Compensation--A Tale of Two Distributors
An in-depth discussion of benefit options for sales reps.
When BFL&S caught up with Chip Grayson, president of Systems Business Forms (SBF) in Savannah, Ga., he had just returned from 10 days at St. Simons Island off of Georgia's coast. "I'm as brown as a biscuit," said Grayson. "It feels good."
However, Grayson isn't the type of leader who only looks out for himself. He understands that his sales team sometimes needs, well, a day at the beach. This is where SBF's flex-time benefit kicks in. "I am not the kind of guy who gets upset and yells or demands anything," said Grayson. "My salespeople can pretty well do what they want. I'm not concerned about it, as long as they get their jobs done."
And, Grayson will be able to tell whether or not his sales staff gets its job done through the monthly evaluations he conducts as an open forum. "The open forum evaluations help shape up our salespeople in front of their peers," said Grayson. "I have found that it is an effective way of communication and lets everyone know where everyone else stands."
Although they were previously done haphazardly, SBF's evaluations now occur both monthly and quarterly. One thing that these evaluations have always been is frank. "We shoot it straight," said Grayson. "We call a spade a spade, and everyone is fine with it."
Instead of reporting each salesperson's gross profit figure for a particular month, Grayson reports the percentage of profit, compared to last year. "I inform the sales representatives whether they are plus or minus from the same month in the previous year," said Grayson. "It provokes a spirit of competition."
On the other hand, MAC Graphics Group, Oakbrook Terrace, Ill., relies on the human element of greed and the lure of graduated commission to improve sales. "Successful salespeople need to be self-driven and, to some extent, greedy," said Bob Cronin, Jr., president of MAC Graphics Group. "There can be—and is—a direct correlation between good, hard work and financial success in sales."
The graduated commission that MAC Graphics Group has implemented for its salespeople bases its percentage on an annualized profit level. Each sales representative receives a bi-weekly draw dictated by his or her proven pattern of commissions. "This policy allows our salespeople a steadier income stream with a sales incentive," explained Cronin.
SBF's compensation formula is also an incentive-based commission, but it differs from MAC Graphics Group's program by building in three designated breaks. "Each time the salespeople reach a new plateau, their percentage of commission changes in their favor," said Grayson. "This encourages higher sales volumes, which means they are selling more and, in turn, making more."
Survey Results
Out of 900 graphic arts sales professionals polled for a 1999-2000 PIA Survey of Sales Compensation, 37.2 percent are paid by commission only. Salary plus commission and salary only follow close behind, respectively comprising 29.5 percent and 22 percent of those surveyed. Salary plus commission plus bonus (8.9 percent), salary plus bonus (6.7 percent) and commission plus bonus (2.4 percent) round out the total.
When it comes to brand-new sales representatives, does the compensation formula change? For MAC Graphics Group and SBF, it initially does. Both companies start new salespeople with a salary. According to Cronin, at MAC Graphics Group, the salary is effective for an agreed-upon time, with a decreasing salary matching an increasing commission level. SBF determines how long new salespeople are salaried according to their performance.
"It could be a couple of months—it just depends on how they are developing," said Grayson. After they graduate from being salaried, SBF's new sales representatives switch to a draw and then eventually to straight commission.
According to the PIA survey, the vast majority of graphic print companies find new sales representatives from other printers. Approximately 28 percent tap other employees within their firm, and 27 percent seek out experienced sales representatives from other industries—an approach that has suited SBF very well over the years.
"We've been market-specific in our hiring process," said Grayson. "Potential candidates don't have to be experienced sales reps in the forms industry." In fact, to add to its expertise and ensure a diverse talent pool, SBF has recently added an office furniture salesman, an office supplies expert and even the former vice president of an advertising agency.
"Because he had an advertising background, this salesman taught us how to create an ad, the best way to work with agencies and how to talk on a marketing level with a customer," explained Grayson. "We were able to create annual reports for national companies because of this person. We're teaching him about forms, and he's teaching us the advertising process."
How does MAC Graphics Group locate potential new hires? "Word-of-mouth referrals seem to work best for us," answered Cronin. "It's very difficult to measure whether or not a candidate's personality would be a good match for our company or whether or not he or she has an ambitious nature."
Health Matters
MAC Graphics Group and SBF also approach health benefits differently—the former pays medical and dental premiums, while the latter evenly splits the cost of health insurance with its sales team. SBF is also currently finalizing a long-term disability plan that it will fully fund for all of its employees.
"It's a super benefit that is not that much more expensive than if I were to implement a large long-term benefit for myself," said Grayson. "I can now cut back on some of my own disability policies, which will result in enough savings to help implement this group policy."
Training Pays Off
One thing that MAC Graphics Group and SBF agree on is that training pays off, which is why they both pour a lot of time and money into the process.
"We invest a tremendous amount of time and dollars in the guidance process, account generation techniques and sales training," said Cronin.
In addition to hosting vendor lunches and providing and challenging its sales staff with information on various sales tools, SBF makes every effort to alleviate the cost of training trips. "We have, from time to time, paid for entire trips," said Grayson. "If it's a longer or more extensive trip, we'll work something out."
In fact, SBF plans to pay half of the airfare and lodging for two sales representatives who are traveling to a promotional products convention. "They can attend the seminars, receive ad speciality training and experience the convention floor," said Grayson. "Then, they can share with all of us what they learned."
The Finer Points
Both MAC Graphics Group and SBF have non-compete agreements, and SBF also has a confidentiality clause, which prevents former salespeople from disclosing information about the company and its accounts. SBF's non-compete agreement lasts for one year and is area-specific. Both companies also own their accounts.
"We decide who represents the account based upon which salesperson offers our company the greatest upside, often because of a personal-contact situation," said Cronin.
Through compensation benefits such as these, distributors are attempting to make a sales representative's job feel more like a day at the beach.
By Jennifer Hans