Compensation Scenario in India

Various trends are emerging in compensation management. As new organizations are emerging, so also are new methods of compensation. Here is an attempt to find out the emerging trends in the sales force compensation methods and its implications for modern-day sales management. We can classify the emerging trends in compensation into four broad categories. The most important trend has been the compensation plan based on the idea of customer satisfaction.

Today, the sales force is not compensated only on the basis of sales volume. The level of customer satisfaction is an important tool of evaluating and rewarding the salespeople. A company like Xerox is the pioneer in designing a compensation plan based on customer satisfaction. It follows a compensation plan based on customer satisfaction defined by the customer itself. This serves as a challenge for the salespeople to achieve the customer-defined satisfaction level.

Another emerging trend is team-based compensation. Though the idea has a Japanese origin, it has found acceptance all over the world. Majority of the B2B selling is done through the team selling strategy and cross-functional teams are designed for handling customer objections in a better way. Clients are also going international in their business operations, and hence customer management is done by more than a single contact point or salesperson.

More and more key account and national account managers are coordinating with the local salespeople to close a sale at multiple points. Many customers are now operating across the territories and geographical boundaries. The organizations need to address their demands and problems at multiple points and in multi-location situations. Hence, it is important to have sales teams.

The performance of the individual salesperson is now linked to the performance of the salespeople in other territories catering to the same set of customers. So companies are replacing the standard straight salary- based or commission-based compensation with team-based compensation, which links the pay of the salespeople with the performance of the customer service personnel, delivery people, and managers heading and supervising the teams.

The technological advances have changed the horizon of customer handling by the salespeople. In the past, the salespeople had to visit every customer to fulfil the information requirement of the customer. Today, email management systems, broadband technology, videoconferencing, and other Web-based technologies enable the salespeople to respond to the customer’s increasing and evolving information need easily and faster.

The customers are also happy with the non- personal form of communication with the salespeople as it leads to lower cost of service and lesser interference by the salespeople at the customer’s place. The e-commerce application has made the communication between the buyer and the seller more interactive and less interfering in nature.

This has made the sales job more target-oriented, as salespeople now can concentrate more on real sales activities than on feeding existing customers with relevant market information, and thus, it has led to an increase in their compensation level due to higher sales realization.

Customers are now spread across the globe and the salespeople serve them by innovative technology and operating across different boundaries and time limits. This has brought the issue of global compensation management systems. Previously the general im­pression was that third world countries are poor in customer care and quality product deliveries, but more and more companies from the West are changing their perception.

Today, majority of customer care and sales service jobs are outsourced to third world countries due to availability of cheap labour and quality of service output. It is a challenge for management to compensate the global sales force working in different countries in different cost zones through an equitable and flexible compensation plan.

Similarly, the challenge is to compensate the sales force with people from various countries but working in the same workplace. While an Indian salary may not be suitable for the European executives in India, the salary paid to an Indian working in the US at the Indian rate may not be adequate for him/her. Therefore, it is also necessary to equate the salary levels of people working in different countries or economy zones.

Compensation plans should be perceived as equitable across the organization. It is observed that the salary structure is low at the base level where the real sales happens and goes higher as one moves farther from the customers to the upper hierarchy levels of the organization. This is a growing trend, which may hamper the growth of many organizations.

It is important to project the sales compensation as equitable for all levels in the sales organization. In many sales, organizations the standard Indian compensation is not equitable from various points of view, including gender inequality.

Male and female employees are paid differently in many com­panies although they are doing a similar kind of job. The management should beware of such discrepancies and try to eliminate them for an effective and equitable compensation plan.