Clients often ask us how they compare financially to the market or how they should reward individuals in different types of roles. Equally candidates want to know if they are paid fairly what they do. In this article Kevin Mayes gives his views on this subject:
Consultants:
There are lots of ways of putting a good package together for a consultant so I have focussed more around the principals of total earnings vs revenue generated here. Broadly speaking, I still believe a good consultant being paid one third of what they generate as total compensation is still a good and fair benchmark to work from. For any business that relies largely on its consultants winning and filling their own work, with the company supporting them with an infrastructure to enable that to happen, one third is still just as fair as it was ten or twenty years ago. I would go one step further in that within a very small firm or a business in raw start up mode, paying closer to forty or fifty percent may be a more appropriate. Looking the other way, where a consultant is heavily supported with a well financed infrastructure; resourcers, marketing teams, dedicated business development Director, warm business fed from central RPO wins or long-term company accounts, then this must be taken into account.
The fairest way I think is to look at the cost associated with this support and calculate that into the equation. So for example, in a heavily supported environment, around twenty percent of fees generated to total compensation could be a more appropriate figure when you factor in the other salaries and costs that have gone into the sales process. In the same way a consultant in a start up business or 2-3 man band, where support can be as basic as having a desk and phone, should retain more of the fees they bring in, a company should also retain more when they have played a bigger part in the respective fee being realised.
Team Leaders/Managers:
I’ve always thought this is the toughest role in recruitment. It really is two jobs. Many firms make the mistake of having structures whereby people in these roles struggle to earn more than they did as a straight biller. This in my view encourages only the less motivated into management and sets the wrong tone in your business. At a junior team leader level, I would favour a structure which allows the individual to retain their personal commission plus an override of perhaps 3-5% on the team above desk costs.
Once the team grows to more than 3-4, it’s difficult to maintain the same billing performance. At this point, I would suggest switching to a team based structure where the individual is rewarded on team revenues, 5-7% with any fees they bring in personally being added to the team total. This allows the individual to play a more team focussed role, winning and passing on business, giving half completed deals to new starters etc and they will be rewarded equally for doing so.
Directors:
This may seem obvious but the important point when considering how to reward a Director should depend entirely on what the core focus of their role is. In most cases, a straight % of GP beyond a standard desk cost threshold is a fair model. This would be for a traditional Sales Director type role. To encourage continued growth though, it’s important to have a ‘threshold holiday’ for new starters, 3-6 months perhaps, so the Director is not penalised for making hires. If the Director’s role is more to oversee not just the sales but profitability of the team, then a scheme based on a P&L is more appropriate.
This would include actual costs, full budgeting and give them real accountability. The danger is they can start to look more on savings rather than better fees to improve the bottom line but as long as this is managed, it’s a good model. Other options in a high growth business are to offer a straight % of year on year GP improvement. Lastly, in a fairly stable business where it’s more about keeping the ship steady, a flat % of their salary based on pre-agreed criteria can work well.
