Professional Jeweler Archive: How to Compensate Sales Managers

April 2005

The Store | Managing: Your Staff

How to Compensate Sales Managers

They play a unique role reward them accordingly

By Jon Parker and Debbie Dern

Sales managers are critical to the success of a jewelry store, so it’s 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 store’s sales – that’s what sales associates are for – so his or her compensation should be based on the store’s 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 manager’s 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 manager’s 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.

Manager’s Goals

As noted, base your manager’s 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 you’ve 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.

Decision Time

You’ve defined the goals, the numbers are crunched and it’s 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 today’s 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 employee’s 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.

Copyright © 2005 by Bond Communications