Hello Fellow HRs,
I hope you and your families are safe during this global pandemic.
I need help in drafting a policy regarding penalties for losses to the company. The current conditions include sales order cancellations (when material is ordered based on booking confirmation from Sales Associates and is stocked but the customer cancels the order), low gross margins (we have standard gross margins), and delayed payment recovery from customers.
I look forward to your input.
Harshada
From India, Mumbai
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I hope you and your families are safe during this global pandemic.
I need help in drafting a policy regarding penalties for losses to the company. The current conditions include sales order cancellations (when material is ordered based on booking confirmation from Sales Associates and is stocked but the customer cancels the order), low gross margins (we have standard gross margins), and delayed payment recovery from customers.
I look forward to your input.
Harshada
From India, Mumbai
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You can consider giving incentives to sales personnel not based on sales orders or sales generated by that particular person. Incentives should be calculated based on the revenues generated by them. For example, if a salesperson achieves sales orders worth 10 lacs but only generates revenue of 4 lacs, the company's incentive payment structure should be based on the 4 lacs generated and not the 10 lacs.
By implementing this approach, you can avoid penalizing sales personnel while ensuring that company management is at ease with the incentive structure.
From India, Aizawl
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651By implementing this approach, you can avoid penalizing sales personnel while ensuring that company management is at ease with the incentive structure.
From India, Aizawl
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Dear Harshada,
While I am not from your industry as such, the occasions for raising a penalty against the salespersons that you mentioned in your post are very aggressive. With this kind of penalty structure, salespersons will get demotivated.
A few of the salespersons who lack the competitive spirit may reconcile with the penalty structure and continue. A few others who will not accept will start quitting the employment. This will increase the cost of employee attrition. Have you compared this cost vis-a-vis the cost of recovery of the losses?
Has anyone studied the reasons for the cancellation of the orders by the customers?
You have described the cancellation as "material ordered based on order booking confirmation from Sales Associates and is stocked at our place and customer cancels the order". But then why order the material unless a receipt of Purchase Order (PO) is in hand? Rather than penalizing the sales associate, why not reduce the delivery turnaround time of the material dispatch?
For the delay in recoveries, have you calculated and thereafter analyzed Account Receivable Turnover Ratio (ARTR)? What is the average ARTR for the last five years? Which salespersons or geographical location are responsible for dragging the ARTR down?
Yes, there has to be a fear of punishment. Nevertheless, any punishment has to be bounded by rationality. While a penalized employee may quit a job and get a new one, your company will have to bear the brunt of the consequences of the penalties. Please note it.
Thanks,
Dinesh Divekar
From India, Bangalore
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While I am not from your industry as such, the occasions for raising a penalty against the salespersons that you mentioned in your post are very aggressive. With this kind of penalty structure, salespersons will get demotivated.
A few of the salespersons who lack the competitive spirit may reconcile with the penalty structure and continue. A few others who will not accept will start quitting the employment. This will increase the cost of employee attrition. Have you compared this cost vis-a-vis the cost of recovery of the losses?
Has anyone studied the reasons for the cancellation of the orders by the customers?
You have described the cancellation as "material ordered based on order booking confirmation from Sales Associates and is stocked at our place and customer cancels the order". But then why order the material unless a receipt of Purchase Order (PO) is in hand? Rather than penalizing the sales associate, why not reduce the delivery turnaround time of the material dispatch?
For the delay in recoveries, have you calculated and thereafter analyzed Account Receivable Turnover Ratio (ARTR)? What is the average ARTR for the last five years? Which salespersons or geographical location are responsible for dragging the ARTR down?
Yes, there has to be a fear of punishment. Nevertheless, any punishment has to be bounded by rationality. While a penalized employee may quit a job and get a new one, your company will have to bear the brunt of the consequences of the penalties. Please note it.
Thanks,
Dinesh Divekar
From India, Bangalore
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