Common Sense Compensation for SMEs

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A few people I’ve met operating small and medium contact centers have complained about one common problem: recruiting good telemarketers. Here’s a phrase to keep:

Cheap salaries equals cheap results.

Obviously, many small business owners, including those operating call centers and telemarketing business centers, think that it’s better to pay cheap rates at the start and allow the new hire to prove himself or herself before you start increasing his or her salary, maybe after a few months and then a year later. Another phrase to keep:

Old school methods equals old revenue results.

You see, in today’s very wired world, the telephone is now a smartphone. You are now competing with multiple communications media – voice, SMS, web and apps. Even print media is now in digital format as well as radio and TV being streamed to the smartphone. Still, a voice-based telephone call is the best medium to close the deal faster than any other digital media. But hiring for cheap is not going to close your sales as fast as you want it. Hiring cheap worked before; not anymore. Here’s what I did to make me competitive.

Every telemarketer has a quota.

Business owners and managers always think that giving a high quota, even with good incentives, will push the telemarketer to exceed beyond expectation. But everyday human psychology has taught us that the feeling of fulfillment outweighs the need to push people to deliver more. So, my quota was simple: come up with a per seat daily break-even value.

From the usual rent, utilities and monthly fixed and variable services to calculating the monthly amortization of capital expenses, you have to find the per seat, per day expense value. When you have that amount, add a 30 percent margin and make the resulting figure your telemarketer’s daily quota. To add a 100 percent margin is not only unfair, it can also be an impossible feat for everyone, not just the new hires. Quotas or targets have psychological impacts on people and if they are too high and unreachable, you will either get resentment or a high resignation rate. Remember, a new hire takes more effort to manage than someone who has been with you for more months.

Pay high, expect high.

From the prevailing rate of new hires with at least one year experience in telemarketing, I offered 30 to 50 percent higher starting gross basic salaries with the promise of fulfilling the fair quota by the end of the second week. For example, if the industry rate of a telemarketer of the small business with one year experience in appointment setting campaigns is $1,500, I’ll offer $2,000 starting gross basic salary. Once the telemarketer goes live, my team and I will monitor that person’s daily performance for the next two weeks while providing guidance. I’m not looking for an average daily performance (like a bank’s average daily balance or ADB). I’m expecting the telemarketer to slide-up his or her performance to reach the daily quota on or before the end of the second week. If the telemarketer doesn’t reach the desired daily quota, I have a decision to make: give the telemarketer another chance and another week, or terminate his or her employment.

Giving the telemarketer another chance isn’t about character, “Oh, he’s a nice kid. I’ll give him another chance.” It’s about your gut feel or intuition, knowing that after monitoring him or her for the past two weeks, your subjective side is telling you he or she can do it. Here’s an example.

I once hired a telemarketer who I knew would succeed even before the two week deadline. I monitored his performance on a daily basis but was surprised he wasn’t making it. By the end of the second week, he hadn’t reached the daily quota and I had a decision to make. I gave him another chance and another week, but I already knew what his problem was. The type of interiors I had didn’t have the same elaborate infrastructure he was used to working with. In short, in my center, he was distracted. So, the following day, I brought one of those eye patches they give you when you ride a long-haul trip in an airline. Since he has already memorized his sales script by heart (if he hasn’t, I’d fire him on the spot), I asked him to put the eye patch for the entire day. One closed sale for the day – not enough. In the next two days, I still asked him to wear the eye patch, and his sales performance increased. By the end of the fourth day, he reached the daily quota required. This is an example of using your gut feel. I had the intuition that he’s suppose to be succeeding but I didn’t give him another week and just leave him be; I helped him. I guided him until he made it.

The rest is sales management and I will not go into that anymore. Once your telemarketer reaches that daily quota, it will slide up and down as usual as sales performances do. Averaging, absolute amounts, guidance, training, coaching, motivation and everything every sales organization does to keep the sales staff performing great is something you need to do, constantly and consistently.

Managing Directors don’t have salaries.

We were four partners and our deal was “no salaries.” Our compensation came from the 30 percent margin divided by percentages based on roles and responsibilities. Because the moment we placed salaries on ourselves (and all of us thought of ourselves as high-paying executives), that margin has to be 100 percent or more, something very unrealistic to do in a small business operation. We also agreed to increase the margin to 40 percent only after the first year of operations.

Above-quota bonuses.

Here’s my simple formula. Any revenue beyond the daily quota, 50 percent goes to sales bonuses, 20 percent to the shareholders, 20 percent to retained earnings and 10 percent to end-of-year profit sharing for all non-sales employees like human resources, accounting, administration and the managing directors.

The bonuses are given to the sales team – telemarketers, quality assurance analysts, team leaders or supervisors and the operations manager. Each telemarketer gets his or her bonus aggregated at the end of the calendar month. – this represents about 70 percent of the pot since there are a lot of them.

My ratio between telemarketers and supervisors is ten-is-to-one. QA analysts have the same ratio as the supervisor. I only had one operations manager out of the 80-something sales employees of telemarketers, supervisors and QA analysts.

So, the remaining 30 percent of the bonuses go to the supervisors, QA analysts and operations manager. But the rule is that 8 out of 10 telemarketers of one team should be reaching the daily quota before the team’s supervisor and QA analyst get their bonuses. The same 80 percent rule applies for the lone operations manager.

The reason why the non-sales oriented QA analyst gets a bonus is because that person actually knows the telemarketers skills in closing sales, and knows the areas of improvement. Which means the QA analyst always needs to relay the daily and weekly analysis to the supervisor for proper coaching and pats on the back. Without the QA analyst being proactive, the supervisor will just be guessing based on a few seconds of hearing how the telemarketer talks on the phone but without hearing the real conversation that includes the prospective customer at the other end of the line. The QA analyst, on the otherhand, listens to the entire conversation of the priority calls made – the calls that resulted in closed sales.

Transparency is equal to honesty.

Many small business owners think that deals with clients, margins and other financial and accounting information should not be divulged to staff. That old school way doesn’t work anymore because one or some of the staff will eventually find out how much the client is paying per closed sale. They can even deduce margins and other financial information.

My entire staff knew how much clients were paying us, how I came up with the daily quota, including the margin, and the formula I was using to determine bonuses. Every month, we had an all-hands meeting where I reported the financial state of our operations. We even had handwritten charts taped on the walls and updated daily. Everyone knew who was pulling the entire company down or who was pulling it up and raking high bonuses every month. So, I didn’t have to pull out individuals from their workstations for a reprimand – everyone did that for me already. I just put on my “good cop” hat to give a pep talk to the lagging employee. Didn’t that make my job or the supervisor’s job or the operations manager’s job easier?

Et al.

I didn’t have additional health care benefits because I talked to my entire staff and told them how much I had to pay per employee, which meant I had to get that money from somewhere in the percentages and formula I was using. “No, just keep the status quo and we’ll manage with government-mandated employee-employer contributions we are all giving to the government health care and social security systems.” But we did implement something on the second year, not comparable to what multinational companies do, but good enough to put a smile on everyone’s face.

We also made sure we had fun all the time. Being a sales-oriented company, we celebrated every imaginable festival with posters, hanging things and short presentations. During our customers’ holidays (we were telemarketing to another country) but wasn’t our holiday, we’d use that for additional training and team building activities. Twice a year, I would schedule a day off from our client and we would all have an out-of-town activity. Our client knows when to expect “no operations” from us and route all activities to other call centers they were using just for those two days. We had spiffs and I’d conk out some weird activity from time to time, like hiring a clown for a surprise visit complete with balloons, jokes and gags.

So, do you still think hiring good people is so difficult?

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