The production manager?s plan alleviates only the geographic imbalance of sales within territories. The consultant?s recommendation only addresses the problem of the poor commission structure.
New Recommended Plan: A new pay structure should be implemented (Appendix A). Under this plan, ?quota? is set at $500,000. Bonus eligibility is subject only to sales level ($500,000), not length of service. After $500,000 level, the salesperson receives an increasing base salary for each additional $100,000 in sales, beginning at $1,000 additional base. Bonuses are also awarded
Other pertinent facts/issues: 1. McDonald strongly believes that each salesperson should be earning $50,000/year.
2. Salespeople currently tend to sell close to home, neglecting the further accounts.
3. Performance is weakly correlated to years of service (except for Campbell). Thus, incentives should not be tied to years of service.
Problems under the current compensation plan: 1. Annual earnings of the company?s salespeople are below industry average.
2. The thresholds for commission pay ($0-300K, $300-500K, $500-1000K) are too large to motivate salesmen to strive to reach the next level.
3. Per diem and traveling expenses are drawn against commission (de-motivator).
4. Sales increase awards award on percentage, which is more motivating to low-volume salesmen than high-volume salesmen.
5. Salespeople have to wait one year to become eligible for the awards, which is a big de-motivating factor for recruiting new, good salespeople.
6. Guarantees result in poor salespeople being retained.
The Comptroller?s plan does not solve major problem of the large sales thresholds. The production manager?s plan alleviates only the geographic imbalance of sales within territories. The consultant?s recommendation only addresses the problem of the poor commission structure.
New Recommended Plan: A new pay structure should be implemented (Appendix A). Under this plan, ?quota? is set at $500,000. Bonus eligibility is subject only to sales level ($500,000), not length of service. After $500,000 level, the salesperson receives an increasing base salary for each additional $100,000 in sales, beginning at $1,000 additional base. Bonuses are also awarded