Tough Call: How much is too much?

January 2, 2018 LBM Journal

New owners want to cut your top rep’s pay, which would likely send her to the competition.

Rep's pay rateLike many family-owned companies, XY Lumber recently reached a place where members of the next generation weren’t interested in carrying on the family business. After a brief time on the market, the company was sold to a larger company with locations across the U.S. You, as the General Manager, and the rest of the company were relieved to learn that the new company planned to keep most everything as-is. After all, they bought XY Lumber because of its strong revenues and margins, it wouldn’t make sense to mess with that.

The first six months or so went along uneventfully. You were left to run the business as you had been, with no major changes. The first big change—one you’re dealing with right now, involving your top salesperson— has the potential to be a very bad thing for the company.

The new owners have guidelines that they use to determine compensation for all employees companywide. Since pay rates vary from location to location, each position has an acceptable range. As it happens, Patty, your top salesperson, earns far beyond the company’s top range for salespeople. She’s been with the company since long before you took over as GM, and she has consistently been #1. The previous owner explained that she pushed to be paid straight commission, with ever-larger bonuses for hitting higher and higher goals.

Somehow, Patty manages to hit every goal every year, which results in very healthy bonuses. The result is that Patty’s pay is consistently far above the norm. That was fine with you and the prior owner…but not with the new owners.

“Everything’s in line with compensation for everyone on your team,” the new owner said, “with the exception of Patty. She’s earning far too much. We’re fine with her being at the very top of our range, but anything above that isn’t going to work.”

Unsurprisingly, this news didn’t go over well with Patty. “I’ve been selling for XY Lumber for more than 20 years, building and nurturing relationships, while generating solid sales and margins for the company. It’s not fair that my pay be reduced. My paychecks are big, but I earn every dollar. I guess the company has to do what it has to do… and I’ll do what I have to do.”

You didn’t like the sound of that, especially knowing that competitors have been courting Patty for years. You explained to the new owners that cutting Patty’s pay will likely lead to her departure, and many of her accounts are sure to follow. “We can’t control that. It’s your job as GM that your people are paid within acceptable levels. The company’s fortunes can’t be held hostage by the threat of one person leaving. You’ve got 60 days to get her pay in line.”

Your mission: reduce your top rep’s pay, while somehow convincing her to stay. What would you do?

1. Be honest. Tell Patty that the new owners have instructed you to cap her pay at a lower level, and vow to do all you can to change it back.

2. Push back. Ask the new owners if it’s worth losing your top rep and key accounts, over an arbitrary pay range.

3. Make it work. Figure out a way to cut other costs, so that you could secretly supplement Patty’s official pay—thus keeping her and the company whole.

4. Meet halfway. Ask Patty if she’d be willing to stay if you could get the company to meet her halfway. Then plead your case with the new owners and push for a yes.

SOMETHING ELSE?
If you’d take a different plan of attack, email your suggested solution to Rick@LBMJournal.com If we publish your reply, we’ll send you a LBM Journal mug.


What would you do?

    See how your judgment compares with others in the industry at LBMJournal.com.
    Final results will appear in The Buzz section of the March 2018 issue.

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