Experts in Compensation Plan Design
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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).
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.
We’ve been working our way through the various ways you can calculate incentive pay and have covered quite a few so far. As a recap, here are the various methods and the articles you can reference to find the content on that method.
A better approach, though I admit it’s harder to explain, is the progressive rate. This pays the higher commission rate only on the dollars within the tier…NOT back to previous tiers or the first dollar. This allows you to get a much smoother payout curve so there is now very little reason to cheat the plan.
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.
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.
In this webinar, Beth previews key topics covered for her upcoming training and answers questions from the audience. Learn more strategies to recruit and retain top talent and how to shape your organizational structure to fit your compensation needs.
At the TIA’s recent Lunch and Learn, Beth gave a quick introduction to the most common Freight Brokerage organization structures, compensation methods, and the pros and cons of each.
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.
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.
