All tagged Commissions

I recently returned from my 10th TIA conference in beautiful Palm Desert, CA, and it was one of the best shows I’ve been to.  There was a theme that I heard over and over again at the show…what a fantastic year 2018 had been so far, following on a pretty strong Q4 for 2017.  Freight rates have been rising and business has been booming, but this has not come without its challenges – chief among them, from my perspective, is what I’m calling the “January Overpayment Syndrome.”

As compensation consultants who specialize in the transportation and logistics industry, one of the most common questions we are asked is “What is the standard freight broker commission rate?”  While this question is posed with the best of intentions, it is unfortunately off the mark. The truth is that commission rates, like any form of incentive, should be a reflection of a company’s business strategy, freight profile, and organization structure.  A better question to ask would be “What is the best commission rate for my organization, given our unique circumstances, strategy, and goals for the future?”

In the world of compensation options (and it’s a bigger world than most realize), we see two extremes: 100% variable pay, also known as 100% commission, and 100% salary. Extreme compensation plans do not provide the best motivational bang for the buck and companies who are using one or the other extreme are missing out on higher levels of motivation, reduced turnover, higher revenue, and lower compensation costs.

What's wrong with the traditional, "highly variable, straight commission on margin" approach for paying your employees?  Nothing...if every employee has the same opportunity, the same skills, the same training, and all your freight is from the spot market where each day is a new day and no one knows for sure what's coming their way.