Using AI to Design Incentive Compensation Plans: Power, Pitfalls, and Practical Reality

Using AI to Design Incentive Compensation Plans: Power, Pitfalls, and Practical Reality

Beth Carroll

A few days later, she came back with a draft plan that she asked me to review, and to let her know if there were any problems that I saw with it. A quick perusal made it evident that she’d plugged her notes from our conversation into an AI program and had copied out what it told her to do and sent that to me. I’ve no doubt this is just the first in what will be many such interactions with clients. I don’t blame her for doing this, and I was curious what result the AI would give her. We all know (by now) that this burgeoning technology can be simultaneously very confident and very wrong. The recommendation it gave wasn’t so much wrong, as it was just…off. Plan weights were assigned to modifiers and the approach was not something that could have been administered (for example, it suggested taking a deduction for negative loads after the first 2 in a month – loads change value all the time!), and it said that all GM$ from negative loads should not be included in the GM% calculation which would only have the effect of artificially INFLATING the GM%. 

Why Compensation Survey Data Matters More Than Ever in Today’s Freight Market

Why Compensation Survey Data Matters More Than Ever in Today’s Freight Market

Beth Carroll

After Covid, salaries increased quickly in nearly every industry. While 3% merit increase or COLA budgets had been the norm for what seemed like decades, suddenly salary jumps were in double digits. I’m sure you all remember the most common carrier sales rep salary quoted prior to Covid…” $36,000” – easily divisible by 12. We are 25% higher than that now, with some places reporting even higher values. 

Without reliable compensation survey data, companies are left guessing or relying on hearsay from employees who have a vested interest in finding numbers as high as possible. 

Good survey data relies on validated incumbent-level data (not self-reported “averages”) and provides objective insight into: 

  • Market salary ranges for comparable roles 

  • Typical pay mix between salary and incentives 

  • Total target compensation levels across the industry 

  • Geographic differences 

  • The ability to do custom cuts based on defined peers (usually for an additional fee) 

This information allows leaders to determine whether they are truly below market—or simply experiencing normal competitive pressure. 

What to Expect Following Comp Plan Changes

Beth Carroll

I’ve developed incentive compensation plans for more than 500 companies over the last 27 years. It always has interested me how some companies get far better results from the changed compensation plans than others, especially when using similar compensation approaches. Companies, like people, have particular personalities, and, also like people, they can get in their own way. Changing a compensation plan will not automatically change other aspects of a company that may be hindering their success. Conversely, a company who already manifests successful characteristics is much more likely to experience the full benefit of a new compensation plan.

Freight Broker Organization Structures Part 2: Split Model

Beth Carroll

In the previous article we looked at the Cradle to Grave organization structure and the common compensation approaches used to go along with those roles.  Now we will look at the Split Model, the roles commonly found in this model, and how they should be paid (spoiler…paying everyone a commission (% of the load), while common, is suboptimal).

Freight Broker Organization Structures – Part 1: Cradle to Grave

Beth Carroll

I’ve been working with freight brokers for over 15 years now, helping them revise their organization structure and align their compensation plans to support the goals of their business.  While the number of different possible organization structures is almost limitless, there are really only two approaches, with some variations on each:  Cradle to Grave and Split Structure.  This article deals with the first; we will address the Split Structure in the next article.

Commissions vs Goal-Based Incentives Part 2: Draws vs Seat Cost

Beth Carroll

On the commission side of our graph (see the article from September 2023), we are moving toward using some sort of “goal” to affect payout, rather than simply paying a straight commission from the first dollar.  One of the ways companies initially think of doing this is by deducting the salary or a “seat cost” from the commission calculation.  This ensures that commissions are not paid until the employee as covered their costs to the organization, which is usually an approach that CFO’s like… a lot.  And it can have it’s place in an organization, particularly when it is just starting up.  However, it does have some downsides.

Commission vs Goal-Based Incentives Part 1

Beth Carroll

In previous articles we looked at different organization structure such as Cradle to Grave or Split model organizations and I referenced the need to understand different compensation approaches when dealing with split roles so that you can do something OTHER than simply paying everyone a smaller and smaller percentage of the GM$.  This article will be the first in a series that will go into detail on these different approaches and how you can learn to select the best one for your various roles.

Beth Carroll 2021 OTA Annual Conference Presentation Video

Beth Carroll

The Ohio Trucking Association recently hosted their 2021 OTA Annual Conference, presented by Pilot Company, this week in Columbus. Over 160 in-person and virtual attendees joined exhibitors and sponsors for the event. The conference featured outstanding programming, opportunities to network and of course featured speakers, including Beth Carroll.

OTA On The Air - Episode #24 - Taming the Compensation Monster

Beth Carroll

Earlier this month Beth Carroll was a guest on an episode of OTA on the Air with President & CEO Tom Balzer. For anyone unfamiliar, OTA on the Air features industry experts and thought leaders who provide updates on the regulatory, legislative and compliance environment. Beth will also be one of the Keynote Speakers at this year’s OTA Annual Conference in September.

TIA Delivers Podcast #2 - Making Goal-Based Incentives Work for You

Beth Carroll

n this episode of TIA Delivers Podcasts, Beth Carroll, Managing Principal of Prosperio Group, provides insights into the series she has been writing for TIA's 3PL Perspectives Magazine. The series, “Going Beyond Commissions”, details the different approaches to goal-based incentives. Her unique perspective and range of industry knowledge are extremely valuable to the 3PL community and this is an episode that you won't want to miss!

Freight Advisors Podcast - Guest Beth Carroll

Beth Carroll

Beth was recently a guest on The Freight Advisors where she had a great conversation with Jared Taylor about the importance of compensation in the freight space. Whether you're a logistics provider or an asset trucking company, getting the right compensation package in place is incredibly important. They also walks us through what that looks like, how to think about compensation, and the importance of emotional intelligence while devising the right strategy.

Incentive Compensation in a Post-COVID World

Beth Carroll

Beth was recently invited to be a guest columnist for the Tenney Group blog and did a great Q&A regarding Incentive Compensation in a Post-COVID World. If you are interested in how other companies have been handling changes to their compensation plans as a result of COVID-19, you’ll definitely want to give it a read.

Is it Ok to Double Bonus?

Beth Carroll

The answer depends, in part, on how the goal was initially set and if there was any provision for double crediting when goals were allocated. Sometimes each sales rep is an island unto themselves, and the sum of their goals equals the overall sales budget. Other times some overlap is built into the system of goal allocation and the sum of the individual goals may equal more than 100% of the overall sales budget. If the goals were set with the planned overlap, then the answer is easy – it’s fine to reward with double credit because the reps were double goaled. But what if the goals weren’t set that way at the start?

Handling Compensation Windfalls

Beth Carroll

One of the less common occurrences in the world of sales compensation is a windfall, or “blue bird” sale. Sales reps love them, but they drive compensation managers (and owners who must pay them) nuts; the pay earned from incentives is often grossly out of proportion to the effort involved…

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