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Is Your Compensation Plan Hurting Your Agency? Transforming a Broken Model into a Strategic Advantage
32 Plays6 days ago
Is your compensation plan helping – or hurting – your bottom line? Rising costs, shrinking margins, and stagnant producer performance are all signs that your compensation model may be working against you. When you’re overpaying for the wrong results – or failing to reward the right ones – you’re quietly bleeding profit while competitors surge ahead. If your pay structure isn’t attracting new talent, keeping your best people, and driving profit, it may be time for a serious reset.
As President of Visus Group, Tom Kosnik has spent decades helping staffing agencies uncover profit leaks and build comp plans that actually drive results. In this episode of Staffing Made Simple, Tom shares proven strategies for designing structures that fuel growth, motivate producers, and protect your margins.
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Transcript
Importance of Reviewing Compensation Plans
00:00:00
Speaker
When was the last time you put your compensation plan under a microscope? And I'm not talking about dusting it off in a meeting once a year, but really taking a hard look and asking the tough questions. Does it still win over top talent?
00:00:11
Speaker
Does it keep them hungry? And does it drive profit to your bottom line? Because here's the truth. Costs are rising, margins are shrinking, and your best people have more choices than ever. In this episode, we're digging into the comp plan trends that are helping agencies thrive and the ones quietly cutting them off at the knees.
00:00:28
Speaker
If you're not sure where your stands, you need to hear this. Welcome to Staffing
Introduction to Staffing Made Simple Podcast
00:00:33
Speaker
Made Simple, a podcast series powered by Simple VMS. Welcome back to Staffing Made Simple, where we talk about what's really happening in staffing, what's working, what's changing, and the actionable takeaways you can put to work in your day-to-day business.
00:00:49
Speaker
I'm Casey Wagerfield, one of your co-hosts, 16 years in the staffing industry, wearing many hats over that time, and now senior sales executive here at Simple BMS. Today, we're tackling a hot topic right now, which is compensation plans.
00:01:01
Speaker
Every staffing agency has one, but not all of them have one that's working. Get it wrong and you're either
Challenges in Profit and Compensation
00:01:06
Speaker
overpaying, paying for the wrong results, or watching your best people walk out the door. And here's the kicker.
00:01:12
Speaker
Expenses are climbing, margins are flat, and in many agencies, gross profit producers are stuck in neutral. So what's going on? Is it the market? Is it the way we pay people? Or is it a bit of both?
00:01:23
Speaker
Whatever the reason,
Expert Insights from Tom Kosnick
00:01:24
Speaker
if your compensation plan isn't keeping your best people and attracting new ones, you're already losing. So with me as always, my friend, co-host, colleague, fellow double bogey golfer, and senior vice president at Simple VMS, Rob Geist.
00:01:38
Speaker
One of these days, it'll just be bogey golfer. Shave me, but... We'll see. But there's really good news about this topic because we've got a perfect guest for today's conversation, Tom Kosnick. He's the president of the Vysis Group.
00:01:50
Speaker
He spent decades in the trenches with staffing companies. He helps boost profitability, transform culture. And yes, he's a leader at building compensation plans. He gives staffing agencies a competitive edge.
00:02:03
Speaker
He's worked with agencies of every size, coached hundreds of leaders and created the organizational development business model, which is a framework that gets strategy, people and numbers working together instead of against each other.
00:02:18
Speaker
And it's not just theory.
Adapting Compensation to Business Changes
00:02:19
Speaker
Tom and his team roll up their sleeves on comp reviews, financials, org structures, all the stuff that actually moves the needle, but too many owners ignore until something is broken.
00:02:30
Speaker
If anyone can help staffing agencies design a truly competitive comp plan, it's Tom. Tom, welcome to the show, my friend. Rob Casey, thank you for having me on the show to talk about one of my favorite subjects, and that is compensation, which by the way, we have been doing a ton of compensation work.
00:02:48
Speaker
So this is a timely podcast and a big need in the industry right now. And it's always been important, right? But I feel like now more than ever, companies are having to buckle down and Maybe we can start with the kind of current landscape.
00:03:01
Speaker
And I know it's something that I mentioned in the intro and you've talked to us about those things that you're seeing lately, which are expenses are going up for agencies. Margins are flat. A lot of the top producers are not producing as much and net income is sliding for some.
00:03:15
Speaker
How much of that ties back to the way in that they're structuring their comp plans? Well, we run into staffing companies that haven't changed their comp plan in 20 years. And so that is certainly not a best practice.
00:03:26
Speaker
Your business mix changes every year. The business environment, the competitive pressure, the workforce that you're bringing in, the technology, it's just changing so much. Look, a staffing company is a sales organization.
00:03:38
Speaker
So best practices is that you've got to be looking at your comp plans at least every year. just to make sure that they are in line with the financial model. You talked about how margins are staying the same.
00:03:51
Speaker
The big challenge that most staffing companies have, frankly, is that their internal expenses, i know we're going to be talking about wage inflation, but their internal expenses are going up. Healthcare expenses are going up. Wages are going up.
00:04:03
Speaker
Look at all the investments
Maintaining Competitiveness and Margins
00:04:04
Speaker
in technology and marketing going up and up and up. But the gross profit production for salesperson and recruiter has basically stayed the same. And in some cases, they adopt a new technology and the gross profit production drops.
00:04:16
Speaker
Can you imagine that? So what we've seen is that these companies, the net income lower because the operating expenses are going up. So we get staffing companies calling us up saying, we quote unquote, have tried to make our company as efficient as possible. We turned over every stone.
00:04:34
Speaker
We've looked at every work process. The only thing that's left is compensation. And look, your people are the biggest expense. So yeah, it's all tied together. So you mentioned wage inflation. It's been a hot topic of late.
00:04:48
Speaker
Are most staffing firms getting out the traditional annual merit increases or is this starting to change? And if so, how do they balance staying competitive without destroying their margins? Yeah. So historically, the majority of staffing firms out there, they would give non-producing employees merit increases every year, certainly based on performance reviews and that sort of thing. But when it comes to sales reps and recruiters, they would tweak the compensation plan. So you wouldn't see merit increases typically for salespeople and recruiters.
00:05:18
Speaker
We have two CFO roundtables. Many of those are north of $100 million in revenue. So we talk about this all the time. But whether it's formally structured or informally structured, we would see the salary bands.
00:05:31
Speaker
So for example, a novice sales rep might be coming into the organization at $50,000 a year. A junior sales rep after two or three years and x amount of productivity, they might get jumped up to 55 or 60K base salary.
00:05:45
Speaker
couple years later, they become a senior sales executive based on performance and all that. They get a $70,000 base salary. And then it tops out at seventy k And so the larger companies typically have formal salary bands, but the smaller ones, it's an informal thing.
00:06:00
Speaker
And one of my clients, he says, when salespeople and recruiters come into his office to ask for raises, he says, you want to make more money, go sell more staffing. But in regard to your question, how do you stay balanced without wrecking the margin?
00:06:14
Speaker
You really have to figure out how to get
Innovative Compensation Structures
00:06:16
Speaker
sales reps and recruiters producing more gross profit than historically we've been able to produce. So this is where you have to really look at utilizing offshore resources, utilizing the technology, looking at the workflows.
00:06:32
Speaker
I don't know how many times I've walked into staffing companies and the owner is like, our the recruiters are only producing X amount of gross profit. And then you sit in the bullpen with them for half a day and you realize that they're spending 70% their time sourcing on job boards and internets and all that stuff. and you're like, oh my gosh, you should have offshore resources doing that.
00:06:51
Speaker
But anyway, So how do you keep the balance? It's not just a financial arrangement or a budgeting arrangement. It's the business model as a whole, looking at the technologies, looking at these other things to keep salespeople and recruiters focused on high performance behavior, high performance activities.
00:07:09
Speaker
That's crazy. said You've talked to agencies that haven't changed it in 20 Do you think, too, that because margins are tight, because revenue is flat with some organizations, that agencies are hesitant to throw more money at compensation plans because things are already tight?
00:07:24
Speaker
Oh, absolutely. It's crazy how busy we are with compensation work right now. The bottom line is making a compensation change in your organization, if you're not smart about it, if you don't do the organizational change thing, it it can be very disruptive.
00:07:38
Speaker
And nobody wants to lose people. It's so hard to find good salespeople and recruiters right now to keep them. um So the business owners of these staffing firms kind of caught between a rock and a hard spot when it comes to compensation and engaging people and trying to drop a certain percentage to the net income every year.
00:07:55
Speaker
So yeah, there's a lot of things that are driving it right now, Casey. You made me think of the Wolf of Wall Street, Leonardo DiCaprio. He's up on stage. Is your wife having another baby? Pick up the phone. You need a bigger house? Pick up the phone.
00:08:08
Speaker
I've got a client. He says, I only hire PhDs. People that are poor, hungry, and desperate. And I tell him that salespeople only work half days and that those are 12 hour days. So, you know, for all the people out there that think salespeople are just going out to lunch and shaking hands, it's a lot harder than they think.
00:08:25
Speaker
But there's a belief out there
Attracting Young Talent with Flexible Packages
00:08:26
Speaker
that the younger generation that's coming out into the workforce, they're not as attracted to that traditional salary plus commission model. Is this true for in your findings? And if so, what kind of comp plans do they like?
00:08:37
Speaker
Great question. And we do a lot of corporate assessments for staffing companies where we'll go and take a look at the various functions. And those corporate assessments will always include focus groups, either one-on-ones with managers and then focus groups or groups of salespeople and recruiters.
00:08:53
Speaker
And I am always surprised at the young folks that are coming into the workforce in the staffing companies. There's also data behind this as well. I find young people that are ambitious, that are innovative, that want to make money, that want to contribute to society, want to make a difference in the world, that are smart, intelligent.
00:09:12
Speaker
So we have to be so careful about This global thinking of all young people want higher salaries and a lower variable. There are some, yes, there are some that are like that. What's driving that could be, I've got a car payment, I've got a rent payment, I've got a student loan payment.
00:09:27
Speaker
But I find that this issue is more about the staffing firms They don't have a hiring process in place where they can find the type of young people that fit that profile.
00:09:40
Speaker
There are young people out there that are attracted to do our industry, want to make money. you know And in terms of compensation, not just a decision that companies have to make, do they want to have multiple comp plans in their company?
00:09:51
Speaker
I used to be an advocate. I know we're going to talk a little bit more about one size fits all, but... I find that if you have a few different comp plans that you can offer employees, that's a better way to go. So for example, a novice for the first six months of employment, you have a novice plan that pays maybe a salary and then an activity bonus.
00:10:10
Speaker
And then you have maybe the standard comp plan. which could be an okay salary, but a high variable. And then you could have just a solid B performer plan, which is, okay, maybe they get a little bit higher base, but the variable is a little bit lower.
00:10:25
Speaker
And what we found from the organizational development side of things is that it's a dialogue. Let the employee choose. So we have to get a lot smarter about how we're hiring folks, the hiring process.
00:10:37
Speaker
And we got to get a lot smarter about the people that we're bringing in our organization and the different ways that we can compensate on them. Yeah, you're right.
Performance and Budget Management with Thresholds
00:10:45
Speaker
There's a ton of great young talent out there. And when you find them, you have to pay them what they're worth and get them to stick around.
00:10:52
Speaker
I like the idea that you mentioned about offering different types of packages because you hear a lot about the younger generation too, where it's not about all money, right? It's about making a difference. And there's probably other perks you can offer outside of just money to draw them into your company. I'll tell you, so somebody that was a client of mine that was extremely successful in this area His average tenure of salespeople and recruiters was off the chart.
00:11:13
Speaker
And he basically had three levels. He would only hire people that fit a very strict profile, first off. Secondly, when they came in, he was looking for people that wanted to become professional salespeople, professional recruiters.
00:11:26
Speaker
And he would say, okay, so you want to become a professional salesperson? Let me show you what we can offer you. And he would say, here is the first two years of your employment. And here are the things that you're going to do. Here are the things that you're going to learn. Here are the things that we're going to do it. And here's the compensation structure.
00:11:44
Speaker
And now after two years, you graduate into the junior level and here's the compensation. Of course, compensation will be greater. He says in the next two years, you're senior. Now after six years, seven years, if you want to stay with us as a senior executive and make $250,000, $300,000 a year, great. We'd love to keep you here. But if you want to move on to another organization, we understand.
00:12:04
Speaker
What was he doing? We're going to teach you all the skills to be a professional sales executive, and we're going to get you to an opportunity where you can make 300 grand a year. Show them the vision.
00:12:15
Speaker
um do want to touch on the thresholds, though, been popular in the past. Are you seeing the thresholds are still effective in sales compensation? And for someone who isn't familiar, maybe you can explain how they work. Basically, a threshold is you have to hit a certain amount of gross profit production before you become eligible for a year of commissions.
00:12:31
Speaker
If you're in the contract staffing or temp staffing, it 7,500, something like that. and historically, on the temporary side and the contract side, we would never see thresholds.
00:12:42
Speaker
However, over the last three, four years, this trend has increased quite a bit. We're seeing a lot of companies put thresholds in. So full-time direct hire recruiters always been thresholds, but on the contract side, temp staffing side, everybody was paying on first dollar in.
00:12:59
Speaker
But now again, because of all those things we've talked about, wage inflation, healthcare, care marketing, technology expenses going up and up and up. A lot of companies can't pay on first dollar
Diverse and Dynamic Compensation Plans
00:13:10
Speaker
in anymore.
00:13:10
Speaker
So we've got to put a threshold in place where the producers got to produce a certain amount of gross profit before they become eligible for commission. Or what they say is that, hey, your monthly target is 50 grand a month in gross profit production.
00:13:24
Speaker
And I'm defining gross profit real quick. I'm defining gross profit as revenue minus cost of sales, which would be your contractors or temps, the burden, anything associated with background checks, drug checks, anything it's associated with getting those individuals placed.
00:13:39
Speaker
And then what's left is your gross profit. And so the company will say, hey, Tom, you've got to be 70% of that 50 grand before you become eligible. So if you drop below 70%, no commission, you got to work to get back above 70%.
00:13:55
Speaker
So these comp components, there's pros and cons with all of them. Speaking of thresholds and keeping them realistic too, I've seen where salespeople hit their threshold in June and say it's a gross margin dollar threshold.
00:14:07
Speaker
Here's your goal for gross margin dollars for the year. And you land a big account and you've hit your gross margin dollar threshold in June. Maybe that's for a one-time bonus. And what I used to do is now you get another threshold, right?
00:14:19
Speaker
You've way surpassed that first threshold for the year. We're going to go and pay your bonus because it's worth that, right? You've killed it. Now go do more and we're going to dangle this other carrot. Now we're adding a threshold.
00:14:30
Speaker
You re-budget. Yeah, absolutely. You reset the targets. Totally. Tom, you kind of touched on the one-size-fits-all comp plan, and I liked how you talked about the different types of players within an organization and how you have to come up and be creative with those. But what kind of approach with comp do you have with people with different verticals within a business and different roles within that business?
00:14:51
Speaker
compensation it's really become very complicated in the staffing industry we used to be able to figure this stuff out on the back of an envelope but when you're talking about different verticals you have to take into account your customer base turnover rates you have to look at your budget hopefully you're budgeting and and you're looking at your pnl because you want a certain percentage of the gross profit being allocated back to sales people and recruiters And when it's too high, then obviously that's going to have a significant negative effect on you hitting in that income goal.
00:15:21
Speaker
You have to look at the raw dollar spread of the contractors that you're putting on billing. the average length of assignment that the contractors are on. You have to look at headcount. You have to look at, do you have one sales rep, two recruiters, one sales rep, three recruiters.
00:15:38
Speaker
So you really have to like take a look at all of that stuff to the best of your ability. You got to take all those variables into consideration. And
Motivation Through Bonuses and Non-Monetary Incentives
00:15:45
Speaker
then you have to model out these plans to financially justify it so the plan pays for itself.
00:15:51
Speaker
In other words, so that either that the plan is not paying enough when somebody's ramping up or the plan is paying too much at the top end if you've got a superstar A producer. I used to advocate like years ago, one size fits all, but you can't do that anymore. or Everything's just more dynamic than it ever used to be. It was so much simpler back in my day. And I know, Tom, you and I have talked about this next topic.
00:16:15
Speaker
How do you handle ramp periods for recruiters and salespeople? And what's the best way to keep them motivated while they build their pipeline up? You know, development research shows that employees will decide in the first 90 days if they will stay with your organization or not.
00:16:32
Speaker
And okay, so staffing company is a sales organization. If you're hiring salespeople, you got to get money in their pockets at the end of the first month. And so create a novice comp plan where you're paying them a base salary and a monthly activity bonus.
00:16:48
Speaker
Period. Simple. It does two things. One, if they're hitting their activity metrics, it gets money in their pocket at the end of month one, end of month two, end of month three.
00:16:58
Speaker
So something better than nothing. Doesn't have to be a lot, but they're getting commission dollars. Secondly, when you start an employee out with a plan like that, you're instilling the kinds of activity that they need to do on a day-to-day basis in order to succeed long-term within your organization.
00:17:15
Speaker
And then they move to a plan that's maybe a standard plan that pays a percentage of the gross profit and could include a quarterly key objective bonus and things like that. I always say action brings action. You get people excited about things and it gets them to produce faster.
00:17:30
Speaker
And that's just a philosophy I've always kind of worked on with my team underneath me. So spot bonus short term, are they gaining traction and how do they fit alongside more traditional comp elements to motivate day-to-day performance?
00:17:42
Speaker
Yeah. So a spot bonus is a temporary bonus. It's only going to last for a certain amount of time. For example, you have a key employee that leaves. Oh my gosh, we got to get some hands on these three key accounts.
00:17:54
Speaker
Casey, you take that account. Rob, you take that account. Tom, you take that account. And so but we're going to pay you two grand each for, you know, getting your hands around that account and making sure that nothing goes wrong until we hire somebody that can come in and take those accounts over.
00:18:09
Speaker
So spot bonuses, they're temporary for when somebody's got to do a special project. I don't know why more companies don't do this, but think about an ATS implementation. Think about a simple VMS implementation.
00:18:20
Speaker
Why not do a spot bonus for somebody that's going to implement the tool and make sure that this is going to happen in the organization. I think the larger companies, they kind of know about spot bonuses and use them, but these smaller companies, I don't see them using spot bonuses much.
00:18:33
Speaker
We kind of touched on this too, but other than just revenue and gross profit, how are firms rewarding the specific behaviors they want from their teams, like client retention? candidate quality, cross-selling to clients?
00:18:45
Speaker
So you've got lag indicators and lead indicators. So lag indicators would be anything results-based. So gross profit is a lag indicator. So you want to have a component of your comp plan that's rewarding on lead indicator, performance driving behavior. So that could be networking events. It could be number of face-to-face meetings. It could be a number of submittals for recruiter or number of interviews that client said, whatever those lead indicators are.
00:19:11
Speaker
And then you could set up a quarterly key objective bonus. And frankly, these things are so effective. I don't know how many companies we've helped put these in place. The employees like them, the managers like them.
00:19:23
Speaker
Because the manager can change up the objective on a quarter by quarter basis. The dollar number that the employee can get is stays the same. But let's say Rob's got two key accounts and we know there are five other staffing companies in that key account. We're like, geez, man, Rob, why are you not increasing headcount penetration in those two accounts?
00:19:42
Speaker
So we put a quarterly key objective bonus to say, we want 10% increase in headcount in these two accounts. And then you say, Hey, it's a $2,500 bonus. So you say, if you hit the 10%, you get the $2,500.
00:19:52
Speaker
you get the twenty five hundred dollars if you're in which is maybe let's say growth, then you get three thousand seven fifty if you're in the eighty percent which is eight percent growth you get one thousand two hundred and fifty dollars So you have to explain clearly what it is and articulate it. But those types of quarterly key objective bonuses, they're very effective in driving behavior.
00:20:15
Speaker
And very few staffing companies would reward on client satisfaction and client retention. Does it get more important than that? They're technically lag indicators. Just think it through.
00:20:26
Speaker
Why would you not try it? I think gross margin dollars is just top of mind for every agency, right? So incentivizing in other ways other than just a gross margin dollar goal will lead to more gross margin dollars if you put those types of rewards place. So back to the question that Rob asked me about these comp plans and how to put them together and all that stuff.
00:20:44
Speaker
There are targets, right? You want 25% of an individual sales reps, gross profit production, going back to that individual. Well, okay, I'm going to pay an $80,000 base salary. I'm going allocate another 20 grand.
00:20:56
Speaker
My expectation is that this individual is going to do $750,000 gross profit. So I'm at $100,000. So now I've got maybe another $100,000 in variable that I can play with.
00:21:09
Speaker
And so then I'm going to take 50% of that and I'm going to allocate it towards the gross profit production piece component of the program. Then I'm going to take 25%. I'm going allocate that to a quarterly key objective bonus. Then I'm going to take 25% of that to a year end or president's club or or something like that.
00:21:26
Speaker
guys, this is as good as it gets, man. This is how you make compelling, engaging compensation programs that are just spot on. And employees love this stuff.
00:21:37
Speaker
Love it, man.
Balancing Fixed Salaries and Commissions
00:21:38
Speaker
So what role do these non-monetary incentives play in these types of situations like recognition programs, career development, flexible work options?
00:21:48
Speaker
I have to imagine it's becoming a bigger piece of the puzzle. Absolutely. If you don't have an eye on the non-monetary incentives, Rob, number one, look at the Gallup polls, years and years of study with employees and all that stuff. If you've got an organization and you have one of those free software things where an employee can shout out another employee, these non-monetary incentives, we really have to start thinking completely different in the staffing industry about compensation.
00:22:16
Speaker
We think salary, gross profit production, just like you're missing out. This is such a funny story. Years ago, I had a client that she weekly or monthly or maybe every two weeks, two free movie tickets. Fran got the most leads.
00:22:30
Speaker
so if you're not thinking about this stuff from a new perspective, you're missing out. And not only are you missing out, but look, you got a well thought out compensation plan that has multiple compensation components where an individual can make money.
00:22:44
Speaker
That's one of the things that attract A players. A players, when they see stuff like that, they're like, I like this. Let's talk more. bet you're passionate about all this. This is really coming through. You just said total compensation instead of just salary and commission. And we've talked about this before.
00:22:59
Speaker
Can you explain to the listeners what Total Comp includes and why staffing firms need to adopt this? You know, Total Comp language is very common in corporate America, but we hardly ever see it talked about here in the staffing industry.
00:23:12
Speaker
But total comp would be just think about everything, right? So think about gross profit commission, the quarterly bonus, president's club, 401k, educational opportunities, all of these different benefits, the the health benefits.
00:23:28
Speaker
I just saw this actually, but I think the average in the United States is fifty fifty s split where companies will pay 50% of the health benefits and the employee pays 50% of the health benefits. I've got clients that are paying 100% of the health benefits.
00:23:41
Speaker
Why in God's name would you not include that in your compensation plan and part of your total comp structure and tell somebody, I've got other clients that have tuition reimbursement program where they'll help pay for student loans.
00:23:55
Speaker
Why would you not include that in your comp plan? and There's a section of the comp plan that talks about all this stuff, the benefits and the educational opportunities in the 401k match and what it is. Again, i mean, you're trying to attract a players.
00:24:08
Speaker
A players are not attracted to mediocre comp plans. I'll tell you that right now. It's not just salary and commission. I mean, it's a package you have to offer people. Amen. That's right. We've kind of touched on it, but wanted ask you, when we talk about a mix of fixed versus variable pay, is there an ideal balance between that fixed salary and the variable commission and staffing?
00:24:28
Speaker
And how should those firms be mixing the elements? When we model these comp plans out, my target is that 50% of the total comp for solid B players. I always like to try to model at a solid B level.
00:24:39
Speaker
And then we test it at the A level. The Cs, you got to manage them out at some point. But at a solid B level, you want the total comp, 50% coming from salary, 50% coming from commissions.
00:24:51
Speaker
So again, maybe my target for a sales rep is half a million dollars, 600,000, somewhere in that category. So then my target comp then for them is going to be 125 to 150, you know, that 20 to 25% of their gross profit. So then if I'm paying a 60K base, then I'm going to allocate another 60K towards that variable piece of it.
00:25:11
Speaker
Now, when you get into the players, they're making two times their base, three times their base, all that stuff. When you get into the light industrial firms and the day labor firms, then you've got a base salary and depending upon where you're at in the country, right? Because all these different wage rates for these different things.
00:25:28
Speaker
And by the way, you should know your geographical area base and total comp at the 25th, 50th and 75th percentiles. We do that
Budgeting and Market Adaptation Strategies
00:25:36
Speaker
research as well for companies so that they know that they're in line, but When you get into light industrial, where you had lower pay rates, lower bill rates, lower draw dollar spreads, then you're talking, you've got a base salary and then 20 25% recruiters, 20, 25% of their base allocated towards variable.
00:25:55
Speaker
And then for the salespeople, we're shooting for that 50-50 for the solid B. I've always thought too, personally, that setting expectations isn't a one-size-fit-all either. So somebody that's selling in Lebanon, Kentucky is going to have a different gross margin dollar goal than somebody selling in Indianapolis, in a metropolitan city where there's thousands of contacts versus...
00:26:16
Speaker
A town where there's eight stoplights, right? I've seen where it's just a, hey, no, this is your goal for the year. Well, there's not enough business in that town to even attain that goal. Yeah, that's where the budgeting comes into place and all that.
00:26:29
Speaker
You have to look at the market. You can figure out like a geographic area and you can figure out how many people are there and how many people are working. And then well, what's one and a half percent of that? Look at the number of staffing firms that are in that.
00:26:40
Speaker
So that's just some back of the envelope marketing stuff that you can do. But ideally you've got a budget in terms of what are the key accounts going to produce. Then you look at the business model, number of employees and our typical recruiter does X or typical sales guy does Y.
00:26:54
Speaker
you kind of build a budget from there and then set those targets. Yeah, you're absolutely spot on there. Well, that's a perfect segue about budgets because when it does come to budgets, i think some agencies, they do think they're essential where other agencies, not so sure.
00:27:08
Speaker
Especially since one big account can throw everything off early in the year, like we talked about. What's your take on budgets and how do you connect them with the compensation so you can adjust it throughout the year? and If you're not budgeting, you're making a big mistake because how do you set your targets for salespeople and recruiters or a gross profit targets for the office? You got to look at the key accounts. You got to look at the prospects. You got to look at the historical production numbers and you put a budget together.
00:27:31
Speaker
Okay. We lose a huge account. Well, then you just recast the budget. We're not talking rocket science, accounting and finance here. but You get a huge account. Well, okay, Casey, to your point earlier, you don't change that sales rep's target when he hits his target in June.
00:27:46
Speaker
What's that rep going to do? He or she is to take their foot off the gas pedal. Look, in the end it's a business. What net income do you need to be making? So you got a net income of whatever percentage.
00:27:57
Speaker
And then how much for the salespeople and recruiters? How much for back office? ah How much for G&A? There are guidelines, there's rules and all that stuff. So if you don't have a budget, you fly in the plane blind.
00:28:08
Speaker
So how can
Vysis Group's Role in Staffing Success
00:28:09
Speaker
a staffing firm's comp plan be a competitive differentiator in the market? And do you have any example of a firm that is, without saying any names, using them innovatively to attract and keep better talent?
00:28:20
Speaker
Look, again, most of the staffing companies, their commission structures are base salary and percentage of gross profit production. So when you put a compensation plan together that's got multiple components,
00:28:32
Speaker
That document in and of itself becomes a sales item. It attracts a performers. And so I've got a handful of clients where we've rebuilt their comp plans to include all these different components.
00:28:45
Speaker
You don't want to make it so complicated that people need a calculator to figure out their comp structure. But if your compensation plan is on one page, you're missing out big time. A well-thought-out compensation plan, it's going to be eight or 10 pages in length.
00:28:58
Speaker
You're going to have examples of how they make money. It's going to be clear. Everything's going to be articulated and defined. You're have all the total comp stuff and how they get paid and when they get paid and what happens if there's a discrepancy in comp.
00:29:12
Speaker
All that stuff. That's a professional compensation document. And that document in and of itself is a component that attracts A players. I think being transparent is key too.
00:29:22
Speaker
Because plenty of times where I've offered a salesperson a position in the past and they've accepted somewhere else. And then two weeks later, they call me like, that was not what I expected. Right. yeah Tom, before we wrap, I know compensation planning and structures is just one part of what you do with staffing agencies.
00:29:39
Speaker
For the listeners out there who might not be familiar with you, could you tell them a little bit about the Vices Group, the President's Roundtable, and what kind of support you and your team provide for these agencies?
00:29:49
Speaker
Yeah, sure. We've got two aspects of the business. One is a peer roundtable program. We have nine peer roundtables in the industry, five president roundtables, two CFO roundtables, a CMO roundtable, and a CSO, sales director, sales manager, vice president sales roundtable.
00:30:06
Speaker
And they get together two or three times in person. They get together in Zoom, in between the in-person meetings. We've lay got an email distribution list. So we've got close to about 100 C-suite execs in those nine different programs.
00:30:19
Speaker
And then on the consulting side, we're leaders on the comp side of the equation. So we do a lot of that work. But... assessments, strategic planning, business planning, and valuation work. So I've got a cadre of a dozen industry subject matter experts that provide these different services in all these different functional areas for staffing companies. And usually 100% of our clients are all in growth mode.
00:30:43
Speaker
So really are a true metal market consulting firm to the staffing industry. So how can people get a hold of you? Yeah, the vicegroup.com website. It's got all our information, how to contact us. And that's Victor, I-S-U-S group.com.
00:30:58
Speaker
And as somebody that's known Tom now for 13 years and have been to those roundtables, I can't tell you how valuable they are. You lead with actionable takeaways that you can take back to your company. You're meeting with peers and getting ideas, sharing and making friends for life. I've still talked to some of the
Episode Wrap-Up and Future Outlook
00:31:14
Speaker
people that were in that roundtable 10 years ago.
00:31:16
Speaker
With that said, we appreciate you joining us today. I think there's a ton of great insight from someone who's really just seen it all when it comes to this topic. And I think if there's one takeaway from the conversation, it's that comp plans really can't be a set it and forget it decision.
00:31:29
Speaker
The market changes, the workforce changes, and your business changes. So your comp plan needs to change with it. If you've been running the same plan for years, it's worth asking whether it's still helping you grow or slowly costing you more than it's making you.
00:31:42
Speaker
And as always to our listeners, thank you for joining. We appreciate your support. If you liked what you heard today, please like and subscribe to our podcast series and please share it with your friends and colleagues out there.
00:31:54
Speaker
And if you'd like to learn more about SimpleVMS and how we can help agencies stand out with tech, win more business, create additional revenue streams, reach out to us on LinkedIn or at simplevms.com.
00:32:06
Speaker
And we look forward to having you join us again on our next episode of Staffing Made Simple. This has been an episode of Staffing Made Simple powered by Simple VMS, the vendor friendly VMS.