Download A Winning Incentive Strategy For Sales Associates

A Winning Incentive Strategy For
Sales Associates
Ritchie Sayner
“Put that coffee down, coffee is for closers
only!” – Alec Baldwin in “Glengarry Glen
Ross”
Bonus: This area was so varied,
it seems best to list a few
examples.
One of my all-time favorite sales
movies is the 1992 film “Glengarry Glen
Ross.” Anyone who is in or has been in a
sales organization can perhaps relate to
this film based on David Mamet’s
Pulitzer Prize-winning play. The film stars
Al Pacino, Jack Lemmon, Alec Baldwin,
Ed Harris, Alan Arkin, and Kevin Spacey.
The star-studded cast alone is worth the
Redbox rental fee. A word of caution is in
order, however: The language is a bit
rough and I wouldn’t call this a “feelgood” movie. If you go forward, consider
yourself warned. One of the most dramatic scenes is a new sales contest,
where first prize is a new Cadillac
Eldorado, second price is a set of steak
knives, and third prize is “You're fired!"
(Next line: “Have I got your attention
now, I think I do?”)
> No goals, no bonuses.
ABC: Always Be Closing
Since wage and salary expense makes
up the second largest expense category
for an independent shoe retailer, I
thought it might be interesting to find
out just exactly what retailers are doing
to compensate and motivate sales associates. As part of my research, I took an
informal poll of several retailers and discovered the following:
Hourly Rate: $8.00-$15.00
Discount: 30-50% on purchases, with
some stores giving free shoes as often as
“each season” to “annually.”
Insurance: 50-90% paid by employer
for health insurance for full-time
employees in the stores that offer it.
12
Published in
the Sep/Oct
2012 issue of
Shoe Retailing
Today, copyright © 2012
National Shoe
Retailers Association, Tucson,
AZ, www.nsra.
org. All rights
reserved.
> 1% commission paid if total store
achieved a pre-set monthly sales goal.
> 6% bonus paid on the difference if
last year’s sales were exceeded by 20%.
> Various formulas involving multiple
sales, average sale, number of items per
ticket, foot scans, and additional sales
of accessories including socks and
insoles.
One retailer told me he paid $10
an hour vs. a 10% commission. He
further explained, “If they are not
making commission, they are not Ritchie Sayner
working here for long.”
Jack Welch, the well-known former employee. I believe compensation
CEO of General Electric, was famous for structures need to be as simple as possiterminating the bottom-producing 10% ble, hence the KISS method, an acronym
every year. Everyone knew the rules for “Keep It Simple, Stupid!” I believe in
going in and it seemed to work for GE. paying bonuses to sales associates for
I’m not suggesting that independent contributions above and beyond the
retailers adopt hard and fast rules that minimum expectations, not for showing
would result in head-rolling for 10% of up and “punching the clock.” I believe
the sales force, but with payroll costs that people have different skill sets, perrunning nearly 23%, the largest portion sonalities, and motivation that might
of which is selling costs, making up affect how much they make. I subscribe
10.6% (NSRA's Business Performance to what I might best describe as a
Report 2011), this is an area that needs Darwinist approach, in that I believe the
more you sell, the more value you add
monitoring.
to the organization and the more you
should make. It’s simple and it’s fair.
Use the KISS Method
I believe in incentives. I believe that
“A man only hits what he aims for.”, reads
most people serving in a sales capacity a sign on the wall of Premiere Properties
are motivated by money. If they are not, in the movie “Glengarry Glen Ross.”
they may still be good employees, but
I would like to offer an approach that
they are not serving in the right capacinot only provides incentive to sales peoty. I believe in setting achievable goals
ple, but is also designed to reduce selling
that reward both the company and the
SEPT-OCT 12
costs at the same time, resulting in a win-win formula. Assume
the following:
Commission Rate for Sales Over Base 5%
Commission on Sales Over Base = $225.00
Hours/Week
15.0
Base Hourly Wage
$10.00
Total Monthly Wages
$825.00
Monthly Sales
$10,500.00
Actual Sales/Month
$10,500.00
Weeks/Month
4.0
Actual Selling Cost = 7.86%
Base Selling Cost
10%
Commission Rate (for Sales Over Base)
5%
Now do the math:
Total Monthly Wages
$825.00
Hours Worked/Month 60
Total Hourly Wages = $13.75
15.0 Hours Worked/Week x 4.0 Weeks/Month = 60.0 Hours
Worked/Month
$10.00 Base Hourly Wage x 60.0 Hours Worked/Month =
$600.00
Base Salary of $600 ÷ Selling Cost of 10% = $6,000 (Base)
$10,500.00 Actual Sales/Month – $6,000 the Base = Sales
Over Base of $4,500
In this example, a selling cost of 10% is used to determine a
base; in this case, it is $6000. No commission is paid until the
base is reached. Once achieved, a 5% commission is paid on
all sales volume over base. The sales associate earns more
based on what he or she sells and the selling costs go down
accordingly.
So go ahead, have that coffee now because everybody is a
winner with this strategy! ■
Ritchie Sayner is vice president of business development at
RMSA Retail Solutions. Retailers are invited to follow him on
Facebook at http://www.facebook.com/RitchieSayner. He can
also be reached by email at [email protected].
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