Case Study $3$: Imaginative Staffing, Inc. $($B$)$

Compensating a Sales Team

Susan Borland, sales director, and her assistant, Judy Morgan, had been assigned the task of developing a program for team$-$selling the company$$s services to prospective accounts. As they dug into their task, they encountered particular difficulty with the matter of how to pay the team.

Imaginative Staffing, Inc., is a temporary services firm in New York City that supplies temporary workers to firms located in the five boroughs. Formed in $1998,$ it had grown to $$17$ million in revenues in $2002.$ Besides Angie Roberts, the president, and her assistant, Nicole Gamin, the company had a chief financial officer, a sales director, four sales reps, an operations manager, $10$ account managers, five administrative assistants, and a receptionist.

One reason Roberts had become aware of the team$-$selling concept was that, for some time, she had been frustrated by how long it took to close a sale with a good prospect. On average, it took about six months of hard work to make a sale to a major customer. One of the sales reps would make the contact and do all of the selling, sometimes with the help of the sales director if the situation seemed to warrant it$.$

Large and small corporations made extensive use of temporary help for any of several reasons: $(1)$ to fill in for workers who, for some reason, were unable to work; $(2)$ to handle overload conditions; or $(3)$ to take care of seasonal peak workloads. In the current legal environment, many organizations were reluctant to hire permanent employees until there was a clear$-$cut, long$-$run need for them. Such factors as benefit packages, insurance, unemployment claims, and termination difficulties made management seriously think about hiring people as permanent employees.

Susan Borland and Judy Morgan had decided that a selling team should usually consist of at least three people: a sales rep, the person who would be the account$$s manager, and one person from top management. There was considerable debate on two issues: Should someone from the sales director$$s office be on the team $($Borland or Morgan$)?$ And who in top management should be involved? In particular, much consideration was given to Angie Roberts$$s role. Should the president be part of a sales team on an important sale, or would that undermine the development of the company$$s salespeople?

In any event, the matter of paying the people became an issue. Borland thought that there should be no special compensation plan for the selling team. $$After all,$$ she said, $$they are paid a salary for their work and they all get substantial bonuses at the end of the year, depending on how much profit we have made. If they sell more, they$$ll get paid in their year$-$end bonus.$$

Morgan demurred. $$Two problems here: Delayed payment provides little immediate incentive, and the impact on a person$$s bonus by any one sale would be slight. I think we need to build some push into this team$-$selling concept by giving the winners some of the spoils.$$

Under the existing system, a sales rep who brought in a new account was paid a commission of $10$ percent of that account$$s billings for the first year. The commission was paid at the end of the month in which the money was received from the account. Thereafter, the sales rep received $1$ percent of the account$$s billings. The account manager who took over the management of the new account was paid a salary plus $1$ percent of her account$$s billings. The company would not accept any account with billings less than $$10,000$ a year. It had slightly more than $500$ active accounts, of which about $100$ had billings totaling approximately $$11$ million. The typical new account started out with billings of about $$12,000$ for the first year, and it grew as it gained experience with the company.

It was part of the account manager$$s job to develop each account$$s use of the firm$$s services. This usually involved getting to know the account$$s special needs and problems, and then developing programs for using temporary employees to solve them. It often involved recruiting people with special skills who could work as needed for different accounts. For example, one client required people with the ability to read music. Another requirement is fluency in Russian.

The reps and the account managers had been receiving earnings based on customer billings. Consequently, both Susan Borland and Judy Morgan anticipated problems with them if those earnings were threatened by the team selling concept. Why would they want to adopt a new selling system that would threaten their earnings? Clearly, they would have to see the system as a way to increase their earnings.

Another problem automatically arose. If the reps and the account managers received incentive compensation based on account billings, how would that affect the attitudes of the other team members? Wouldn$$t they also want some pay based