We have all heard that “employees are a company’s most valuable asset.” And for most organizations, in particular agricultural retailers, employees also represent one of the largest expenses. In an ideal world, managers could pay each employee more without any worry about the cost or budget implication; but we live in a world of trade-offs and a delicate balance has to be struck.
To begin understanding this balance, the Center for Food and Agricultural Business at Purdue University and CropLife magazine, with consulting support from employment and recruitment firm Ag1Source, have partnered to develop the 2014 Retailer Compensation Survey. Collecting responses from nearly 150 agricultural retail locations across the country, this survey — which focused on salespeople and applicators — was designed to help top level managers to understand employee compensation and the utilization of various human capital management strategies.
The survey was conducted earlier this spring and these are the earliest results. This article provides insight into compensation for salespeople and applicators.
Compensation, Commissions, Bonuses
One of the most basic forms of compensation is the base salary, commissions and bonus. Collectively, these can be thought of as the take-home portion of a paycheck. The survey asked respondents to fill out the highest, average and lowest base salary, commission and bonuses paid by their organization.
For salespeople, the mean average-base compensation was $59,427 with the mean for the lowest and highest reported at $44,792 and $66,751 respectively. Of particular interest is the commission and bonuses. The mean average-commission and bonus was $16,194 and $7,496, respectively. Together, the average commission and bonus are valued at $23,690, or nearly 40% of the average-base salary.
While the base salary, commission and bonus structure can take several forms, it is important to consider how much the commission and bonus make up the base salary. If employees have adjusted to living standards that are 40% higher than their base salary, what happens when performance metrics are not met — for individual-specific reasons of a turn in the general agriculture economy — and that additional salary bump is not fully realized?
Applicator base pay rate was reported in dollars per hour (as a quick conversion to an annual salary, we used 2,000 hours per year). The mean ranged from $13.89/hour at the lowest to $18.58/hour at the highest; the average was $15.90/hour. When reporting applicator bonuses, typically paid on a per-acre applied structure, we found that the mean bonuses ranged from 38 cents/acre to 49 cents/acre, with an average bonus of 43 cents/acre.
Slicing the apple a little differently, application bonuses were also reported based on the type of application. Spreading lime or dry fertilizer was the lowest bonus application at 37 cents/acre. For the more challenging applications — dealing with a planted or standing crop — the bonus was slightly higher. Spraying pesticides (preemerge and postemerge) and foliar fertilizers were both reported at an average of 53 cents/acre.
While the applicator bonuses initially seem small, it is important to keep in mind the rate at which applicators can cover the ground. For example, applying pesticides at an average rate of 50 acres per hour would generate in a bonus equivalent of $26.50/hour — which is substantially higher than the average base salary of $15.90/hour.
Beyond the take-home portion of the paycheck, there are other important considerations, especially retirement. When asked about 401K and retirement contributions, 51% of responding organizations indicated that they contributed. Those contributing reported an average contribution rate of 6.2% of the salespersons’ base compensation. Those offering 401K or other retirement contribution to applicators represented 43% of respondents with an average contribution rate of 4.5% of base salary.
A second form of additional compensation investigated was profit sharing. Thirty-six percent of respondents reported sharing profits with their employees. For salespeople, the profit share was equal to 9% of base compensation. Applicator’s profit share was equal to 14% of base compensation.
Keep in mind that rates were reported as a percentage of base compensation. If an organization were to offer a uniform profit share across the entire organization, applicators — given a lower base salary — would have a higher reported bonus. For example, a profit share of $4,000 for all employees would be relatively smaller (as a percentage of base salary) for a salesperson making $50,000 base compensation (8%) than an applicator making $30,000 (13%).
Mike Smith, CEO of Ag1Source, asserts that retailers should not under-estimate the value that sharing some of the profits with all of the employees may have. “They will see a positive connection between the overall missions and objectives of the company and the resulting success. The implementation rule is, keep it simple and communicate progress along the way.”
Employers can provide various “perks” to make the work-life more enjoyable. A few of interest in this survey were cellphone compensation plans and policies for a salespeople’s use of vehicles.
Cellphones are critical to our current personal and work life. Their reliability and convenience has made them a necessity. Fifty-one percent of respondents indicated they paid a portion of salespersons’ cellphone plan. For applicators, only 37% of respondents reported paying a portion of employees’ cellphone plan. The survey did not ask about those that provide a company-issued cellphone to employees, which is likely a significant percentage.
The second perk we examined was the vehicle policy for salespeople. Sixty-nine percent reported they have a formal vehicle policy that allows for blending of a vehicle between company business and personal use. The most common type of arrangement, used by 38% of those with a vehicle policy, was allowing the use of a company vehicle for personal use at no charge, or with an income adjustment to the salesperson. For this arrangement, consider how difficult it would be for a salesperson looking at another job to consider life without this company vehicle. The Survey did not ask about organization offering the use of company vehicles for only company business.
Employee Development, Reward
While not felt directly in the employee’s paycheck, additional benefits through award trips, technical training and professional development are important for recognizing past performance and preparing for future employee success.
Employee reward trips were the least commonly offered and most expensive. Only 27% of respondents reported offering these trips to salespeople. The average cost of the salesperson award trips was $2,037 per employee. For applicators, only 15% offered the reward trips at an average cost of $1,034 per employee.
Technical training of salespeople and applicators was much more common. For salespeople, 61% offered technical training at an average cost of $1,629 per employee. A similar percentage offered technical training for applicators, 56%, but the average cost per employee was significantly less — $763 per employee.
A gap was observed for professional development. More than half of organizations (57%) offered professional development for salespeople. In comparison, only 35% offered the development opportunity for applicators. The average cost of professional development was $1,530 per employee for salespeople and $909 per employee for applicators.
In the second article from the survey, organizations were asked to report how many positions they plan to rehire in the next five years. The answer: A lot! Professional development and technical training can be an important tool for getting new employees up to speed. Organizations facing a lot of new hires will likely want to consider how they can increase their training and development efforts.
Another area of interest from the survey was how salespeople spend their time in addition to selling. The results are as follows:
- 26% Field Scouting
- 20% Seed/Fertilizer Delivery
- 18% Operating Application Equipment
At 26% of their time, field scouting is the non-sales activity that salespeople do the most. While none of these activities alone consume a majority of salesperson’s time, collectively they represent more than two-thirds, or 64%, of the salesperson’s time. This allocation might be appropriate in some cases, especially for smaller retailers, but managers should think strategically and carefully about their organization and the implications for how their salesforce spends its time.
A final note to make on sales commissions: Earlier, it was discussed how a significant proportion of a salesperson’s take-home pay can come from commissions. In some cases, the commission can be larger than the base compensation. To understand what goes into the commissions, respondents were asked to report which sales activities generated the commissions. The results below show the activities and share of total commissions each generated across the organization:
- Seed 44%
- Crop Protection 25%
- Fertilizers 22%
- Precision Ag 6%
- Custom Application 4%
By far, the largest source of agricultural retail commissions is from seed sales. Ninety percent of retailer commissions come from seed, chemical and fertilizer sales. Retailers and managers, especially those concerned about a salesforce that is reliant on commission, should measure and watch this closely. While making an individual sale is the responsibility of the salesperson, managers need to provide as much support as possible, such as programs to gain market share, organizational sales programs and initiatives, to make sure their organization can help its salespeople close the deal as often as possible.
Ultimately, the 2014 Retailer Salary Survey work confirms our initial suspicion that offering a competitive compensation package to highly valuable employees is a delicate balance. While several considerations weren’t considered in this survey — flex-time, overtime pay, workplace benefits, vacation/sick/leave policies and general organization rule and policies — we hope this research will be of value to the managers looking to recruit the top-talents sales and application salesforce.