Incentives in Retail: What We Can Learn From the AT&T Strike
I grew up listening to Union stories. My father was a member of the Teamsters Local 710 in Chicago when he was a stevedore on the docks before heading to Vietnam. His father was a member of the California Teachers union, serving as the chief negotiator on several issues. So last week, when I read that the AT&T members of the Communications Workers of America were striking, I began reading out of paternal interest.
One sentence in the New York Times write-up in particular caught my attention. According to Robert Master, a union official from the CWA, “… changes in retail workers’ commissions have limited or reduced their take-home pay. As part of its next contract, the union wants to bar AT&T from changing its commission structure unilaterally.”
Now don’t get me wrong, changing commission plans is absolutely fine. In fact, every company should be regularly reviewing their commission plan structure and operations to find ways to optimize for maximum performance and motivation. However, just adding to quota every year is not a thought out commission model, if it is not backed by data on market conditions, relative peer performance, and historical trends. Moreover, it’s a surefire way to kill motivation.
As evidence, AT&T retail consultant, and the local’s Unit 42 president James Stiffey from Pennsylvania was cited in another publication noting, “In the six years I’ve been with the company, we’ve seen our goals and performance metrics go up, we’ve seen the number of products we’re expected to sell increase, and we’ve seen more competition put into the marketplace by the company with authorized retailers. We’re making less money than we were making five or six years ago.”
As part of the strike, some AT&T workers were carrying toilet seats to work – a symbol of their demand that the company stop flushing their sales commissions and incentive pay down the toilet. One article stated that AT&T even put a cap on commissions for their retail workers, violating one of my golden compensation rules – never cap. My analogy for a commission cap is that nobody pushes down on the accelerator when they see a red light ahead. They take their foot off the gas, and coast to a halt at the light. Caps on commission plans tells sales teams to sandbag, pocket deals, or just phone it in.
The ability of employees to push back is a key part of any plan rollout. At minimum, companies should be including representatives from the field sales force during the plan design process to help ensure that the plan will not fail once it is communicated. Orange Richardson IV, President of the CWA’s San Francisco office stated to ABC 7 News that, “The union wants to empower cell phone store workers to negotiate commissions because at present they are controlled by the company.”
I won’t comment on either side’s statement of facts, offers, etc. But I am interested in how commissions in retail operations – such as AT&T – impact worker motivation and productivity, plus the ancillary effect on the customer experience.
Incentives drive behavior, and that definitely applies to retail incentives, too. But, that behavior can be great (companies that provide bonuses based on Net Promotor Score, or customer satisfaction surveys) or can be detrimental to overall brand reputation (Wells Fargo). Every offer made will drive some type of action, and companies need to be ready to respond when the actions are not in line with the overall company goals.
When poorly designed incentives are rolled out, companies run the risk of having their workers chase the commission payment, regardless of how that can be off-putting to the customer. Anyone who was ever chased through a Circuit City store by floor rep selling cables or warranties knows the problem and the impact on how customers view the firm.