As a compensation plan expert, I’ve written extensively about the 12 key behaviors all compensation plans should motivate and reward.
The 12th behavior is staying active and engaged in the business. This is retention.
At the two Compensation Plan Schools I recently conducted in South Africa for direct selling companies, one of the attendees asked me how a compensation plan should specifically reward retention. After answering the question, I realized that you, too, may be interested in the answer.
What Is Retention?
Retention is staying active as long as possible. Activity is usually measured by the generation of personal sales volume.
Attrition is the opposite of retention. Attrition is a word that describes what happens when an independent representative stops generating personal sales volume (she quits).
How To Measure Retention
Retention is usually measured by direct selling companies in one or both of the following ways:
- The count of independent representatives with personal sales volume over a 3-month or 6-month period of time.
- The percentages of independent representatives who have personal sales volume in their second, third, fourth, fifth, etc. months with your company.
Many Ways To Grow
Independent representatives can grow the sales volume of their downlines by (a) increasing the number of independent representatives with personal sales volume each month, (b) increasing the average monthly amount of personal sales volume per downline consultant, and (c) reducing attrition or (d) recruiting new representatives.
The best way to grow sales volume is to do all of the above.
Should Retention Be Rewarded Specifically?
The answer is clear. It’s “no.”
If your compensation plan specifically rewards retention, you will experience undesired effects. In their quest to meet or beat your retention requirements, some of your representatives may choose to not recruit people they believe won’t stick with the business.
You don’t want to give your representatives any reasons not to recruit, because they can’t tell who will be successful in the business and who won’t. No one can.
If your compensation plan has volume and structure requirements, retention is rewarded in an indirect way. The higher the retention, the less necessary it is to recruit.