Dealers debate salary vs. commission for RSAs
January 16/23, 2017: Volume 31, Number 16
By Ken Ryan
Flooring is an unusual retail species. Unlike mass merchants or other high-traffic venues, the typical flooring store may only see five or 10 customers in a day. Further research shows that for nearly 25% of dealers, between one and five people will buy flooring from them in a given week—which translates to less than one transaction per day on average.
The way flooring dealers compensate their RSAs is often different as well. Many successful dealers employ a commission-only structure, a model that seems to work for the largest dealers that have the traffic and transactions to satisfy their staff. Other retailers choose a straight hourly salary. Then there are those that combine salary plus commission, with higher amounts depending on the gross profit of the sale.
Deb DeGraaf, co-owner of DeGraaf Interiors, Grand Rapids, Mich., avoids a one-size-fits-all salary approach when it comes to compensating her salespeople. Rather, she takes a more customized approach, which allows her to work with the individuals and determine what suits them best. “Overall the majority of our sales staff operates on a commission basis. For those who appreciate the predictability of a salary we offer that as well; in those cases we monitor the amount of commission they would have earned. It is our goal to have a system whereby a salesperson can sell under the compensation plan that allows her to do so without worry or trepidation.”
Steve Weisberg, owner of Crest Flooring in Allentown, Pa., uses what he calls a “bucket system.” In his store, the majority of his staff works on salary plus model, which means they receive a weekly salary for which they have to write a certain percentage of business. “Once they write that specific amount in the month, any more sales beyond that earn them commission,” he explained, noting the commission is a floating scale. “Fill up the bucket and you’ve earned your salary. When the bucket is filled up, the fallout earns at different levels—2%, 4% and 6%. Once an RSA earns his salary he should be able to make more at no additional cost to the business.”
Bobby Meredith, who runs Flooring America OKC in Oklahoma City, provides a base salary that helps promote comfort and financial security for sales associates. “In addition to the salary, we pay a commission per sale that is calculated as a percentage of the sale based upon the gross profit,” he explained. “The commission reminds the sales associate of the value of each and every customer who walks through the door.”
Some flooring dealers refrain from a commission-only approach because they do not want their RSAs to become overzealous in their approach. However, some of the most successful flooring retailers in the industry are all-in for a commission structure. Avalon Flooring, with 14 locations in New Jersey, Pennsylvania and Delaware, is one of the largest such dealers. “We believe a commissioned sales force will produce a far better result for both the company and the salesperson,” said Brian Witkin, executive vice president of sales. “This gives the salesperson more opportunity to increase his or her earnings, and if the company is making more money I want my salespeople to make more money. Also, paying on gross profit rather than the total sale of the job will have a greater bottom line impact for everyone.”
The challenge Avalon and other dealers are starting to face is the younger generation wants more security and are somewhat afraid of a commissioned-based job, according to Witkin. In addition, some dealers believe many young salespeople do not like the pressure of their performance being responsible for their income. As such, a salary can give them the security they desire.
For retailers like Carlton Billingsley, owner of Floors and More, Benton, Ark., their job is to persuade millennials that a commissioned structure will pay dividends in the end. “We believe in earning what you work for, and your compensation is a reflection of your book of business by reaching goals/benchmarks through a commissioned sale,” he said. “Our commissioned [salespeople] will be focused on getting the sale, keeping the sale and expect referrals/additional business from their relationships built from the first transaction with a client. Our commissioned sales professionals write more business to grow their individual wealth and expect our business to grow so that we can grow together.”