Alternatives to noncompete agreements
By Staff -- Industrial Distribution, 2/1/1998
Jim Piraino, vice president of marketing for WESCO Distribution, says most top ID recruits would never sign a noncompete agreement. Because employees are so resistant to them and courts are often reluctant to enforce them, he says there are more rewarding ways for distribution companies to retain key employees.First and foremost is by paying them well. About four years ago, Pittsburgh-based WESCO initiated an aggressive incentive program for salespeople and branch managers. The program gives those employees a mix of bonuses and commissions that are tied to the company's top and bottom lines.
For instance, WESCO offers salespeople whose expenses are paid by the company a 12.5 percent commission on the annual gross profit of their sales. Salespeople who pay their own expenses get 18 percent of the gross profit their annual sales bring in. For salespeople in the latter category, WESCO also pays bonuses for exceeding the total profit their sales generated the previous year.
But with reward also comes risk. The company tracks sales performance closely, grading it on a quarterly basis. Salespeople are paid a monthly advance of between $2,500 and $3,000 against their commission -- those who don't cover that advance at the end of a quarter are fired or moved into a less demanding job.
Branch managers get a bonus on top of their base salary if their branch's profit grows from one year to the next. WESCO also offers branch managers stock options for improving their sales at a compounded rate of 10 percent for three years. And that's an attractive option, given that WESCO is looking to go public soon, having filed an initial public offering of its stock with the Securities and Exchange Commission in December.
Of course, first-rate incentives also stretch to the company's top management. In addition to bonuses and stock options, WESCO's holding company requires that 15 percent of the company be owned by management -- and those managers must purchase that 15 percent themselves. It's quite a personal commitment, but one that carries with it the potential for huge rewards.
"It creates a fantastic culture," Piraino says of all the incentives. "Everyone has their life on the line...basically, there are big rewards, but there is risk involved as well.
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