Connecting Incentive Pay & Performance Reviews

Beth Carroll

Incentive plan measures must be both objective and quantifiable but performance plan measures can be subjective and qualitative. Because so many elements differentiate a successful sales representative from an unsuccessful one, it is critical to create two sets of performance measures: one for the incentive plan and one for the performance management plan.

Four Tests to Measure the Effectiveness of Your Incentive Plan

Beth Carroll

Most organizations use some kind of pay for performance program for their employees. There are cash incentive plans and non-cash incentive plans. The non-cash incentives include trips and recognition programs.

Whenever you implement or change your incentive plan, you should use the best performance measures possible.  A “performance measure” is the metric by which you are gauging an employee’s results, such as revenue, profit dollars, profit percentage, net income, EBITDA, number of new customers, number of customer calls, number of invoices processed, etc.

Role Definition

Beth Carroll

Many organizations believe that to have full role definition clarity, each sales rep must have a unique role and must be compensated uniquely as well. This results in an over-abundance of roles and compensation plans. There is a point of diminishing returns when trying to sub-divide roles into the most precise functions, and one of the keys to successful compensation plan design is understanding when you have reached that point.

Communicating Compensation Plan Changes

Beth Carroll

Communicating changing sales compensation plans is never easy. The salesforce will always start with the assumption that the new plan is going to take something away and will be skeptical of anything the company tries to push as a "positive change." It usually takes two payout cycles under a new plan for the reps to figure out what behaviors they need to change to maximize their pay under the plan, and this is the point at which your top performers will finally stop holding their breath about the new plan design (provided, of course, it is designed well and truly rewards top performance in a fair and equitable manner).

Lessons In Change Management

Beth Carroll

When rolling out a change initiative it is helpful to understand the psychology of the members of the affected group. The Vocality/Predisposition Matrix (VPM) (below) can help managers identify (before and after the change) those parties who may need some extra attention to get them over the hump of accepting the new program.

Common Freight Broker Compensation Models

Beth Carroll

…After going to all this effort to restructure the business it would be a shame to continue paying using the antiquated “5% of margin” approach for everyone.  So let me hypothesize about what some compensation arrangements would be for the different roles Rick describes.

Defining Business Goals - 5 Steps

Beth Carroll

This article will take you through the steps required to define business goals and put the goals into action. In this first part we will look at establishing the baseline, setting the goal, and doing the analysis to figure out how you will get from A to B. In the second part we will break down the goals established in step #3 into accountabilities for the different roles in your organization and then discuss how you might tie these accountabilities to a tightly woven incentive plan framework that aligns each person in each role to the portion of your business plan they can control.

Sales Compensation 101 for Logistics

Beth Carroll

…you need to be very careful how you design your incentive plan or you just might end up dealing with some unexpected consequences, and possibly paying out more than you intended, or worse, getting no measurable return (or negative return!) for dollars you are spending.

Top Compensation Mistakes - Part 3

Beth Carroll

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.

Top Compensation Mistakes - Part 2

Beth Carroll

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.

Top Compensation Mistakes - Part 1

Beth Carroll

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.

Components of Well Written Incentive Plans

Beth Carroll

The risks of having poorly documented incentive compensation plans range from your employees not understanding the plan and therefore not being motivated by it (leaving your sales director scratching his head as to the lack of results, and possibly his lack of job!), to legal battles with former employees who are claiming they are owed back incentive pay due to vague, inaccurate, or misleading wording in the plan document. At a minimum, well-written incentive plans must have the following components

Traditional Broker Compensation

Beth Carroll

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.