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 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. This is because of a number of factors that they felt were not favorable for them. Some of the main reasons that could have led to their exit included the following and some of my specific recommendations follow directly:
The commission that the company pays for every sale is somewhat minor that the current industry standards, this makes it hard for the company’s freight executives 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. 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
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.
The company needs to consider giving bonuses to freight people who hit their target. These employees should be awarded cash in additional to their freight commission. However, if the company feel this is not practical I have amidst of companies which have implemented this idea and the profit that the company has realized after implementing this commission structures (Ogunjobi, pp. 13–19).
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.
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 executives. 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:
- The number of leads that one sale produces
- The number of leads that I have turned into meetings,
- The number of meetings that I have turned onto opportunities
- And the number of business opportunities that I have 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. In some months, business is good while in other months, business is extremely distressing. Most companies close shop while some employee quit and engage in other income generating activities as you have noticed with your previous employees
According to Bloch, (pp. 18-26), the average deals size is also another factor that your company does not consider when setting targets. For example, the company uses the previous deal sizes to set the current target; this should be done in consideration of the prevailing environmental conditions. Most of the freight volume that I have achieved was also composed of renewals. And by now the company should realize that the renewal rate of my freight deals is exceptionally high, making me eligible for a better package.
The company also need to know that there are a number of opportunities out there for up sells as well as cross sell, which I can take advantage of and if I am motivated by incentives and other benefits
A perfect basic compensation plan for a freight executive is as bellow:
|On Target Earnings:
|Variable Compensation: OTE – Base Salary =
|Commission Rate: Variable/Quota =
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 13%. 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 13% rate.
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.
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).
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