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
48 American Scientific Journal № ( 31) / 20 19
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IMPROVING MOTIVATION OF SALES REPRESENTATIVES AS AN INSTRUMENT OF
UPGRADING QUALITY OF DISTRIBUTOR'S HUMAN RESOURCES

Elena Vor onina
Associate Professor, PhD in Economics,
Associate Professor at the Department of Management and Business,
Institute of Eco nomics and Management,
Surgut State University, Surgut
Nailia Khadasevich
Associate Professor, PhD in Economics,
Head of the Dep artment of Public,
Municipal and Personnel Management,
Institute of Economics and Management,
Surgut State University, Surgut
Irina Sergeyeva,
PhD in Economics, Senior Teacher at the Department
of Public, Municipal and Personnel Management,
Institute o f Economics and Management,
Surgut State University, Surgut

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 representat ives 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 indicators KPI.

In the field of commerce, the development of labor
potential is one of the main sources of boosting 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 e mployees –
sales representatives.
Aiming to increase the efficiency of the
commercial department (sales department) of a
company, the management should consider qu ality
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 outer
environment to f orm competitive advantages [4].
Quality management system for human resources
of a trading company includes the following elements
[4]: object and subject of management, management
mechanism.
Objects of quality management in human
resources in a trading c ompany are: real and potential
workforce; organizational culture; activities ca rried out
by heads of departments, HR managers and other HR
employees; infrastructure of labor market [4].
Subjects of human resources quality management
of a trading company ar e: 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
quality management i n a trading company is a specific
impact of the management subject on the manag ement
object, including certain forms and methods of
influence [4].
A subject of management uses modern scientific
approaches, methods and principles of human
resources manageme nt 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].

American Scientific Journal № ( 31) / 2019 49

Ways of influencing quality of human resources
Quality
pla nning
Organization of
quality
assurance
Quality
motivation
Quality
control
set of measures to
define the level of
human resources
quality 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 compan y:
- hiring, selection
and recruitment of
candidates with
required
competence;
- personal and
professional growth.
set of measures to
encourage the level of
human resources quality
required by the company:
personnel motivation to
continuing personal and
professional growth;
- motivation for c reating 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 ach ieved level of
human resources quality a nd the
required level, as well as to
move to the next cycle of
management:
- correcting existing aims in
human resources quality or
setting new ones (planning):
- monitoring human resources
quality;
- monitoring ac tivity in the field
of human resources quality
management carried out by both
heads of departments and HR
managers.

Human resources characterized by the level of competitiveness required to ensure company's
competitiveness
Fig. 1. The structural flow chart 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 co nnected to reallocation of
functions, increasing workload on personnel, additional
material stimuli, etc. [1].
At the same time, company's organizational
structure optimization and increasing human resources
quality can have the following effect [1]:
− cutd own of non -production expenses and
restraining personnel's wrongful acts;
− reorganiza tion of personnel, losing
"deadload";
− improving methods of interaction with old
clients, avoiding losing them;
− improving the efficiency of work with new
clients, increasing gross receipts;
− freeing senior management from routine to
solve strategic tasks;
− mo re effective capital distribution, speeding
up assets turnover.
Maximum efficiency is unachievable;
implementation of new technology first lowers the
efficiency, and then i ncreases 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 compa ny, 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 dist ributor's sales is a process that
directly actualizes the aim of the interaction "su pplier -
distributor". This process is characterized by the
following parameters:
− coverage territory by sales channels and
trading points (clients) – distribution extensive ness
(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 a ssures final results. The main link in the
sales process is sales representatives that fulfill planned
figures by using the instruments given by the
distributor. Moti vation of sales representatives 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 introduce 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 months (December, January
and February), as the basic period. To receive m ore
correct calculation results, let us carry out the
comparison not on the basis of summi ng up results for
three months, but on the basis of the arithmetic mean
for one month. Calculation results are presented in
Table 1.

50 American Scientific Journal № ( 31) / 20 19
Table 1
THE VALUES OF EXTENS IVENESS AND INTENSIV ENESS OF DISTRIBUTIO N OF THE TRADE
GROUP N BEFORE AND A FTER REFORMATION O F THE COMMERCIAL SER VICE.
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, positiv e dynamics is observed in
all parameters that characterize financial result of
distributor's work: sales volumes in value terms on
average for March -May 2019 increased by 26% as
compared to previous three months; profit from sales
increased by more than 33 %; profit marg in, by 7%;
Active Customers Base, by 28%; SKU, by 8%; and
number of orders, by almost 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 bon uses for performance of a range of specific
tasks (KPI).
Key Performance Indicators (KPI ) is an
evaluati on system that helps a company define the
achievement of strategic and tactic (operational) 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 approa ch, but there
is one difference: performance parameters of each
employee are tied to the general KPI of the whole
company (like profit, profitability or capitalization).
The aim of the system is to ensure that actions of
employees from different department s do not contr adict
one another and do not impede work of specialists from
other departments.
Using KPI, a company can evaluate its current
state and stra tegy implementation, control business
activity of employees and the whole company 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 mor e efficient sy stem 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 benefits t hat
company receives from employee's activity [3].
There is no need for many key 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...", "num ber of
new clients no lower than...", "value of an average
contract for each client 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 th ey will receiv e as a bonus, for what job
and when. Each employee has personal tasks and
deadlines 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 e conomic results of a company. In trading
companies these 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 e mployees
because personal KPI are closely connected to KPI of
the whole department. 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 s alary; if, how ever, an employee
fails to fulfill something, they are 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 ti me the formula to
calculate the bonus is pretty complicated: it takes 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 results. For example, if
there are 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 f ollowing
specific tasks for KPI:
− the threshold of plan fulfillment,
− the number of orders per day,
− the share of overdue receivables at the end of
the month,
− Active Customers Base (ACB),
− bonuses for bringing new clients (per client),
− and others .
At the same time, the threshold of plan fulfillment,
Active Customers Base, the share of overdue
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 management for the t rade
grou p 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 (regardles s of sold contracts).

American Scientific Journal № ( 31) / 2019 51

2. Compensation package (transport,
telecommunication service) increased from 2 to 6
thousand of rubles.
Table 2 presents an example of calculation of a
month payment for sales representatives of the "general
pricelist" of the trade g roup N be fore and after changes.

Table 2
AN EXAMPLE OF CALCUL ATION OF A MONTH PAY MENT FOR SALES REPRE SENTATIVES
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 custo ms
area = 200 rubles 1600 Sales of residual stock with short shelf life 1000
Compensation (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 motivation has increased by 50%. The bonus
part varies depending on the fulfillment of KPI. Since
March 2019, 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 evaluated 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 bon us 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 REP RESENTATIVES OF
THE "GENERAL PRICELI ST" OF THE TRADE GROUP N IN APR IL 2019
Parameter
Amou
nt,
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 residual 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 1751 0
Given to SR of MIX
Sales plan, Supplier 3, ₽ 5 000 780
078
689
000 88,32 80 4 000

52 American Scientific Journal № ( 31) / 20 19
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
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 manufacturers.
Manufacturers that have the biggest weight among
the contracts of the trade group N partly compe nsate the
distributor their expenses on payments to sales
representa tives (depending on how well the plan is
fulfilled).
Improving the quality of performance on coverage
territory – sales territory – allows to increase not only
sales volumes, but also the share of manufacturers'
compensations for labor expenses. Judging f rom the
results of changes made, positive dynamics is observed
(Table 4).
Table 4
DYNAMICS OF PAYROLL FOR SALES REPRESENTA TIVES OF THE TRADE G ROUP N IN 2019.
# Parameter January February March April May
Plan
1 Sales volumes, K ₽ 6639 10467,08 12624 1196 2 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' compensation 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 Man ufacturers' compensation 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 share
by more than 70% for the period analyzed (from 45%
in January to 77% in May).
The significant surplus of actual manufacturers'
compensation share over the planned one prov es the
increase in quality of processing contacts for Suppliers
1-4.
The positive dyna mics of distribution efficiency
values also suggests the efficiency of the developed
system.

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