Business Unfiltered
Employee Compensation Strategies
October 17, 2023
Welcome back to Business Unfiltered with Mercer and Jeff Sauer today's topic is Employee Compensation Strategies 0:00: Mercer and Jeff discuss employee compensation strategies with a 360 view. 0:56: Compensation plans and their importance in business. Mercer shares stories of compensation plans gone wrong, highlighting the importance of careful planning to avoid unintended consequences. Jeff recounts his experience with a poorly structured comp plan as a minority owner in his agency, emphasizing the need for fair market value and added value to the organization. Jeff explains how sales bonuses work in his company, where he earns a percentage of the revenue above his salary threshold. Sauer's bonus structure incentivizes him to continuously sell more, with escalating percentages for higher sales amounts. 5:11: Sales compensation strategies and moving goalposts. Jeff shares his experience with a bonus structure that led to a moving goalpost, where the target kept increasing after being exceeded. Mercer agrees that the goalpost moving phenomenon is common in sales roles, where the focus is on commission-based income. Mercer also shares his experience in a non-sales role, where he found that salespeople were better compensated despite having a similar job function. 7:54: Sales compensation plans and their variations. Mercer describes his experience with a commission-based sales job, where they had to sell $20,000 to cover their $2,000 draw and could earn higher commissions above that threshold. He notes that managing salespeople with high targets can lead to demotivation, as it may be difficult to repeat past successes and maintain that level of performance. He discusses compensation plans for salespeople, including base salary, draw, quota, and bonus plans. Jeff highlights similarities and differences between various compensation plans, emphasizing terminology and outcome. 12:19: Commission-based sales structures and their challenges. Jeff shares his experience with 100% commission-based sales, noting that it can be risky for both the salesperson and the employer. He emphasizes the importance of having a threshold for bonus plans, based on revenue and profit rather than just revenue. 14:36: Compensation plans for business growth. Jeff emphasizes the importance of budgeting and adjusting comp plans based on sustainable revenue growth. Sauer's agency prioritizes recurring revenue and adjusts comp plans accordingly, with a focus on incremental business. Jeff and Mercer discuss the importance of revenue and profit in business, and how it can be challenging to measure and incentivize these metrics as the company grows. Mercer highlights the need to consider various aspects of compensation, including salaries, bonuses, and benefits, to attract and retain the right team members. 19:23: Employee compensation strategies and team member motivation. Mercer reflects on a team meeting where members were not future-focused on retirement savings, but were open to compensation strategies like 401k matching. He implements a company matching 401k program to help team members save for retirement, with the goal of providing additional compensation. He reflects on his experience with company matching for 401k and other benefits, noting that it's not necessary to have a lot of money to offer compelling incentives. Mercer emphasizes the importance of understanding what motivates individual team members, whether it's stability or the potential for growth and risk-taking. Mercer says mistakes made with comp plans include paying too much too fast, raising salaries too fast, and lack of core motivation among team members. Adjusting comp plans based on team member motivation and company growth is crucial for success. 25:21: Employee motivation and comp plans. Jeff discusses motivation, bonuses, and organizational culture in a business setting. Jeff highlights the importance of understanding employer costs beyond salary, including benefits and taxes. 28:24: Employee compensation strategies based on role and individual motivations. Jeff agrees that figuring out people's motivations in the majority can make compensation plans better. Sauer customizes compensation plans by role and person, taking into account individual preferences for stability and upside. Mercer discusses customizing compensation plans based on role, not individual performance. Jeff emphasizes the importance of role-based compensation and the overall comp plan, rather than just individual performance.
Topics Covered In This Episode

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