Message from Frito-Lay's CHRO, Patrick McLaughlin
“The Performance Pay program has proven to drive a strong culture change that is built on a legacy of growth and reinforcing our competitive place in the market. Employees have responded very positively to the opportunity to increase their earnings by exceeding the organization’s sales goals.”
Frito-Lay – Frontline Sales – Performance Pay Program
Traditionally, Frito-Lay Route Sales Representatives (RSRs) are paid using a simple commission rate, the total volume of sales net of returned unsellable product. This provides the RSRs with a low incentive to grow sales, aside from the encouragement from their supervisors.
There also is a physical limit to how much an RSR can grow a route’s sales because the RSR is responsible for transporting and merchandising all of the products. If the sales volume grows too high, one person simply cannot manage all of the products for the route in a normal work week. To help with this issue, Frito-Lay rebalances the routes by changing the number and types of stores serviced. Yet with compensation based on a simple commission rate, any cut in product volume means lower compensation, a demotivator.
So, Frito-Lay designed a new plan to provide greater incentives to grow sales and remove the negative impact of route rebalancing -- compensation based on meeting sales growth targets. Frito-Lay partnered with the Center for Effective Organizations at the University of Southern California to evaluate the new compensation plan to ensure the change would have the intended impacts before rolling it out to nearly 19,000 RSRs.
The evaluation was launched in mid-2007, with post-launch measurements continuing for two years, through mid-2009. After the evaluation showed a positive impact on motivation and sales, Frito-Lay engaged in an organizational change process to determine the feasibility of making a change to such a large part of its operations. The decision was ultimately made and the rollout started in 2013.