I'm considering a dramatic reduction in the compensation plan of one of our company's salespeople. I'm not sure how to approach this issue and still salvage my relationship with him. If you have any thoughts, I'd really appreciate your insight.
Some background: I negotiated our salesperson's current compensation plan with him at a time when I had almost no sales or financial management experience. Now we're renegotiating, and I think the old compensation plan is way too high. Our board of directors agrees. I can get into the reasons why if you'd like.
So: I feel an obligation to be fair to this employee because he is basing his life decisions around an expected income of $X. I believe that a different income, $Y, is what the company can support and still pay him a great salary at a market rate. $Y is much lower than $X.
What would you do in this situation? How would you prepare for this discussion? What would you call "fair?"
Thanks so much in advance!
- to say the least! Even if this person is currently overpaid for the position, I don't think anything you do to reduce his pay is going to be seen by him as fair. If you said he was worth $X, and now he's worth $Y, how is he going to see that as fair if his performance hasn't changed? If pay cuts are not occurring across the board he will feel singled out. Depending on your location, he may even have grounds for a lawsuit. Unless he is a very exceptional person, I would also doubt that you will get top performance from him after a pay cut. I think you need to be prepared that if you cut his pay dramatically, you stand a good chance of losing him one way or another.
If you don't show him how he can make $X in a different way he will probably walk.
50% of A and 50% of B = $X
can change to
40% of A and 40% of B and 20% of C = $X
If it's not possible for him to ever get $X under any circumstance then the only path I think you can take is to explain why his work is no longer valued by the company at the same level as before. I don't think it will work, but he will be wondering what changed and if this is your attempt to force him to quit because you don't want to fire him.