HOT CUPPA JOE: When More is Less
-by TS Newshound
May 4, 2010– Seasoned industry sales pros are well aware that when management starts jacking around with the commission structure it generally means one of two things: A) The company has been taken over by bean counters who know nothing about sales or sales people or B) The company is facing financial issues. Either way, it’s not a good indication for the future.
Naturally, when “the big bust” happened and thousands of timeshare reps were laid off, those who remained were in no position to object to the “adjustments” being made by many of the struggling companies. We were glad just to have the job and had to swallow those adjustments.
Many of the companies tried to hide the cuts by lowering the commission while dangling a “bonus” carrot in front of sales reps. Again, seasoned pros are onto that game, since all too often it is nearly impossible to meet those bonus guidelines. No matter what management says, less is not more.
For example, let’s say a company lowers sales commissions by two (2) points, but then provides a means (the “bonus” structure) whereby the difference might be made up, thus assuring the sales people that they’ll actually be earning more.
Translated, if a sales person was earning 6 points before the cut but is now earning 4 points, well, get your calculators out and you’ll discover you just took a hit on your annual income of about 33.3% (Forget the bonus structure for the moment; it’s the immediate hit to your income that is critically important to understand here.)
What the company has really announced is this: All things being equal (tour flow, qualifications, etc.) if over the last 12 months an average sales person earned $50-K, then over the next 12 months the company will pay out $16,650 less in commissions for the same amount of production. In other words, the sales rep will earn $33,500 that year instead of $50,000. A company with 50 such “bread-and-butter” sales people, has just saved itself a whopping $832,500, which came out of the pockets of the sales reps, and it’s very unlikely that anyone in that income bracket will meet bonus.
Of course, I’d bet that not many of the lower earners, those in that $50 K range with a so-so VPG, survived the personnel cuts so the point may be moot. But if you were one of the superstars who survived, a cut like that is an even bigger ouch for the sales rep (and a reason to celebrate for the company). Sure, there are some who manage to reach the elusive bonuses, but in the end did those bonuses really make up the difference?
I’d bet my socks that when the turmoil is over, when the industry gets back on its feet and sales are good again, the commission structures at most companies will not increase to meet the good times, nor will it become easier to hit those bonuses.
Once bean counters rule, bean counters rule. More is less!
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TS Newshound, the standard byline for this column, is an inclusive nom de plume for anyone who wants to contribute to the Hot Cuppa Joe section. The “who” depends on who feels like writing or sharing information and therefore can change without notice. If you have something you’d like to contribute under that nom de plume, email tsnewshound@insidethegate.com
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