All tagged Freight Brokerage Compensation

Freight Broker Organization Structures – Part 1: Cradle to Grave

Beth Carroll

I’ve been working with freight brokers for over 15 years now, helping them revise their organization structure and align their compensation plans to support the goals of their business.  While the number of different possible organization structures is almost limitless, there are really only two approaches, with some variations on each:  Cradle to Grave and Split Structure.  This article deals with the first; we will address the Split Structure in the next article.

Commissions vs Goal-Based Incentives Part 2: Draws vs Seat Cost

Beth Carroll

On the commission side of our graph (see the article from September 2023), we are moving toward using some sort of “goal” to affect payout, rather than simply paying a straight commission from the first dollar.  One of the ways companies initially think of doing this is by deducting the salary or a “seat cost” from the commission calculation.  This ensures that commissions are not paid until the employee as covered their costs to the organization, which is usually an approach that CFO’s like… a lot.  And it can have it’s place in an organization, particularly when it is just starting up.  However, it does have some downsides.

Top Three Transportation Broker Compensation Methods

Beth Carroll

Developing compensation plans for an organization is a bit like cooking up a gourmet meal for a group of people with very particular tastes. Some people might like their meal spicier with more exotic ingredients; while others are strictly “meat and potatoes” folks who like to keep things simple and straight-forward.

Freight Brokerage Customer & Shipper Sales Pay Trends

Beth Carroll

This is a good and welcome change as straight commissions provide ZERO flexibility to deal with fluctuations in the economy, types of accounts, or capacity crunches that create higher freight rates.  On a straight commission, the payout is the same percentage, regardless of the CAUSE of the volume increase.  Using a tiered approach…

Driver Pay Explained for Brokers

Beth Carroll

At the recent TIA conference, I was asked many times how my business is going.  Many of you have known me from nearly the start and I’m always touched by the genuine interest and support so many of you give.  I explained to some of you that I’ve been doing more work with driver pay, and more than once I was met with a bit of a puzzled look and the question…”aren’t they just paid by the mile?  How hard could it be to raise that a penny (or five)?” 

Freight Broker Structures - Cradle To Grave

Beth Carroll

There is ONE universal compensation plan that does not depend on or affect your organization structure and allows you to change your structure, roles, responsibilities, and workflow pretty much at will, and that is a “salary only” plan where there is no incentive tied to individual performance.  You could also have pretty much complete org design freedom if you did salary plus company year-end bonus.  Neither of these approaches is affected at all by the structure or flow of work.  An individual would earn the same amount if they were working cradle to grave or only as carrier sales (the salary levels might need to be adjusted but that is all).  Consider the opposite extreme – the version that I consider to be THE WORST change to make…

Freight Broker Commission Rate

Beth Carroll

As compensation consultants who specialize in the transportation and logistics industry, one of the most common questions we are asked is “What is the standard freight broker commission rate?”  While this question is posed with the best of intentions, it is unfortunately off the mark. The truth is that commission rates, like any form of incentive, should be a reflection of a company’s business strategy, freight profile, and organization structure.  A better question to ask would be “What is the best commission rate for my organization, given our unique circumstances, strategy, and goals for the future?”

Compensation Pay Mix Selection

Beth Carroll

What is the right pay mix for Freight Broker Carrier Sales (Dispatcher) Roles? Carrier Sales roles are typically less prominent than either of the two main sales roles, but often they are compensated as 100% variable. This causes psychological stress as there are significant amounts of the pure carrier sales role that are outside of the carrier reps’ control…with the two biggies being the type of freight solicited and the price negotiated for that freight. If the sales rep is doing a miserable job, the carrier sales rep who is downstream will be stuck trying to make the best of a bad situation. How fair it is to compensate them solely on the total outcome when they had to start with bad inputs?

Common Freight Broker Compensation Models

Beth Carroll

…After going to all this effort to restructure the business it would be a shame to continue paying using the antiquated “5% of margin” approach for everyone.  So let me hypothesize about what some compensation arrangements would be for the different roles Rick describes.

Traditional Broker Compensation

Beth Carroll

What's wrong with the traditional, "highly variable, straight commission on margin" approach for paying your employees?  Nothing...if every employee has the same opportunity, the same skills, the same training, and all your freight is from the spot market where each day is a new day and no one knows for sure what's coming their way.