|
Indian River's experiences throughout all aspects of Wholesale Distribution allow us to bring a non-HR perspective to compensation and incentives. Although attracting and retaining high performing individuals is a big part of the equation, it is imperative that these issues be viewed in the context of the contemporary distribution industry.
Compensation in distribution is currently a very sensitive issue. Many distributors, if they were to look back at their company five years ago would hardly recognize it. New sales channels, supplier consolidation, acquisition mania and the technology epidemic have all significantly altered the environment in which we compete. All these contemporary pressures are forcing distributors to review, and in most cases alter, their value propositions and business models. These pressures have also generated another result; at least for those reading this, distribution companies are a lot bigger than they were five years ago. Subsequently, the agility of these companies has been reduced. The compounding effect of these two scenarios is the driver behind the compensation issue, communicating direction to a growing organization in an ever-changing environment. When our clients engage us, it is usually not about under-paying or over-paying; it is about influencing behaviors.
Typical Engagements
Although all consulting projects performed by Indian River's Compensation Practice are customized and tailored to each client, the majority of our engagements can be dissected into four categories. Do any of the topics below hit a nerve? If so, follow the corresponding link for information on these engagements as well as some case studies.
- Compensation Audit & Policy
As companies grow, inevitably they reach a point where, whether out of frustration or to ease the budgeting process, a formal method for determining salaries and salary increases becomes necessary. When companies are in their early stages, with few employees, not only are compensation costs minor relative to the other costs associated with running the company, but also the time necessary to review each contributor's pay is relatively small. As companies grow, the labor costs appreciate relative to other costs and 'negotiating' raises with employees is no longer a small feat.
Indian River's Compensation Audit & Policy begins by analyzing all the positions in a company. This is necessary because when comparing jobs to the market value for similar jobs, specific activities and responsibilities will provide more accurate information than just using job titles.
Step two in the process entails referencing multiple salary databases for the purpose of determining market value, and then grouping positions with similar market values into salary grades. Once all this work has been accomplished and a solid foundation has been established, Indian River works with our clients to formulate a salary administration policy. This policy explains for all employees how tenure, performance and a merit pay budget will influence their base compensation over time.
- Sales Incentives
IRCG holds the following 2 convictions very strongly:
-
Outside sales will continue to be a fundamental part of Wholesale Distribution.
-
The role of the outside sales representative is and will continue to evolve past the point where gross margin can adequately serve as a measure of performance.
The following excerpt from the Bureau of Labor Statistics Industry Outlook 2000 - 01 Edition provides the official government viewpoint, which we surprisingly agree with.
"Wage and salary jobs in wholesale trade are projected to grow about 15% slower than the rate of growth projected for all industries combined. Industry trends will change the composition and nature of much wholesale trade employment…
Wholesale trade will undoubtedly feel the effects of electronic commerce and new technology. Few jobs will be left untouched by technological innovations, and demand for some occupations will decline considerably, as computer systems dramatically improve worker productivity. The two largest occupational groups in wholesale trade, marketing and sales occupations, will be the most affected… The work of sales workers will change as the selling process becomes more automated and as customer service becomes more important…
More of outside sales workers' responsibilities will be complex customer service work. They will still visit customers to solicit new business and maintain good relations, to aid with installation and maintenance, and to advise on the most efficient use of purchases. Although the duties of sales workers will change, their importance will not. Increasingly, they will tailor inventory and distribution systems to individual customer's needs."
- Bureau of Labor Statistics Guide to Industries 2000 - 01 Edition
When consulting on sales incentives, IRCG is guided by two basic principles:
-
Employees are a Wholesale Distributor's greatest assets.
-
No longer is one measure, e.g. gross profit, adequate in measuring and rewarding the performance of a sales representative.
These two guiding principles, along with years of experience working exclusively in wholesale distribution, allow Indian River's Compensation Design practice to design custom sales incentive plans that fit a company's situation and culture.
- Executive Compensation
A stable and cohesive management team is one of the most critical success factors for any company. Unfortunately, as with most skilled positions the supply is far less than the demand. Indian River's Executive Compensation competence can assist any distributor in determining fair market value for executive and managerial positions, formulating customized incentive programs, and discussing options in setting up deferred income alternatives.
Pertinent & Useful Information
The links below can provide an abundance of quantitative information. Be very careful, consulting fees are sizably larger when damage control is involved. Just because everyone can buy a paintbrush doesn't mean everyone can paint the Mona Lisa.
- Bureau of Labor Statistics Compensation and Working Conditions - This site contains published BLS compensation surveys. I suggest going to the archive heading when beginning your search.
- Salary.com's Salary Wizard™ - This one is dangerous! Enter any job and location and quartile data will be displayed. Keep in mind that this information is not industry or company size specific. If you don't believe me, go to Executive and Management and select Chief Executive Officer.
|
