Bitch better have my money...

August 12, 2008 12:11 PM

Negotiating Filter: Please help suggest a way to negotiate with tight fisted mgmt so they will recognize an above the call of duty sale with an above the call of duty commission above the existing commission structure

A friend is a national Sales Mgr for a small company that manufactures a unique (patented) device for boats. The company is owned/operated by the husband (inventor of the device) and his wife. Sales have been good with steady growth in the 5 years since they started up.
As sales manager, he routinely sells to dealers and the occasional distributor, and is compensated for this with salary, + a small commission plus bonus if certain goals are met.
Some owners are very much enlightened and cognizant that its a team that makes their company a success and it comes across in the way they share the spoils of success.
These owners, not so much. Their attitude is more akin to "we thought of it, and the employees are here to help us capitalize on our continued success".
The last sales manager quit after he missed his bonus by less than 1/4 of a percent (in large part due to production probs caused by the owners). They declined to pay his bonus, and pulled up in his and hers Mercedes the next day. He left over this not long afterwards.
At issue here is my friend the sales manager, at a trade show, has opened up a very large new account with a very large boating mfr, and at higher pricing than they give distributors (for scale, a distrib account is usually a bit smaller than the value of this new deal with the snow mobile mfr).
So this is a home run for the SM, and now that the deal has been cemented, he'd like recognition in the form of a higher commission than he normally gets since this is far and above a larger account than he's expected to land.
He feels quite certain that if he doesn't ask for more, they won't offer more on their own initiative.
Asking outright seems like a sure path to sore feelings / expectations on both sides of the table. I suggested that he present the deal with pride to the owner along with an explicit pledge to repeat this performance if the incentive is there, but even that message presents a real risk of being poorly received and generating acrimony . Is there a better way to broach the topic?

posted by Fupped Duck to work & money (9 answers total)

If he attempts to merely imply that he wants a higher commission he is giving them permission to ignore his hints. History suggests that they will gladly take the opportunity to ignore them.

So, really, I think the best bet is to make a straightforward request with clear, rational reasons as to why the extra commission is justified. He should definitely make it clear that if he gets a better commission he will continue to work on big accounts. In other words he should stress that the extra commission for him will result in greater business for them. If he really wants to try a softer, more nuanced, approached he should be ready to make a straightforward request if the owners fail to act in the way he wants.
posted by oddman at 12:23 PM on August 12, 2008

Seconding oddman -- given the tiny bio on the owners, they're unlikely to see the achievement as one deserving more than the agreed-upon commission.

As difficult as it may be, I would be completely up-front, lay out the rationale for it, and even suggest what type of percentage that the SM believes the commission is worth -- that way, there is no chance for misunderstanding.
posted by liquado at 12:33 PM on August 12, 2008

Subtlety is lost on those unable to find it.
posted by rhizome at 12:37 PM on August 12, 2008 [1 favorite]

My intuition: Your friend is SOL. He's going to get the agreed-upon commission, because that's all they contractually need to pay. I think that he's going to get nowhere with asking for more money. Maybe, down the road, he can convince them to offer him a contract with better commission terms.
posted by Citrus at 12:41 PM on August 12, 2008

I like AMG's warmed-over second-rate gangsta rap as much as the next person, but the title of this post seems to be potentially-offensive for no good reason.
posted by box at 12:45 PM on August 12, 2008

From the owner's perspective, it's your friends job to repeat the performance. I don't know that that line of reasoning will get him anywhere. I'm thinking cold hard facts are his best option. Explicitly lay out that the comp plan was targeted for X, I'm exceeding X by this huge percentage, and if the plan had been targeted at Y, this is what I would be making, and this is what I should be making. Be prepared to settle for something lower this time in exchange for renegotiating the comp plan.
posted by COD at 12:55 PM on August 12, 2008

Frankly, I think your friend should get what he deserves, and what he deserves is explicitly laid out in his employment contract that he agreed to.

That said, this might be a good time to renegotiate that for future instances of this kind of superb sale. I think this is the most fair option, anyway, for both parties: play by the rules. If the rules suck, change them, but don't disregard them just because you don't like them.

If they're unwilling to do that and this is a deal breaker for him, and he's actually worth more than they're paying him, then he can find work else where easily.

On the other hand, if he's being compensated fairly or more, then he should probably just take the increased commission that he already gets by virtue of the sale being larger than normal, and keep his mouth shut.

Would it be motivational for the owners to reward outstanding performance with additional pay? Probably... but keep in mind that the point of the commission is to incentivize sales people to sell the most they possibly can. From where his bosses are sitting, he shouldn't need more incentive to sell, it's his job!

(Also? If I were the boss and got the feeling that I was getting a "pay me more or this kind of sale won't happen again" sort of vibe, I'd probably start looking for a replacement.)
posted by toomuchpete at 1:35 PM on August 12, 2008

A very common commission structure involves a quota. For example, let's say that in this business, someone in his position can fairly easily achieve x dollars in sales each year. The sales team and the management sit down and discuss what the quota should be (maybe x*1.2). The commission is then determined by whether the quota was exceeded or not.

Commission = 3% of all sales up to the quota + 4.5% of sales over the quota

The result is that there is serious reason to meet and exceed that quota by as much as possible as often as possible. As long as the quota is set appropriately, the tiered plan behooves all parties. Regardless of whether they seem to show it, the owners want your friend to kick ass. If he can show them that a tiered commission structure is going to benefit them (and their wallets) then he is set. If he can't, then he is pretty well locked in to his current situation.

An alternative is to reduce his normal compensation, and increase the effective commission component (making sales more critical to his well-being, and _potentially_ lowering their net outlay of funds). This is a bit more risky and does not really handle things "after-the-fact".

Regardless, the core of the technique is to demonstrate the upside of whatever modification he is going to suggest. The more evident that upside appears to the owners, the better off his negotiation will go.
posted by milqman at 3:30 PM on August 12, 2008

Negotiating external sales deals is only half of the job of a sales manager. The other half is negotiating internally e.g. with manufacturing, to avoid the woes of sales manager #1, or with the boss to ensure that you get what you're worth. The exact same analysis and skills are required.
What does the SM have that they want? The skills to sell a shitload of widgets above target price repeatedly. The SM has to sell this ides to the owners in exactly the same fashion as he sells widgets to customers. He has to convince them that he has what they want (a big sale is a good start here, but not enough on its own), he has to show them how that will benefit the company (with hard numbers), and he has to convince them that if they won't buy it at a fair price, one of their competitors will. Then be prepared to be flexible in how the deal is constructed, but make sure you understand the numbers for your side.
These internal negotiations tend to be done in a drip-drip fashion rather than in a formal pitch, but the best results will be obtained by structuring his strategy, attitude and persistence as for an external deal. It becomes much easier when you think of it as just another sale.
posted by Jakey at 2:36 AM on August 13, 2008