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CHAPTER 17: “Cheating on the Expense Account”
What is the most ethical action to take?
A. Do nothing. It is not your responsibility to turn them in. Besides,
you never would have known if you didn’t “accidentally” hear.
B. Without mentioning particulars, let your boss know that you have
heard people were padding their expense reports and that he/she
might want to review them all carefully.
C. Tell your boss about the conversation you heard and who was
involved. It is not right of them to take advantage of the company –
they should expect whatever punishment comes to them.
CHAPTER 17
MOTIVATION, COMPENSATION, LEADERSHIP, AND EVALUATION OF SALESPEOPLE
COMMENTS ON CHAPTER 17 SALES APPLICATION QUESTIONS
1. Motivation is defined as "the arousal, intensity, direction and persistence of effort directed
management control procedures.
2. Compensation methods include: (A) straight salary; (B) straight commission, or (C) a
advantages and disadvantages.
3. Performance evaluations: (A) examine "past" performance; (B) develop "future" plan; and
(C) motivate. The primary evaluator should be the salesperson's immediate superior. If
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To properly evaluate someone:
A. Both manager and salesperson should be prepared.
B. The manager should be positive.
C. There should be two-way communication between the manager and the salesperson
including:
1. freely discussing each performance criterion.
2. asking salesperson to discuss performance.
D. Finalize the performance evaluation.
4. PLAN A
Salesperson
10% Commission
12% Commission
Total
Herndon $25,000 $6,000 $31,000
MacLean $25,000 $240 $25,240
Menon $19,000 $19,000
PLAN B
Salesperson
Salary
5% Commission
Total
Herndon $10,000 $15,000 $ 25,000
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Menon $10,000 $9,500 $19,500
Baker $10,000 $14,500 $24,500
PLAN C
Salesperson
Salary
4% Commission
Total
Herndon $25,000 $2,000 $27,000
MacLean $25,000 $800 $25,800
Menon $25,000 $25,000
Plan A is the most expensive, Plan B the least expensive. However, monetary costs are not the only
consideration. The company will have greater control over the sales force with Plan C and the
5. This is a tough situation. Some companies treat older salespeople poorly and would fire this person.
6. It does make a difference whether it is a new recruit or a veteran saleswoman. For a new recruit a
COMMENTS ON CASES
Case 17-1: Baxter Surgical Supplies Incorporated
SUMMARY
Baxter Surgical Supplies Incorporated (BSSI) is the second leading manufacturer and distributor of medical
supplies and equipment in the United States. Its sales force consists of over 600 personnel, who are
supervised by 60 sales managers.
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missionary activities such as minor maintenance on equipment sold to customers and other goodwill tasks.
compensation plan.
Sales personnel at BSSI generally have excellent qualifications and receive compensation which is
roughly equivalent to amounts paid by the leading competitors. However, Bill Woodson, a marketing
CASE OBJECTIVES
1. Allow for the discussion of the advantages and disadvantages of the three methods of compensation.
2. Have students make a decision as to which method is best for BSSI.
PRIMARY DECISIONS
1. What type of compensation program is best for BSSI?
2. If the present compensation program is changed, how should it be presented to the sales force?
ANSWERS TO QUESTIONS AT END OF CASE
Main Advantages
Main Disadvantages
1. Straight salary is a reasonable approach
for new salespeople.
1. Not enough incentive to improve motivation and
reduce turnover.
both salespeople and managers.
2. Is the compensation plan causing a problem? How?
3. What would you do to correct the situation, if anything?
WHAT ACTUALLY HAPPENED?
Mr. Woodson and Mr. Jones decided it was a good idea to keep first year sales personnel on a fixed salary.
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They felt that because the industry was so competitive and training took several months, it was better for
them to have
"known income." However, salaries for experienced personnel needed to be adjusted. They believed the
straight salary would not provide enough incentive in this industry and would only increase their already high
The two decided that the best method would be one containing a base salary plus commission and
bonus. This was similar to the one already in use except that the new plan was dependent on the individual
instead of the group. The district's manager was given an amount of bonus money based on the district's
this would keep the sales personnel pulling for each other as a group.
Woodson decided that the incentive portion of the salesperson's income would be obtained through a
2% commission on sales.
Along with the personnel compensation, the men agreed that the Company should continue to
Case 17-2: The Dunn Corporation
SUMMARY AND CASE OBJECTIVES
The case allows students to identify the issues involved in handling a salesman who threatens to
quit and take a major part of the company's business with him. Students are required to recommend solutions
DISCUSSION/ISSUES
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account's potential loss cannot be taken lightly. The critical question regarding the likelihood of
losing an account is: To what extent is the customer's loyalty tied to the salesman and to what
2. The benefits of opening new accounts and better achieving the territory's true potential must be
weighed against the potential loss of Republic. If Head allows Little to continue selling primarily to Republic
firing Little should be taken.
3. Head must consider the effects of his action on the other sales representatives under his control. If
Head allows Little to do as he pleases, either by transferring part of Little's territory to others or by
ACTION ACTUALLY TAKEN AND RESULTS
In light of Little's attitude, Head felt that he had no other course of action than termination. Head
Head's first decision was to divide Little's sales district among the existing districts. This
called on Republic to explain the situation. No assurance was given by Mr. Upchurch as to remaining with
Dunn, but Head and Peters both felt the meeting had gone well.
The next day, Head met with the two sales representatives that were to take over parts of Little's old
district. It was Head's opinion that prompt attention and service to Little's former customers were essential to
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etc. Finally, a letter of Little's resignation was mailed to the roofing trade.
been accomplished at a
lower cost by eliminating the expense of a district office in Atlanta
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