Developing and Navigating Commission Plan Changes

It’s understandable that companies will need to evaluate their overall compensation models to include commission plans in order to keep it relevant. Commission schemes should be positioned to drive the behaviors and accomplish the business objectives the company needs, while also being attractive to the market to get the best talent in the door.

That being said, changing a commission payout plan can be a slippery slope, and when not handled properly, can slip your sales teams right out the door. Pay is a sensitive topic, and typically the moment a change in it is announced, the majority of your staff is updating their résumés and finding the time to talk to that recruiter from another company who has been messaging them for the last year.

Often, companies make the mistake of assuming that the negative impact to earnings is only a losing situation and therefore just roll it out and brace themselves for the backlash. Yes, there will be backlash, but that’s often the initial reaction to hearing of the change. Think about when a customer has an initial reaction to a price quote  —aka “sticker shock” — and then you discuss and talk through the benefits and the returns and all works out in the end. Give your employees the benefit of the doubt. A lot of them are there to be a part of company growth — they just need to be heard and considered and understand the bigger picture.

Change management and communication is crucial here and I have outlined some steps to help navigate through this very bumpy landscape based on my own experiences, both positive and negative:

Be clear on the reason to change commissions. There needs to be a business driver behind it, to create disruption and distraction without being clear as to the why is just unnecessarily putting your business at risk. Do you need to achieve a healthier payout percentage? Is it not competitive with the market and therefore causing you to lose hires at offer stage? Does it not support new sales strategies you need to introduce to accomplish company objectives? Maybe it’s just a tough economic time like we are in today and the company needs to do this to survive. This reason will be at the very root of your decision and your communication plan.

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Establish a committee. Select not just management but some of your key sales team members. Explain to them the reasons for the coming change and ask for their ideas on how they would change it to create that balance between what the business needs and what the teams need to stay motivated. These don’t always need to be top performers but certainly a least a representative from that group. Don’t be afraid of your squeakiest wheels here, if you can explain to them the reason for the decision and involve them in the process of establishing a new structure their noise will work in your favor when rolling this out.

Allow time for people to adjust and plan for the change. Assuming this will impact earnings to a degree, people don’t like to have that sprung on them and it’s only going to create more resistance. Certain states’ employment laws aside, people need time to rework their budgets and plan for the impact to their overall earnings.

Use a multi-phased communication plan:

  1. Start with your top person hosting a call with all team to be impacted and explain the reasons why. Explain the wins one can expect even if taking a bit of a haircut in commissions in the short term.  Are they shareholders and this change increases company bottom line/value? Is this part of a new sales strategy/structure that allows them to do more and therefore potentially earn more over time? Are they aware of how your plan stacks up against the market? Maybe you have been “overpaying” for some time but they aren’t aware of that.
  2. From there, every manager should have another meeting with their respective teams, followed by
  3. a round of one on ones.  Be sure to have done some modeling with your finance team to help them see the impact–don’t assume every one of your reps is adept at working numbers in a new plan.

Expect and allow for feedback. Again, people need to feel heard.  It doesn’t necessarily mean it will change anything but oftentimes just having their perspective listened to can help.

It’s never smooth sailing and ultimately you cannot make everyone happy while running an efficient and smart business; you WILL lose some people along the way but there are ways to minimize the risks to keep your best talent with you.

Tricia Bielinski
Tricia Bielinski is global HR director, K2 Partnering Solutions Ltd.

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