Changing Compensation Plans

When it comes to changing compensation plans for sales associates, it is all too often that the broker owner or his branch managers will think that this is a 'kiss of death' leading to a mass exit of their sales force. Although care and planning is the only way to make changes to your compensation plans, it is also something that senior management should review on a regular basis to stay in step with the ever changing market.

Number 3 – Fine tune sales associate compensation plans to make profitability a reality

Even small adjustments to your associate compensation plans can have a positive bottom-line result. Older systems are usually ridged and incapable of tweaking. Newer technology on the other hand is so flexible that even the slightest adjustment is quick and easy with potential upside results.

Compensation plans are not just about commission rates. Off-the-top and off-the-bottom deductions can play an important role in a compensation plan. Accounts receivable balances can have interest and late charges applied. Rolling back compensation plans to reflect a previous year of activity is another great way to make minor adjustments to reflect actual production and reward. Modern solutions fully automates this process to eliminate administrative effort and reduce human error.

Full service brokerage operations are often in a fight with ‘discount’ brokers and your sales associates are the foot soldiers in this war. When one of your sales associates discounts a sales commission, they are not just giving up a part of their commission, but a part of the company’s too! It usually means the company actually lost money on the deal. State-of-the-art technology can provide an automated solution that would see more of the ‘discount’ come from the agent’s portion of the transaction and ensure the company’s profitability on the sale was maintained.

Profit opportunities are everywhere when the right technology is properly used and making small adjustments to your compensation plans is quick and easy when you have the right tool in hand.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
25 transactions per month (300 sides per year)
$200,000.00 sale price
3% gross commission per side ($1,800,000.00)
2.5% recovery on gross commission income ($45,000.00)
Using NAR $100.00 average profit per side the $45,000.00 would be like adding 450 more sides to your transaction total for this branch office