by Marcy J. Maslov
The sales director calls you to tell you he’s changed the sales commission plan mid-year. Your commission calculations under the new plan indicate that all sales people have been overpaid, and the sales director tells you to collect the overpayments from everyone.
What would you do in this situation?
Why do situations like this really happen? What options would you have in this case? And most importantly, what are the consequences if you do as the sales director requests and try to collect the overpayments?
This is a true story, one that actually happened to me. I was a low-level financial analyst at the time, totally at the mercy of the big bosses who made all the decisions. The main driver for this request was that the group was headed for a loss, which meant no bonuses for the senior executives. I had a major dilemma on my hands.
Let’s look at this situation a little closer. First, a plan was established and communicated to the sales people. We assume those sales people had been operating successfully enough to get paid under that plan. Second, the plan was changed mid-year. The wording seems to imply that this was an unplanned change. This means the change in plan could be a surprise to the sales people and possibly not communicated properly.
Third, the change in plan means that the sales goal was raised or the total sales commission payouts were decreased. There could be other factors that caused this plan change as well, such as poor results in other parts of the company or a challenge to the sales director’s own goals.
Fourth and finally, the sales director is requesting collection of overpayments from those sales people who have most likely already spent the money and who have acted in good faith based on an initial defined set of rules. Usually when a commission payment is made, it is with the understanding or expectation that it was earned and the task completed successfully.
These are the facts as we might interpret them from the scenario. What about the options to resolve this dilemma? After all, the sales director has issued a direct order. Do we collect the overpayment? Do we refuse to follow this order? Is there some other in-between action that can be taken here? Ultimately, what is the right thing to do? What is fair to the sales people, sales director, senior executives and us (the collectors)?
What are the appropriate actions and consequences of each available choice?
What possible options do we have, and what are the consequences of each option? We can dissect this dilemma further, if we wish to.
For example, do the sales people receive a base salary, or are commissions the only income source for them? What is the reason for the change in sales plan? What is the financial position of the organization? What exactly was communicated in the original sales plan about payment structure? What was communicated about the change to the sales plan, and when did this new plan actually take effect? Because this dilemma is communicated in vague and unclear terms, we are left to make assumptions based on our own background, experience and values.
It may seem that the sales director is a bit insensitive in his demand for collecting overpayments. However, if business is really bad, the sales director may have a legitimate reason for making a sudden change to the sales commission plan. And the sales director may feel that he has no other options. Again, we do not know all the facts of this situation and are left to our own imaginations.
On the other hand, if the sales people performed as requested in the original sales plan, does the sales director have the right to collect the overpayments? Isn’t it true that the sales plan set a certain expectation of performance? Demanding a return of these commissions could create real instability for the company, as well as a lack of trust and decrease in productivity by the sales people. After all, taking one payment away sets the expectation that it could happen again. This is only compounded if there is a perception that the big bosses are making changes to the sales plan in order to ensure they receive their bonus payments.
Here is the dilemma: vague communication creates a difference in viewpoint between the leaders of an organization and their staff, and this leads to ethical challenges. In hindsight, and after years of experience as a leader, I’ve come to see a few different perspectives on this situation. But in the heat of the moment the first reaction is emotional. The reaction depends not only on the position you hold but the perception people have of the ethical standards of the leadership team, the staff or organization. What is right for one group is not always right for another group.
So I ask you: If you were being asked to collect the overpayment, what would you do in this situation? How do you make your decision? Write in your comments and share your perspectives on this situation.