This CNNMoney.com article is fascinating, at least to me.  A doctor opens up about his clinic/practice in terms of the financials of it.  As a small business owner, I have a complete appreciation for the decisions he has to make in terms of his business.  At the end of the day, it is a business.

If you think your business has to fund some extraordinary insurance policies, wrap your mind around this information:

Fixed costs for a private practice also include malpractice insurance. He pays about $7,000 a year for himself and $2,000 each for his two nurse practitioners. Schreiber admits that his cost for malpractice insurance is relatively low, compared to specialists such as ob/gyns, who pay upward of $100,000 a year.

I just about did a spit take that would have showered my laptop with coffee.  Anyway, it is an interesting read.

Comments(0)

I had this thought when talking to a customer – he has an employee to whom he pays a set wage (hourly pay, but same number of hours every pay period).  Week in and week out, there is no discernable, tangible output of work from this employee.  Does this fact make this employee’s pay infinite per hour?

Just a thought.

Comments(0)

Now this is something I have not seen yet – loaning out your employees during slow periods.  Inc.com provides the article:

How it works: On the StaffShare website the “seller” company lists the employee’s skills, daily rate, and availability. The cost is £50 (roughly $81.70) a year per candidate. The “buyer” company searches the database, uses the website’s message system to vet candidates and iron out details with the seller, and then a contract is sent electronically.

The background behind the idea:

“The companies had these redeployment pools of 1,000 people who needed to find other work within the company,” Flaxton says. “So we thought, ‘What if there was a service where they could find it at another company?’”

Conceptually, I think it is a tremendous idea.  Logistically, I’m not sure how this approach would work for retention.  Still, I believe there will be major transformations once we finally come out of this severe recession.  Employees moving to a contract agreement seems to be a natural progression.

The movement of health insurance payments from the employer to the employee (inevitable based on rising costs) will remove one of the incentives of traditional employment agreements.  A contractual (1099) agreement could become the more standard arrangement.

Comments(0)

Great article from Yahoo Finance.  I think I have worked with some salespeople in the past who had this same compensation program:

Anthony Armatys is facing up to six years in prison for his dumb move. But he’s not the only dummy in this story.

Armatys accepted a job in 2002 with telecom equipment maker Avaya but then changed his mind before he started. He was already in the payroll system however, and the company started depositing his six-figure salary into his checking account.

For five years, Armatys did not notify Avaya of its error, but his attempt to make an early withdrawal from his 401(k) prompted an investigation that led to his arrest.

In October Armatys pleaded guilty to theft and was ordered to repay the $470,995.53 in compensation he received. He faces full sentencing in January.

Comments(0)

The Herman Trend Alert newsletter (sorry, no link) provides some interesting statistics from a Cisco survey:

Now the international technology giant Cisco Systems has just released a study of its own organization demonstrating these benefits and more. Using telecommuting, Cisco estimates annual savings of USD $277 Million. In its in-depth “Teleworker Survey” of almost 2,000 company employees, the company evaluated the social, economic, and environmental impacts associated with telecommuting.

The study found that telecommuting significantly increased employee productivity, work-life flexibility, and job satisfaction. In addition, the report cited that “a majority of respondents experienced a significant increase in work-life flexibility, productivity, and overall satisfaction as a result of their ability to work remotely”.

The productivity gains were impressive. Approximately 69 percent of the employees surveyed cited higher productivity when working remotely, and 75 percent said the timeliness of their work improved. Sixty-seven percent reported work quality improvement. Telecommuting can also lead to better employee retention; more than 91 percent of participants said telecommuting was somewhat or very important to their overall satisfaction and 80 percent believed they enjoyed an improved quality of life.

Couple things here – the study does appear to be self-reporting – “…of the employees surveyed cited….”  This type of reporting is always a bit of a concern.  It would be more helpful if there was a technique for putting an objective metric to their productivity.

Second, the value of telecommuting in a candidate’s eyes is noteworthy.  91% said it is very important to their overall satisfaction.  When it comes to hiring salespeople, this is a crucial fact to keep at the top of your mind when designing a compensation plan.

Comments(0)

SellingPower.com’s article deals with something we have seen throughout our many years of sales assessing, hiring and coaching – financial comfort zones.  Here is a good explanation of it from the article (emphasis mine):

Eker stumbled on the concept of financial blueprints while running his first company, a fitness business. In that business, his trainers often referred to a body’s “set point,” or the metabolic rate at which a body is comfortable. Eker, looking back over his financial history one day, realized that again and again he followed the same financial pattern of making a lot of money and then losing it. Up and down, up and down for fifteen years. “Wow,” he thought. “In the same way we have a set point with weight, we must have a set point with money.” His follow-on observations of others confirmed his theory, that everyone has a financial set point they unconsciously return to all their lives.

So true – this plays out time and again in the sales world.  Salespeople often get caught in a stagnant mode once they hit their financial set point.  They stop prospecting, they find busy paperwork, they fine-tune tasks…essentially their behavior goes into cruise control.

When hiring salespeople, it is important to dig for this set point.  Typically a candidate will not provide it willingly, but you can pursue their past successes.  It is perfectly legitimate to ask for a previous W2.  It is always valuable to delve into the largest deals they closed and the commission they earned.

A candidate with enough of a history will show distinct financial set points that you can then determine if they are a fit for your position.  One last thought is that this set point works 2 ways – you won’t retain a salesperson in a $75K position when their set point is $150K.  If your compensation plan is inflexible, capped or unattainable, they will leave once they realize the ceiling.

Comments(0)

The Herman Trend Alert has a surprising report on a survey looking at employee perks for 2008.  The economy may be tanking, but employers are aware of the need to retain talent.

In spite of the drastic effects of the economy on the labor market with announced workforce reductions up 30 percent, a surprising majority of companies (66.7 percent) have chosen to preserve their employee perks. Ten percent of those employers said they had considered trimming perks, but decided to leave them at current levels.

Despite their need to reduce their expenses, almost 55 percent still plan to distribute year-end bonus checks this year (2008). Only 20 percent of the companies surveyed said they had cut or eliminated perks to contain costs. At the same time, 35 percent reported they had to cut these extras to save jobs.

…

The destabilized economy has led to major reductions in force. According to Challenger’s estimates, through September 2008, employers have announced plans to cut a total of over 750,000 jobs. Yet in spite of the softer economy, another survey conducted by a business research firm in Arlington, Virginia and ADP, the payroll provider, found that 34 percent of their respondents reported “recruitment and retention” as their top priority.

Looking at the findings from both of these studies, we can infer that a large percentage of employers understand the value talented workers provide to the organization. They know that if they do not take care of their employees during this difficult time, when the economy improves, those employees might leave.

Wise employers will hunker down and engage their associates to help them streamline processes, market smarter, and cut expenses. They will continue to resist reducing bonuses and perks, because they know the future dangers and choose to think long-term.

Remember Clark Griswold in Christmas Vacation receiving his Christmas bonus of a one-year membership in the jelly-of-the-month club?  I guess that would not be a good option in this instance.

Comments(0)

ManageSmarter has a good article that provides 10 ways that you can help your employees through the economic crisis.  There are some simple ideas on the list that a manager should do regardless of the economy.  What better way to retain your employees than to show your appreciation for their efforts?

1. Shortening the work week to four days with extended work hours will increase productivity and give a welcome break for people.
2. Consider giving turkeys to employees for Thanksgiving and accompany the gift with a card expressing appreciation for what everyone is doing.
3. Facilitate a car pool, coordinating rides or give a gas cards.
4. Hold regular one-on-one meetings with employees to learn of their financial situation and their stress levels.
5. Giving employees movie passes or restaurant certificates for excellent work.
6. Boost morale by having senior leaders conduct regular communication meetings with all employees to share what is going on with the company and to solicit ideas on how to help each other deal with economic uncertainties.
7. Bring in childcare services or set up a day care opportunity close to the office to lessen child care travel time and expenses for employees.
8. Make exercise programs and gym equipment available so they can stay trim and fit without paying monthly membership fees.
   Work with your downtown business association to see what after-hours shopping discounts can be arranged to assist employees with saving money.
9. Take some time now to write an individual thank-you card to each employee expressing sincere gratitude and appreciation for sticking with the company and thank them for their contributions.

Comments(1)

According to the most recent Workforce Recruiting newsletter (sorry no link available), 1,100 employers were asked what the main reason was for them not being able to hire their top candidates over the past two years.  Their responses were as follows:

• 35.9% – Said they went elsewhere for higher perceived pay.
• 15.5% – Said they went elsewhere for better perceived career development opportunities.
• 8.0%   – Said they went elsewhere for better perceived work/life advantages.
• 7.1%   – Said they went elsewhere for higher perceived long-term incentive/equity compensation.
• 1.5%   – Said they went elsewhere for better perceived benefits.
• 31.9% – Said they were able to hire the majority of their top candidates.

It would be interesting to know of the 31.9% that hired their top candidates knew exactly what was the deciding factor of the candidate who accepted the offer.

Comments(0)

I know, lame title, but I couldn’t resist. ManageSmarter.com offers up this article – Compensation Complexity Hinders Sales – regarding current compensation plans.  Here are some numbers they quote within the article (my editing):

Only 41% of sales leaders were satisfied with their current compensation plans (down from 59% two years prior), and only 46% believed their plans were promoting the correct behaviors for sales success.

Nearly half (46%) of sales force leaders believe their sales compensation programs have become more complex since 2006.

I always found the compensation plans to be more “complex” when I wasn’t at quota.  Successful selling definitely alleviates many problems.

But there is this:

The survey points out that many companies are making strides toward more effective compensation plans. Among the productive steps forward are companies using three or fewer measures of performance (73%), conducting a plan review at least annually (77%) and changing metrics less often than before (58%).

Those are 3 excellent points regarding sales compensation plans.  Companies that shift the commission structure around mid-term (weekly, monthly, quarterly, etc.) are generally demotivating their sales team.  Consistency is the best policy here.  Try to change it only at preset intervals (annually).

Measuring too much can also be a demotivator.  Simple, straight-forward commission plans work best.  We are proponents of providing commission based on gross margin in as many situations as possible.  This approach keeps the salesperson honest when it comes to discounting.  If they discount, they lose money themselves – a very good structure for money-driven salespeople.

Comments(0)