Staying Competitive with Your Management Compensation Plan
1 Jan, 2004
By: Chad McDanielIs your management compensation plan working? Call centers are the most viable channel for implementation of a successful customer relationship management (CRM) strategy. Regardless of where the call center is located—domestic, near-shore or offshore—it still provides the most cost-effective channel to communicate with customers.
Who you have chose to manage your call center—and to support your company’s CRM strategy—drives the success or failure of how your customers perceive the quality of product and service obtained. These people are critical to the overall effectiveness of customer service and customer communication success. How you compensate your call center management and key stakeholders is as important as defining the CRM strategy. An effective CRM strategy will not succeed without the proper planning and implementation of compensation at the management level.
Numerous articles have been written about agent level compensation in the call center, but little has been discussed with compensation structures at the management level.
As call center technologies continue to advance, work flows continuously change and management-level skill requirements increase. This means organizations need to review the competitiveness of their management compensation plans frequently.
Industry in Change
There is no question that the greatest expense in running a CRM strategy involves the human element (employees and compensation). How your organization approaches its compensation model can be the main driver behind success or failure.
There are no short answers or quick wins. Compensation models are difficult. Perfecting them takes time, patience, significant job modeling and fine-tuning. Successful organizations have found a way to balance their overall priorities and time constraints. They have spent the upfront time in developing a communication model that allows real-time measurement, observation and feedback on the relevancy and success of their compensation plans. At the same time, they are not afraid to recognize a failed plan. They are models of change and continuous improvement.
Consider these questions:
• How do you influence management compensation in your organization? What is your role?
• Do your performance incentives motivate or demotivate? Why?
• Think of an organization you have worked for that had a successful management compensation plan. Why was this?
• Do you have procedures in place to measure satisfaction and competitiveness in the industry?
• When is the last time you updated your compensation plan?
• Does executive management allow creative thinking and input?
• Are you committed to discussing compensation in your organization?
The start to a successful compensation plan requires taking your answers to these questions and putting them into actionable form. Working collectively with key stakeholders in your company, begin to design the compensation plan that is custom tailored to fit your organization. Not all compensation plans have to be identical, but they must be efficient and effective for your company.
Compensation Benchmarks
Below you will find sample benchmarks of management compensation in the call center industry. Please keep in mind that these figures are averages and do not take into account specific geographical issues, advanced skill level requirements, etc. The numbers presented in this piece are benchmarks that M.E.R., Inc. has developed from field research, and are used in written offers to candidates in the industry.
Compensation can vary depending on in-house service environments and outsource customer care organizations. Some organizations view customer service as a cost, others as profit. Depending on what side of the fence you sit with your organization will affect your view of competitive compensation benchmarks.
How Compensation is Modeled
Most positions include a set range of base salary and some sort of variable incentive. Variable incentives range significantly in dollars, percentages and how the employee can achieve the metric. Many organizations tend to place dollar amounts against company profitability indicators.
Most organizations have removed more elaborate perks such as signing bonuses and other on-top cash incentives; however, they still do exist and—when utilized properly—can be effective in acquiring the right talent.
Call Center Operations (includes supervisors, managers, senior managers, directors and executive leadership): Management personnel in call center operations are critical to the success of the operation because they are the leaders who ensure customer communications are representing the company’s value proposition to the market. Rarely do you find such positions that can directly affect client/customer satisfaction. Call center management is responsible for ensuring clear direction and organizational effectiveness of the agent group and for servicing customer expectations. They typically are frontline, involved directly in customer relationship strategies.
The majority of organizations model their operations compensation with:
• A defined base salary range
• Performance indicators (bonus) based on achievement against objectives
Supervisors manage the call center agents; managers manage the supervisors; senior managers manage the work group; directors manage the overall facility; and executive leadership manages the entire company strategy on customer response and satisfaction.
Benchmark – Base Pay:
• Call center supervisors: $35,000–$50,000 USD
• Call center managers: $45,000–$60,000
• Senior managers: $55,000–$70,000
• Directors: $80,000–$110,000
• Executive leadership: $120,000+
The majority of these positions will have some sort of variable pay component (bonus) opportunity. Companies will reward the employees in this category for customer satisfaction, increased retention of customers or growth of new customers. Typically, you will see an average of 5 percent to 20 percent of base salary for additional bonus dollars. The key is to ensure that you continuously monitor and measure how your variable pay component is working in this employee category.
Call Center Sales and Marketing Positions: Sales are defined as any position in the organization that contributes to revenue obtainment. Marketing positions are usually included in this category. Typically, outsourced customer care providers will have dedicated teams of individuals that specialize in the promotion and marketing of specific areas.
In-house providers will not typically have a defined outside sales team, but rather a team of internal specialists that are enhancing revenue and increasing efficiency to some degree.
Benchmark – Base Pay:
Outsourced customer care—sales executives:
• Base $90,000-$120,000 on a $3 million to $5 million new revenue target
• Variable pay/commission is typically anywhere from 3 percent to 6 percent in Year 1
• Some organizations offer a 3/2/1 model while others provide a percentage based on lifetime of the contract
In-house providers—marketing/sales (anyone involved in revenue enhancement):
• Percentage of revenue capture or performance enhancement, again anywhere from 4 percent to 6 percent
Call Center Support Staff: These are staff/administrative positions that support the overall objective of the call center. Among these positions are quality monitoring, scheduling, dialer, IT, human resources, finance, etc.
These positions have a direct and important impact on the overall effectiveness of the call center strategy and goal achievement. More organizations are recognizing the value and direct impact of these positions and are finding ways to include them in profit sharing or bonus recognition based on overall company results. Trends suggest this will be a continued growth area for how management compensation plans will be strategically intertwined.
Each job function has a defined job description and will have a defined job band (rate of pay) assigned to it. Bonus and performance incentives are seen in some organizations.
Base/variable Pay Mix
Employers struggle with finding the optimum balance between base and variable pay and strengthening the link between pay and performance. Variable pay can include bonuses, commissions, and other incentives that are most often based on achievement of individual objectives.
Base pay is the foundation of most compensation packages. It represents the portion of a salary an employee receives for performing his or her job consistently and effectively. Base pay is typically adjusted annually through performance reviews and corresponding wage increases. In a competitive market, businesses may review salaries more often. Base pay increases in 2004 budgets are benchmarked from 3 percent to 5 percent. In addition, other common forms of compensation are often used to supplement the base package:
• Annual bonuses are one-time payments to all eligible employees based on the company''s results, individual performance or a combination of factors.
• Incentive programs reward the superior performance of an individual or group. For example, as a bonus based on their participation in the rollout of mission-critical initiatives by their department, technology employees might receive a percentage of their annual salaries.
Common Hiring Offers
Employers utilized a variety of techniques—cash comp, signing bonus, stock, benefits, relocation, executive perks—to secure a potential employee. The variable element is the value of the employee. Positions at the director and above level will have more flexibility and negotiation as to what is ultimately included in the final cash/comp offering.
Reinforcement of the Plan
Successful compensation plans have been designed and written, but lacked an adequate strategy for reinforcement and ongoing evaluation of the plan. Organizations have spent significant dollars on having their compensation plans designed and formulated, only to see them fail on the back end. Do not be afraid to walk away from an ineffective or poorly designed compensation plan. A bad compensation plan is exactly that—a bad plan that will not motivate or drive the behaviors you are looking for in the organization.
When evaluating a plan, consider these questions:
• What resources do you have available in the organization to administer the plan?
• Do these resources possess the proper skill set to measure, monitor and enhance the plan?
• What systems do you have in place to measure, monitor and provide feedback?
• What will you do if the plan fails?
Sidebar 1
For Job Seekers
Before going to the job market, make sure you have a clear definition of your value proposition and assessment of worth. If you want to increase your compensation, you must sell your attributes to the employer. Organizations look for highlights of success and accomplishments. No matter what your skill, job or background, make sure you have quantified your results. Quantitative numerics work the best. For example:
• Increased revenue by ____
• Drove efficiency by ____
• Improved employee production by ____
• Increased client satisfaction by _____
• Improved x number of processes, improving profitability by _____
If you successfully define your value proposition, you are prepared to gain the most from a variety of cash/compensation offers (base, signing bonus, stock, benefits, relocation, perks, etc). If you cannot define your value proposition, be prepared for the employer not to accurately assess your value, thus lowering your overall market ability and compensation net.
Conclusion
Taking adequate time to plan your management compensation plan is equally as important as the time you took to define your CRM strategy. Both employers and employees have common objectives that are trying to be achieved.
Planning, communicating and modifying are the key ingredients to successful compensation modeling. Study, read and evaluate market competitiveness and trends on a continuous basis. Incorporate your findings and ideals, while remembering that there is no perfect compensation plan, just those that continuously evolve.
