Hiring a Sales Manager or a Selling Manager

We’ve often been retained to locate sales managers for retail jewelry stores. In our experience, we’ve found that two distinct roles are often lumped together under the term “sales manager,” and paid accordingly—that is, not enough. To find the most effective candidate, you first need to determine his or her real role, and then structure the compensation package. Here’s how we advise clients to do it:

  1. Determine if the position is a sales manager or a selling manager. There is a difference. A sales manager acts more as a true manager and coach, responsible for forecasting sales, monitoring inventory, conducting training meetings, and overseeing the sales team on the floor. A sales manager shouldn’t be responsible for writing many sales—about 5 percent of the store’s total is sufficient.
    A selling manager is an active salesperson with customers of his or her own. He or she leads by example and, while the selling manager needn’t be the store’s top salesperson—indeed it may be better if that’s not the case—he or she should write at least 10 percent of the store’s total sales.

  2. Because the responsibilities are different for the two types of managers, the compensation packages also should be structured differently. Incentive or productivity pay will keep both challenged and moving forward and is not difficult to establish for either type of manager. We will offer examples of compensation plans for each. (Please note that these are only samples; many variables need to be taken into account, such as the cost of living in your area, the size of your business, the level of experience of the individual, the type of store you operate, what comparable competitors are paying, and so forth.) To establish a base line, the following two examples are predicated on a single store with a $3.5 million sales volume in a suburb in a major metropolitan area in the Midwest. Let’s also assume this store’s sales staff is paid salary plus commission.

  3. The sales manager example. The base salary for an effective sales manager should be in the $50,000 to $60,000 range. One who is a strong motivator and sales trainer and an alert presence on the sales floor, monitoring its activity level to keep everything running smoothly, will command the higher end of the range. So will a sales manager experienced in selling higher-end branded goods or designer jewelry. A person with a track record of making high-end sales may command even more.
    Added to the base is productivity pay. In our experience, productivity pay for a sales manager should consist of a simple override on either the gross profit (4 percent or 5 percent after controllable expenses), or 0.25 percent to 0.75 percent of the gross volume, with adherence to gross margin and a bonus for gross-margin improvement when coupled with sales-volume growth. Your sales manager should reap what he sows, just as the business does and you do.

  4. The selling manager example. The base salary for an effective selling manager should be $40,000 to $55,000. It’s lower than that of a sales manager because the selling manager is an active participant on the sales floor and, therefore, should receive a higher sales commission. A selling manager spends far less time (if any) motivating or training the rest of the sales staff, or monitoring the flow of activity on the floor. His or her management functions are usually limited to gathering and reporting sales figures and perhaps scheduling or assisting in the hiring of sales staff.
    Since selling managers have much less influence over the total store volume or gross profit, they should be rewarded with less of an override on it. A 0.1 percent to 0.25 percent override is typical, plus whatever commission they earn on their personal sales. (We’re not big proponents of this selling manager profile because the person is competing against the sales staff he or she is helping to manage.)

  5. The rest of the compensation package for either position might consist of some or all of the following: vacation (one week for every six months is standard); sick leave (not less than five days per year and typically no more than eight per year); health insurance (in our experience, stores with better health plans always have better and happier employees); profit-sharing or 401(k) plans; paid educational opportunities; store discounts; life insurance; disability insurance; paid maternity leave; and more.

  6. If you compare this column to the JCK annual salary survey (see “2005 Salary Survey: Gender, Volume, Region Affect Jewelers’ Pay, Benefits,” p. 78), you might notice that the base-pay ranges we’re suggesting are higher than the median figures given in the survey. “Median” refers to the midpoint, meaning that half of all survey respondents pay their managers more, and half pay less. You might also recall that employee retention is an ongoing issue in this industry.

  7. Other resources you can use to help with job costing of all types include BLR (Business & Legal Reports), found at www.blr.com. This site has plenty of useful information, such as resources for helping with state and federal compliance laws as well as job costing. You can order reports by region, and the firm also has an informative e-newsletter. Another site, www.hr.com, has useful information and a chat room where you can talk to other human resources professionals. It also offers helpful monthly e-mail newsletters. If another business in your area targets the same kind of customer, you can ask how they pay their staff and what benefits they offer. Many won’t tell you, but some might.

  8. Finally, if you invest in your employees, as the saying goes, you’ll reap what you sow. But if you’re willing to pay only median wages, you’ll get a median performer. It’s up to you to decide how much you want your business to grow.