Read the article below and answer the questions in detail to support your answer. Each question must be answered in detail.
- What theories about motivation underlie the switch from salary to commission pay?
- Which motivation theory (or theories) do you think best explains the different responses of the shoes/handbags and lingerie departments to the implementation of the commission system? Explain your reasoning.
- 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 devise and test some other compensation method? If you decided to test another system, what would it look like?
Note: Motivational theories include:
- Maslow’s hierarchy of needs
- McClelland’s “three needs” theory
- Herzberg’s motivator-hygiene theory
- Extrinsic motivators
- Intrinsic motivators
- Theories X, Y, and Z
- The Vroom model
- Strength based management
- Personal motivation- Expectancy, instrumentality, valence, high motivation, low motivation
Kimbel’s Department Store
Frances Patterson, Kimbel’s CEO, looked at the latest “Sales by Manager” figures on her daily Web-based sales report. What did these up-to-the-minute numbers tell her about the results of Kimbel’s trial of straight commission pay for its salespeople?
A regional chain of upscale department stores based in St. Louis, Kimbel’s faces the challenge shared by most department stores these days: how to stop losing share of overall retail sales to discount store chains. A key component of the strategy the company formulated to counter this long-term trend is the revival of great customer service on the floor, once a hallmark of upscale stores. Frances knows Kimbel’s has its work cut out for it. When she dropped in on several stores incognito a few years ago, she was dismayed to discover that finding a salesperson actively engaged with a customer was rare. In fact, finding a salesperson when a customer wanted to pay for an item was often difficult.
About a year and a half ago, the CEO read about a quiet revolution sweeping department store retailing. At stores such as Bloomingdale’s and Bergdorf Goodman, managers put all salespeople on straight commission. Frances decided to give the system a yearlong try in two area stores.
Such a plan, she reasoned, would be good for Kimbel’s if it lived up to its promise of attracting better salespeople, improving their motivation, and making them more customer-oriented. It could also potentially be good for employees. Salespeople in departments such as electronics, appliances, and jewelry, where expertise and highly personalized services paid off, had long worked solely on commission. But the majority of employees earned an hourly wage plus a meager 0.5 percent commission on total sales. Under the new scheme, all employees would earn a 7 percent commission on sales. When she compared the two systems, she saw that a new salesclerk in women’s wear would earn $35,000 on $500,000 in sales, as opposed to only $18,000 under the old scheme.
Now, with the trial period about to end, Frances notes that while overall sales in the two stores have increased modestly, so also has employee turnover. When the CEO examined the sales-by-manager figures, it was obvious that some associates had thrived and others had not. Most fell somewhere in the middle.
For example, Juan Santore is enthusiastic about the change—and for good reason. He works in women’s designer shoes and handbags, where a single item can cost upwards of $1,000. Motivated largely by the desire to make lots of money, he’s a personable, outgoing individual with an entrepreneurial streak. Ever since the straight commission plan took effect, he has put even more time and effort into cultivating relationships with wealthy customers, and it shows. His pay has increased an average of $150 per week.
It’s a different story in the lingerie department, where even luxury items have more modest price tags. The lingerie department head, Gladys Weinholtz, said salespeople in her department are demoralized. Several valued employees had quit, and most miss the security of a salary. No matter how hard they work, they cannot match their previous earnings. “Yes, they’re paying more attention to customers,” conceded Gladys, “but they’re so anxious about making ends meet, they tend to pounce on the poor women who wander into the department.” Furthermore, lingerie sales associates are giving short shrift to duties such as handling complaints or returns that don’t immediately translate into sales. “And boy, do they ever resent the sales superstars in the other departments,” said Gladys.
The year is nearly up. It’s time to decide. Should Frances declare the straight commission experiment a success on the whole and roll it out across the chain over the next six months?
Patterson faces a difficult choice because she is living out a challenging situation where motivational theories have converged. The result is that not one exact theory fits perfectly and there is not one "right" answer to her predicament. I think that the situation with Kimbel's Department Store represents multiple examples of motivational theories. On one hand, the move from salary to commission represents a convergence of both intrinsic and extrinsic motivators. Patterson's initial observation that her staff lacked the personal regard so critical in customer purchase of merchandise: "...she was dismayed to discover that finding a salesperson actively engaged with a customer was rare. In fact, finding a salesperson when a customer wanted to pay for an item was often difficult." This observation suggests that there needed to be a management system that enhanced both sets of motivators. It is reflective of a theory of motivation that helps to underscore the switch from salary to commission pay. Patterson understood that her staff required a type of galvanizing force that would transform their ability to work better with customers. This exists on providing direct and tangible extrinsic awards in the form of money and recognition as well as intrinsic motivators to ensure that there was a sustained effort in effectively networking with customers.
Another motivational theory that is evident in the Kimbel's Case Study is strength- based management. Patterson recognized that the move to commission could tap into the reservoir of strengths that her employees possess. An example of this would be Juan Santore, whose description represents specific strengths that fit a style of management that would enhance a particular skill set: "Motivated largely by the desire to make lots of money, he’s a personable, outgoing individual with an entrepreneurial streak." The strengths- based approach to motivation makes decisions in accordance to the talents individuals possess. Patterson's move to commission fits perfectly with an employee like Santore's strengths because his attributes are critical to success in the commission system. His strengths exist on both intrinsic and extrinsic levels. It is in this regard where the strengths- based theory regarding motivation emphasizes the switch from salary to commission pay. The strength- based management approach to motivation is evident in Patterson's management decisions to embrace commission pay.
Finally, the Kimbel's case study is reflective of the Vroom model of contextual leadership. The Vroom model suggests that management and the construction of motivation is contextual. This notion of situational leadership suggests that different tools for different jobs is required. In the case study, the departmental landscape is the very justification for situational leadership. For example, the challenges that the commission model holds for the lingerie department has to be contrasted with the women's designer shoes and handbags department. In its assertion that the "best style of leadership is contingent to the situation," Patterson must make a decision about the motivational realities that underscore the different departments in her store. What might be effective in one department might not necessarily translate into another one. In its positive form, this theory about motivation underlies the switch from salary to commission pay. It also represents how the Vroom model underscores Patterson's thoughts about motivation and the realities that govern her store.
The different reactions to the switch in Patterson's store can be represented through the paradigms already mentioned. For example, there is a district reality in which extrinsic and intrinsic motivators motivate the employees in her store. Patterson's initial study of the shift helps to explain this:
But the majority of employees earned an hourly wage plus a meager 0.5 percent commission on total sales. Under the new scheme, all employees would earn a 7 percent commission on sales. When she compared the two systems, she saw that a new salesclerk in women’s wear would earn $35,000 on $500,000 in sales, as opposed to only $18,000 under the old scheme.
Patterson's initial understanding of the pay shift reflects the presence of extrinsic and intrinsic factors that underscore motivation, and help to explain the switch from salary to commission pay. It also helps to explain an initial embrace of the new system, a reality that might have explained how there was initial buy- in from the people in both the shoes/ handbags and lingerie departments. The presence of extrinsic and intrinsic motivators and present with the unveiling of the new scheme might have cut across all departments.
However, as time passed, the case study reveals that there were different responses to the new shift. A motivation theory that can explain the varying responses to the implementation to the commission system would be the Two Factor Theory. In this paradigm, Herzog suggests that there is a dualistic reality which governs the workplace setting. The presence of one set of motivators increase job satisfaction, while the presence of another help to increase dissatisfaction:
The factors on the right that led to satisfaction (achievement, intrinsic interest in the work, responsibility, and advancement) are mostly unipolar; that is, they contribute very little to job dissatisfaction. Conversely, the dis-satisfiers (company policy and administrative practices, supervision, interpersonal relationships, working conditions, and salary) contribute very little to job satisfaction.
Herzog believes that the independence of both conditions define the reality of the workplace setting: "Essentially, hygiene factors are needed to ensure an employee is not dissatisfied. Motivation factors are needed to motivate an employee to higher performance." No better is this seen than in the different reactions from the departments in the shift from salary to commission based reality. Consider the zeal and enthusiasm that is evident in the shoes/ handbags department as representative of "job satisfaction" motivators, such as acknowledgement ("sales superstars,") and financial compensation ("His pay has increased an average of $150 per week.") In the same light, the reaction of the lingerie department reflects a set of hygiene factors such as salary ("most miss the security of a salary") and security ("Several valued employees had quit" and "They're so anxious about making ends meet.") The Herzog model can be used to explain the different reactions to the pay scale shift. It can be used to explain why one group of people are zealously for it, while another group is demoralized by it. The former revels in the motivator factors present, while the latter is terrified by the reality of hygiene factors that increase job dissatisfaction.
If I were Frances Patterson, I would be mindful of enacting any system that legitimizes one group of employees being perceived as more valued than another. There are institutional factors that make one group prefer the commission model to the salaried vision. This is evident in the defining elements of the lingerie department: "Furthermore, lingerie sales associates are giving short shrift to duties such as handling complaints or returns that don’t immediately translate into sales." At the same time, the benefits of the commission scale in departments such as shoes/ handbags cannot be overlooked. Therefore, I think that embracing a situational leadership model that establishes salaried structures as present in the departments that do not feature very high end merchandise and continuing the commission structure in more lucrative departments could be an option. This would require nuanced approach in contractual language and criteria, but still might retain the presence of these motivating factors without the presence of demotivating ones. Another equally nuanced approach would be to devise individual arrangements with employees as to which structure they would choose for compensation. Employees from different departments can fundamentally choose what structure they wish to embrace, giving them a sense of power and control in their workplace setting.