Transportation & Logistics Services

The Cygnal Group, Inc.

The Cygnal Group offers the following services for Transportation & Logistics Companies:

Plan Assessment

With an assessment we determine how well (or poorly) your plan is working, how it compares to compensation best practices, and what would be your top priorities for change. This option is ideal for companies who suspect their plans could be doing more to help them achieve their business objectives, but they are not sure they are fully “broken.”

Interviews with a handful of Senior Leaders and employees help us understand your business objectives, roles, and employee understanding of and motivation from your current compensation plans
Pay and performance analysis of the prior two years’ history identifies trends which indicate dysfunction in your incentive plan (compensation costs increasing faster than revenue, for example)
Review of current plan documents helps us compare them to best practices
Comparison of pay levels to market pay data helps you understand your competitive positioning for top talent and determine what, if any, changes are necessary
Our final deliverable is a read-out meeting with the leadership team to review the findings, teach a bit of Sales Comp 101, and determine the priorities for change.

At this point you can decide to continue with any necessary changes on your own, or we can help you make those changes by moving into a full design project…

Full Package: Assessment, Design, Implementation and On-Going Support for the First Full Plan Year

We include all parts of the assessment, but move more quickly through them as you’ve already determined your plans are broken and don’t need to spend too much time investigating why they are broken. The schedule below shows a typical work process for a small to medium-sized company. Larger companies or companies with organization, customer or strategy changes, or other complex issues may need more meetings. Many of these meetings are conducted via webinar to keep travel costs down.

Meeting #1: Assessment, Sales Comp 101 and Conceptual Design: Set target total compensation, pay mix, leverage, and performance measure selection for each role (we come to you for this meeting)
Meeting #2: Detailed Design: Set performance measure weights, performance periods, pay frequency and mechanics for each plan element (can be done in person or via webinar)
Meeting #3: Cost Modeling using historical and predictive data to understand how the new plans will affect both individuals and the aggregate cost of compensation under various performance scenarios (webinar)
Meeting #4: If transition plans are necessary, we help develop those so your staff can ease their way into the new plan design (webinar)
Communications Material Development: We develop roll-out presentations, plan documents to ensure the plans are fully documented and communicated, and goal-sheets to show employees what they need to do to earn different levels of pay (remote work by Cygnal group with back and forth review with client team; client responsible for all final sign-offs on documents)
Roll-Out Meeting: We are there with you as you roll-out the new plans to your staff. This meeting often lasts a full day and should bring as many of your affected staff together in person as possible. We rehearse with the management team as needed to ensure they are comfortable with their roles in this process (we come to your office for this meeting).
One Year of On-going Support, with semi-annual or quarterly check-ins to ensure things are moving along smoothly – and we stand by you if they don’t, helping you make any changes which are necessary

Additional Services

We can provide Excel-based tools that help you calculate the incentives and deliver statements to payroll and/or to your employees so they can understand the connections between their performance and pay. We sometimes develop tools the employees can use on their own to model their pay under different scenarios, as well. These items cannot be priced as part of the initial contract because we have no idea how complex (or simple) your designs will be. Also, many clients have a resident “Excel Guru” that can handle this task just fine, with a bit of over-the-shoulder guidance from us and we may not know or be aware of this person’s skills at the outset of a project.

We can administer your plans (Beth Carroll administered CRST Logistics’ incentive plans for 18 months, and refined the calculation process down from 4 days to 4 hours per month). This saved CRST thousands of dollars in additional purchased software which might have otherwise been necessary to calculate incentives. Administrative service pricing is determined based on number of employees, complexity of designs, and frequency of payouts.

One Person, One Plan

For very small start-up companies, or for those with one particular problem point they need to address (such as an offer to a potential new hire, or a correction for a legacy problem with one person), we can provide 4 to 6 hours of consulting which is enough to develop a single incentive plan for a single individual. This will get you plan design and plan documentation, but there will be no or very limited modeling work and all work will be performed remotely by our consultants.

Frequently Asked Questions

What does it cost?

Pricing varies based on:

The number of roles (a unique role usually requires a unique incentive plan)
The number of employees to be covered by the incentive plans, and
The overall complexity of the organization.

An increase in any of these factors means a likely increase in the number of meetings and calls, the complexity of the modeling required to come to sound economic decisions, and the number of roll-out presentations and plan documents which will need to be developed to support the plan designs.

On-going support varies a bit by size as well. Large organizations (who have had larger design projects) will typically get quarterly check-in meetings, whereas smaller to medium sized companies (with smaller to medium-sized projects) may only get semi-annual check-in meetings.

There is no on-going support offered with an Assessment Only project.

Keep in mind that if you choose an Assessment first, and then decide to move into a full design project, the costs will be slightly higher than that of a full design project, as there is a full-stop at the assessment meeting and we must return for the conceptual design meeting, whereas in a full project these two meetings are combined into one.

We use a fixed-fee approach which minimizes your risk of scope creep. As long as you are sticking to the workplan and not adding meetings, roles or people, your costs will be what we originally agreed upon.

Travel and other large out of pocket costs (such as large volume printing jobs) are additional and billed as incurred.

We offer a full-payment discount of 10% of fees or $2,500 (whichever is smaller) for clients who want to pre-pay and save costs and the administrative hassle of processing multiple invoices.

If the full-payment option is not selected, 40% of fees is billed at signing, 30% billed mid way through the project (around Detailed Design), and 30% billed prior to roll-out. All invoices are due within 30 days. Alternative arrangements may be negotiated based on client cash-flow needs. (Assessment only projects are billed in full at the start with no discount and must be paid in full before the read-out meeting).

What size companies should consider a project like this?

This is a significant investment in time and money for your company, and should only be undertaken by companies who are serious about change and have the resources to put these changes into effect. While we would like to be able to serve clients of all sizes, we have found that clients with less than $5 million in annual revenues are unlikely to get the full benefit of one of our projects. Smaller companies are encouraged to review our website, attend webinars and conferences, and should always feel free to send us one-off questions which we will answer as soon as possible.

Why can’t you just tell me what the “right” compensation plan is – how can it be that hard?

Even within as homogeneous a group as United States based Logistics Brokers, no two companies are identical, and the transportation industry involves domestic and international brokers, trucking companies, freight forwarders, warehousing providers, 3PLs, and 4PLs (to name just a few). We’ve helped clients who are starting from a 100% commission approach and other clients who are starting from a 100% salary approach. We’ve developed over 50 different incentive plans in the transportation industry in the last 2 years alone and not one of these plans is identical to another. There are different strategic goals, different types of freight (heavy haul vs LTL vs TL, short vs long haul, etc.), different business models (asset or non-asset based, regional or account based), different organization structures (broker who does both “sides” vs customer/truck split) and different cultures (family/team orientation vs highly competitive individualistic). Your incentive plans should reflect your company’s unique vision, values, culture, and business objectives. If they do not, they will not be effective.

If you are looking for a quick fix, an incentive design project is probably not the right answer for you. Incentive compensation is, by its very nature, complicated, time consuming, and fraught with peril. It should be taken seriously or not bothered with at all.

What are some key success factors – how can we help ensure a successful outcome?

Include at least three senior leaders on the design team, typically representing top leadership (President or CEO), sales or operations leadership, and Finance/IT/HR. With fewer than three people the free interchange of ideas is not as likely to occur. These leaders need to make this project a priority and make every attempt to attend all meetings.
Strong support by top leadership. If the President or CEO is not actually on the design team (due to other responsibilities) then his/her visible and vocal support at critical junctures in the process will be key to a successful outcome. He/she should be kept apprised of the direction the design team is taking throughout the project to course correct as needed (you DON’T want this happening right before roll-out).
Do not include people on the design team whose own incentive plans are affected by this process – they cannot be objective and will derail the project if they believe the outcome will adversely affect them.
Communicate openly with your staff that this project is underway – work toward transparency as you will need this trust and support when it is time to roll-out the new plans.
Allow for a multi-step process if you are seeking to make radical changes. It may take longer than you think to go from A to B (especially if it turns out you really want to go to M or Z instead of B).
Provide us with clean and complete data. The better data we have to work with the better decisions can be made. We sign non-disclosures with each client so you do not need to worry about sending us your client level or load level data.
Be realistic about what incentive compensation can and cannot do – it does not replace good management and it cannot fix dysfunctional leadership, finances, systems, strategies or org. structures (if your company has any of these problems, take care of these issues first and then work on incentive compensation)
Allow enough time for the process to work. We recommend one to two weeks between meetings to allow decisions to be thought through and to gel with the team. There are typically no less than 4 meetings, so that means a minimum of 4 to 8 weeks from the first design team meeting to the roll-out. Typically the assessment/fact-finding phase takes at least an additional two weeks. Most projects for small to medium sized companies can be completed in 2 to 3 months. Larger projects will take longer. On occasion (rarely) a project can be completed in as little as 6 weeks, but often the outcome is less effective if the process is rushed.

What is the ROI on your fees? How will I know if this is a wise investment?

When we first are talking with a potential client we typically ask what they expect to gain from a project such as this. Answers include:

Support for our 20%, 30% or higher revenue growth objectives
Higher profit percentages (getting more from each load – working smarter, not harder)
More new customers or better customer mix (less dependency on a few big accounts to reduce risk)
Penetration into new markets
Better team work, more coordination among departments
More sales from existing customers (secure more plants, lanes, types of freight, etc.)
Improve our operating ratio / operating profit
Attract higher caliber talent
Reduce turnover costs
Reduce noise/friction and therefore reduce managerial time controlling noise/friction around compensation
Share the risk /reduce cost of compensation in down times
Reduce the risk of legal challenges post termination
Ensure payouts are tied to performance and are not “windfalls”
Improve employee motivation, remove complacency (*note it’s not a best use of compensation plan changes to drive poor performers out of the organization – management should do this)
Improve the cost of compensation as a % of revenue, gross margin, etc. (improve the return on compensation spend)
Improve morale after the hard years we’ve had by returning to a pay for performance environment

An improvement in any one of these areas (and most clients see improvements in multiple areas) more than covers the cost of our fees several times over within the first year, even for the smaller clients. In a dynamic world it is impossible to hold all other variables constant so as to exactly quantify how much of the improvement is due to the new plan designs (however much we would like to be able to). The economy may go up or down, and the new plans may end up preventing a worse loss (how to quantify what would have been?), or conversely the plans could gain some unfair “lift” from a positive shift in the economy (we always prefer this scenario so we can “claim” the increase in performance is due solely to the new design!). Management may change, staffing may change, clients may change, strategy or structure may change. Often incentive redesign is a lighting rod that draws all problem areas in the organization out into the open and FORCES their correction – “how can we pay based on X when we can’t measure it? Ok we need to fix our systems so we CAN measure X” which results in a deeper understanding of your account base, a better alignment of customers with staff, etc.

In nearly every case, clients report additional gains in their productivity or improvement in their operations, culture, or structure that came about as an ancillary result of the compensation project, in addition to the accomplishment of the specific stated objectives of the project.

Will you provide references?

Absolutely. Our goal is to develop long-term relationships with our customers so we can support them through plan design changes over many years. Beth Carroll has worked with one of her clients every year (except one) from 2004 to 2010. (They reported that the year they skipped, 2007, was a disaster from a plan design perspective and that they would not do that again!) Beth also provides on-going support for another large transportation broker, whom she has worked with since 2007.

If you are serious about engaging our services, please call Beth at 815-485-4711 or email her at beth.carroll@cygnalgroup.com. She can provide you with references that will be most suited to your situation.

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