We all know compensation drives behavior. In transportation and logistics, compensation can be the difference between business growth or stagnation. Spoiler alert: We typically see improvements of 19% revenue margin growth and 15% gross revenue improvement after a compensation overhaul.
Compensation tends to be a topic that drives a lot of emotions in business: fear, resentment, jealousy, anxiety, and motivation. In our experience, getting past initial reactions about compensation reveals a goal to make compensation fair and competitive. You can take a logical, strategic, and data-driven approach to address compensation in a manner that is beneficial to both your employees and your business.
Compensation can be a powerful lever in a business growth toolkit, but it is often overlooked by leaders and managers. Compensation change is one of the first aspects an organization can take into consideration when attempting to minimize waste and maximize long-term growth. If you’re curious if compensation updates might be necessary in your organization, check out 5 Signs Your Company’s Compensation Strategy Needs Repair.
You may just need a better variable compensation strategy. Variable compensation is a great tool to incentivize your employees to go the extra mile. It may be that your compensation structure isn't the root cause of your issue - you may just need refinements to roles & responsibilities. We often see instances where roles & responsibilities need to be adjusted to align with compensation, or vice-versa. Sometimes roles & responsibilities and compensation need to be adjusted to match your overall company goals.
Or, you may need a complete compensation overhaul.
A compensation overhaul can bring myriad benefits to your organization, especially if your compensation plan is currently a root issue for other problems in your business. A compensation overhaul may sound overwhelming, but it doesn’t need to be, which is why we’re focusing on it here.
Typical outcomes of a successful compensation overhaul include:
- Positive changes in metrics like gross margin growth and gross revenue improvement
- A motivated workforce incentivized to achieve beyond their projections
- Commission structures that scale economically, as efficiency is gained with the help of technology and process flywheels
- Increased employee retention
- Improved new talent attraction
- Job descriptions that are aligned to your organization structure and employee alignment to roles & responsibilities that best utilize their skills sets and allow for growth
- An understanding across your business of best practices and responsibilities to eliminate overlap and ambiguity
- A happier, healthier company culture
In this post we’ll outline the process and steps involved in a compensation overhaul. The goals of a compensation overhaul project are to evaluate, design, and implement a long-term compensation plan that will help eliminate inefficiency and drive top-line growth for your organization. Let’s break it down.
Evaluation and Alignment
You’ll want to assess all aspects of your current state of compensation and ensure leadership is on board with the same expectations and goals. This includes an analysis of your current compensation plans and documentation as well as interviews with key roles to identify your current state of compensation. From this, you will discover opportunities for improvement. This process includes:
- Leadership alignment - Working Sessions with company leadership to understand current state point points and their objectives for a compensation program
- Role assessment - Evaluating and understanding responsibilities, processes and objectives for all roles in focus
- Incentives evaluation (Download our guide to successful variable compensation here.)
- Benchmarking - Measuring your compensation programs to like-competitors and industry leaders
Workshops are collaborative, long-form sessions that aim to design the compensation program needed to meet your company objectives. This phase includes:
- Standard Operating Procedures (SOPs)
- Fixed pay structure benchmarked to market rate
- Variable Compensation Structures for each role in consideration aligned with desired behaviors
- Identify other factors that will improve the progress to your future state compensation.
The goals of this step are to ensure that people’s roles and responsibilities directly align with the goals of your company and the business area, and that compensation supports this alignment to eliminate any potential contradictions of roles. This step includes:
- Review of roles and responsibilities to determine alignment with compensation, organization, and company objectives.
- Make sure roles are clearly defined. Don’t duplicate effort. Multiple people with the same responsibilities causes confusion about the responsibility.
You’ll want to see forecasts that demonstrate various potential compensation structure scenarios and hypotheticals to understand how newly designed programs would impact existing employees. This is where you can envision your ideal future state and the real-world financial effects that it may have. This step includes:
- Models for each aspect in scope: individual payouts, total team, and department payouts
- Input sample data such as loads booked, monthly margin, etc.
- Create variations of your models based on performance level and market conditions
Rollout + Change Management
Once a design has been finalized, the development of implementation plans is critical to buy in and ownership of compensation structures. Development of a plan involving communications, training, and informational sessions will ensure affected employees are informed and knowledgeable about the change. This step includes:
- A timeline to set expectations and keep contributors on track
- A communication plan to ensure everyone is informed and understanding of the plan
- Training and informational collateral to inform those affected by the change and the opportunity presented
Following rollout it’s important to measure your forecast and adjust accordingly if forecasts differ from actual. This phase includes:
- ROI measurements so you can fairly measure the impact
- Adjustment measures to reverse / modify changes made to account for unplanned scenarios or market swings
This outline can apply to compensation in a variety of scopes: Carrier Sales, Customer Sales, Account Management, and supporting roles, among others. Improving your compensation strategy, and especially undergoing a compensation overhaul, is a huge opportunity to set your business up for maximum output and scalability. Beyond that, a quality compensation structure impacts other aspects of your company’s success such as employee motivation & morale, employee turnover & retention, and company culture.
CarrierDirect has extensive experience assessing transportation and logistics companies, developing future state compensation and organizational structures, and implementing changes through change management and training. We work with 3PLs, carriers, shippers, and managed transportation providers to overcome obstacles toward progress and growth, so we can contribute to a more efficient world together.
Interested in learning more about how CarrierDirect can help your organization improve your compensation strategy? Submit the form below to request a preliminary consultation with one of our industry experts.