I am VP of Sales for a small, privately held company.  We are an indirect sales channel for a Fortune 50 company.  I manage a sales team of 9 people that are located in Tier 1 markets around the country.  It was just announced that the company we are aligned with is reducing compensation to the entire indirect channel.  

****My question is this:  How do you take a team of sales professionals that are paid well (base salaries above average) and determine the best way to change their compensation without them losing the will to forge ahead and succeed.  I am thinking that a lower base salary and higher at risk commission structure is the first step but my main concern is the effect that will have on overall motivation.  Another tidbit, since we are an indirect channel our success is based on relationships with National Account Managers at our Fortune 50 partner and thus ability to control the sale is fairly limited.  If this were a direct model, it would be much easier to implement the above.

Any advice?

ken_wills's picture

 In my experience with maybe a dozen salesforces...


If you change the overall ratio of salary/commission too much, expect turnover.  They're different types of people, most notably in how much risk they're willing to accept.


I don't have a hard and fast set of numbers that I can give you, but I DO know this:


If your average producer ends a typical year with 75% salary and 25% at risk, she might be able to tolerate making the same total with a 60/40 split - but I bet if you jump to a 50/50 split, she'll freak out.


I'm not saying you shouldn't do it - it's just that you should expect to lose people and replace them with others who are less risk-adverse.


Bonus thought:  They're going to look around - the question is, are there alternatives with the same mix that they have now (using my example, other jobs where they can make the same amount, with a 75/25 split).  If there are ways they can change employers without changing income, they'll do it!


Good luck!


yahtzee's picture

 Thanks for the reply - sure gets quiet on here sometimes so I really appreciate your response.  

My gut tells me the same thing that you mentioned.  Overall, we have a great team but I'd hate to lose a couple (specifically) of the folks because of an abnormal reduction in salary (even with an increased potential to make more in commission).  It almost seems to make more sense to look at a reduction in headcount to offset some of that decreased commission payments to our company vs. making everyone suffer.  

Hope to hear from some other folks but thanks again!


PS. I'm still not getting notifications to my replies on here and have checked spam filters.  The only forum I belong to that I don't get notified of new responses.  Happy New Year.

dealersolutions's picture

I looked everywhere and even risked my sanity with salary consultants. In the end the answer was really about what we really wanted our clients to experience - this was advice to ourselves. We had bought a business with a salesforce that worked in the traditional model of low base salary and high upfront commission and the model stank. This model forces deceit and poor ethics. All the sales were being made in the last day of the month and the sales people were unable to live a planned and sustainable life.

The changes we made were:- title to relationship manager - commission became recognition - recognition paid a small amount (upfront) on contract and small % as trailing while the client stays a customer for max 24 months - clarified the product rate chart and removed all discounts - paid trailing on existing business - divided territories and multiplied out again to allow for growth - introduced bonus scheme of all expenses paid one week island holiday for 2 base on products that were weighted to compnay objectives

after5 months the results are - lost no-one (did pitch it well as we should since it peoples lives we are playing with)- all can now plan their lives and their careers with us - they now look at our customers as "relationships not sales" - client churn GONE - products are being explained and bought not just "sold" - the relationship managers now "gather and hunt" and we are very proud of them in every circumstance - they represent us well - our competitor is still with the sticky model and we hope they stay that way

We are a software company (licence and support) but I shared this with other companies in different industries and early sighs are good

Put the client before the rep and the rep before thinking has worked for us