Cummins Inc.: Executive Summary

Cummins Inc. is a manufacturing, distribution, service, and sales organization. Until recently, every region had their own compensation reward system that was designed specific to that region and specific to the market it served. In 2015 we moved away from individual performance based bonus structure to a companywide profit sharing plan. This benefit to this program is the unified goal of reducing costs while driving company PBIT. The goal is good and motives for the company are understandable, but local motivation is hampered when you are looking at GLOBAL PBIT goal. The challenge we face now is the lack of motivation for individual and team results that go beyond the expected AOP and work-plan. When there was pay for performance plans for

A strong way to motivate a sales person is to tie their work performance directly with their compensation. For the sales organization I encourage a lower base salary with sliding scale commission structure that will drive for results targeting healthy margins. This type of sales structure is low risk for companies as compensation is directly linked to profitable sales. This Performance-Based Pay as Lam explains is also consistent with what Vroom calls the expectancy theory (2014, pg. 164). Here we understand that these extrinsic motivators of finical rewards are key drivers for sales representatives. With commissions structures clearly identified, the sales reps know what compensation they will receive ahead of time and this is what Lam (2014) identifies as incentive pay. For the sales leaders, I also recommend that the 1/3 performance reward should be linked to the sales success of the their direct teams, 1/3 should be linked to the PBIT of their department helping to control costs, and the final 1/3 should be based on the employee retention. I personally believe that all mangers should have an element of their performance rewards tied to employee retention, as this would drive better behaviours of our leaders to care, coach and train our employees for success. This type of leadership is known as transformational leadership where the leader influences, inspires, challenges, and listens to the employee. This helps to build trust and elevate both the leader and employee to a higher level of values and motivation (Lam 2014, pg.