What Happens To Sales Commissions If The Economy Tanks?

Good Morning. This topic has been lying dormant for a while, but I am making some fundamental changes in our shop. I have read nearly all of the articles here and more elsewhere. I am missing one important piece of advice. With whatever scheme is implemented, what do you do if you have a good sales person, with a good package they like, but the economy is in the tank. Do you demand performance? Do you adjust the goals to take the economy into consideration? I appreciate theory, but I would appreciate specifics. What have others decided to do that works, if 2008 ever comes around again? From an integrator's perspective, although others are encouraged to offer opinions as well. Thanks and enjoy, its Friday!!

NOTICE: This comment was moved from an existing discussion: Does This Sales Salary/Commission Rate Seem Fair?

I think depending on the industry you may have to adjust goals and demands as you dont want to make goals that are simply unacheivable. I dont know if I speak for other companies though but I find our business to be very little affected by the overall economy. I wouldnt call Security recession proof totally but I would guess that it doesnt get hammered as bad as other industries do when the economy tanks.

I'll add that High achievers won't stay under-employed for long if they can help it. In a slump, keeping your bullpen together is more than just finding money to pay them; it's also keeping them convinced the grass isn't greener somewhere else!

Hi Mark.

During a recession or contracting market, make sure your strong sales people are happy and continue to be paid well. If your forecast shows a 20% reduction over last year, then cut 20% of your sales staff. Do not mess with the compensation of your producers.

Reduce the manpower, shift the account / market assignment to give your producers more accounts and the opportunity to continue to hit their number. I even suggest giving them a choice of taking a $10k cut if salary for rewards later. If they hit 90% of their number, they get their $10k back and if they hit 100% they get another $10k bonus - above their regular comp plan.

I'm not throwing out the standard "when times are tough, invest more in the sales department" line. My suggestion is to cut your sales budget if needed, but cut lesser performers and keep your strong performers motivated.

BTW, I love the long-term thinking!

I'm curious how you arrived at the 'cut 20% of staff' when forcasting a 20% reduction in revenue - as the correlation between the two is not linear.

It could be rephrased as 'cut 20% of your sales compensation expense by reducing head count'. It's just a mouthful.

I meant 'sales staff' - sorry. Most of the time with integration companies that have five or less sales people, that's not linear either. My primary suggestion is to find your cost savings by cutting the lesser performers rather than cutting the compensation of everyone.

The questions you really need to ask. Why are these sales people sucessful. The market, the product, the company or them. Again bing 70 years old and being insome formof sales for 45 years, I have found over the years that good sales people, rather than order takers always find a way to make money. So my suggestion is not to touch anything, The winners will win and the blow hard will fiind other companies to milk until lthe economy comes back. I would also suggest that you have a bench of people training to go outside. This is a good time to try new people out.

I dont see contractions in the market comming. But I do see a real commoditiation of product line. More sales and less profit. Watch out for the price dealers, they will cost you and your business dearly. Find new peoruct and new market to play in. Increase product and engineering skill set for a more complicated sale. Longer sales cycles. eTC.