All tagged Compensation Mistakes

I was recently asked by a medium-sized freight broker to provide a list of the things we look for when assessing the health of an incentive plan. That prompted the following list of key items that we consider when determining if a compensation plan may need to be revised. While this list has items specific to freight brokers, you can easily substitute your roles and economics in place of the broker specifics mentioned.

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.

In Part 2, we examined Top Compensation Mistakes #3:  Not considering short-term and long-term unintended consequences, and Top Compensation Mistakes #4:  Not clarifying goals to enable the shift from transactional to growth-focused plans. We will now consider the last two mistakes:  Top Compensation Mistakes #5: Not understanding the legal ramifications of incentive compensation (yes, there are laws about incentive pay!), and Top Compensation Mistakes #6:  Not communicating and supporting the plans, and not following up with solid tracking and feedback.

In Part 1, originally published in the Logistics Journal, we examined Top Compensation Mistakes #1: Not realizing that compensation is part of a complex and interconnected system, and Top Compensation Mistakes #2: Thinking about compensation as only an economic deal with the employees.  We will now look at the next two top compensation mistakes.

We are often asked “what is ‘the right way’ to pay?” But there is no easy answer to this question. The “right way” depends on a variety of factors particular to each company. There are some definite wrong ways to pay, and this three-part article will outline the six most common compensation mistakes we have seen in our work with more than 40 transportation and logistics companies and over 14 years as a sales compensation consultants working with private and public companies from a variety of industries, ranging in size from small privately held companies to multi-billion dollar global giants.