Didn't YOu get your commission?

As discussed in a previous article, here on INKISH NEWS, salaries for salespeople, often consists of a combination of a fixed salary and incentives. A growing problem for the industry is vendors not fulfilling their payment obligations. Of course, the vendors may have legal backing to decide not to pay what the salesperson was expecting, but let's look into at least one angle of the problem. We would love to hear from vendors who want to share their opinion about this subject!

When a vendor chooses to have incentives as part of their compensation packages, they do so since this will affect the salesperson's motivation. The incentives can be high, and for some so high, that it can be a personal game-changer to make huge sales. Though sales-processes can take months if not years, we are confident that the incentives play a role. We have spoken to several people in the industry that confirm that incentives do play a role.

However, some salespeople also tell us that some vendors refuse to payout commissions in full if the commission is very high. The commission can sometimes exceed the salary of the CEO of a company, and lead to what we believe is jealousy, fear when salespeople eventually flash wealth, or simply because the vendors have financial issues, and do all they can, to ensure cashflow.

However, some vendors are also 'very good' at adding terms that allow them to change the commissions' terms as they want. We know of salespeople who have left their job from vendors because the vendor changed the commission structure to avoid payouts of already signed for sales. Sometimes changes in commission structures are very late delivered to salespeople and a very short time for the employee to accept and return the signed agreement. Complex models don't make it easier.

Sometimes the changes in commissions are due to other reasons. Often the incentive can have the objective of promoting sales of both hardware, software, service, consumables, etc. If the salesperson reaches only the budget for, i.e., hardware, this can lead to a lower commission.

When I used to work for Xerox many years ago, my compensation consisted of a relatively low fixed salary and a high commission on sales. As salespeople will know, sometimes the incentives will not only come from the company you are employed with. Incentives can come from financing partners, and others, all with the same objective, of pushing the salespeople's effort to the max. With incentives comes the ever-recurring question, who's interest do you serve? Your company's, your customers, or your own?

Some vendors also have a hierarchical structure where managers, on many levels, have compensations based on the performance of people beneath them. The compensation structure varies most likely from vendor to vendor, and from country to country, however, the intentions are the same. Competitive sales environments for "hungry" salespeople may be the right culture to conclude sales and reach budgets; however, when compensations are not paid out per agreement or altered in the last moment, it creates a negative and almost anti-brand culture that can have negative consequences.

The above is, of course, a one-sided story, since agreements are always two-sided. If budgets are not reached, or commissions are accepted based on deliveries across more than one product category, there are sound reasons for vendors to reduce or change commissions, as long as this is part of the agreement. Salespeople should be aware that some vendors have a "fine print," where the maybe most important details are stated.

Jul 17, 2020

Author: Morten B. Reitoft