Introduction
Syntel, Inc. is a manufacturer of industrial air compressor and other related products. It has worked with major retail chains to develop efficient air compressors for the industrial and commercial markets. The 1990s has been very profitable for the compressor industries due to the implementation of the do-it-yourself market where consumers were involved in home-improvement projects and automotive repairs. Syntel focused on the smaller light-weight product line of the compressor which increased its sales rate due to extensive research and development on the consumers need. Syntel jumped to the home-based air compressor where it faced traditional difficulties to bring the product into the market and expand its sales force accordingly. To overcome the problem, Syntel created three different groups of national account manager, manufacturers' representatives, and junior sales people. All three groups were offered different types of compensation mix plans like commission, yearly bonuses, salary, and benefits.
After a few years of operation, Syntel faced a high rate of dissatisfaction from its junior lever salespeople where high turnover existed. The issue of fairness was arisen due to their task distribution and compensation plans. The need for improvement in the management level, intense competition, and high dissatisfaction level in its salespeople, low sales growth has forced Syntel to think about re-entering in the contractor segment. The opportunity to reach a large number of home consumers through smaller contractor segment was reapproached by Syntel to improve its sales.
Discussion
1. Should Syntel enter the small contractor segment with its product? Why or why not?
Syntel was already in the small contractor segment as they have forgotten about it or was assuming it to be part of the consumer market segment. The sales growth rate has slowed down in the home market due to an intense competition so it will be a good idea for Syntel to enter the contractor segment. The segmentation will help the company to group the customers into different segments with similar characteristics with similar needs. This segmentation will help them to identify the market with a research process if the market is large enough and the consumers have enough buying power.
The contractor segment will help to identify the ability of their sales force skills and implement a different type of compensation plans which will give a broad vision to solve their problem of salespeople turnover. So trying a smaller segment will definitely be a benefit for the company to develop its long term compensation plans for its employees.
2. Give some suggestions on how the high turnover problem among Syntel’s junior salespeople might be solved.
Syntel has been only providing junior salespeople salary of yearly averaged $45,000 - $60,000 with small benefits of $10,000 - $12,000. Junior salespeople are not receiving any commission or year-end bonus. They have been complaining about the inequalities shown by the company. They have been in a tough job to make sales call three times more in comparison to others for such low pay.
Compensation plays a high role in motivating salespeople either it could be financial or non-financial incentives. The basic regularity of income is guaranteed but the fairness in the workforce do not exist which has been a demotivating factor for the junior salespeople. Syntel should provide a commission to the junior salespeople when they achieve a sales quota. The junior salespeople should be offered supplemental life insurance, tax return preparation, supplemental medical insurance, personal tax and financial planning, country-club membership, low- or no-interest loans, deferred compensation, supplemental retirement benefits, relocation allowance, and stock options. These offering will surely motivate the salespeople to work harder and ally with the vision of the company thus reducing the turnover rate of the junior salespeople.
3. What major questions must be answered before Syntel makes the decision to enter the small contractor market? Should its sales force structure and three compensation plans remain the same? Why or why not?
Syntel should address the problem with a high turnover of the junior salespeople, fairness in the task for a different group of salespeople, improve management strength, and equality in the compensation design.
The current structure of the sales force was unusual though the company profited due to unexpected growth in sales. The current structure should remain intact but the company should develop and design new compensation plans to the structure and should focus on fairer task division.
The proportion of salary should be fairer to make the living expenses of the junior salespeople. Commission and bonus should be awarded to the salespeople on meeting the sales target. The fixed commission should be avoided since it does not support high sales and the progressive mode of commission should be used since it supports the high rate of commission and bonus as sales grow up from the target assigned.
4. Assuming Syntel enters the small contractor market and remains in the in-home consumer market, recommend a compensation program for the entire sales force. Be specific in your recommendations by considering each of the seven steps in developing a compensation plan.
While developing a compensation plan, the following stages should be considered to make a good compensation plan, prepare job descriptions, establish specific objectives, determine general levels of compensation, develop the compensation mix, pretest the plan, administer the plan, and evaluate the plan.
Syntel should make a detailed job description which should include responsibilities and performance criteria that will compare the current sales positions according to the organizational needs in a systematic way. Syntel is now trying a smaller market segment so it should have objectives to maximize profit, win more new accounts, and reduce the selling cost. Syntel should consider control, economy, motivation, and simplicity as of organizational view and should include income regularity, the reward for superior performance, and fairness in the prospect of the salespeople. Syntel will have to control the time allocation of the salespeople, keep an eye on sales expenses and sales revenue, motivate salespeople for higher performance and the sales plan should be simple and flexible according to the market environment. The compensation mix includes salary, commission, and/or bonus. The compensation should address the cost of compensation, the proportion of salary, proportions of incentives, incentives according to time frame, splitting commissions, and types of incentives. Commission and bonus should be provided once a sales quota is achieved, different incentives which will act as hygiene factors for salespeople like insurance, retirement benefits, stock options. The designed plan should be pretested before implementing to evaluate the impact on profits and organizational objectives. Finally, the compensation plan should be administered if it is being fair to the employees or not. Syntel has been getting complaints about its unfair practice so it should focus more on fair practice.
5. Would any of the recent compensation trends help Syntel? Why or why not?
The recent compensation trends fringe and expense accounts will help Syntel to manage its sales force. Fringe helps the salespeople to benefit with personal security and job satisfaction whereas expense accounts help them to perform the necessary selling activities. Expense accounts are one of the important factors of the compensation package design. The cost of lodging and food, entertainment, traveling cost are necessary factors that should exist to address the basic needs of salespeople. The question and need of equity-based plan have arisen in Syntel so all the salespeople should be treated equally, they should be evaluated equally regardless of the sales assignment. Syntel has been biased in allocating high profitable commission to the national account managers and has been providing tougher sales job to the junior salespeople which is less paid salary jobs. Larger communities and customers are only allocated to national managers where benefits probability is higher. Such probabilities should be equally distributed to the other salespeople working for the Syntel to discourage current biased practices.
Conclusion
Whatever be the company making a profit out from its sales, it should always be working towards beneficial of its employees. Though Syntel has good sales growth, it has a very bad turnover rate in the junior salespeople. The high turnover means excessive cost and time for the company to train its new salespeople for the same job time and again. A company should design and develop a suitable compensation plan for its employees and should address the needs of its employees. This case has also emphasized not only on compensation problem but also the biases of the company is task distribution. So the compensation plan should be equally distributed to the salespeople regardless of the task assignment. The issues are going to arise since the compensation plan are not able to cover everything but a fair compensation plan can answer few problems out of them and motivate lower-level salespeople to work harder for their own benefits. Also, the case concludes that a company should focus on smaller segments to capture a huge market share.
References
Collard Philip. (2019, March 14). Market Segmentation in the construction industry. Retrieved May 24, 2019, from
https://www.designingbuildings.co.uk/wiki/Market_segmentation_in_the_construction_industry
Wasserman Elizabeth. (2009, December 16). How to Set Up a Sales Compensation Plan. Retrieved May 24, 2019, from
https://www.inc.com/guides/sales-compensation-plan.html
Unknown. Case 9.1 Syntel Inc.: the Role of Compensation in Salesperson Turnover Essay. Retrieved May 24. 2019, from
https://www.antiessays.com/free-essays/Case-9-1-Syntel-Inc-The-Role-587549.html
