Diving into Measurement & Comp Plans that Work
If you’re like many staffing firm executives, the end of the calendar year means a targeted focus on employee performance, achievements, and compensation. You need to know how your team stacks up, and how much you need to pay them to execute your vision.
It’s a complicated topic to be sure, but fortunately we had Business Strategist and Executive Coach Tom Nunn at the 2016 TechServe Alliance Conference to share best practices for measuring success and incentivizing your team. He covered a wide range of topics, from differentiated comp plans to tiered bonuses and work from home policies, and everything in between.
Along the way, he gave our participants some valuable advice, including this definitive statement: “The worst mistake you can make is to pay for activity and not for results.”
What to Measure
So how do you differentiate between activity and results? That’s a universal challenge. The employee evaluation process starts with identifying the Key Performance Metrics (KPMs) that are most relevant to your business, your employees, and your culture. We’re all familiar with average submittals and new job orders and the like, but Nunn threw some new ideas into the mix.
Using “JSIP” stats is an excellent way to track several important quality metrics. JSIP stands for: Job Order to Submittals to Interviews to Placements. Knowing how these numbers relate to each other gives you visibility into many things, including the quality of your customers (J to P), Recruiter Quality (S to I) and overall effort from your producers. It also provides a clear benchmarking mechanism to the TechServe Alliance Operating Practices Report (OPR), so you can see how you measure up to the competition.
Production over Tenure (POT)
POT is another innovative measurement approach that provides an excellent way to convey expectations and hold people accountable. Unlike straight up performance metrics, POT also recognizes that it takes new employees time to ramp up.
Like you can see in the sample report, a POT report tracks an employee’s first 24 months and rates them against your expectations. They might be a Star, or they might be Below Minimum, but at least you know the system is taking real standards into account.
Why Measurement Matters
Nunn shared that an effective performance measurement program is built on a foundational and fundamental belief: Everyone deserves to know how they are doing. How can you improve if you don’t know where you stand? That holds true for individuals, teams, and the company as a whole. Measurement gives you the insight to answer key questions such as:
- What is the story the data is telling me?
- Where do I stand vs. expectations?
- What do we need to do about the situation?
According to Nunn, effective accountability systems focus on five things:
- Clear expectations
- Clear capability
- Clear measurement
- Clear feedback
- Clear consequences
These principals set the stage for a clear, fair, and consistent compensation system. Comp programs must not only recognize the difference between efforts and results, they must reward those behaviors that drive the results. Ask yourself, what behaviors do you truly want to incent (or not incent!)? Gross margin spread or percentage? New customers? New starts? Nunn suggested starting with the end in mind and then using compensation “accelerators” to recognize superior performance.
Looking at the staffing landscape, Nunn identified a few comp trends, including:
- Lower commissions on “legacy” GM contributions, much higher on new GM
- Deal by deal commission % based on GM%
- Targeted activity bonuses: new customers, growing existing customers, new GM$, Higher GM%, etc.
- Leveraged plans with reasonable salaries and greater upside if they produce
In addition to too-high salaries (because “that’s what it takes to attract talent”), Nunn cautioned against rolling out too many different plans for too many people, which just causes headaches. He also advised to keep guarantee periods short and not to pay too much for “low touch” business models. During the Q&A, Nunn also answered questions about use of equity as part of the compensation plan, whether to turn a blind eye to high performers’ activity levels, and change management techniques for altering comp plans.
When it comes down to it, your best producers are those who want to get better and who are HUNGRY for results. They are infinitely coachable and want to be surrounded by other top producers. When you provide them with clear data about their performance and a powerful compensation plan, you’ll be amazed at what they can do for your company!