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There are a variety of methods being used across the country for determining
Branch Manager compensation plans. Which method best suits a branch office
is determined by what is necessary to drive the office; i.e., recruiting,
retention, expense control, increased productivity, affiliate services support,
maintenance of what already exists or a combination of two or more of these
items.
Compensation can be 1) bonus only, 2) salary only, 3) salary + bonus, or 4)
salary + bonus + incentives. Several factors will weigh in the decision as
to how to pay a Branch Manager for their individual office. These factors
include: competitors' management compensation plans, existing management
compensation plans, experience level of manager, availability of management
talent, profitability and productivity of office, type of office; i.e.,
turnaround office, new office, satellite office, etc.
To assist in developing a compensation plan that makes sense for each office in
your company, begin with the following:
1. Quartile the sales associates to determine if minimum
productivity standards set by the company are being met; i.e., one listing and
one sale on average per month
2. Determine if current commission schedules provide the
company with a fair profit…if not, commission plan analysis and new designs
may become part of this overall process; review the past 12 months actual
results… recruiting, retention, productivity per person, GCI, Co. $, Expenses,
Net Profit, market share and ancillary services support, if any
3. Project realistic recruiting,
production goals (# of listings, # of sales, GCI, Co. $, Expenses, and Net
Profit) and ancillary service goals for the next 12-month period
4. Determine what you are willing to pay
for the management position and which compensation method (from the four listed
above) works best for your company
5. Determine which area(s), if any, need
specific improvement and upon which you want to base percentages, incentives or
fixed amounts, i.e., recruiting, increase in productivity, improvement in
previous 12 months GCI, Co. $, Expenses or Net Profit, etc. In a multiple office
company, the areas of focus may vary from office to office.
6. Back in the salary, if any and
percentages
7. Review for overall fairness to entire
management team
The following are some examples of a variety of methods using the same
numbers for a fictitious branch office:
NOWHEREVILLE, CA BRANCH OFFICE
50 Sales Associates - 750 Sold Units/Yr. @ $222,225 Avg. Sale Price
$5M GCI, $1.5M Co. $ (30% retained Co. $), $520K Net Profit ($960K Annual
Expenses)
1. Bonus Only
- May be used for an
office in which the Branch Manager also lists and sells real estate and merely
oversees the office
- May also include
raising the Branch Managers' commission level as additional compensation OR as
the only compensation if it's a very small office or a satellite office
Example: Bonus Only
1999 Net Profit - $520K
2000 Base Salary @ 10% of Net Profit
TOTAL ANNUAL INCOME - $52,000 + Income
from Sold Units
2. Salary Only - No Bonus, No Incentives
- May be used for a
mature, high volume office that only requires a capable "maintenance"
type manager
Example: Salary Only
1999 GCI - $5M
2000 Base Salary @ 3% of GCI = $150K
TOTAL ANNUAL INCOME - $150,000
3. Salary + Bonus
- Determine which
area(s) needs focus: GCI (increasing productivity and recruiting), Co. $
(controlling associate splits and retention) or Net Profit (controlling
expenses)
- Salary can be
based on a percent of the previous year's GCI, Co.$ or Net Profit
-
Bonus can be based on a percent of improvement in the
previous year's GCI, Co. $ or Net Profit
Example: Salary + Bonus
1999 Co. $ - $1.5M
2000 Base Salary @ 9% of Co. $ = $135K
2000 Bonus @ 10% of improvement in Co. $
over previous year* (Projected
improvement in GCI $150K) = $15K
TOTAL ANNUAL INCOME - $150,000
*If Co. $ falls below the previous year, the Branch Manager will receive no
bonus, and the base salary for the following year will automatically drop due to
the decrease in Co. $.
4. Salary + Bonus + Incentives
- Incentives are
added for increasing some other aspect of the company's ancillary services;
i.e., mortgages, title, insurance; home connections and/or recruiting
Example: Types of bonuses
1) Recruiting Bonus:
$500 for
new recruit
$1K for
$1.5M Producer
$1.5K
for $2M Producer
$2K for
$3M Producer, etc.
-
Pay manager in increments of $500 to $1,000 from recruited associates'
settlements with the company to insure that company isn't paying for
non-productive associates.
2) Mortgage Loans: a) set per
loan bonus; i.e. $25 per loan, or b) set a minimum goal + bonus; i.e., 350 loans
minimum and $100 per loan over goal, or c) set loan goal of 50% of all annual
buyer-controlled sales and $100 per loan over 50%.
- Bonus
amounts can be whatever makes sense to the company and should be given in the
form of quarterly bonuses to avoid potential RESPA issues.
3) Title, Insurance and any
other related services can be set up similar to mortgage loans
Example: Salary + Bonus + Incentives
1999 Net Profit - $520K
2000 Base Salary @ 25% of Net Profit = $130K
2000 Bonus @ 20% of improvement in Net
Profit over previous year*
(Projected improvement in Net Profit $52K) = $10.4K
2000
Mortgage Incentive @ $25 per loan paid quarterly (Projected loans to mortgage
company 384) = $9,6K
TOTAL ANNUAL INCOME -
$150,000
*If Net Profit falls below the previous year, the Branch Manager will receive no
bonus, and the base salary for the following year will automatically drop due to
the decrease in Net Profit. Mortgage loans are a separate incentive.
However, if they are less than Projected Goal of 384, incentive bonus will be
decreased accordingly.
In conclusion, it's important that a Branch Manager's compensation is focused on
increasing those aspects of the company's business that increase profit.
Profit provides the base for continued growth and improvement throughout the
company and insures it's stability and longevity.
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