Американский Научный Журнал IMPROVING MOTIVATION OF SALES REPRESENTATIVES AS AN INSTRUMENT OF UPGRADING QUALITY OF DISTRIBUTOR’S HUMAN RESOURCES

Abstract. Aim – improving motivation of distributor's representatives. Methods – analysis, synthesis, mathematical modeling. Result – improving quality of distributor's human resources, enhancing the efficiency of distribution. Conclusions – the effect from improving the motivation system of sales representatives manifests itself in reduced actual labor costs (per unit), an increase in actual manufacturers’ compensation share by more than 70%. Скачать в формате PDF
American Scientific Journal № ( 30) / 2019 51

IMPROVING MOTIVATION OF SALES REPRESENTATIVES AS AN INSTRUMENT OF
UPGRADING QUALITY OF DISTRIBUTOR'S HUMAN RESOURCES

Elena Voronina
Associate Professor, PhD in Economics,
Associate Professor at the Department of Management and Business,
Institute of Economics and Management,
Surgut State University, Surgut
Nailia K hadasevich
Associate Professor, PhD in Economics,
Head of the Department of Public,
Municipa l and Personnel Management,
Institute of Economics and Management,
Surgut State University, Surgut
Irina Sergeyeva
PhD in Economics,
Senior Teacher at the Depar tment
of Public, Municipal and Personnel Management,
Institute of Economics and Management,
Surgut State University, Surgut

Abstract . Aim – improving motivation of distributor's representatives. Methods – analysis, synthesis,
mathematical modeling . Resu lt – improving quality of distributor's human resources, enhancing the efficiency of
distribution. Co nclusions – the effect from improving the motivation system of sales representatives manifests
itself in reduced actual labor costs (per unit), an increase in actual manufacturers’ compensation share by more
than 70%.
Key words: distribution, motivation, human resources quality, key performance in dicators KPI .

In the field of commerce , the development of labor
potential is one of the main sources of boosti ng the
efficiency of financial results of an activity and
ensuring company's competitiveness in the market [4;
5]. The front office in the field is frontline employees –
sales representatives.
Aiming to increase the efficiency of the
commerc ial department (sales department) of a
company, the management should consider quality
management of human resources of the company to be
the primary task [4].
Quality of human resources is the degree to which
all features of labor combined and its organizational
culture meet the requirements set by the inner and oute r
environment to form competitive advantages [ 4].
Quality management system for human resources
of a trading company includes the following elements
[4]: object and subject of management, management
mechanis m.
Objects of quality management in human
resour ces in a trading company are: real and potential
workforce; organizational culture ; activities carried out
by heads of departments, HR managers and other HR
employees ; infrastructure of labor market [ 4].
Subj ects of human resources quality management
of a trading company are: a real or potential employee;
a body carrying out management on the company's
level; a body or a person carrying out management on
the state or municipal level of government or
management [4].
Management mechanism in human resources
qu ality management in a trading company is a specific
impact of the management subject on the management
object, including certain forms and methods of
influence [ 4].
A subject of management uses modern scienti fic
approaches, methods and principles of human
resources management and fulfills the following
functions: planning, organization, motivation and
control [4].
The structural flowchart of the mechanism of
human resources quality management on the company
level is presented on Figure 1 [4].

52 American Scientific Journal № ( 30) / 20 19
Ways of influencing quality of human resources
Quality
planning
Organization of
quality
assurance
Quality
motivation
Quality
control
set of measures to
define the level of
human resources
qu ality required by
the company:
- analysis of the
business strategy and
development of a
strategy for human
resources supply;
- developing a quality
management policy
for human resources;
- setting competence
standards for job
positions.
set of measures to
reach the level of
human resources
quality required by
the company:
- hiring, selection
and recruitment of
candi dates with
required
competence;
- personal and
professional
growth.
set of measures to
encourage the level of
human resources quality
requ ired by the company:
personnel motivation to
continuing personal and
professional growth;
- motivation for creating a
self -learning organization;
- motivation for
department managers and
HR managers to
effectively carry out
measures related to
quality.
Set of measures to define the
degree of correspondence
between the achieved level of
human resources quality and the
required level, as well as to move
to the ne xt cycle of management:
- correcting existing aims in
human resources quality or
setting new one s (planning):
- monitoring human resources
quality;
- monitoring activity in the field
of human resources quality
management carried out by both
heads of departments and HR
managers.

Human resources characterized by th e level of competitiveness requ ired to ensure company's
competitiveness
Fig. 1. The structural flowchart of the mechanism of human resources quality management
on the company level

Human resources quality management of a trading
company is inevitably connected to optimization of its
organizational structure and is accompanied by
increasing expenses connected to reallocation of
functions, increasing workload on personnel , additional
material stimuli, etc. [1 ]. At the same time, company's
organizational structure optimization and incr easing
human resources quality can have the following effect
[1]:
− cutdown of non -production expenses and
restraining personnel's wrongful acts;
− reorganization of personnel, losing
"deadload";
− improving methods of interaction with old
clients, avoiding losi ng them;
− impr oving the efficiency of work with new
clients, increasing gross receipts;
− freeing senior management from routine to
solve strategic tasks;
− more effective capital distribution, speeding
up assets turnover.
Maximum efficiency is unachievable;
im plementation of new technology first lowers the
efficiency, and then increases it; the adaptation stage is
characterized by a certain efficiency decrease.
In our opinion, the term "optimization" proposed
in [1 ] does not completely reflect the essence of
reforming the structure and functions of the sales
department in a company , since there is no selection of
certain organizational structures out of several ones; the
main task is to increase the efficiency of the sales
department performance for the sake of improving
financial results of company's activity.
Management of distributor's sales is a process that
directly actualizes the aim of the interaction "supplier -
distributor". This process is characterized by the
following parameters:
− coverage territory by sales channels and
trading points (clients) – distribution extensiveness
(ACB, SKU, number of orders);
− efficiency of customer service provided to
sales channels and trading points (clients) – distribution
intensiveness (sales volumes, profit and profit margin).
Achieving aims set by the manufacturer and the
distributor assures final results. The main link in the
sales process is sales representatives that fulfil l planned
figures by using the instruments given by the
distributor. Motivation of sales repr esentatives is
performed both by the distributor and the manufacturer.
Let us calculate the values of extensiveness and
intensiveness of distribution of the trade group N before
and after reformation of the sales department structure.
Therein let us introd uce the following conventions.
Since the new structure was implemented in March
2019, let us take March, April and May as the reference
period and three previous m onths (December, January
and February), as the basic period. To receive more
correct calculat ion results, let us carry out the
comparison not on the basis of summing up results for
three months, but on the basis of the arithmetic mean
for one month. Calcul ation results are presented in
Table 1 .

American Scientific Journal № ( 30) / 2019 53

Table 1
THE VALUES OF EXTENS IVENESS AND INTENSIV EN ESS OF DISTRIBUTION OF T HE TRADE
GROUP N BEFORE AND AFTER RE FORMATION OF THE COM MERCIAL SERVICE.
Parameter Period Changes
Basic Reference Absolute Relative, %
Sales volumes, K of ₽ 8232 10374,44 2142,44 26,03
Profit, K of ₽ 1156,3 1543,03 386,73 33,45
Profit margin, % 14 15 1 7,14
ACB, quantity 200 256 56 28,00
SKU, quantity 1553 1682 129 8,31
Number of orders 1096 1775 679 61,95
As figures show, positive dynamics is observed in
all parameters that characterize financial result of
distributor's w ork: sales volumes in value terms on
average for March -May 2019 increased by 26% as
compared to previous three months; profit from sales
incr eased by more than 33%; profit margin, by 7%;
Active Customers Base , by 28%; SKU , by 8% ; and
number of orders, by a lmost 62%.
While developing the system of material stimuli
for sales representatives in the trade group N, the
“salary + bonus ” system is used. It includes salary and
money bonuses for performance of a range of specific
tasks (KPI).
Key Performance Indicat ors (KPI ) is an
evaluation system that helps a company define the
achievement of strategic and tactic (o perational) aims.
KPI is a system of parameters with the help of which
employers evaluate their employees. It has a lot in
common with the regular planning approach, but there
is one difference: performance parameters of each
employee are tied to the gener al KPI of t he whole
company (like profit, profitability or capitalization).
The aim of the system is to ensure that actions of
employees from different departments do not contradict
one another and do not impede work of specialists from
other departments.
Using KPI , a company can evaluate its current
state and strategy implementation, control business
activity of employees and the whole compan y in real
time [6, p. 54].
KPI and personnel motivation became inseparable
notions, since with the help of these indicators (KPI)
one can create a better and more efficien t system of
motivation and stimuli for company's employees [3].
Analyzing KPI helps specialists understand better
what needs to be done to increase their efficiency.
Efficiency means not only the amount of work
performed in a time unit, but also the benefi ts that
company receives from employee's activity [ 3].
There is no need for many ke y indicators (three -
five are more than enough); the important thing is that
all of them must be measurable. Here are common KPI
in sales: "sales volumes no lower than...", "number of
new clients no lower than...", "value of an a verage
contract for each cli ent within...", "English level no
lower than..." [ 3].
The main advantage of the KPI system for
employees is that each sales representative sees how
much money they will receive as a bonus, for what job
and when. Each employee h as personal tasks and
deadli nes for fulfilling them, and the company controls
their work through evaluation. Besides, the KPI system
is effective for those employees who directly influence
financial and economic results of a company. In trading
companies t hese are mainly top managers and sales
managers [ 3].
One of the main disadvantages of KPI is that if a
department does not reach the set key efficiency values ,
it can result in money losses for all its employees
because personal KPI are closely connected to KPI of
the whole departme nt. Often a KPI -based motivation
system is one -sided: all extra work that an employee
does is just seen as good performance that is paid for
with the employee’s salary; if, however, an employee
fails to fulfill something, they a re deprived of some
share of their salary as a punishment.
For employees from different departments the
bonus influenced by KPI may vary from 20% to 100%
of their salary [ 3]. At the same time the formula to
calculate the bonus is pretty complicated: it ta kes into
account KPI values, coefficient of fulfilling each of
them, as well as its "weight", that is the influence
coefficient (the more important the parameter is, the
more "weight" it has) [2, p. 58]. If a KPI scale is
incorrect, it will bring poor resu lts. For example, if
there a re too many KPI, the influence of each indicator
on the bonus will be insignificant.
Bonus payments for sales representatives of the
trade group N are formed for solving the following
specific tasks for KPI:
− the threshold of plan fulfillment,
− the number o f orders per day,
− the share of overdue receivables at the end of
the month,
− Active Customers Base (ACB),
− bonuses for bringing new clients (per clie nt),
− and others.
At the same time, the threshold of plan fulfillment,
Active Customers Base , the share of ove rdue
receivables at the end of the month are moving tasks.
The rest of KPI change from month to month depending
on the current tasks of sales ma nagement for the trade
group N (the number of orders per day, new customer
acquisition, profitability and cost -efficiency, etc.).
Since March 2019 the following changes were
implemented in the trade group N:
1. Unified motivation system for sales
representatives (regardless of sold contracts).

54 American Scientific Journal № ( 30) / 20 19
2. Compensation package (transport,
telecommunication service) increase d from 2 to 6
thousand of rubles.
Table 2 presents an example of calculation of a
month payment for sales representatives of the "general
price list " of the trade group N before and after changes.

Table 2.
AN EXAMPLE OF CALCUL ATION OF A MONTH PAY MENT FOR SALES REPRESENTATIVES
OF THE "GENERAL PRIC ELIST" OF THE TRADE GROUP N, RUBLES.
Before March 2019 Amount Since March 2019 Amount
Salary 14000 Salary 14000
KPI, including: 17600 KPI, including: 20000
Sales plan 9000 Sales plan 13000
Number of orders per day 2000 Number of orders per day 2000
Overdue receivables percent 2000 Profit margin 2000
ACB 3000 ACB 2000
Bonus for shipment to each new
customs area = 200 rubles 1600 Sales of residual stock with short shelf life 1000
Compensat ion (telecommunication
services, transportation) 2000 Compensation (telecommunication services, transportation) 6000
Total 33600 Total 40000
The permanent part (salary + compensation for
services and transportation) in the structure of
monetary moti vation has increased by 50%. The bonus
part varies depending on the fulfillment of KPI. Since
March 201 9, profit margin (by profit from sales) of
10 % was added to KPI.
The share of each of the numbered tasks in the
salary of a sales representative is eval uated by the
percent of fulfillment of each task:
− if plan is fulfilled by less than 70%, there is no
bonus;
− if plan is fulfilled by 70 -79%, the bonus
comprises 70% of the total bonus amount for this task;
− if plan is fulfilled by 80 -89%, the bonus
comprises 80% of the total bonus amount for this task;
− if plan is fulfilled by 90 -99%, the bonus is paid
as earned ;
− if plan is fulfilled by 100%, the bonus is paid
fully;
Table 3 presents an example of calculation of a
month bonus for sales representatives of the " general
pricelist" of the trade group N in April 2019.

Table 3
AN EXAMPLE OF CALCUL ATION OF A MONTH BON US FOR SALES REPRESENTATIVES OF
THE "GENERAL PRICELI ST" OF THE TRADE GROUP N IN APRIL 2019
Parameter Amount,
rubles Plan Fact Fulfillme
nt, %
Bonu
s, %
Bonus,
rubles
"General pricelist"
Sales plan, ₽ 10 000 1 865
768
1 442
198 77,3 70 7 000
ACB , Supplier 2 3 000 35 35 100 100 3 000
Sales plan , Supplier 2 , ₽ 4 000 95 000 113 634 110 100 4 000
Profit margin, % 2 000 24 23 95,83 96 1 920
Sales of res idual stock with short shelf
life, ₽ 1 000 16 000 0 0 0 0
Total KPI 20 000 х х 76,63 73 15920
Given to SR of "Colgate"
Sales plan, ₽ 9 000 880 000 884 373 100,5 100 9 000
Number of orders per day 2 000 8 7 87,5 80 1 600
Task from Supplier 1 29 SKU ( into the
number of customs areas) 2 000 45 10 22,22 0 0
ACB 3 000 85 83 97,65 97 2 910
Task from Supplier 1 4 000 15 17 110 100 4 000
Total KPI 20 000 х х 83,57 75 17510
Given to SR of MIX
Sales plan, Supplier 3 , ₽ 5 000 780 078 689 000 88,32 80 4 000
Sales plan, Supplier 4 , ₽ 5 000 620 396 688 000 110 100 5 000
ACB , Supplier 3 3 000 75 89 110 100 3 000

American Scientific Journal № ( 30) / 2019 55

ACB , Supplier 4 3 000 75 70 93,33 93 2 790
Profit margin, % 3 000 10 10 100 100 3 000
Sales of residual stock with short shelf
life, ₽ 1 000 25 000 0 0 0 0
Total KPI 20 000 х х 83,6 79 17790

At this stage of their development, the trade group
N sets the tasks of increasing sales volumes and their
market share, which will save money on labor expenses
due to increasing compensations from manuf acturers.
Manufacturers that have the biggest weight among
the contracts of the trade group N partly compensate the
distributor their expenses on payments to sales
representatives (depending on how well the plan is
fulfilled).
Improving the quality of per formance o n coverage
territory – sales territory – allows to increase not only
sales volumes, but also the share of manufacturers'
compensations for labor expenses. Judging from the
results of changes made, positive dynamics is observed
(Table 4).
Table 4
DYNAMICS OF PAYROLL FOR SALE S REPRESENTATIVES OF THE TRADE GROUP N IN 201 9.
# Parameter January February March April May
Plan
1 Sales volumes, K ₽ 6639 10467,08 12624 11962 13785
2 Payroll, K ₽ 334,7 329 264 336 340
3 Costs per unit for payroll ( line 2 : line . 1 * 100), % 5 3 2 3 2
4 Manufacturers' compensation, K ₽ 158 184 214 214 214
5 Manufacturers' com pensation share in payroll ( line
4 : line . 2 * 100), % 47 56 81 64 63
Fact
6 Sales volumes, K ₽ 6582 10977 9799,15 11
024,18 10300
7 Payroll, K ₽ 267,82 267,8 222,4 265,42 261
8 Costs per unit for payroll ( line 7 : line 6 * 100), % 4 2 2 2 3
9 Manufacturers' compensation, K ₽ 121,14 189,13 173,64 216,3 201
10 Manufacturers' com pensation share in payroll ( line
9 : line . 7 * 100), % 45 71 78 81 77

Thus, the effect of improving the motivation
system of sales representatives manifests itself in
reduced actual labor costs (per unit) by 2% in February -
April, by 1% in May as compared to January; in
increase in actual manufacturers' compensation sh are
by more than 70% for the period analyzed (from 45%
in January to 77% in May).
The significant surplus of actual manufact urers'
compensation share over the planned one proves the
increase in quality of processing contacts for S uppliers
1-4.
The positi ve dynamics of distribution efficiency
values also suggests the efficiency of the developed
system.
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