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Monday, July 02, 2007

It's always interesting when I speak to clients about our fees how different expectations vary.

In all sectors, if you want to hire an interim manager then you generally expect to pay more than if you employ someone direct. This is because interims are hired for a number of benefits beyond their cost per day. As always, Wikipedia provides a good perspective on these benefits Interim Management.

However, regarding interim sales management roles, there is a difference.

Sales compensation packages include a basic salary and then an OTE (On Target Earnings) element. For many companies, this is usually set at something like a 60/40 ratio.

(I could post a separate blog entirely about Sales Compensation, it's a big topic)

So, let's assume you are launching a new product line into a non-aligned market. You want a Sales Manager to focus exclusively on the product until it has gained traction in the market (after which you plan to introduce the product to your existing sales team). This is often a good strategy as sales teams can be reluctant to promote new products lines over the ones they earn most of their commission from. Plus the new product may require market or technical knowledge that they do not have.

You decide that the employed position would attract a 60k GBP OTE (split 40k basic and 20k commission). I would consider this a mid-level package. In some sectors, such as industrial IT, it could be lower. In other, such as high-value BPO sales, it would be higher.

Typically, you would also have accelerators, quarterly targets, etc, but let's keep it simple. Also, I'm assuming that the OTE is based on some sound business plans, rather than a rough guess.

When you factor in National Insurance (currently 12.8%), holidays, benefits such as car allowance, health-care, pension, etc - then that 60k package will cost you 314 GBP per day.

Add to that a recruitment fee of around 25% of the package, which means you're paying an additional 15k up-front to hire your new sales manager.

So, how does this compare with interim rates?

There's a general industry rule called "the one percent rule".

Someone who would normally attract a 60k OTE package would cost around 600 GBP per day (or 1% of the annual salary)

In our experience, this is a reasonable guide but the market rate can often be lower than this.

Why? Typically interims are senior, over-qualified individuals who have made a lifestyle decision to become a consultant or interim manager. They usually have a portfolio of interests and, as such, put a premium on flexibility.

So, often, the market rate to attract the right sales manager to an employed role can be comparable to hiring an interim on a part-time contract.

If we take the example of the 60k GBP employed role. Whilst the total cost of employing this person would be 314 GBP per day, it may be possible to engage an interim for around 400 GBP per day.

That's a small premium for flexibility, experience, immediate access and reduced risk.

Plus it saves you the up-front recruitment fee of 15k GBP!

Other factors to consider that will affect the daily rate include length of the project (longer term normally equates to lower rates), level of risk (turnarounds with high risk of failure attract a further premium on daily rates) and, of course, how sexy the project is.

Working for a great name in a great location can be so attractive to some candidates they will discount their standard rate to get the gig.

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Posted by: David Regler @ 8:10 am |   | Links to this post  

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