Olympia Machine Company Inc Case Study
It is the desire of every company to perform well in terms of profitability. However, these desire sometimes becomes elusive. Olympia machine company Inc is currently facing challenges in its operation. It is facing the challenge of reduced sales due to slow growing market. This paper seeks to find out appropriate alternative solutions aimed at replacing the current method of compensation of salary plus expenses to ensure greater sales effort and retaining of sales force.
The three alternatives to be considered to solve the problem faced by Olympia Machine Company Inc include the point system, a salary with commission system and a salary with bonus system.
The point system is a method of compensation in which various characteristics that the job requires are used in setting the pay of a salesperson (Douglas, 2007). The sales person is rewarded based on various parameters such as education, level of knowledge, experience, the physical demands of the job, mental demands, working conditions and job hazards among many others. Using this method means, that salespeople will have to earn different salaries based on the various characteristics that they have. For this method to be therefore successful in improving sales and retaining sales people it requires proper skills and strategies of identifying various skills and characteristics of the salesperson. Furthermore, it should be implemented in such a manner that requires employees of different skills to attend to specific kinds of clients.
The second alternative solution is the basic salary with commission. This alternative allows the salesperson to get a particular basic salary with additional commissions on volume of sales that that every salesperson makes. This method is more appealing and motivating to the staff. A hardworking salesperson will have to earn higher commission compared to those that are not working hard. This method is also important in increasing the sales and helpful in retaining salespeople in the company’s distribution channel. For this method to be effective and successful, it requires salesperson to cooperate with the management and to work hard.
The third option is basic salary/retainer with bonus. In this arrangement, the salespeople are paid basic salary plus bonuses depending on the amount of sales revenue they accrue. Implementation activities that need to be considered for success this alternative to be successful include the size of the company, the revenue the company accrues and the returns accrued or sales volume every sales person accrues.
Out of the three alternatives, the best alternative that the company should implement is basic salary plus commission. This method is not discriminatory as it ensures that those that work hard earn more through the commissions. This method is also conducive for people working as sales person because it motivates them to work even harder and in the event increasing the sales return and reducing the rates of employee turnover. This method will be implemented because it will ensure that the company realizes its goals. Salespersons will help to a greater extent in promoting the products and services of the company (Stufflebeam & Webster, 1980). As indicated earlier, this will be implemented by reviewing both the terms of employment and compensation. Furthermore, the nature of the work and the issue of motivation will be included in the stages of planning and implementation.
To determine whether this alternative of compensating employees with basic salary and commission will solve the problem facing the company, the company will refer to the total sales accrued and the amount of commissions that the sales person get. If the sales revenue and commission is improved, it shows that indeed the salespersons are working hard to reach as many customers as possible and that the level of sales revenue is improving. The rate of turnover will be evaluated on the levels of sales person that leave the company after certain duration.
References
Douglas, H. (2007). How to Measure Anything: Finding the Value of Intangibles in Business. John Wiley & Sons.
Stufflebeam L., & Webster, W. (1980). An analysis of alternative approaches to evaluation, Educational Evaluation and Policy Analysis. 2(3), 5-19.
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