Incentives: A Scientific Sales Bonus
Like many professional-service companies, ERM Program Management in Exton, Pa., relies on the people who know its product best -- its technical staff -- to push its environmental engineering services. Unlike many of his rivals, CEO Jack Newell decided that technical staffers who act like salespeople should be paid like salespeople.
Twenty senior scientists and engineers compete for bonuses -- worth as much as 50% of their base salary. The bonuses are tied to new-business targets, billable hours, and other goals such as presenting a certain number of technical papers. They are paid out twice a year provided the company meets its overall profitability goal -- which it has for the last three years, while its sales have grown from $3.6 million to $25.9 million.
At ERM the typical bonus is 25% of a technical staffer's salary, although one exceptional program director recently raked in 50% after, among other things, he brought in an extra $1 million in sales and increased his billable hours.
For the year ending last March, ERM paid out $520,000 -- or almost 29% of pretax net profits. Is the plan too generous? "Since we meet our goals, I'm reluctant to change it," says Newell. In fact, he gives the incentive program credit for the near-zero turnover among his scientist-salespeople and for landing the company on the 1995 Inc. 500 list (at #260).
Still, the CEO doesn't believe that money alone is enough. Before sending scientists and engineers into the trenches, he hired a marketing manager, who directs the efforts of the technical staff. He also paid for the group to take communications classes, at which they learned the basics of selling.* * *