Name
Professor
Course
Date
Commission structures
I would like to take this opportunity to thanks you for accepting me into your teams, because i have gained enough exposure while working in this your company and would like to inform you how loyal i am to the companys work environment. Some of the benefits that I have gained working for this company include the bonuses such as activating new accounts, booking full truckloads and setting enterprise level appointments. I would also like to inform you that working on the commission is one of the best payment structures in the world because individuals are paid for what they deliver.
The current commission structure used in the company is not effective. This is always proportional to their efforts. However, I have a have a few issues with the current structure that the company is using to calculate my pay. My point is; freight brokerage is particularly difficult, and the business world is filled up with a lot of challenges that are beyond the control of both the company, and the account managers. Nevertheless, in spite of the challenging business environment and the economic cycles, I could still make it in the business. This is enough evidence of my capabilities, potential and willingness to work in the company because this is where I belong.
It is also necessary to understand the fact that most of the people who were there before me could not take that long in the company. You should also note the fact that while the company is celebrating the growth of the national sales department, it is imperative to note that the sale realized was as a result of the efforts of the sales people who left the company when their sales could not hit the 10000 mark and received $0 for the following month. These people left not because they could deliver, but because they had no incentive to work for the company, the basic $700 that the company provides every two weeks is not enough a retainer to last freight brokers over the required duration. Perhaps the company should try to reconsider the costs incurred in the whole process of acquiring new human resources, training them and grooming them for the freight brokerage as opposed to developing the employees who are already very productive and are contributing to the companys growth. Increasing the basic pay and working out a new commission structure is the best way to help the employees grow. The company should try to determine how much the company stands to gain if it developed it human resources.
Some of the possible reasons why our department recorded the highest rate of employee turnover are listed bellow and recommendation follows shortly.
Determine commission
The commission that the company pays for every sale is somewhat lower than the current industry standards; this makes it hard for the company’s freight brokers to last in this company. Most of the people who used to work here were demotivated by the volume of freight to commission ratio. Under your current structure, an employee has to convert so many leads to produce am remarkable freight volume that could help in the realization of the company’s goals. For example, last year, I managed to achieve a sale of $30,000, and going by your current structure I am supposed to make 70,000 this year; this is not practical considering the current business environment. Any figure below this would mean I don’t get anything in return, this may sound a little unprofessional, but I feel this needs to be reconsidered. The company needs to consider a straight commission structure.
Perhaps the company needs to increase its commission percentage on the achievement of the baseline goals. If this is increased by by 2 %, freight brokers would be motivated because at the current rate, the freight brokers would not be able to stay with the company for long. The company return on investment would drop so low, that the company would be a launching pad for the graduates where the graduates come for training and then move to other companies.
Freight accelerators
The company should consider a commission structure that motivates super freight persons. For example, these employees who hit the freight target should be awarded 5% commission. This includes those employees who hit between 75-100% of the freight target. Additionally, those employees who achieve higher freight than the original freight volume should be eligible for an additional 8% commission on the freight on top of the targeted 100% sale freight volume.
Percentage kicker for cash upfront
Companies are run on revenue, and in most cases, most companies end up cash trapped because, most of the freight transaction were done on credit, the company need to consider the fact that most of my freight were paid for upfront, thereby reducing the company’s expenses on credit management. The company needs to develop a commission structure. These structures should focus on which those freight people whose customers pay upfront. These freight brokers should be awarded some amount maybe 2% of freight to motivate employees. Employee motivation is extremely beneficial, but the most noteworthy is how to motivate employees.
You must have realized that the rate of employee turnover in our department was very high in the last two years, with some of them being employed by our key competitors; this is likely to be the trend for the next couple of years. The company had had a number of employees who were motivated to deliver like me, and could not think of leaving the company but had to leave the company when they realized that employee motivation and development is not part of the company. All employees are a human being, and rational human beings are likely to look for work in companies where the prospects of career development are high. The company should work towards developing their employees, and should start with employee motivation.
Increasing Freight Pipeline
The company should be geared at increasing the company’s freight pipeline. The number of opportunities should be increased; however, the company is not trying hard to retain its customer based on the experiences. Most of the customer the company has ever had are scared away from the company after the company fails to deliver. This is seriously hurting the freight efforts of the freight brokers. The company needs to offer some form of bonus to those employees who bring substantial freight business. For example, those employees who have customers with long running contracts should be awarded a bonus or incentives so that they can work with their customers to increase their freight pipeline (Ryan, 77).
On the other hand, companies should develop better freight representative’s compensation plans that consider their quota and volumes of on target earnings. The compensation plans should be structured around, a basic salary and additional variable commission compensation. This variable compensation is configured around a number of factors such as freight volume, frequency or repeat purchases etc. The variable compensation is a basic commission which the employees must earn based on the freight volume. It is also disheartening to realize that there are months that freight brokers could not make any significant freight, but they are not offered anything. These are people who are in employment and have debt obligation that they must discharge, offering a basic salary would go a long way in ensuring that they get what they need to cover their basic need (Ogunjobi, pp13-19)
The on target earning (OTE) is an immensely creative approach to compensating employees and the company should consider implementing this system as it also motivates the employees. The company should consider the 50/50 ration. This means that the ration between the salary and the commission is one half each. The company needs to consider the volume and the velocity of its freight funnel
The company needs to consider the following factors while compensating me and other employee:
1) Gross margin brought in to the company (profit dollars)
2) Gross Revenue
3) Enterprise opportunities closed..
Some other factors that the company needs to reconsider while compensating us include the fact that all freight cycles usually take much longer to complete, therefore, making it hard for freight representatives to hit their target based on the average of the previous three months.
The company should also build an accelerator, in this way the employees would strive to achieve their quotas and then be eligible for the sweet rates. This means that when the freight brokers reaches 110% of the quotas, they are eligible for an extra commission of 15%. I personally would pour on some gas when I am in this zone, because every dollar or revenues that I shall have brought to the company attracts 15% rate (Erickson, 2011).
Conclusion
In my opinion, I feel that a new commission structure is have a straight 25% of whatever you bring in that is profit for the company(Berger, 23). It is also important to consider a structure that uses the last months averaged out and have that as a goal but only as a “target” to hit and if you hit that target goal every profit dollar after that you receive an additional 15% of those dollars. The company needs to develop incentive-specific compensation plans that would help them win the market, retain the company market share, retain the company’s existing customer and grow its contract length. Above all, the company should consider the fact that it needs to deal profitably in all occasions by motivating both the customer and the employees. These are not complaints but my feelings about this job and the commission structure in use, in this company. I hope my recommendations shall meet your kindest considerations.
Works cited
Bloch, B “Multilevel marketing: what’s the catch?” Journal of Consumer Marketing 13:4 pp. 18-26. (1996)
Ogunjobi, T. SCAMS – and how to protect yourself from them. Tee Publishing. pp. 13–19. (2008).
Ryan G. Business Students Focus on Ethics (Praxiology): The international Annual of Practical Philosophy and Methodology Volume 8. New Jersey: Transaction Publishers. pp.75. (2000).
Erickson A. Money Talks, Sales Commission Structures In the Office Equipment Industry Copier Marketplace (2011). From HYPERLINK “http://www.talentmatch.net/articles/commission-structures.html” http://www.talentmatch.net/articles/commission-structures.html
HYPERLINK “http://easy-commission.jimdo.com/” http://easy-commission.jimdo.com/
Berger, M. “When Their Ship Comes In: How to Create an Incentive Program that Motivates All of Your Salespeople—and Sends More Happy Winners on that Coveted Trip.” Sales and Marketing Management. ( 1997). http://www.referenceforbusiness.com/small/Qu-Sm/Sales-Commissions.html#b#ixzz1jihtTNwF
