I played my cards close to the vest during that summer of 1992. As we geared up to the August 24 announcement of our new pay plan, I was still out in the marketplace constantly, still talking about Marshall’s customer-focused mission to anyone who would listen, but I didn’t say a word about what we were going to do with commissions. I wasn’t ready to go public yet; my anxiety level was too high.
There were times when I could picture the bottom falling out. Our customers would like a new plan; I was always sure of that. And our suppliers, I thought, could be persuaded at least to give it a chance. But in my worst nightmare, I saw our sales force deserting en masse, leaving Marshall a gutted shell and my career in ruins. Gordon [Marshall] had named me Marshall’s president earlier that summer, and I would be blamed, fairly, for the debacle.
In the light of day, though, I thought that we could just maybe pull it off. We had momentum on our side, the experience of changing one pay system, and a growing internal enthusiasm for the radically redesigned Marhsall that we were creating. The key would be to get the sales staff to understand the thinking behind the change.
Our managers had been glad to be rid of MBOs; they liked being judged and rewarded on a more-sophisticated matrix of skills. Why would the salespeople be any different? No more being judged on a single skill; no more skullduggery over account assignments. No more worrying that a key account will move production to someone else’s territory. We were offering our sales force a future tied to their talents, more flexibility, and more opportunity–and the chance, if everything worked, to revolutionize our industry and reinvent the customer relationship.
The clincher, we knew, would be the money. Once again, we committed to revenue neutrality, at least for a year. Except for our top fifteen salespeople, who presented a special problem, no one would make less money, and many would make more. Dick [Bentley] and I sat at my office table and reviewed all six hundred salespeople individually before we set their salaries. If someone had been getting $1,500 per month draw with an added $3,000 in commissions, we moved is or her salary to $4,500 per month guaranteed–or more if we though that their performance trend or value in the market was moving up.
It would take a second book to credit all of the people who threw themselves into preparing for the change. Marshall has always been a seat-of-the-pants company, but this process was methodical and detailed, a concentrated and coordinated three-month effort. One task force designed what would become the Marshall Process; a second designed how account profiling should work; a third puzzled out how to integrate the Marshall Process and account profiles into our converted computer-operating system, which was scheduled to be launched that coming December. Meanwhile, Dick, Nida [Bakaitis], and I were wrestling with how to teach our sales managers, general managers, and regional managers to use their new tools, and Les [Jones], our vice president of human resources, was developing a monitoring program to make sure that everyone felt mothered after the change and to adjust salaries if necessary. For ninety days, each salesperson would meet individually with his or her manager every two weeks, with a report sent to headquarters; after that, one-on-one meeting reports would be due each quarter.
Despite the preparation, I knew what the sales force would ask first, though, no matter how much salary we paid: “How can I make more? What’s my upside?”
I knew what I would tell them, too. I had rehearsed the arguments and advantages of our new pay plan so often that I could recite them in my sleeep.
“We don’t want to keep you from hitting the mother lode, but you can’t just make more money, you have to earn it. If your business grows and you add more value for your customer–and Marshall, of course—your salary will go up, just as it would for any business professional with more responsibility.
“Volume is critical, but there are other things that are important, too. Think about how dramatically the world is changing, If all you do each year is book more business because you’re chasing upside, if you aren’t learning all the time, preparing for those changes, you’ll be obsolete.”
This would work for the majority of our salespeople, whose incomes wouldn’t change, but our top fifteen performers presented a problem of a different sort. They were terrific salespeople, critical to our future, but some of them were cashing commission checks worth $250,000 a year, and we couldn’t rationalize guaranteeing that level of income–the deals involved were bigger than any one salesperson really, for they involved dozens of people at Marshall and millions of dollars of inventory credit and corporate support. So we had to adjust those incomes down, closer to what we considered market value.
Dick or I talked with all fifteen individually, and, in most cases, we worked together fairly easily to come up with a salary level that we could agree on. A few people, however, were very upset. “We don’t want to argue about nickels and dimes here,” Dick and I told them. “We’ve got a big program ahead of us here, and we want you to be part of it. So go look at your market value in the world. Put your resume out on the street. Talk to a headhunter. Then we’ll negotiate.”
Today, six years later, all fifteen of them are still at Marshall, still among our top performers, and all are earning more money every year.
The last few weeks before announcement day were spent in the trenches. Enterprise redesign is a fine and exhilarating thing, but, like any management effort it ultimately comes down to grunt work. We made checklists of all of the key constituencies we served and all the idiosyncratic needs of the individual players, deciding who would tell whom, when, and how they would explain it, then made checklists of our checklists. We put together a video to show to all of our salespeople on the big day itself, and prepared a package of support material for each of them individually. Dick and I double-checked all six hundred salaries again, then triple-checked and reality-tested them with each salesperson’s direct manager. Then, as best we could in a two-day meeting, we trained those managers on how to use the video and pay-package worksheets to make the day run smoothly.
At last we were ready. All that was left was to tell the outside world.
No one would have come to a Marshall press conference; to most people, we were still just one more distributor. But ours is a gossipy industry, a small network of people who talk all the time. So, if I didn’t explain loud and clear the reasons behind our change, people would deem it a cost-cutting move, and rumors would fly. For that reason, we decided to make a public announcement in our industry’s weekly trade paper, Electronic Buyers’ News. We bought space for an open letter to explain our goals to our valued business partners.
We must have written that letter seven zillion times, passing drafts back and forth between Nida, Dick, and me. Writing it was easier than deciding who should sign it, though. Just Gordon, the founder and chairman? All three of us, a united senior-management front?
“It should be me,” I said. “Gordon’s built a great reputation over thirty-five years. Why risk tarnishing it? If we all sign, we could all go down in flames together. Why not have just one guy go down? If the company crashes, Dick can step in and try to pick up the pieces: ‘Hey, Rodin had a bad idea, but it’s gone and he’s gone.’ ”
I flipped and flopped in bed all through the night before announcement day, unable to still the adrenaline-fueled what-ifs in my head. I was terrified, but excited, too. Though it had not dawned on me until now, I’d be pointing toward this change since the red bead game eighteen long months before. I knew I’d have to defend the decision, but not matter how hard I looked, I couldn’t see where it was wrong. Every change we’d made so far was working; maybe we could make this work, too.
“What’s the matter?” my wife, Debbie, asked me sleepily at 3:00 A.M., eyes half open. “What are you doing?”
“I’m taking all the salespeople off commissions.”
That woke her up fast. “Rob, are you crazy?”
Crazy or not, the die had been cast.
Dick and I both came to work early the next morning, before 6:00 A.M. in Los Angeles, 9:00 A.M. back east, when our Boston and New York branches were opening. It was eerie just to sit there in the silence, waiting for who knows what to happen. In Boston and New York, people were playing out the most drastic gamble in Marshall’s history, but in headquarters everything was still. No phones. No footsteps. Nothing. “Now they’re watching the video,” I thought. And we waited. “Now they’re opening their pay packages.” And we waited some more.
Finally, when I couldn’t stand it anymore, I called Boston. “How’s it going?” I asked.
“OK. A few questions, but nothing we didn’t anticipate.”
Then I called New York.
“It’s OK here, too, I guess. No one seems particularly disturbed or anything.”
I was astonished, but the more I thought about the calm, the more sense it made. Nobody was going to dump a good job with a hot company in five minutes–they’d quit tomorrow, after they’d had a chance to hash it out at home, or next week, after they’d found a place to jump to.
The next day, as expected, the supplier calls started coming–first a torrent, then a flood–all asking the same questions. “I don’t get it, this is crazy. What will keep your people motivated?” So I’d explain the whole Marshall Process to them, from “No one ever asks for a salesman” through the importance of teaching people to listen better to how account profiling would make their connection with Marshall more productive.
Salespeople called me, too, but fewer and less agitated than I’d feared. “Explain it to me again,” they’d ask. “How do I make more money? What if this happens? What if that happens? It seemed like a pretty fair deal to most of them, actually. If they’d been making $55,000 before, most were making $55,000 now guaranteed. Some were taking home more. They’d give us the benefit of the doubt, at least for a while.
I remember that week as a high-speed blur, spent pacing back and forth in my office, talking into my telephone headset, explaining, explaining, explaining, working through every analogy and open-ended question in my repertoire. The gossip in the marketplace was intense; and our competitors took nonstop potshots. Day after day, Dick and I worked the phones, rallying the troops, quashing rumors, and soothing fears. By the weekend, I felt totally drained, but relieved, too. No suppliers had withdrawn their business. No salespeople had quit. The bottom hadn’t fallen out after all, at least not yet.
Then, when I came back to work on Monday morning, disaster. The latest issue of Electronic Buyer’s News lay on my office table, open to the editorial page. “THIS ISN’T TQM!” the boldface headline thundered.
I was beside myself. I’d been reading that paper my entire career, and they’d never once let a writer criticize any company’s policy. Here, slugged “Executive Comment,” was a diatribe against Marshall, specifically and by name. “Now’s not the time to demotivate salespeople,” the editorialist warned. “I’m sure Marshall Industries has made adjustments in its sales compensation to offset short-term concerns. But salespeople are different from other people; to take incentives away from the is to pull their legs out.”
Short-term concerns? Give me a break. We were trying to align ourselves with the forces of the future; we’d been talking, thinking and planning for months. Salespeople are different? Get real. Are they so different that if you came into a room of fifty people, you could pick out the ones in sales? Money isn’t all they care about; they’re motivated by many things, just like everyone else is, not just carrots and sticks. The editorial was wrong on all counts. But every supplier and every buyer for every customer we did business with would read it, and dismiss Marshall as doomed to mediocrity. Our competitors would have a field day.
Outraged, I called the paper’s publisher, demanding a retraction, but the best he’d promise me was equal space to mount Marshall’s defense on the editorial page of the next issue. I tried to write it myself, but every draft sounded more defensive than the one before. So Nida and I worked on Marshall’s rebuttal together. Then she wrote and signed the final version, an elegant summation of Marshall’s ongoing search for ways to forge beyond the old barriers to customer service, quality, and performance. Our branches wrote letters, too, unsolicited but appreciated.
Looking back, the Electronic Buyer’s News attack still makes my blood boil, but unwelcome as it was at the time, it turned out to be a blessing. We had wanted differentiation, and now, thanks to the dueling editorials and the debate they set off, we had it. Morale went up, too: pulling through the crisis had pulled us together.
Letters came in to me for months after that, at least two hundred or three hundred of them, an outpouring that none of us had expected. “I foresee higher prices, slower service, and quality salespeople leaving,” one critic warned. “The whole idea sounds like communism–no competition and no incentives!” The vast majority of the letters were complimentary, though–congratulations on our boldness and courage, and pledges of support for what we were trying to do.
For all my fears, Marshall didn’t lose a single salesperson when we made the change, either. Many of our people liked getting off of the commission roller coaster, and more still liked the broader range of career paths our new system opened up for them. Today, Marshall is the only company in the industry without commissions. Our turnover has gone down, and our productivity has gone up. Our sales force uses the compensation system as a selling point; human resources uses it as a recruiting tool.
“It lets me be more professional. I can focus on the customer’s benefit, not on pushing something at them so I can pay the rent,” account manager Steve Macina explains. “We can work on long-term objectives without being distracted solely by what needs to be sold this month,” product sales manager Leigh MacQueen adds.
“I never would have allowed myself to be put in the position of having only one account, like I do now,” Randy Ferguson says. “But it could be important, and I can make it work. I’m not sitting around thinking: ‘Oh, my God, how am I going to justify my existence?’ “
Not every salesperson bought in at first, though. I remember our top guy in Boston asking me to go on a customer call with him six weeks after we made the change. So I flew into Logan airport, and we drove to the call together. For forty-five minutes in the car, he told me everything he thought was wrong with our new plan. Then, when we were in the customer’s office and he was finishing his presentation, he said, “Oh, by the way I’m not on commission here, so you can trust that I’m not trying to manipulate things.” Then, when we got back in the car, he started ragging on the new plan again.
“Wait a second,” I said. “If you think it won’t work, why did you just use it to sell that customer?”
“I know customers love it,” he admitted. “But I still don’t see the point.”