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The Stimson Group Newsletter
Sep 2008
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Vol 2 Issue 9
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Greetings,
I hope you had a great summer and enjoyed some time off. It sounds like most folks are expecting a fairly busy Fall.
This month's Best Practices installment touches on one of the hottest topics in our industry - Commissions and Incentives. How do you compensate sales folks and reward everyone else who contributes to your success? Well, there's isn't enough space or time to answer this completely in one article, but I will outline some key considerations.
Our Rental & Staging Trends Survey checks your pulse on the movement away from 4:3 images and products. Are your ready? Are your customers?
Finally, get your calendars out and add a few events to your business schedule. The Rental & Staging Roadshow is coming to Chicago and don't forget The LDI Show in Las Vegas. I hope to see you at both events!
Enjoy,
Tom (TR) Stimson, CTS
My Direct Email
Website
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 Mark Your Calendars
We have two Rental & Staging Roadshows coming this Fall. The first will be in Chicago on November 5th. This event will be located at Production Plus' beautiful headquarters and they are proving to be wonderful hosts. I expect a huge regional turnout for our first time to the area. Next we will be in Burbank, CA on December 3rd. Stay tuned for more info on the location and hosts. The Roadshow is a day of training, seminars, and exhibits presented by the folks at Rental & Staging Systems Magazine - the definitive publication for AV Stagers. This is a great opportunity to get some training for the team and for your CTS holders to earn Renewal Units from InfoComm. Learn more and reserve your FREE spot here.  October 20-26 is LDI in Las Vegas. The exhibits are open Friday through Sunday. This event is hosted by my friends at Live Design Magazine and is a must-attend event for anyone in the entertainment and live event industries. I will be announcing a Friday networking event hosted by InfoComm in next month's issue. Stay tuned.
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Monthly Business Trends Survey
Our September survey checks your pulse on the 16:9 migration. Now is the time when companies are either getting ready to implement their purchasing plan for the year or develop one for next year. Are you seeing a reduction in demand for 4:3? Is it changing the way you sell? Does your company have a strategy to become a leader in this area?
Take the September Survey now.
In our August survey we asked thirty questions about day-to-day business habits and learned things like: 20% of respondents have sales meetings on Mondays, but the majority don't have regular meetings at all. 11% use an auto-attendant to answer the phone during business hours. And less than half make a habit of inviting prospective and current clients to their offices. See how you compare to everyone else.
This month our short answer question was about marketing. Do you increase or cut back in a shrinking economy? Here's one insightful comment from a respondent:
"A friend of mine once told me that if we ran our companies when things are good as well as we do when thing are bad we would be very successful." -Anonymous
Download this report.
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 Show-Off Your Digs
We are featuring some of our readers' office and warehouse design accomplishments. If you have recently moved into a new space, remodeled, or found a great warehouse, workspace, or storage solution then you should show-off a little. Please send me some photos
that highlight a cool warehouse innovation, storage trick, conference
room, or lobby/reception area. This month the nice folks at Videoscope in Toronto have sent photos of their new offices. Read their story and see the results in our photo gallery. Browse the photos.
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Best Practices Series:
Commissions & Incentives Part 1
The topic of commissions seems to come up at every meeting I have with clients. It usually starts like this: Will commissions increase our sales? If I hire a new salesperson, what how should I structure their pay? How do I get my current sales staff off their butts? I think I am already paying too much because no one on the sales team seems motivated to grow revenue. My sales guy wants more money, but my profits aren't growing - what do I do? My operations team doesn't try hard enough to prevent mistakes and it's costing us money. Sound familiar?
Commissions are how you get your sales folks to sell the right things. Incentives are your tool for getting the correct behaviors out of everyone else. I believe that companies need both. Most employees will pay more attention to their work when there's some quantifiable reward for doing so. Operations teams will minimize costs if there's incentive and Sales folks will generally do what it takes to earn more money. (Do you have someone in a sales position that is not motivated by money? How's that working out for you?) What puts off many managers and owners from developing logical commission formulas is determining what to calculate. So, they resort to using either gross revenue or job cost. But, commissions on gross revenue can be destructive when used alone and job costs are generally out of the control of sales folks. Both commissions and incentives need to be based on things that can be managed by the recipient.
The biggest mistake a company can make in this area is to adopt a commission structure and never change. Reevaluate these systems annually and revise as necessary by determining the right goals and then restructuring your commission to support them. What are the right goals? If your top priority is to grow revenue you are mostly right. I think growing the RIGHT revenue is more important. But there are a lot of questions you need to be asking yourself: Is your business as profitable as it should be? Will having more revenue make you more profitable or just bring incremental profit? Are you meeting your goals for market share, repeat business, new customers, happy customers, promoting your core business strategy, or a higher profit per project? You may have even more complex goals such as selling a higher percentage of labor to equipment or introducing new pricing guidelines. If it is a goal, then you can create a commission or incentive that encourages it.
Before you get too far into goal setting, do a little financial analysis. Compare some really profitable years (based on operating income) against others. What was your ratio of labor to equipment? How well did you utilize assets? What was your revenue per employee man-hours? Review your shipping, trucking, travel, sub-rentals, outside labor, etc. If you do not have a profitable year to compare, then use some industry metrics and compare your company to others. InfoComm International Market Research has a couple of relevant surveys in this area. Rental & Stagers should order the 2007 R&S Survey Report. If you are an NSCA member, you might also look at what NSCA Industry Research has to offer. Choose three to five metrics that you believe are influenced by sales and set goals to improve those numbers.
Next, you need to determine how you will measure and commission that business goal. Will it be based on an empirical measurement or do you only commission for improvements? When you have multiple measurements you are trying to encourage, you will need to consider how you weight them. Finally, consider the unique personalities of your sales team members. Not everyone is motivated the same way and to the same degree. You will need to address employee lifestyle issues. If you replace some portion of guaranteed salary with incentive-based compensation, how will that affect the individual's personal cash flow? Will you be creating anxious and desperate sales folks? How will you smooth out their income - and should you?
I see companies that have no formal sales commission structure all the
way to highly sophisticated systems and I can assure you - there is no
one right solution.Commissions and incentives won't fix all your problems or make you a better company on their own. They are an important part of a complex formula. Next month we'll take a look at some specific techniques you might consider and calculate some sample bonuses. I will offer some example plans and suggestions for migrating towards them. This is a big topic. Please take some time to grasp the depth of the subject before jumping in.
Comments? Email me.
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 About Thomas R. Stimson, MBA, CTS
Tom
Stimson is celebrating over twenty-five years in the communications
technology industry. As a Consultant, Tom helps companies build
smoother operations, focus sales, and increase profit through strategic planning, process improvement, and market research. For more
information visit the website.
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