Paying their due
Might channel salespeople soon receive a raise after years of frozen salaries? Fleur Doidge investigates the state of pay
The new year message from John Cridland, director-general of the CBI, was that all should benefit from economic recovery - and that this means it could be time for employers to raise salaries once again, if they are benefiting from this growth.
"As the financial situation of many firms begins to turn a corner, one of the biggest challenges facing businesses is to deliver growth that will mean better pay and more opportunities for all their employees after a prolonged squeeze," Cridland told media on 30 December.
"Businesses must support employees in every part of the country to move up the career ladder, while also giving a helping hand to young people taking their first tentative steps into the world of work."
So can channel salespeople look forward to an actual pay increase this year, rather than adjustments in line with inflation, or having to making savings somewhere to maintain discretionary spend? Or are they paid appropriately, already, anyway?
Hard, reliable, up-to-date figures on IT channel sales salaries are not easy to come by. However, Office of National Statistics figures out in December suggest that earnings across all industries rose slightly in 2013. April to April, median gross full-time pay was £517 a week, up 2.2 per cent from 2012. Full-year median was £27,000, up 2.1 per cent from 2012.
What about IT?
PayScale.co.uk's online surveys suggest the average annual UK salary for an IT services professional is £35,616 and for a software developer £34,735, based on 4,551 and 3,371 responses respectively. Overall UK average salaries were £31,784 for a man, and £24,535 for a woman, based on 59,034 and 37,897 responses respectively. According to PayScale's poll, IT as an industry pays better than even banking and financial services.
Executive recruiter PSD's Salary Survey 2013-Marketing and Sales looks at remuneration of senior marketing and sales professionals in a range of industries, and it found that salaries remained fairly consistent from 2012 to 2013. "The majority of respondents relied on bonuses to drive up overall pay," it said. "Only four per cent received a bonus in excess of 50 per cent, with 31 per cent receiving no bonus."
Marketing and salespeople working in consumer electronics and hardware had seen a challenging 2012, with many restructures and redundancies. Overall, supply of talent exceeded demand in 2013, spurring some to move into other sectors such as mobile, financial services or even automotive.
However, PSD also found that senior channel sales leaders were most in demand of all in this group as vendors sought to get closer to customers across Europe.
In mobile and telecoms, the picture was a little brighter for those hoping for raises in 2013, although redundancies and consolidation remained a feature.
"This was an opportunity for some brands to acquire talent not normally available, but also contributed to higher levels of available short-term contractors or consultants and senior managers prepared to consider lower salary levels for permanent positions - meaning flat salary levels overall," it said.
It would seem from the above that channel sales isn't badly paid - and several off-the-record comments sourced by CRN complained that they earn far too much - but by the same token many, especially if they've performed well, may genuinely feel they are overdue for a raise.
Ashley Gatehouse, global marketing directer at volume licence partner and consultancy Crayon, says the challenge is evaluating worth and contribution, particularly when you are operating in an environment where the existing account manager or team doesn't have all the skills to complete more complex engagements with the client, such as volume licensing.
"The creation of overlay specialist sales functions to serve these types of client requirements is an obvious response but can add significantly to cost unless compensation plans are very carefully constructed and maintained," he says.
"Some members of a team may be disproportionately rewarded, the opposite being true elsewhere in the business, damaging team coherence, corporate culture and the long-term health of an organisation."
It can make more sense, says Gatehouse, to formally train client account managers and teams so they can serve more of the client requirements, without resorting to specialist resources. This can reduce cost and improve effectiveness as well as opportunities. Having it all linked to skills and accreditations, as well as client relationship tenure, can be more complicated - but the benefits are clear.
"Not just for their operational costs, but also for the quality of the service they can provide to their clients and the career progression and job satisfaction of their team," he concludes.
James Ward, managing director of distributor Hammer (pictured, right) says he has always worked to a formula of offering slightly lower basic pay but higher commission, with a view to rewarding and reinforcing reliability, success, and an entrepreneurial attitude that goes above and beyond the call of duty.
"Cultivating staff and promoting brand loyalty is a big priority for us, to ensure staff have complete storage product and solution knowledge, and that each of our customers' businesses is completely understood by our staff," Ward says.
"Our figures reflect this. Our account managers have been with us for an average of eight years, and our business development managers an average 12 years. We are extremely proud of that. With knowledge comes success, which builds commission bases and loyalty."
Ian Vickerage, managing director of video comms VAD Imago, suggests it tries to avoid some of the issues with salary by recruiting young staff early in their careers rather than from "the general employment market". "We're a little different from many channel companies that way," he says.
"If you look at sales management, for example, all of them came through our training scheme. If you're on the open market looking for quicker results, then you're often going to be paying over the odds."
Often, Vickerage says, those salespeople one may end up hiring to fill a more senior position in a hurry will demand a higher salary although "often they're not worth that". It may be a "controversial view", he adds, but sometimes salespeople command a high salary simply because of their seniority, and their actual sales results might not meet the same standard.
Some may also have been sitting happily making sales for a well-established supplier, and may not have achieved so well if working for a smaller, up-and-coming player that had to chase much more brand-new business, Vickerage (pictured, left) notes.
Targets should be kept clear and not changed at short notice, he warns, and the structure of commission schemes also needs consideration. "In interviews, we receive a lot of complaints about people's commission schemes. For example, if they're capped: if people are making bigger sales for the company, why shouldn't they be rewarded?" he says.
There is no easy way to decide what a channel salesperson should be paid, although those are a few of the factors that must be considered and interlocked for maximum results - and non-cash-based incentives should be in tune with the overall strategy as well, Vickerage confirms.
Andy Burton, founder and director of sector body the Cloud Industry Forum (CIF), notes that it is all dependent on the specific business model. The compensation strategy should be predictable, make sense as part of a whole, and be consciously designed to assist the tech provider to score goals, he agrees.
"It's different if you're upselling cloud, or a provider of services, or a product-based business," he says. "And pay should follow incentives."
If the salesperson has been working for an early-stage, growing company, his or her performance could be assessed according to the references available as well as whether or not the sales are growing. Companies must consider whether they want to provide incentives according to volume performance or value. "In a more mature business, you might be looking at value," Burton says.
It is right, too, that compensation packages should reflect the scale of the organisation, with larger firms, as is often the case, paying a somewhat higher base salary to their staff for similar roles. Pay scales should reflect the risk taken by both the employee and his or her employer, as well as the business as a whole.
When it comes to the fraught issue of compensation in a cloud business - as opposed to traditional resales - though, Burton (pictured, left) says things have moved on significantly from even two years ago.
"The primary concern was how does the channel move into more complex sales based on recurring revenue. I think most people have got their head around that now in terms of knowing that [compensating according to recurring revenue, instead of just at point of sale] is the right thing," he says.
"I'm not saying they have necessarily changed their business model."
If a deal is on a pay-as-you-go basis, compensation should accrue as the business grows. Salespeople should get something for winning a cloud services deal or making a renewal, but perhaps less than they would have received for a more traditional sale. Then, over time, they will receive more.
"In an early-stage business, you're probably balancing it against the number of units of sales and the value of the sale, adding the probable value. But there is no one size that fits all," he agrees.
"Especially if you're comparing the world of a cloud reseller to that of a managed services provider, they're going to have a number of different margin operations within the business."
And if you're transforming your resales business from one to the other, incentives to help salespeople focus in that direction can also prove valuable, even if the overall value of an individual sale - or lead, for that matter - appears to be less. Salespeople can and should make good money selling cloud services, he affirms.
"But the number one rule is not to copy the next person's sales plan," says Burton.
The view from recruitment
Zoe Albans, sales director at recruitment agency Channel Recruitment Solutions (CRS), confirms that channel sales pay in the £18,000 to £25,000 bracket seems to be rising a little bit, perhaps by a couple of £1,000 per annum "here and there".
"I think companies are trying to get better quality candidates in, though. At mid-level - £25,000 to £40,000 - things haven't changed that much in the past couple of years. There I would say that companies are still trying to get as much as possible for as little as possible," she says.
When it comes to more senior positions, though, CRS has noticed a "solid rise" in salaries accompanying a rise in the quality of candidates and the emergence from recession, perhaps reflecting a boost to supply. Director level has gone to £80,000 to £90,000 basic with £10,000 to £20,000 on top, with senior sales packages at vendors at about £130,000 per annum, Albans says.
"But I would say that smaller vendors are probably still paying around £40,000 to £50,000 basic, with £30,000 to £50,000 on top," she says.
"The strange thing is that a lot of vendors or channel companies are quite indecisive at the moment; we'll get a job and a couple of weeks later they'll change the criteria. They seem to want more quality for what they are paying, and perhaps remain a little cautious."