A (not entirely) hypothetical management question

You are a CEO. Your sales and customer support department has three employees.

Employee A has been around a while, makes 40k, and does 60% of the customer support work.
Employee B has been around a while, makes 32k, and does 15% of the customer support work.
Employee C is new, makes 27k, and does 25% of the customer support work.

Employee A feels like they deserve a raise, in virtue of having been around a while and having been consistently the most productive worker, and asks for a new salary of 44k. Rather than granting the requested raise to the base pay, which seems a little high to you, you institute a commission system, on top of the base pay. Employee A sells the most things and with commission raises their salary to 52k per year. Employees B and C don't sell very much, so with commission, they up their salaries to 33k and 29k, respectively.

After a year, you, as CEO, have a predicament. Your company has not been as profitable as you hoped, mostly treading water over the course of the year. Employee A has been selling more than you anticipated--you weren't sure you had the money for a 4k raise, and 52k is a whole lot more than you want to pay a customer support rep. Also, you feel that Employees B and C aren't pulling their weight and need to be pushed harder, especially as Employee A has a major surgery scheduled and will be taking short-term disability leave. Someone will need to pick up the slack.

So you come up with a new idea: scrap commission entirely, and give everyone the same salary. Employees A keeps their 40k salary, and Employees B and C both get raises up to 40k. But Employees B and C are told that with their increased salary comes increased responsibility--they need to increase their production to match Employee A, or they risk being fired.

How would you expect your three employees to respond? How should they respond? Would you expect your management plan for this department to be effective or ineffective?

 

I'd expect employee A to quit. and i'd expect B & C to not change their ways. if a commission based system didn't get them to work hard, a guaranteed salary isn't going to do it.

 

Agree with Droski. B and C were not motivated to work more for increased earnings previously, so bumping them and expecting performance to follow is foolish. Also, while I'm aware 'up or out' models can and do work in some workforces (consulting), creating a work environment with termination used as a primary motivator is a terribly bad model.

 

I worked in consulting for a couple of years and they had a plan that after year 1 you get X raise. year 2 get Y raise. etc. they also would hire people from outside at my same position and experience and pay them more than me. talk about a way to sap an employees motivation to outperform.

 

Sales people have to meet quota and work on commission. No other way. The nomenclature here says sales service, which is an entirely different animal

 

if I was the employer i'd keep A at their current salary + commission, fire employee B, keep employee C temporarily, and hire a new employee cheap + commission.

 

Yep.

It seems that employee B should be removed from the equation and replaced with employee D. Start employee D out at what C is making now and use the savings in getting rid of B and hiring D to give A, and possibly C, a raise.

 

All three employees are acquaintances of mine, but Employee A (as you might've guessed) is the closest. I'm trying to figure out how to best advise them to respond (it can't be quit immediately, because then they wouldn't get short-term disability). My current best idea is something like: write up the numbers of how much you do relative to everyone else, and then point out how much of a pay cut you're getting, while the unproductive people get raises, and take it to your CEO, in hope that when laid out plainly like this, he sees that this plan is incredibly stupid. Try to negotiate either to keep commission or to have a smaller raise in base salary with some added benefit (like being able to work from home--which should be plenty doable since all of the support and sales are over the phone/internet)

 

I think I'd sell the business and start a food truck

 

how long is A going on disability for? has this already been implemented or is it proposed? if it has already been implemented, I might wait till I got back to full strength. otherwise A has to act now.

 

judging by the prices food trucks now charge here and somehow get away with i'm beginning to think that food trucks have to be great investments.

 

To make all this even more messed up:

There was a manager for this department, who was told that there would be an employee D hired, because the department was swamped (with Employee A especially overworked). But after months of being told this, no job search ever materialized, and this plan to try to make B and C more effective was proposed instead.

The manager, however, was promoted, and another manager was hired in his place. The new manager, after less than a week on the job, realized he wasn't cut out for customer support (he had experience in management but not in support and had no experience with the products) and got transferred to another department. To replace him, the old, old manager (who was reassigned without a raise a year ago), had "customer support manager" added to list of job responsibilities from his new assignment.

smh

 

It is proposed, not official, but tentatively agreed on by the CEO, for three months disability with one month pay (which the CEO sees as extremely generous, since there is no legal requirement to pay anything).

 

sounds to me like employee A needs to get out as soon as they can.

 

Yep

 

I feel like that does put the employee at a disadvantage. out of site out of mind and all. I would certainly get the comp fixed before I went on disability.

 

I tend to agree, but the upcoming leave complicates things.

Yeah, I am advising to try to get this sorted out before going on leave--hopefully get enough concessions to lessen the immediate pressure to get out (the ideal world is that the company starts appropriately valuing their work and there becomes no need to get out, but I think that's unlikely at this point, so I'm in the "try to get the best you can while you're still there" mindset)

 

This department was originally purely customer service. Sales was officially added to their responsibilities when the commission structure went into place. Another department handles bulk orders, but the customer service folks do the individual sales stuff.

 

Why are we penalizing the only producer we have?

It appears we have a B & C problem, and are not addressing it.

 

That was what I thought when I first heard about this (and seems to be the consensus). I want to give C a little slack, because C hasn't had years to get up to speed on all the products they service and is still outperforming one of the long-time employees. But it looks to me like A is strikingly efficient and B is strikingly inefficient.