Pay for performance?

By
|

According to many industry experts, commission-based pay systems for counselors are key to a profitable shop. But how many agency owners are really taking this advice to heart?

In our InstaPoll on Crossroads Web site, we found over three-fourths of all 210 respondents paid their agents on a commission-based system, with the breakdown as follows: commission only, 23%; salary plus commission,53%, and salary only, 23%.

But it's not likely that this high percentage of commission-based agencies will translate to the total agency population, according to experts we checked with. For example, Bowie, Md.-based industry educator Doris Davidoff said, "I doubt that more than 20% of agency owners pay commission on the bulk of the inside agent's salary."

And in truth, the way we'd written the question -- with a focus on the positives of commission-based pay -- probably encouraged more agency owners who pay commission to answer the question in the first place.

We also heard from a number of outside agents as well as agency owners on this topic. One outside agent had a negative take. "I personally don't make as much as the salaried agent for the same amount of time, clients and years of experience," she wrote. "My pay has gone down since the commissions have been cut and continue to be cut. To offset the loss, I have to get more clients and work longer by providing [20 hours, seven days a week] service and value-added services."

Barbara Arendt, an independent contractor based in Lincoln, Neb., said, "In the last two years, my commission-only salary has been exactly two-and-a-half times more than what I made salary-only as a front-line agent. Of course, I'm an independent contractor and the equivalent of one year of salary equals my deductible expenses, so my actual 'net' increase in salary would be 1.5 times."

Arendt said being on commission has definitely made her a better salesperson. "Before, getting the sale was not my priority. It is now."

The right pay formulas

Doris DavidoffTravel Weekly's pay survey elicited the following question: "I am looking to hire another agent and would like to offer salary plus commission or commission only but have no idea what structure/scale is appropriate." -- Maria Snizik, The Travel and Meeting Place, Dayton, Ohio

Here's what three experts suggest as a start:

  • The key, according to industry educator Doris Davidoff, is what's called the multiplier. To make a reasonable profit, you must figure out how many dollars agents must generate in commission for each dollar of salary they make.
  • John Dalton, former industry consultant and now vice president of agency consortium Travelsavers, suggests rewarding agents on a salary plus commission program that comes to about 35% of all income they generate. The agency will then retain 65% of the revenue, 45% of which should be used for overhead, leaving 20% for bottom-line profit.
  • Dick Landis, "head coach" at Wayzata, Minn.-based agency networking group Travel Agency Management Services (TAMS), suggests a "rolling 12-month pay scenario" that averages out the commission an agent generates for several months. This helps protect agents against the fallout from slow-selling months. "It takes several months of below-average performance to noticeably affect an agent's pay," Landis said. For more information, call Landis at (612) 476-0005.
  • Landis also suggests that you prepare your agents six to nine months before actually beginning a commission-based program. Figure out what they would be making under the new program and tell them -- as a motivator for good producers and a warning to poor ones. You might note on their salary checks what they would be making on the new program and tell them whenever they want to, they can move onto the commission-based system -- but they cannot go back.

    The agency owners' side

    bag of cashA surprising message from Crossroads' Web salary survey came from an agency owner who said he'd like to pay his agents on commission but couldn't because he lived in a town where all of his competition paid their travel agents on salary.

    "The problem is that with the shortage of front-line agents throughout the country, I am the loser if I change the method of paying my inside staff," wrote David Bradach, owner of All-American Travel Club in Naples, Fla. These agents "look at the benefits [of working on commission] but are scared off by the potential loss of income for not producing. The answer, for them, is to work for someone willing to say it is OK to draw a salary without a compensating revenue stream."

    Bradach said he's considered hiring good salespeople outside the travel industry who really know how to produce, but "I don't have the time and patience to teach them Sabre. When the CRS systems change I can bring in a go-getter who does real estate sales, but until then I'm going to pay my agents a salary," he said.

    "If I had 35 agents answering my ads [for new employees] -- all of whom had computer experience -- maybe I'd feel differently."

    The fine art of motivating

    Continuing with the theme of agency compensation, here are more thoughts on the subject from the book "Managing for Dummies":

    "Whenever you give everyone the same incentive -- the same salary increase, equal recognition or even equal amounts of your time -- we call that jellybean motivation. Although this treatment may initially sound fair, it isn't. Nothing is as unfair as the equal treatment of unequal performers."

    The authors of the book, Bob Nelson and Peter Economy, then tell a story about a "large California aerospace manufacturer that decided to be nice and thank all of its employees at Christmas with a turkey to take home for the holidays. Some employees noticed that their turkeys were smaller than those of their coworkers. Soon, the complaints reached the executive suites -- employees with the smaller turkeys thought that they were being punished for poor performance. Faced with this dilemma, management ... accompanied each Christmas turkey with a printed note that stated, 'The weight of your turkey does not necessarily reflect your performance over the last year.' "

    The "big secret" to motivating employees, according to the book: "No single prescription can help you motivate all your employees. Each employee has his or her own unique motivators, and your job is to figure out what they are. ... The simplest way to find out is to ask them. Often managers assume their employees want only money and are surprised when their employees tell them other things -- such as ... having a more flexible working schedule -- may be much more motivating."

    Creative selling hints

    Here's Dale Moss, British Airways' director of sales worldwide, on how to develop consultant-like selling skills:

    "Creative agents find ways of developing relationships with customers that transcend core travel," he said. "As long as we think we're selling just travel, we lose. Agents are also selling education, fun, family exploration and romance."

    Tell clients, "We're going to talk about your vacations for the next five years" and help them to develop a long-range, long-term plan. This strategy can include talking to them about putting money away in a kind of travel club, with the line, "Think of travel as an investment. Here's how you can afford it."

    Such planning can take into account the different kinds of trips appropriate for a growing child -- from theme parks at 10 to the educational trip to London when a child turns 16. With a focus on long-term planning, "you've just raised your level of partnership with that customer considerably," Moss said.

    Looking for seniors?

    SeniorsIf you want to find -- and book -- more senior travelers, consider attending the travel marketplaces run by the Salem, Ohio-based Group Leaders of America (Glamer) shows that provide group travel leaders with seminars and exhibits as well as specific events for leaders to network with travel agents.

    In 1999, Glamer will add nine new group leader travel marketplaces, for a total of 76. The new locations will be Lexington, Ky.; Branson, Mo.; Akron/Canton, Ohio; Woodland Hills, Calif.; Palm Springs, Calif.; Dayton, Ohio; Fort Worth, Texas, and Vancouver, British Columbia.

    A third marketplace will be added in the Chicago area, with the current Chicago South show, which until now has been held in Merrillville, Ind., becoming the North Indiana marketplace.

    The 1999 Glamer travel marketplace schedule will run from March through June and from August through October; dates will be announced shortly.

    For information, contact Group Leaders of America at (330) 337-1027 or check the company's Web site at www.glamer.com.

    Comments

    From Our Partners

    2020 NTG Webinar Series
    Travel, Our Future and Yours A Series of Conversations with Industry Leaders
    Register Now
    American Queen South
    American Queen Steamboat Company
    Read More
    2020 Club Med Webinar
    Let’s Escape Again with Club Med
    Register Now

    JDS Travel News JDS Viewpoints JDS Africa/MI