Food Shippers, Distributors & Manufacturers Compensation

Beth Carroll leads a panel at the recent Food Shippers of America conference. Topics discussed included the Total Rewards Framework, Incentive Compensation Design and how compensation affects staffing. Don’t miss this valuable portion of the panel.

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Sales Rep Pay

With our expertise in the transportation and logistics space, we have been called on to help with driver pay for several food shippers and distributor companies, along with warehouse worker pay transitions for several others.  We have worked with more than a handful of food and beverage distribution companies as well to revise their driver pay plans, and others to help with changes to their sales compensation plans.  The sales compensation philosophy in this world is changing, with a couple of the major players shifting to salary pay for their IFS (independent food service) sales reps. 

This is a major market shift as traditionally most companies paid these reps on a 100% variable plan based on weekly order value.  This has the natural effect of creating a “phantom salary” from regular customers with repeat orders (yes, yes…, every week they could be underbid by a competitor and every week they could lose the order) but the reality is that most reps are making at least $50k to $60k a year (often much more) and it just doesn’t fluctuate that much from year to year.  Food service companies are seeing a lack of sufficient new customer acquisition as a result of this. Meaning they are looking for ways to incentivize their reps to gain more business from new customers and increase volume with existing customers.  We have helped some of the major players work on this sticky problem, and we can help you.

Warehouse Worker Pay

Warehouse worker pay is another beast entirely, with a common approach being step rates or tiers, whereby workers are given hourly rate increases at set intervals. This helps combat the very high turnover rates among this workforce.  However, Amazon is disrupting this approach (as it is disrupting everything else) but coming into markets and offering $15/hour to start (as of this writing…a year from now it may be $20/hour).  This makes it hard for companies with a traditional step rate plan (which may start below $15/hour but end far above it) to even get the people in the door in the first place – even when they can demonstrate a much higher rate after a year or two on the job. 

Explosive Growth

In addition, this industry is dealing with explosive growth and the mergers and acquisitions happening is causing the need for reconciliation of disparate plans as former competitor DCs that are in the same town are now the same company and can no longer make employee theft from each other their pass time.  We have helped reconcile and simplify step rates for companies with over 150 DCs across the US using 2 vastly different business models and 3 different step rate schemes.  It took two years, but we got it done and management was elated with the results.

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Food Manufacturers

We have also worked with several upstream food manufacturers to revise their sales compensation plans, from spice and soy ingredient manufacturers to one of the major poultry providers.  We understand the direct sales roles as well as channel sales roles that can exist in these worlds, and the need for dealing differently with major providers such as hospitals and universities and smaller independent production groups. 

International Markets & Forecasting

We also have experience dealing with bi-product or over production sales to international markets.  Thinking about “lead times for production” when talking about growing living beings to be ready at a certain time makes “forecast accuracy” take on a whole new level of meaning. Particularly, as a sales rep compensation metric since you can’t just “make another chicken” in a couple days.

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Common Project Types

Express Design Project

When your needs span several roles but you have only a few people and will not have much of an issue with change management, our Express Design Project is for you. We’ll spend time with you and your senior leaders in a one-day on-site meeting and complete the rest of the meetings virtually. We’ve successfully executed a number of engagements for small to medium-sized organizations (5 to 20 people) just like yours.

An Express Incentive Design Project includes:
• Compensation plan design for up to 5 roles (salary bands and incentives)
• Market benchmarking of pay levels for the 5 roles
• Plan documentation
• Pro-forma economic modeling (no historical testing)
• Roll-out training
• Strategy and structure review/refinement
• 6 months of post-project support
• Turnaround is approximately 4-6 weeks

1P1P Project: One plan, one role

A 1P1P Project is great for start-ups and small companies, and those with an immediate need for a compensation plan for one person in one role. The 1P1P Project is a virtually delivered program that’s a fast, affordable alternative to big consulting firm fees.

The 1P1P Project includes:
• All plan design details
• Basic market pricing
• Economic testing
• Incentive plan documentation
• Outlining of goals and expectations
• Review of business goals and impact of this role on those goals
• Role clarification
• 3 months of post-project support
• Turnaround is approximately 2-3 weeks

Full Service Sales Compensation Plan Design Project

When you need more in-depth assistance in clarifying business objectives, streamlining your organization structure, improving accountabilities and role definition, and are developing incentive plans for several interconnected roles for a large staff, we recommend a Full Service Incentive Plan Design Project. This solution features on-site meetings with our consultant and your design team, and is often selected by medium-sized to larger companies, or small companies undergoing significant transition.

Full Service Sales Compensation Plan Design Project includes:
• Business goal clarification
• Business strengths assessment
• Compensation plan design for all roles in scope (salary bands and incentives)
• Development of career levels for highly populated roles
• Employee change management
• Extensive pro-forma and historical economic modeling
• Goal-setting guidance
• Sales compensation plan documentation
• Market benchmarking of pay levels for all roles in scope
• More detailed Excel template for use by your staff for doing plan calculations (variable based on your needs)
• On-site roll-out support
• Organization redesign and role change/definition
• 12 months post-project support
• Four+ on-site days
• Turnaround time is at least 90 days, but may take longer depending on size of organization and magnitude of change