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Transcript of Kimbel
What is a Straight Commission Pay plan ?
Compensation method in which a salesperson is paid a percentage of the sales they generate as opposed to receiving a fixed salary.
Amount received is a function of the employees performance reflected in sales volume and not the actual time worked.
Implementing the "STRAIGHT COMMISSION PAY PLAN"
Result at the end of the trial period:
Overall sales in the 2 stores increased modestly.
Increase in employee turnover.
Only a few of the employees benefited with the plan.
Most of the salespersons fell somewhere in the middle.
Perks of this plan :
To attract better sales people
To improve employee motivation
Make them more customer oriented
Employees got more pay satisfying their needs.
Went in disguise to check how the Stores were functioning.Was shocked to see :
Rare interaction or engagement between customers and salespersons.
Difficulty in finding salespersons even when customers decide to buy something.
How to stop loosing share of overall retail sales to discount store chains ?
Needed to revive
great customer service
to overcome the challenge.
Quiet revolution sweeping department store retailing.
Bloomingdale’s and Bergdorf Goodman managers used straight commission rule.
Decided to implement the
"Straight Commission Pay"
plan for their sales people.
A year long trial period in two of their area stores.
CEO, Frances Patterson
Upscale department store
Based in St. Louis.
New Scheme : Old Scheme :
Earn $35,000 on $500,000 of sales
Earn $18,000 on $500,000 of sales
Lingerie Department Head
Even the luxury items had modest price tags.
Employees were demoralized since they missed security of salary.
Many valued employees quit.
Gave little consideration to handling complaints or returns.
Anxious to make ends meet.
Resented superstar salespersons of other dept.
Women's designer shoes and bags department:
Happy about the new plan.Since even a single item
can cost like $1000+
Personable, outgoing with an entrepreneurial
streak with a desire to make a lot of money
Puts in extra effort & time to cultivate
relationships with wealthy customers
Increase in pay by $150 per week.
Q1. What theories about motivation underlie the switch from salary to commission pay?
With respect to the case :
Money is the main motivator which stimulates necessity to meet needs and encourage better performance.
Process Theories :
People hold belief's about their inputs and outcomes.
People compare their input to outcome ratio with others.
People form beliefs about others input/outcome.
Perceptions of inequity motivate behavior to restore equity.
Expectancy Theory :
More Effort=Better Service
Q. What needs are met under the commission system?Are they the same needs in the shoes &handbag dept as they are in lingerie? Explain.
Q. 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 device& test some other compensation method?If you decided to test another system,what would it look like?
Back to previous
New Method (Hybrid Method )
Hybrid Method :
Based on the price of the product a hybrid method can be deployed as follows:
Job Rotation (provides variety+ stimulation + fairness)
Reward all employees after reaching a predetermined sales target irrespective of the dept.