Sprint …a cautionary tale. Beware the business-critical ramifications of badly managed sales compensation
Anyone happen to see the recent news item highlighting what can happen when companies engage in non-effective sales compensation management in December 2nd’s Information Week?
The article says “Sprint is facing a lawsuit from thousands of its store employees who say the wireless carrier has failed to pay them proper commissions.” It goes on to state that “19,000 former and current employees are potentially affected,” and that it was the integration of Sprint and Nextel’s back-end systems that led “to more than $5 million in lost commissions.” Ouch!
According to the article, court documents say that Sprint knew there was a computer problem, spent $10 million to fix it, and “did not acknowledge employees hadn’t been paid correct commission.” Double ouch.
From my perspective, regardless of whether the commissions were paid correctly or not, the damage is done. And it is considerable.
There’s nothing like having your employees this riled up – not to mention 19,000 of them. Hence the first question facing any company in this unfortunate position is how much trust – and indeed motivation – will their employees have going forward? There’s a lot of damage needing to be repaired – and that’s true whether you have 19,000 reps or 19. Then there’s the enormous financial impact around the settlement to deal with. And all the time and effort that will go into handling the case and its aftermath. And the potential for balance-sheet revisions and corporate financial restatements. And the erosion of shareholder and analyst confidence.
But the clincher is, this is the type of corporate mess that can so easily be avoided. Providing sales reps with real-time, web-based visibility into their commission plans can help nip a problem like this in the bud, long before it snowballs to class-action suit status. This visibility, combined with accurate, rules-based commissions calculation (emphasis on rules-based), is the foundation for effective sales compensation management.
And the bedrock on which this foundation rests is the effective integration of all the data used to determine compensation. Any competent compensation-management solution absolutely has to get this right. And, with the advent of Software-as-a-Service (SaaS) solutions, it doesn’t take a lot of costly on-premise software and expensive consultants to nail this particular kind of data integration either, at least not anymore.
Finally, complete compensation audit trails are mandatory, and entirely possible. The attorney representing Sprint’s store clerks alleged the company made the internal process for appealing shortages in commissions too “time-consuming and burdensome.”
Sprint is a reputable company, and it’s certainly not in its interest to purposefully, as the article has it, “shaft employees.” The company obviously needs to overhaul its current compensation-management process, and fast.
You don’t have to be the size of Sprint to take a lesson here. Sales compensation management is a business-critical function for any organization. It doesn’t pay to confuse, betray and anger the employees that feed you, no matter how inadvertently it may happen. And there’s certainly no excuse for it with state-of-the-art SaaS-based sales compensation management solutions that are available today.