A few days ago the Velvet Hammer provided some pointers on putting together offer letters and I wanted to chime in on the topic. I have just a couple of general reminders as you deliver the offers to your sales candidates:

1. Your position is probably not the only opportunity they are looking at so keep the process moving along – timing is everything.
2. Qualify the total compensation package with the candidate. Will the offer be in the candidate’s range or will it be out in left field?
3. Expect to have some negotiation with the candidate on the offer. Again, this is probably not the only opportunity they are pursuing.
4. Make sure the offer has a date the candidate needs to respond by, do not leave it open ended. As we like to say, it doesn’t take longer to say yes. The longer they take to respond, the more likely they will decline the offer.
5. This sounds rudimentary, but make sure you follow up with the candidate after the offer has been given. We had one customer, who after tendering an offer and telling the candidate they would follow-up in a couple of days, never did. They almost lost a very strong candidate because they got busy and forgot to make the call.

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Wall Street Pay Averages $300,000 Per Year. “Averages” is the word that hooked me into the article. The straight-forward article simply relays the stats and how an improved Wall Street helps NYC. Today’s news that the Dow Jones Industrial Average crossed the 12,000 line for the first time ever bodes well for that average pay moving up.

I enjoyed this rather dry statement from the short article:

“Wall Street is recovering,” Hevesi said in a statement.

I guess so.

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We are working through some offers for sales candidates with multiple clients this week and thought it would be helpful to discuss some general points.

Salary – we’re big believers in a modest/decent salary. The best plans we see provide a salary to cover the basic needs of the salesperson. If they are worrying about basic bills, they are not as effective. I know there is an old school belief that commission-only plans are the best – purest form of selling, you eat what you kill. The largest drawback to this approach is that sales managers often leave the salesperson to their own devices. Their rationale – the salesperson will either sink or swim. This is not a good investment of the company’s hard-earned leads.

Commissions – offer a realistic, uncapped plan. Often we come across commission plans that are set so astronomically high the space shuttle orbits them. Salespeople know this. I like to say, “If they make their number, they should own the company.” Keep the commission plan real. It is best to leave it uncapped and the best way to do this is to pay a percentage of gross (bid) margin. The margin reward is the tonic to the discounting disease. If you pay on revenue, the salesperson has no incentive to maintain high margins. Worst case, they will discount to below cost to get an easy sale.

Ramp Incentive – we always recommend offering some form of an incentive during their ramp up time. Here’s what we don’t recommend – don’t start them at a higher salary with the plan to lower it after the ramp period. This is always perceived by the salesperson as a pay cut no matter how clear the plan. Also, a guaranteed draw/commission is risky in that the salesperson receives commission dollars without earning them through closed deals. This approach is synonymous to feeding bears in the park. Pretty soon, they stop hunting on their own and wait for handouts. We recommend you provide them with a ramp incentive but that they earn specific commissions by completing specific tasks (market analysis, value proposition, first few deals, etc.).

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I received a comment from Sonia Meisenheimer at PayScale yesterday regarding this post from last month on the Ask Dr. Salary blog. Sonia mentioned that the blog is actually run by PayScale and not CareerBuilder – my bad.

PayScale has launched a new blog called Salary Stories which I checked out this morning. I enjoyed the blog and their excellent use of YouTube (should I call that GoogleTube now?). Their description of the blog:

Salary Stories are true tales about working people who do what they love and love what they do.

The videos are well done – I watched a couple of the interviews and they are quite compelling, earthy and insightful. The interview with founder of Cranium, Inc. – Whit Alexander is quite entertaining. He went from working for free in Africa to being employed by Microsoft and working on the first ever release of Encarta.

Check out Salary Stories – it is well worth the visit.

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At Select Metrix, we constantly preach that compensation plans should be, in part, tied to an individual’s performance. So when I was reading through my newsletters and RSS feeds, I was amazed to find stats from several different articles and feeds.

First off, CEO turnover is up. The numbers show that CEO turnover for 2005 was 15% compared to 9% just 10 years earlier. Pay is also up, this could be due to the fact that more CEOs are moving around. In 2004 CEO pay increased 14.5% and in 2005 it increased 7.1% with the median salary and bonus coming in at $2,408,665.

With this trend, The Corporate Library (paid subscription required) just published these findings:

Eleven companies that authorized a total of $865 million in pay to CEOs who led their companies to a cumulative loss in shareholder value of $640 billion last year.

Ouch! Those companies may want to think about looking for different leadership and restructure the incentives to be more directly tied to overall corporate performance.

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The Workforce Management newsletter arrived this morning in my inbox and I came across a startling article. I was shocked at the compensation of the top 30 HR leaders in the US. The top 10 HR executives’ compensation is between $2.5 million to just over $6.6 million a year. If you are interested in viewing the list, here is the link: The 30 Highest-Paid HR Leaders.

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The 2 companies in the title of this post have released a new website – cbsalary.com. The site is a competitor of the long established salary.com website of which I am a fan.

The CareerBuilder site has some interesting hooks to it including a direct link to current job listings on their board. If I am not mistaken, salary.com offers a comprehensive service that searches the big 3 job boards. There is a section towards the end of the free report that offers a comparison to similar profiles which was interesting. The similar jobs were close, but not quite exact. I searched on a Technical Recruiter position but the comparisons were for a general recruiter which is a big difference. The report does list benefits/perks for the profile which has some valuable information (laptop, cell phone, telecommute, etc.).

One thing I have to mention, cbsalary has a blog! And it is run by Dr. Al Lee who is a PhD in physics from Yale and goes by the moniker “Dr. Salary.” You’ll know that fact the minute you read a post there.

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An interesting article ran in last week’s Selling Power Newsletter for Hiring & Recruiting titled “Why Do Salespeople Leave?”

According to Compensation Resources, Inc. (CRI), obtained turnover statistics and trends from a broad range of industries and company sizes. The results indicate that both voluntary turnover and overall turnover have slightly increased in 2006 over 2004 when the last data were collected. The report identified an important shift in the motivators for leaving noted by employees. In 2004, the top reasons for moving on were better pay and better benefits. In 2006, the top reasons for leaving an employer is the desire for better opportunities and increased responsibilities.

“More and more, employees are seeking to improve their abilities and be recognized for their work, and are no longer motivated by pay alone,” says a CRI spokesperson.

They touch on an interesting point that I actually posted last week in Attracting the Passive Candidate. Whether we are talking about candidates or employees, all salespeople are asking a similar question, “What’s in it for me?” Understanding their rewards is the first step whether you are looking to hire or retain salespeople.

The second step is to match your rewards to match the employee’s motivation-reward pattern. For example, say you plan to run fourth quarter contest to try and bolster sales. If your sales team is motivated Utilitarianism and rewarded by Material Possessions, providing a President’s Club reward may not align with their goals. You won’t see much of a buy-in from your team. Now, if you use money bonuses, you will have captured their attention and engaged their motivation-reward structure.

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I just received an interesting email from Salary.com:

Do you deserve more than a 3.7% raise?
Your increasing skills are worth more than the standard 3.7% cost of living increase.Be prepared for your next salary review by purchasing a Personal Salary Subscription today.

I received a 13.25% raise because of Salary.com information
- Satisfied Salary.com Customer

I have never encountered this approach, but I am intrigued by an employee showing up to a salary review with a detailed report. I don’t know how I would take that as a manager.

Another part of the email mentioned:

“Thanks for all your help. This is an amazing tool. It has helped me to prepare for my salary negotiation and has given me the confidence to negotiate for a 10% increase in pay.”
- Salary.com Customer

The 10% raise apparently did not lead to a “satisfied” Salary.com customer like the first quote. Nonetheless, you have to love the information available on the Internet.

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CareerJournal.com has a long article entitled Get the Most Pay Out of Your Job. The article follows a typical format of 10 tips for employees and there are some solid suggestions. In the list, point #2 hit on a topic dear to my own belief:

2. Bet on yourself
Having a bonus tied to performance goals and hitting them can get you more money annually…The key to receiving more bonus money is superior performance. If you meet your goals, you should receive your target bonus amount. But at some companies, if you exceed the targets set for you, you may receive an award that exceeds your target bonus. At Biogen Idec, for instance, high-performing employees can receive as much as 200% of their target bonus amount, says Mr. Schneier.

Amen to that approach. I love the confident heading – Bet On Yourself. I have always believed that every employee should be incented with a bonus/commission plan based upon performance. Whether it is corporate or individual performance, some plan should be in place to have every member of the company working towards similar goals.

When sourcing sales candidates, we always pay close attention to their compensation questions and requests. Personally, I prefer to see sales candidates who want to discuss the commission plan as opposed to the salary. The salary range should be addressed in the ad and there is no problem in negotiating on that topic. However, I am always leery of salespeople who drive hard on a higher salary and seem indifferent regarding the commission plan. That, in our world, is a big red flag.

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