Compensation is Complicated
Every business manager or owner says, “People are our biggest asset” but for distributors the statement is true in spades. In many wholesale lines of trade benchmarking reveals 60 percent of every Gross Margin dollar goes to compensation. If not the distributor’s biggest asset, compensation truly is the distributor’s biggest expense. Nothing negatively impacts distributors quite like a poorly thought out compensation model.
In the sales department, changes in compensation plans always raise employee anxiety. Further, many distributors lack a well thought out plan which ties employee actions to company goals. Commission plans, which are the single most common type of sales compensation, are often a historical hodgepodge of existing plans inherited from years gone by. But, conditions change, strategic company direction shifts and the commission plan continues.
River Heights Consulting has assisted dozens of distributors in crafting just the right plan for their team. In each case, the discussion revolves around the following:
- Strategic company objectives, future direction and critical customer focus
- Understanding how the current plan evolved
- Management’s need to properly communicate the changes
- Appreciation of employee concern with compensation
- Specific seller’s unique situation within the company
We recommend you review these articles from “The Distributor Channel” Blog
- An Exercise in Questioning Your Sales Compensation Plan
- More questions about commissions and sales compensation
- Compensation/Commission Thoughts from Daniel Pink
And read this article originally published in Distribution Center Magazine
- Sales Compensation: Are Commissions Obsolete