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CompensationMaster Case Study, October/November 2003 Lori Hawkins, president of John L. Scott Southern Oregon, started offering a choice of compensation plans because the sales associates she was recruiting wanted commissions similar to those their previous
company offered.
Hawkins was also concerned about getting the company dollar from associates whose productivity
was dropping. "We wanted to base compensation on productivity and make it fair to everyone," she states.
She worked with CompensationMaster to design five plans customized to meet the competitive pressures
of her market:
Partner plan
Associates start at a split of 50 to 70%, determined by their prior year's gross commission income
(GCI). Upon achievement of a certain associate earnings level, they accelerate to 88.5% or 90% with a unit fee.
Daily rolling average plan
This plan stabilizes the associate's income on an annual basis, so associates don't have to return
to a lower level at the start of a new year.
Entrepreneur A & B plans
Both Entrepreneur plans have a monthly desk fee. The split for plan A starts between 60 and 70%,
depending on the prior year's GCI, and accelerates to 90% with a transaction fee. Plan B starts at 70%,
accelerates to 95% and tops out at 100% (with the transaction fee) once associate earnings reach a
defined level.
Executive plan
Associates pay a monthly overhead fee, a transaction fee, and all expenses. This plan starts at 95%; once
associate earnings reach a certain level, the split increases to 100%.
Helping people choose the right plan was the most difficult part. "It was interesting to us that the
associates were more interested in their split level than in total earnings," explains Hawkins.
"However, we didn't lose any associates over the commissions, and the top producers were ecstatic,"
Hawkins continues. "They had been paying the major portion of the company's expenses and could see the
benefits immediately."
"The main reason to introduce these new plans was to increase profitability, no question. This has
changed our bottom line dramatically," says Hawkins.
Two years ago, the company had one office with 50 associates. It has since acquired four other
companies and opened one new office, for a total of six offices with over 145 associates.
The company handled 1500 transactions in 2002, up from 837 in 2001. Volume increased 108%, and company
dollar increased 62%.
Hawkins expects 2003 to be their biggest year yet. "As of September our profit is already ten times
what it was for the whole year last year," she states.
"Profitability is your only sustaining power," concludes Hawkins. "In today's marketplace there's
so much competition. The only way you can survive is to have compensation plans that increase your
overall staying power."
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