Kimbel’s Department Store
QUESTIONS: 1. What theories about motivation underlie the switch from salary to commission pay? Solution: The theory of motivation to stimulate sales performance assumes money is a primary motivator. This form of motivation is based on content theories of motivation. With increased sales commissions, money can satisfy psychological needs, social needs, and self-esteem. Also, the expectancy and equity process theories of motivation can be applied to this situation.
According to Expectancy theory, the employee is attracted to the reward being offered and believes he or she can put forth the effort necessary to achieve a level of performance that will lead to that reward (Daft & Marcic, 2010). Commission pay is an extrinsic reward that will often increase performance by sales people. Equity theory relates to sales people being compensated for their level of effort, compared to other sales people and the compensation they receive for their level of work (Daft & Marcic, 2010). . What needs are met under the commission system? Are they the same needs in the shoes and handbag department as they are in lingerie? Explain. Solution: Higher level needs can be achieved through a commission payment system. Increased commissions and sales effort by the staff can lead to increased recognition of individuals and some will be able to realize their fullest potential. The higher-level needs of self-esteem and self-actualization can be achieved.
There are motivating factors such as increased growth or promotion opportunities, recognition, and increased responsibility can be forthcoming. Although the needs are the same in both departments, a straight commission system in the lingerie department does not offer the same level of reward as it does in a shoes and handbags department. The per-item commission on lingerie is much lower than for shoes and handbags, resulting in reduced motivation because the lingerie salespeople must sell more products to make the same level of commission as the shoes and handbag salespeople.
The lingerie salespeople are demoralized by the new pay system because they can’t make as much as they did under the old system no matter how hard they work. 3. If you were Frances Patterson, would you go back to the previous compensation system, implement the straight commission plan in all Kimbel’s stores, or devise and test some other compensation method? If you decided to test another system, what would it look like? Solution:
Neither the previous compensation system nor the straight commission system works well for all of Kimbel’s salespeople. The best compensation plan for Kimbel’s may be a hybrid plan that includes straight commission for salespeople in departments with higher-priced items and a salary combined with a lower commission for salespeople in departments with lower-priced items. Reference Daft, R. L. , & Marcic, D. (2010). Understanding Management (7th ed. ). New York, NY: South-Western College Pub.