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A great idea: variable CSR compensation

Jun 1, 2006 12:00 AM

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Gorelick's Management

In recent years, the stature and importance of customer service representatives have grown. That’s true in the graphic arts industry, particularly, and in American business, generally. The reasons are complex, subjective and too lengthy to address meaningfully in a column.

In most cases, the CSR has developed an unprecedented level of credibility with his or her customers. Things have come a long way from the days in which the primary function of the customer service representative could be summarized as someone walking behind the elephant with a giant shovel. Not too many years ago, the customer service function was regarded as “overhead” by many graphic arts accountants. One prominent CPA told me, “If everyone in a printing company did his or her job, we wouldn’t need customer service people.

The role of the CSR continues to evolve. It is growing increasingly proactive and responsible. In too many companies, customers think more highly of the CSR role than their employers, and this tends to be underutilized by the salespeople. In fact, I recommend that the business cards of salespeople list the name and phone number of their customer service representative.

The issue of compensation for CSRs has been the subject of a great deal of discussion in recent years; the average salary has increased and the position, once seen as a transitional, is increasingly seen as a lifetime position.

Managers and owners also have shown great interest in developing a variable compensation plan for customer service representatives in their respective companies. It sounds like such a fair, simple and reasonable idea. An effective CSR is in a direct position to reduce costs, lower manufacturing spoilage, and elevate customer satisfaction. Why not reward outstanding performers?

What’s the problem?
The trouble begins when it is decided that all CSRs in a company should be subject to the same criteria for earning variable compensation. That’s a great theory, but in practice, no two customer service reps have the same duties or challenges. The playing field isn’t level.

My experience is that, despite management’s best efforts to be fair, it’s virtually impossible to devise an empirical program that all the participants consider to be equitable. Major account development usually involves customized services and processes, and the customer service person usually ends up the shepherd of work related to a major account.

Our firm conducted an extensive survey of owners and senior managers in a segment of the graphic arts industry several years ago. Every one of the 140 or so respondents thought that variable, or performance-based, compensation was a good idea. Most had devised or implemented a program. Only one respondent claimed to be satisfied with the results and felt the program was fair to all parties.

Companies that have tried to devise and implement a statistical variable compensation program for customer service representatives usually run into these inequities:

  • Dependence upon a salesperson’s performance if the plan is volume-based.
  • Sales volume might not be a fair unit of measurement if it involves a relatively small number of large orders.
  • Complexity of work and number of orders might not be considered.
  • Some customers and sales reps impose a burden on the CSR through missing, ambiguous, or inaccurate job specifications. Other CSRs might have the benefit of customers and a rep who provide impeccable job specifications.
  • Some CSRs almost exclusively handle original jobs. Some others might handle a larger number of reprints.
It is ironic that the fairest method for evaluating a customer service rep’s performance and determining bonus compensation is subjective. It’s a case in which there might be a best solution, not a good solution. Management determines that a CSR is eligible to earn as much as a specific percent of his/her annual salary based on performance. A quarterly meeting is held with the CSR, performance is discussed and management decides upon the percentage of the maximum quarterly bonus owned by the CSR.

Got a success story?
Let me hear from you if you’ve been successful with variable compensation for customer service representatives. It seems like a simple matter, but it can be described as the Rubik’s Cube of the graphic arts industry.

Dick Gorelick is president of Gorelick & Associates and the Graphic Arts Sales Foundation. He can be reached at

To read more of Dick Gorelick’s Management columns, visit our Management Archives.