Every business organization will agree that most valuable asset for an organization will be Human Resources and we cannot measure the appropriate value of Human resources in monetary terms (Instead of Human Resource accounting methods are available). So we need to provide proper appraisal system or performance measurement system for the employees in order to measure their performance and provide satisfactory and equal benefits to all the employees. Proper appraisal system will help the organization to share the profits with the employees in a scientific way. So I have made a small contribution towards the employees appraisal system for RETAIL STORES.

1. Sales Employees
Incentive Scheme

2. The organizations can succeeds only when employees gets the motivation for
the improvement and growth of the business of the organizations in different
ways like sales growth, Customer satisfaction, Cost reductions etc
However the pay based solely on the measure may fail to motivate the
employees to perform their full capacity
Unmotivated Employees are likely to meet only Minimum performance
standards.
Recognizing this fact, Organizations offer some form of incentives to their
workers and employees.
These organizations are attempting to get more motivational mileage out of
employee compensation by tying it more clearly to employee performance
Now let us understand the
INTRODUCTION

3.  Incentive Plans Creates an operating environment that champions a
philosophy of shared commitment through the belief that every individual
contributes to organizational success.
 Incentives focus employee efforts on specific performance targets. They
provide real motivation that produces Loyal employee and organizational
gains.
 Incentives payouts are variable costs linked to the achievement of results.
Base salaries are fixed costs largely unrelated to output.
 Incentive Compensation is directly related to operating performance. If
performance objectives are met, incentives are paid. If objectives are not
achieved , incentives are withheld.
 Incentives foster Teamwork and unit cohesiveness when payments to
individuals are based on team results.
 Incentives are a way to distribute success among those responsible for
producing that success.
Now,We need to understand How an incentive system can be successful
REASONS FOR ADOPTING INCENTIVE SCHEME

4. Satisfy Employee
Needs
• The incentive
system needs to
satisfy the employee
Needs
Proper
Implementation
• The Management
needs to give
adequate attention
for the Design and
implementation of
the Incentive Plan
Transparent
Results
• The employees
must be able to see
a clear connection
between incentive
payments they
receive and their
job performance
FACTORS FOR SUCCESSFUL INCENTIVE SCHEME

5. Separate Pay for
Incentives
The employees
needs to get the
Incentive pay as a
different amount
it should not be
included in the
Normal Salary.
Hence it will
effect the eye of
the employee.
Monitor the
Payments
The Management
should monitor
the incentive
payments made
to the employees
and budgets
needs to be
prepared on
monthly basis for
the incentive
amounts to avail
cost effective
benefit
Conducting the
Meetings
Information
Communication
System
We need to
develop a system
in the
organization to
communicate the
employees
regarding their
incentive
payments and
made employees
educated about
the incentive
system and it will
improve the faith
of employees on
incentive system.
Meetings needs to
be conducted on
Monthly Basis (on
a fixed date in a
month) for the
low incentive
getting employees
for the
improvement of
their Performance.
FACTORS FOR SUCCESSFUL INCENTIVE SCHEME

6. When ever we think about the Sales personnel Incentive in Retail Stores we
will get three things to our Mind
Lets understand One by One what it means
BASIC FACTORS FOR EFFECTIVE INCENTIVES SCHEME

7. For each and every kind of employment there will be some factors which will
evaluate the performance of the Personnel. Here we are mentioning main
performance evaluation factors for the sales personnel.
PERFORMACE EVALUATION

8. In Retail sector,
The Range of products will be very huge in number and it is completely
different from one another. But mostly the types of products will be as follows
RANGE OF PRODUCTS

9. Normally in Retail Industry, Business cycle will be divided into
Seasonal Business and Unseasonal Business on the basis of Festivals
and other Celebrations. By the nature, it is seasonal business there
will be effect on the revenue and it will drastically deviate from season
to unseasonal period.
Business
Cycle
Seasonal
Business
On the basis
of Period
On the Basis
of Product
Category
Unseasonal
Business
On the Basis
of Period
On the basis
of Product
Category
High Revenue High
Incentive
Low Revenue Low
Incentive
BUSINESS CYCLE EFFECTS

10. Now we should have a Incentive system which will overcome all the
disabilities of the retail industry and make the employees performance
measurement on the same platform.
The incentive system should take into consideration the following factors:
Needs to select the good performance measurement factor
Needs to make all the products under one Price Range
Needs to provide equalize revenue throughout the business
cycle
It should be easy to compute and less time taking process
Finally, tit should understandable and motivational to the employees.
REQUIREMENTS OF INCENTIVCE SCHEME

11. Incentive Systems
Now we will Understand and design the Incentive System
Regular Incentive
System
Periodical Incentive
System
It will be calculated regularly
like monthly and payment will
be made on monthly basis
It will be calculated on
periodical basis like Once in 3
months and Best Sales person
on yearly Basis
TYPES OF INCENTIVE SYSTEMS

12. Now we learn how to calculate incentive under Regular Incentive system
Before going for the calculation,We needs to make a decision on which basis
we will measure the performance on SalesValue or Sales Quantity
APPROACH-1 ON THE BASIS OF SALESVALUE
Immediate Sales Incentive Scheme
Target of the Sales 20%
Target of the Salary 30%
Section of
the
Employee
Name of
the
Employee
Sales
VALUE of
the
Previous
period
Current
Actual
Sales
VALUE
% of
Actual
Sales
VALUE
Target
%
Bonus
Turnover
%
Actual
Points
Bonus
Points
Total
Points
Incentive
for the
Immediat
e Sales
Salary of
the
Employee
Incenti
ve of
the
employ
ee
Excess
/(shor
t)
Boys
Ready
Made
A
100,000 80,000
80% 120% -40%
50 - 50 750 5,000 1,050 (525)
- -
#DIV/0! 120% #DIV/0!
#DIV/0
!
#DIV/0!
#DIV/0
!
#DIV/0!
- - -
REGULAR INCENTIVE SYSTEM – ON VALUE BASIS

13. EXPLANATION FOR APPROACH-1
We will understand term by term about the valuation Procedure
• We need to fix the percentage of growth in sales when
compared to last yearSales Target
• We need to fix the Percentage of salary which we will be
budgeted as Incentive to the employeeBudgeted
Incentive in Salary
• Needs to mention the name of the section in which
the employee is working during the periodSection of the
employee
• Needs to mention the name of the employee
Name of the
Employee
• Needs to mention the employee sales
in the section in the same period
Sales of the
Previous period

14. • We need to mention the sales of the employee in the
current periodActual Sales
• It will show the % of current sales in the Previous year
sales of the employee% of Actual Sales
• It gives an idea about the targeted sales % fixed for
the employeesTarget %
• It will show the extraordinary performance of the
employee when he crossed theTarget fixed by the
Management
Bonus Turnover %
• On the basis of the employee performance the sales
% will be converted into Points (ReferTable-1)Actual Points
EXPLANATION FOR APPROACH-1

15. • We will give appreciation to the employee for the
extraordinary performance in different Manner(Refer
Notes)
Bonus Points
• It will show the Net points (Actual points + Bonus points)
gained by the employees.Total Points
• It shows the amount of incentive gained by the employee
through his performance during the periodIncentive for Sales
• Needs to mention the salary of the employees during the
period of calculation.
Salary of the
employee
• It will show the budgeted incentive of the employee and
it will get compared with the actual and variance can be
visible immediately in the next column.
Budgeted
Incentive
EXPLANATION FOR APPROACH-1

16. NOTES FOR APPROACH-1
 An employee will be eligible for the incentive only when the employee achieves
the 80% of the previous period sales.
 On the basis of Percentage we will give points to the employees. The table is as
follows
 In case the employee crossed the Fixed target, then he will get the bonus points.
For every 1% of extra sales the employee will get 0.5 points.
 In the incentive gained by the employee, we will pay 70% for the immediate sales
incentive (Regular Incentive) and the balance 30% will be paid as Non immediate
Sales incentive (Periodical Incentive)
 Through the variance in the calculation we can see the immediate effect on the
budget of the incentive system.
 The employee previous year sales will be fixed asTotal sales value of the
particular section for the previous year is divided by number of employees working
in the section in the previous year
Percentage of Sales Actual Points
80%-90% 50
90%-100% 55
100%-110% 60
110%-120% 70
Table-1

17. The Management needs to be careful while fixing the Budgeted
incentive % in salary and SalesTarget and it should be acceptable by the
employees. It is the essence of the Entire Incentive System.
The targets needs to be change from time to time basis because in
season we can expect more but in un season we cannot expect. Hence
it needs to be fair as per situation of the business.
APPROACH-2 ON THE BASIS OF SALES QUANTITY
Method -2 is exactly same procedure as Method-1. But only the difference
will be in method – 1 we will calculate the Points on the basis of salesValue
but in this method we will calculate on the basis of sales Qty.
We can select any of the methods because each method has its own
advantages.
Hence Management needs to take decision on Method of Calculation
REGULAR INCENTIVE SYSTEM–ON QUANTITY BASIS

18. Advantages of Two Methods
On the Basis ofValue On the Basis of Qty
In this method, we can fix the target
most appropriately and it will be easy to
the employee to achieve the same.
In this method,We can avoid the effect
of the Inflation and price increase
There is more scope to increase the
SalesValue per Bill.
It will improve the quality of service and
customer satisfaction
We can improve the sales of the High
price Range products.
The employee will be attentive and
ready to sell even if the product value is
low
It is easy to compute and understand.
The Management can make accurate
budgets and results can be expectable.
Team performance can be improved by
supporting each employee to the other
employee sales through References to
other sections
Team performance can be improved by
supporting each employee to the other
employee sales through References to
other sections
POSITIVE POINTS OFTWO APPROACHES

19. Now let us understand how to calculate Periodical Incentive system.
The Incentive under the Periodical incentive system will be based on the
feedback received from the supervisors. It will helps to improve the long term
growth aspects like customer loyalty, Customer Services etc
Basically the entire incentive for the periodical incentive will be based on the
qualitative factors relating to the sales Person.
Grading system will helps us to measure the qualitative performance of the
employees on individual or group of individuals basis.
On the basis of Grading, the employee will gets the points and it will be
converted into monetary funds.
We will make an attempt to understand the incentive calculation under
Periodical Incentive System
PERIODICAL INCENTIVE SYSTEM

20. The following are the qualitative factors which are Minimum criteria for the
successful sales Employee
Non Immediate Sales Incentive
Name of the Section:
Name of the Employee:
Floor Incharge:
Salary of the Employee 5000
Target of the Salary 30%
Sl.No Qualitative Factors Grade No of Points
1 Attendance & punctuality of the Employee A 10
2
Reference given by the sales person for the new
customers
A 10
3
Any Ideas given for the development or growth of the
organization or new strategies in sales growth
A 10
4 Proper Availment and usage of the Non selling time A 10
5
Customers management or relations( No complaints
during the period)
A 10
6 Knowledge and follow of Organization rules & Policies A 10
7 Quality of Sales Presentations A 10
8 Knowledge of Customer Tastes and Products A 10
9
Co operative, Responsible in team work and ability to
analyze logically
A 10
10 Personal Appearance in the organisation A 10
Grand Total 100
Incentive Amount 450

21. Needs to fill up the basic details in the place
provided at the top of the Table for the basic
knowledge of the employee profile
Management needs to take a decision on the
Target of the salary and even though it is
periodical payment but entire amount will be paid
in one shot for the satisfaction of the employee
The qualitative factors are the industry standard
factors. Hence it will be applicable for all kinds of
sales staff irrespective of their Working Areas in
the organization.
The Grades provided in the table will on the basis
of the Grading table (ReferTable-A) which will
help the supervisor to finish the feedback within
the short span of time.
EXPLANATION FOR PPERIODICAL INCENTIVE
SCHEME

22. NOTES FOR PPERIODICAL INCENTIVE SCHEME
 The incentive can be determined either on the individual basis which means
for each and every employee and on the group of individuals basis which
means for the common group of employees.
 In this method,We will stop some portion of the employee incentive which
will be paid at a shot on periodical basis. It hellps to improve the loyalty of
the employees.
 The grading table is as follows:
Performance Grade Points
Outstanding A 10
Above Average B 5
Average C 3.5
Below Avg D 2.5
Poor E 0
TABLE-A

23. NOTES FOR PPERIODICAL INCENTIVE SCHEME
 The incentive can be determined either on the individual basis which means
for each and every employee and on the group of individuals basis which
means for the common group of employees.
 In this method,We will stop some portion of the employee incentive which
will be paid at a shot on periodical basis. It helps to improve the loyalty of the
employees.
 The grading table is as follows:
Performance Grade Points
Outstanding A 10
Above Average B 5
Average C 3.5
Below Avg D 2.5
Poor E 0
TABLE-A

24. PROFITABILITY OF INCENTIVE SCHEME
Up to now we have understood How to calculate the incentive under different
methods. But now we need to understand what benefit we are getting from the
Incentive System.
As an organization, it is very important to Make benefit for each and every
Rupee of Cost incurred.
Lets have a look on the benefit of the Incentive scheme in our organization and
Makes measures to calculate the benefit of the incentive scheme.
Name of the
Section
Additional
Turnover of
the section
Contribution %
Contribution
Amount
Incentive
payment Amt
Return for the
Investment
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

25. EXPLANATION FOR PROFITABILITY
Name of the
Section
Additional
Turnover of the
section
Contribution %
• Needs to mention the
name of the section.
• The additional turnover
achieved by the section
when compared to the
previous period needs to
be mention.
• The Average GP % which
will be visible in the
software needs to be
mention.

26. EXPLANATION FOR PROFITABILITY
Contribution
Amount
Incentive
Payment
Amount
Return for the
Investment
• It is the applied formula
of Additional Turnover
multiplied by
Contribution %
• The amount of Incentive
paid to a particular
section during the period
needs to be mention
• It helps to understand
the number of times of
benefit arrived for the
cost incurred on the
incentive scheme.

27. LAST FEW WORDS
• In the Entire Process, we needs to fill up only few areas in the tables and
other calculations will come automatically along with the Budgeted and
Actual Figures
•The Data tables are designed in a comprehensive manner which will show
the Budgets ,Actual andVariances for the same.
• Management decision making only makes the difference for the incentive
scheme.While taking decision, management needs to be careful and it
should change fromTime toTime on the basis of the business cycles and
industry fluctuations.
• The results of the incentives needs to be communicate to the employees
of the organization on monthly basis. It will helps the employees to
understand and improve their performance.
• If we get Involved in the procedure for calculation of Incentive then it will
be easy to compute on monthly basis with in a Short span of time.

28. THE END