The Impact of Sales Incentive Scheme Change on Organization Performance - A Case Study of a Medical Device Company
Date Issued
2008
Date
2008
Author(s)
Wu, Tsui-Lan
Abstract
The major purpose of an organization’s compensation system is to motivate the sales force to achieve the goals and objectives specified by management. The ideal compensation system not only can attract the high performance sales persons, but also can retain the high quality sales force. Many organizations try to modify the existing compensation scheme to be more competitive. This research examines the impact of the incentive scheme change on organization performance. The research site is a branch office of an American medical device company. The company modified the sales incentive scheme in 2002 and 2006 respectively. The main purpose of the change is to align with the company goals. This thesis explores the effect of the change by analyzing the company’s sales, gross margin and selling units. he company incorporated the indicator of gross margin in the sales incentive scheme in 2002. After excluding the product mix factor and reimbursement products, the gross margin of Suture product department has been increased by 3%, Sterilization product department has been increased by 5%, Endoscopic product department has been decreased by 1% and there is no impact for Cardiology product department. The study adopts the t test to examine the difference of gross margin and the selling units of high margin products between 2001 and 2002. The findings indicate that the change of sales incentive scheme does not have a significant impact on organization performance. The study also analyze the behavior change of sales person by using the t test to examine the difference of sales achievement rate between 2001and 2002. The result shows that the ndicator weighting change does not have a significant impact on sales’ effort. he company revised the incentive percentage for the incremental sales in 2006. Due to the data limitation, the study can not adopt the statistical analysis to examine the effect of sales incentive scheme change. The author explores the effects of the change by analyzing the market share and the average sales per sales person. After the company changed the sales incentive scheme, the market share of Suture product department has been increased by 5%, Sterilization product department has been increased by 2.5%, Endoscopic product department has been increased by 2.3% and Cardiology product department has been decreased by 3% (the market share of the main product drug stent is same as 2005). The average sales per sales person of Suture product department has been increased by 9%, Endoscopic product department has been increased by 14.88%, Cardiology product department has been increased by 17.88% and Sterilization product department has been increased by 12%. It shows that the change of incentive scheme in 2006 has positive impact on organization performance.
Subjects
Compensation system
sales incentive scheme
sales person
sales force control system
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