2009 Compensation Survey: A Positive Picture?
By Kenneth Hein
Research by Larry Basinait
There is nothing more important than autonomy to Thomas Pitzer. The sales manager at Riggans Advertising (asi/308900) says, “I love the freedom. There is no one around all of the time. The rest of the staff is at another location and if I want to go to the Outer Banks for 10 days, I do it. It’s pretty loose.”
Pitzer is not unlike many salespeople in the ad specialties industry when it comes to the allure of controlling his own destiny. He is also similar to others by virtue of the fact that he makes straight commission at a 50-50 split, gets paid every two weeks and does not receive benefits.
These are common attributes in the industry, according to Advantages’ second annual sales compensation study. Conducted during the first quarter of the year, nearly 200 respondents spoke candidly about what they made, their compensation plan, as well as what they wish their bosses would add to their current package.
The average salary, according to respondents which varied from company owners to independent sales representatives, is $75,000. Reactions from salespeople interviewed ranged from “wow, I’d like to make that” to “that seems a little low.”
Doing the Splits
The most common compensation plan, far and away, is straight commission. More than half (52%) of respondents said that this was their company’s model. This was up 7% from 2008. “Sales are about doing whatever it takes to get it sold,” says Doug Miller, account executive with Clayman Promotional Group (asi/162850) who works on straight commission.
Miller left a larger company as a rep to work for Clayman on a straight commission basis. He says he wanted to be part of a smaller, more personal company. He works on a 50-50 split. “I’m not going to agree to less. Life is too short,” he says.
Roughly a third (37%) of companies polled currently employ a 50-50 split. Of the 63% of companies who use other types of splits, it breaks down like this: less than 50% rep (65%); 55% rep/45% company (11%); 60% rep/40% company (12%); 65% rep/35% company (4%); 70% rep/30% company (2%); and greater than 70% rep (6%).
Adjusting the splits is a necessity, says Mitch Emoff, executive vice president of Goldner Associates (asi/209800). “If you keep the splits the same, at some point your company will get run aground. You can’t just sell at 10% and give half to a rep. You have to do what makes sense. You have to know the cost structure and where the overhead percentages are.”
Yet others do it differently. Rick Casner, vice president of sales and marketing at the Gizmo Group (asi/207455) gets straight commission plus a bonus that consists of a percentage of the profits. He says this isn’t likely to happen at larger companies, but it is extremely motivational for small and medium-sized businesses that rely on their sales staff to play a role in day-to-day operations.
The second most popular plan was straight salary which 10% of distributorships currently offer. Some like the security of having a salary. Ken “K.C.” Canter, sales manager with Studio Graphics, Inc. (asi/338425), says this encourages employees to focus on the company rather than just themselves. “They want the business to do better so their salaries will grow. Plus, it’s more comfortable. You know you’re guaranteed to get this amount every two weeks.”
The Swiss-Army Salesperson
Canter, who served in the U.S. Air Force, loves his freedom as much as anyone, but he loves his customers as well. “I absolutely enjoy working with them and building relationships. I’ve been here seven years and I still look forward to coming to work every Monday morning. I can’t believe I missed this all of my life.”
Like many salespeople, Canter focuses on customer service, phone follow-ups and a variety of other roles. In addition to sales, 80% of respondents focus on customer service, 68% handle budgets and promotion and 61% deal with public relations and marketing.
“Salespeople have a lot of responsibilities,” says Emoff who is part of a sales staff of 30 that works on straight commission. But in the end, this is a good thing. “You don’t want to just turn the customer over to someone internally. If the sales rep walks away from the details completely, it’s hard to maintain the relationship.” Nearly every respondent (95%) worked off their own account base.
However, Michelle Lowe, account executive, Polar Graphics USA (asi/296750), says handling clients “is a group effort. We make sure we follow everything together from ‘a’ to ‘z.’”
While sales staffs work hard to make their clients happy, one place where there is often little bend is when it comes to margins. More than half (56%) say that there is a margin that they cannot sell below. Yet only 15% get charged back if they sell below a stated margin.
The same does not hold true for non-payment of orders, which leads the pack, according to 69% of respondents, of what companies will charge their salespeople for. This was up 36% from last year. Most chalked the increase up to the down economy. Reps were also being charged for errors by 59% of those polled – up 32%.
Miller says he gets charged for errors sometimes, “other times we split it.” Pitzer says his company goes to great lengths to avoid them altogether. “We have three people looking at items and the client has to sign off on the proof.” Still, it happens occasionally, he says.
Ron Thomas, owner, Stowebridge Promotion Group (asi/337500), says he doesn’t charge his salespeople for errors. “Not yet, maybe I should.” Still he says after a banner 2008 and a slow start of the year, things are picking up. “We’re doing OK.”
Not Feeling So Perky?
Amid this economic climate, however, many are looking to cut costs. Perks and benefits have been affected. Twenty-one percent of respondents said they do not get benefits (up 7% from last year), self-promotion budgets declined 13% to about a quarter (24%) of respondents using them, and paid trips to trade shows was flat at 40%.
Michael Petrocelli, vice president of sales and marketing for the Petrocelli Marketing Group (asi/294780) says he offers his salespeople samples at no charge (so did 52% of respondents), as well as other essential tools for them to get the job done. However, his company doesn’t offer benefits and he feels it hurts. “Every time we do bring in a sales rep (he currently has one), Proforma takes them away. We’re contemplating joining Proforma because of the deals they have.”
The good news is 85% of respondents said they were not cutting any benefits. Thomas offers Stowebridge employees health benefits, of which they pay half the cost. It offers paid trips to trade shows as well as self-promos. In fact, he plans on increasing the use of self-promos. “They work pretty well. People love them. They always say ‘thank you.’ Any time a vendor comes out with some good pricing and great specials, we go ahead and get some.”
Lynn Strange, sales, Best Business Systems (asi/138560), says, “We have profit sharing. Health benefits are available; the company pays part. Is everyone going to start ringing our doorbell now?”
While that sounds like a funny line, employers realize maintaining their salesforce is serious business and benefits play a part. Polar Graphics also offers medical, dental and a 401(k) as does Goldner Associates. “It’s competitive. We want to keep our salespeople,” says Emoff.
Of course the benefit that all employees work for is payday. More than half of respondents (55%) say they get their dough when the order is paid. About a quarter (22%) receive a bi-weekly payday. Thomas says his company doles out checks on a bi-weekly basis. However it is reflective upon whether the order has been completed. Pitzer’s company has the same policy. “We get paid every two weeks, once the order is on the books.” As does Strange’s employer: “Twice a month based on collected, not written sales.”
Miller’s arrangement allows him to get paid 75% of the estimated net on a weekly basis. He receives the balance once the company is paid. “That’s what I liked,” he says. Still, he falls in with only 1% of respondents who are compensated that way.
Overall, a number of respondents said they wished their bosses would provide 401(k), benefits and of course more money. But, no matter what the package, Pitzer says he wouldn’t trade his job for the world. “My company is in its 59th year and I’m in my 12th. I don’t get benefits. It’s probably not going to happen, but hopefully sales will be the same as last year,” he says. If not he can turn it up a notch, but then again there is always the draw of the Outer Banks.
Kenneth Hein is a NY-based writer and editor; Larry Basinait is executive director of research services at ASI.