HP loses attempt to deny colossal commission to star sales staffer
- Reference: 1614238145
- News link: https://www.theregister.co.uk/2021/02/25/hp_australia_sales_commission_case/
- Source link:
The [1]case of Hewlett Packard Pty Ltd v Subasic [2021] ACTCA 3 (February 19, 2021) concerns an Australian salesperson who, three years after leaving pre-split HP, claimed she had been short-changed AU$309,750 (US$247,000, £175,000) in commissions.
[2]
HP did not contest that the salesperson in question, Melinda Subasic, achieved over 500 per cent of her budgeted sales target. According to HP’s incentive scheme of the time, 2009 to 2010, that performance should have resulted in a payment of AU$446,250.39 (US$356,000, £252,000).
Subasic was instead paid AU$136,500 (US$109,000, £77,000). When Subasic asked why she’d been paid that sum, she was told that HP retrospectively capped incentive payments.
[3]
The first trial in the matter saw a judge rule that HP breached its employment contract. HP appealed, though the Oz courts again found Subasic was owed the full payment.
One element of the case that three judges of the Supreme Court of the Australian Capital Territory considered was that, in 2007, HP reduced base pay for its sales team and made the removal of caps on incentive payments a positive incentive.
IBM stands for I Block Money, says sales rep: Big Blue sued yet again by its own staff over 'missing' commissions [4]READ MORE
“The new sales plan rewards strong sales performance. By moving more money into variable pay, which unlike base pay, can be multiplied by the accelerator, higher payouts are possible for over-performers,” read an HP document explaining the base pay reductions.
Sales staff were also told: “HP has eliminated the use of pay plan caps under the new plan. However, there will be a management review process for exceptionally high performance.”
That review process became important, because HP used it to review performance of eleven salespeople and decided that it would reimpose a cap on incentive payments for those staffers.
But the court found the cap was re-imposed after the sales had been made and incentives earned, so HP breached its contract and Subasic should get her cash and AU$61,568 of interest.
Which is a nice outcome, but not the win Subasic wanted as she cross-appealed because the first judge to hear the case calculated interest from the start of proceedings in 2016 rather than starting from her departure from HP in 2010. The appeal denied her the AU$130,000 in interest that Subasic’s preferred timeframe would have delivered.
[5]
Cases like this are not unusual. Oracle has denied allegations of [6]systematic commission-snipping, and even [7]ditched a staffer who disputed commission payments. And IBM recently [8]fought a claim for over US$1.4m of commission. ®
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[1] http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/act/ACTCA/2021/3.html
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YDeDS9WpQdMiDV08JwFOrwAAAMU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YDeDS9WpQdMiDV08JwFOrwAAAMU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[4] https://www.theregister.com/2019/11/05/ibm_sued_unlawful_sales_commission_tactics/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YDeDS9WpQdMiDV08JwFOrwAAAMU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2017/09/07/oracle_dragging_heels_in_debt_servitude_case
[7] https://www.theregister.com/2019/04/24/oracle_lawsuit_qatar/
[8] https://www.theregister.com/2020/04/10/ibm_practice_of_capping_sales/
[9] https://whitepapers.theregister.com/
Because they think they can!
Explains why HP have a range of laptops called HP Envy.
Yep - everywhere I've worked, massive payouts like this are widely advertised to encourage the rest of the sales team. £10m sale at 14% commission for one luck salesman.
Because she probably got the sales by at loss making prices.
I suffered for years as a result of IBM sales people under pricing jobs to make quarterly revenue targets. Then have my team castigated and bonuses reduced when the project made a loss. I don’t blame the sales people as they were under constant pressure from management to sign sales at any cost.
IBMs senior management were asleep during the “turnover is vanity, profit is sanity” lecture.
Sales people should get commission, but it should be linked to the profit on a contract and paid over the length of the contract. That would hopefully stop the kind of contracts which initially look good, but basically screw over the people who actually need to deliver the contract.
Also you need to pay sales people an actual salary - so they are not incentivized to sign any crappy deal just to get a normal income. I am sure large bonus for good contracts will still drive the sales.
I quite agree - but then I wouldnt work for any company that was so stupid as to allow people to sell product at a loss. Well not for long as neither would anyone else. I did work for a company that still gave commission even when the product was returned. Turned out their managers got a cut too so turned a blind eye. It no longer trades. But if HP were allowing those sales and promising the commission without any real oversight they should realise they have to pay that commission. If manangement cant sort out simple problems like that legally then its their bloody fault.
I spent 25 years in presales - the techie working with the sales folks. I have never seen a situation where a sales rep can price a deal at low margin without approval from a long way up the management chain. Salesfolks are often targeted just on revenue but the levels above them have a margin target as well.
I have on two occasions worked with sales reps who had recently joined from HP and were sueing HP for not paying commission. It's been standard practice there for a long time.
Sales people are often a pain in the arse, but a lot of them get screeed over by bosses.
I did a six month stint as a copier salesman in the early eighties, aside from the fact that you were pushed to get clients locked into crappy lease purchase with supplies contracts with very dodgy small print on future pricing.
There was fight over commissions constantly.
I had two huge multiple sales taken off me and handed to the 'National sales' after I had done all the work that the bosses knew about, never even got a thank you, so I went back to the client and recommended a better supplier after walking out of the job.
“I like money”
- Frito
Coin operated and risk/reward
Salespeople are largely coin operated and will find ways of maximising their income based on the incentive plans put to them - there is nothing wrong with that. Commission plans need to be designed to incentivise behaviour (and deals) which are in line with company objectives.
I have no issue with salespeople earning large commission payments. Their total pay has a significant risk element to it (often lower basic salary, but higher total earnings potential through commission, easier to fire through 'performance management' as few others have as stark a performance measurement as "% of target achieved").
Moving the goalposts after the fact is wrong, but I have seen it many times - the money 'saved' is offset by higher staff turnover and high achievers probably leaving in disgust at a time of their choosing.
In this case HP got the benefit of the deal(s). Commission should be treated as a cost of sale and paid according to plan.
Disclaimer - I do not work in Sales...
Re: Coin operated and risk/reward
> Salespeople are largely coin operated and will find ways of maximising their income based on the incentive plans put to them - there is nothing wrong with that. Commission plans need to be designed to incentivise behaviour (and deals) which are in line with company objectives.
Exactly this.
We had an issue a little while back.
There was an option on our services that customers could take that was really expensive to manage/maintain (it never turned a profit as a result).
We got a feature out-of-the door that allowed the customer to get the same functionality in a self-service manner, whilst massively reducing our support overheads etc, and reducing the cost incurred to us to peanuts.
The challenge, though, was how to get customers off the old and onto the new come renewal time.
The business didn't want to totally withdraw option A yet, so made the decision to instead make the price very high.
We ended up with something like
Option A: $20,000/yr
Option B: $1000/yr
However, crucially, the business didn't exclude either from the sales commissions. So Sales, of course (quite predictably), started selling customers on the benefits of Option A because it significantly increased their commission payments.
Sales commission is a useful tool when wielded properly, but it has to be carefully managed to ensure it results in benefit to the company, rather than just more sales on paper.
Not a big fan of sales people but 500% over target is not bad. Why would management upset the people who effectively pay everyone else's bread and butter? PHB FTW?
Idiots.