SI Review: June 2011

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Expert's Corner

Where’s the Prize?

Back sales performance activity with financial incentives

As the economy brightens, many staffing firms are hiring. And reviewing compensation plans is a natural step when adding personnel.

Most staffing industry compensation plans involve base salary plus commission based on gross profit production. However, most plans stop short of rewarding performance-driving behavior.

Here are few things to think about to increase the effectiveness of a compensation plan:

Rewarding Performance-Driving Activity

We know what leads to success for staffing salespeople — performance-driving activity such as outbound phone calls, face-to-face appointments, networking events, getting referrals and following up on referrals from recruiters.

The lesson here is to reward such performance-driving activity financially.

For example, a professional staffing service may want its sales reps to make 35 outbound calls a day, have seven to 10 face-to-face appointments a week, attend two networking events a month, obtain 10 referrals a week, etc. The firm sets the performance goal and then backs this performance goal up with a financial reward.

Such a component in a compensation plan may offer a potential for $1,000 commission each month, for example. If the employee hits 100 percent of the performance goal, then he or she gets $1,000.

If the employee hits 90 percent to 99 percent of the performance goal, then he or she gets $750. For every 10 percentage-point range drop in performance, the bonus drops by $250, so an employee hitting less than 70 percent of his or her goals receives zero activity commission.

Spiffs

A sales rep can be likened to a squirrel.

A hungry squirrel goes hunting and finds a tree. In that tree is a hole, and in that hole are a bunch of nuts. Fantastic! Every day thereafter, the squirrel returns to the same tree, the same hole, until all the nuts are gone. Days later, instead of looking for a new tree, the squirrel keeps going back to that same tree, but the results are not there.

How do we get sales reps to accomplish certain key goals that they might not be inclined to do because they are making good money off their existing accounts? This is where spiffs come in handy.

Think of a spiff as onetime commission to sales reps for hitting a short-term goal or accomplishing a specific task. Such spiffs can be very effective.

Ideally, spiffs are tied to the strategic intent of the business.

For example, say 100 percent of a staffing firm’s customers are in financial services, and the company wants to branch out into serving healthcare organizations. The staffing company may offer a one-time $5,000 commission to the first sales rep that lands a healthcare account.

Spiffs come in all kinds of shapes and sizes. This is not a reward for winning a sales contest. A staffing firm can have a different spiff for each one of its sales reps, and each spiff can vary in financial payout.

Some firms use spiffs to encourage sales reps to focus on hitting certain goals that will grow the rep’s business and help forward the strategic intent of the business.

Get Rid of Discretionary Bonuses

This is a bonus I advise be eliminated. A discretionary bonus is one not tied to any specific behavior, activity or accomplishment. It is given to an employee for no specific reason.

Some companies have year-end discretionary bonuses. Some companies have year-end holiday bonuses. It is a nice gesture for an owner of a business to offer employees a year-end bonus. However, because the money is tied to no specific behavior, activity or goal, it is a complete waste.

It would be more prudent to take money allocated to a discretionary bonus pool and let employees choose a charity to receive the money. Making such a contribution and letting employees in on the recipient decision will give them a good and healthy sense about their employer.

                                                                                                                                                                                                                                      

Tom Kosnik is president of Visus Group (www.visusgroup.com). He helps staffing companies improve employee performance, corporate revenue and net income profits. Kosnik can be reached at (312) 527-2950 or tkosnik@visusgroup.com.

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