I have had the following question posed to me several times in the last several months... "Should my company lay employees off or cut their pay?"
My answer is... "That depends."
The answer depends upon the needs of the job. It also depends upon what is important to your employees. When you have true Job Fit - what is important for the job and what is important for the employee become one in the same... Consider...
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For some people - if you cut compensation, they lose motivation to do the job well. For people who really value compensation as part of their overall "package", they will likely become emotionally disengaged. An excellent example of this is sales professionals - especially high-performing sales professionals.
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For others - if you cut compensation and keep more of their "friends" on the "bus" - they are happier and "in this together". A possible example may be a project team or perhaps social workers.
Let's explore the sales professional as an example. Sales people are often the highest compensated team members in the organization and the natural obvious place to start cutting compensation. Therefore sales people are often amongst the first to be cut and receive the hardest compensation "hit".
I believe in candor and have to say that I believe group pay cuts of sales people to be strategically dumb. Yes. I am using the word, "dumb" on purpose. That is - "dumb" if one is laying off the highest compensated instead of the lowest performer.
What makes a good sales professional "good" at what they do is the pursuit of value-based pay or commission. Reduce the top-end compensation and a high performer "Rainmaker" sales professional becomes very disengaged very quickly.
Please allow me to share a bit of background into my strategic thought process to set the "stage" for my argument...
Every position has a unique "Job DNA" that is a combination of Behaviors, Values, and Personal Attributes. Like a good "meal" - too much of this and too little of that destroys everything you are seeking to create and accomplish in a position.
In successful outside sales people, we find high-performing Rainmaker sales professionals have very high levels of the following "Behavioral" characteristics:
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Urgency
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Competitiveness
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Versatility
In highly-successful outside sales people, we find high-performing Rainmaker sales professionals have very high levels of the following "Values" or "Workplace Motivators:
Utilitarian Value or Motivator - This value is the desire to be efficent with one's time, to receive a return on investment, to be compensated for performance. Rainmaker sales professionals aggressively seek to be paid based on their performance. Individualistic Value or Motivator - This value is the desire to "shape" and control one's destiny as well as the potential to shape that of others. Rainmaker outside sales professionals seek to aggressively create their own future - they do not want to wait for others to create their future. Theoretical Value or Motivator - This value is the desire to seek knowledge, to understand, to learn more. Rainmaker sales professionals continuously seek knowledge to better themselves.
A "Value" or "Workplace Motivator" that we do not necessarily want to see high levels of in a Rainmaker sales professional is the "Social Value". In sales professionals with a high Social Value, we find they tend to spend more time being "friends" with prospects (and fellow sales team members) than identifying strategic needs and getting the sale (note the word, "Rainmaker" is missing purposefully). In other words, high-performing Rainmaker sales professionals are "hunters" who go out and "bag" the Client and expect to be compensated for what they themselves bring back.
High-performing Rainmaker sales professionals are not the best "team players". Rainmaker sales people will be "team members" to the extent it helps them close the deal.
Back to the question I have heard... "Chris, our highest cost right now is our sales team. Should we cut pay or lay off sales team members?"
I often answer questions with a question once I have shared my strategic thought process. I will ask...
"Is it strategically sound to cut compensation for a high-producing "Rainmaker" outside sales professional in order to keep lower-performer "friends" on the bus?" "Do you really want to demotivate high-performing sales professionals by cutting compensation and retain their lower performer "friends" on the team?" "What kind of culture does cutting every sales person's compensation create - that we are all friends in this together? Or resentment and distrust?" "Do you want sales people to get out and sell right now during a critical time in the economy and your company's future in order to feed everyone else?"
Ultimately, the answers really depend upon what one wants. If you want your top 20 percent high performing Rainmaker outside sales professionals to leave - to quit their sales career with you - to go to your competition with a chip on their shoulders - then cut their compensation and share it with lower performers and call it a "team-thing to do". That will inspire them! The end result will not be inspiration of your best sales team members. Your top 20 percent Rainmaker sales professionals will eventually leave for "greener" pastures. Do not get me wrong. Selling is a "team event" to some extent (support staff supports high-performers, not high-performers supporting low-performers) - but high-performers feeding lower-performing sales people is not a team sport - it is called a slow death for the organization.
And the ultimate "gift" is that the bottom 20 percent that you should have had the intestinal fortitude to cut long before the recession - they will stay and continue to provide a low return on investment - if any at all.
The reality is... Instead of cutting everyone's pay to be "fair" - cut your bottom 20 percent "performers". If you really want to make a difference cut your bottom 40 percent and replace half with high performer Rainmaker outside sales professionals.
Final thoughts...
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If you want to destroy Rainmaker sales professional - employee morale, cut pay across the board. Say something like, "It is in the best interests of the team to keep everyone." High-performing sales professionals despise pay cuts. Cut their pay and they will despise you and your organization and they will eventually leave.
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Cut low performers. The bottom 20 percent should leave right now. Cut the bottom 20 percent and your high-performer Rainmaker sales professionals will respect you right now and work with you in the future.
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Russia tried socialism. It did not work.
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Socialism does not work in sales teams.
Last comments. If you are not using a powerful pre-employment personality profile assessment to select and hire future Rainmaker outside sales professionals (or any position), you are guessing about the future of your organization.
If you are going to cut compensation in the effort to save the team, you better be right or you will create far more damage than if you cut low performers to keep the rest of the team fully compensated.
High-performance organizations do not guess when it comes to talent. Guessing is for losing organizations and if they are not losing yet - they just do not know it yet - it is a matter of time.
Now go Maximize Possibility!
Other blog posts you may be interested in:
2009 - Your Job is Value Creation
Creative Destruction: How to Manage Employee Headcount in an Economic Downturn
Are Your Top Performers Really Top Performers?
Chris Young helps organizations Maximize Possibility through talent management, cultural transformation, and strategic intervention. Bring Chris in today!
