I encounter cases where management feels the need to reduce overall marketing costs. Our chaotic economic environment adds to expense-cutting pressure. Sure, there are ways to defer or reduce marketing costs to respond to short-term imperatives, but monkeying with long-standing sales compensation plans can be very dangerous.
A really stupid move is to reduce the earning capacity of individual salespeople at a time when retaining customers and acquiring new customers is critical. Unfortunately, there is much sales mismanagement around today.
One move, often employed, is changing existing sales compensation plans to reduce commissions or bonuses. Generally, this means that salespeople must work just as hard…or harder, and produce more sales, then take home significantly less pay in the process!
Such a move is stupid because it penalizes all salespeople, especially top producers. Top producers with enviable sales records have options. What is the result? They begin to search for other job opportunities with firms who place a higher value on their work. Employers who reduce sales compensation (or dramatically increase quotas) may avoid paying commissions or bonuses, but they end up losing their best salespeople, retaining only those who produce mediocre results.
It behooves sales management to exercise extreme care when fashioning a sales compensation system. Once the system is in place, reducing that plan to curtail the amount that a top salesperson can make will have a negative effect on turnover and future sales results.