The Store | Managing: Your Staff
How to Compensate Sales Managers
They play a unique role Ð reward them accordingly
By Jon Parker and Debbie Dern
Sales managers are critical to the success of a jewelry store, so its important to compensate them appropriately.
You should assess a sales manager and a sales associate using different criteria because their roles are very different. Ideally, a sales manager creates sales energy, gives the staff effective selling tools and works with them to improve their selling techniques. Your sales manager should not generate the bulk of your stores sales thats what sales associates are for so his or her compensation should be based on the stores total sales volume.
Consider what happens when your sales manager sells instead of manages. In a store with $2 million in sales, a manager may have $45,000 in sales, or 2.25% of the sales volume. If a store has $10 million in sales, a managers sales may be $150,000, or 1.5% of total sales volume. You might think the manager generating more sales is good for the store. However, the sales managers cost eventually could outweigh his or her contribution to your bottom line. Simply, if your sales manager is selling instead of managing, he or she is missing opportunities to train, lead and grow your staff.
More problematic is the dynamic of sales associates competing with their boss for sales. This can hurt morale and prevent your sales staff from reaching greater success.
As noted, base your managers salary on store performance. Set clearly defined goals with your manager. Then measure his or her performance against these goals. Consider gross margin if sales volume is steady, did your manager increase gross margin? If so, he or she made a positive impact on your bottom line and should be rewarded.
Maybe youve asked your manager to increase sales volume, but keep gross margin at a fixed rate. The key is the ability to quantify success. If you do the math, the numbers will easily guide you and your manager through the salary review process.
Youve defined the goals, the numbers are crunched and its truth time. You have to determine the increase you give a manager who is meeting or exceeding the goals. Because salary reviews never take place in a vacuum, consider inflation. In todays market, a 7.5% to 9% increase is appropriate. If your manager sleepwalks through the day and achieves the bare minimum, a 2%-4% increase, if any, is appropriate. If your manager is on a downward trend, adjust the salary downward. Give the manager one financial quarter to improve performance, outline specific goals and reassess his or her compensation after that time.
A salary review can be difficult to navigate. As an employer, you must balance an employees cost to your business against his or her contribution. The key is to maintain a clear, concise and consistent compensation plan with measurable goals.
Jon Parker and Debbie Dern of DJP Executive Search, Virginia Beach, VA, offer personalized service on each staffing assignment from jewelry tradesperson to executive. Contact them at (757) 430-9500.