Recently, salesperson Xiao Yang suddenly called to say that after much consideration, he was ready to resign. When asked why, Xiao Yang was furious: "The boss is always making random reforms; I can't work like this anymore!" According to Xiao Yang, his trading company had undergone a round of salary and performance reform, which made him, who had been with the company for four or five years, very dissatisfied. "The previous 'base salary + commission' model only required looking at sales figures to calculate, but now with so many added assessment items and such complexity, isn't it just to make us work more for less pay? It's simply a heartless capitalist!" ...... After calming Xiao Yang down, I found the boss of his trading company, Mr. Wang. As soon as I met Mr. Wang, he also had a bitter face: "People's hearts are scattered; the team is hard to lead! Now it's not just Xiao Yang who wants to leave; everyone wants to leave!" From Mr. Wang, I learned that since the company's founding, it had used the base salary + commission model, but over time, many problems emerged:
In peak season, sales are good, but labor costs are high; in off-season, sales become difficult, and salesperson turnover is high. Over time, employees are unwilling to share hardships with the company.
Salespeople only visit stores with high sales volume; even if visit rates are required, they just go through the motions. Sales are also focused on best-selling first-tier products, while second- and third-tier high-margin products basically don't sell.
Front-end promotion is difficult, and store coverage is very low. Tasks for salespeople are repeatedly reduced but still not completed. Pushing them hard leads to massive stockpiling and returns, harming both company interests and terminal customer relationships. To change this situation, Mr. Wang consulted many peers and finally decided to adopt the base salary + commission + KPI assessment + net profit sharing model, hoping to standardize employee actions through process indicator assessment and encourage employees to sell more high-margin products through net profit sharing, thereby increasing per-store output. The ideal was beautiful, but reality gave him a harsh blow. On one hand, having run a trading company for over a decade, many employees were older and felt confused by the reform, seeing it as a disguised way to cut wages. Coupled with a few "troublemakers" within the team stirring up trouble, it triggered a wave of collective protest and strikes; On the other hand, the finance department reported that salary calculation was too complex, with too many assessment items, and salespeople spent a lot of time every day calculating their wages. Clearly a more "scientific" salary and performance model, but in Mr. Wang's company, it seemed so "out of place." After all the fuss, many veteran employees were threatening to resign. Where exactly was the problem? Mr. Wang's logic and direction in salary and performance reform were correct, but for distributors, besides applying mature salary and performance models, it is more important to combine with the company's actual situation and advance steadily and slowly. Regarding the reasons for the failure of his salary and performance reform, Mr. Zhao Bo, founder of New Distribution, believes the main points are as follows. 1. The distributor's own influence within the team is insufficient, and credibility is problematic. The fact that a strike occurred upon reform indicates that internal employee relations were already very tense; the reform was just the trigger. This also reflects problems in daily management, such as lack of transparency and fairness. Many distributors started as husband-and-wife businesses or partnerships with relatives, and in daily management, they cannot achieve "merit-based employment" but rather "nepotism." Within the company, there is one big boss and several small bosses, diluting their own voice and influence. Secondly, many distributors have low educational levels and find it difficult to be transparent in financial matters, leaving employees without a sense of belonging or security. 2. Management granularity is insufficient. The initial base salary + commission model was too crude. After recognizing the problem, a more "scientific" performance assessment system was introduced, but without considering the team's actual situation and acceptance capacity, the reform could not be implemented. Most salespeople generally lack the boss's holistic thinking. When process management is not done well, using profit as an assessment in salary and performance is very difficult. 3. Inadequate mobilization before the reform. Any reform is bound to affect some people's interests. Before implementing any policy, full mobilization and in-depth communication should be conducted, openly discussing with employees to let them understand the purpose, process, and expected effects of the reform, dispelling their doubts and resistance. 4. The reform was too radical, causing employee dissatisfaction. Starting with drastic reforms all at once, with too much change, no adaptation period for employees, and no corresponding process implementation actions, resulted in significant salary fluctuations and employee dissatisfaction. 5. Insufficient resource reserves for the reform. Before the reform, talent reserves and financial budgets should be prepared in advance to avoid falling into a passive situation. During the reform, it is inevitable that some employees will oppose or choose to resign because they cannot adapt to the new system. If there is personnel turnover, having backup players ready at any time ensures the normal progress of various tasks. At the same time, business may fluctuate during the reform period, such as changes in sales, increased recruitment costs due to personnel loss, and expenses for motivating employees to adapt to the new system. Financial budgets should be prepared in advance to address related issues. From the salesperson's perspective, expectations for work are simply less work and more pay. Without intervention, they tend to sell best-selling products that are easy to sell. From the distributor's perspective, they need to consider company profits and manufacturer tasks, requiring salespeople to sell not only best-sellers but also high-margin products and continuously develop new markets. Different roles, different positions. There is a natural contradiction between the two. If not handled properly, it can lead to personnel loss at best, or business collapse at worst. From the distributor's perspective, how can they drive salespeople to execute better? Mr. Zhao Bo suggests that management should be more detailed and humane: First, build personal influence and improve relationships with employees. Some employees are inherently distrustful of the boss and immediately take an opposing stance at the slightest sign of trouble, which is detrimental to the implementation of any policy. Distributors need to establish their authority and credibility in daily management, winning employees' trust and support through fair, just, and transparent management methods. For example, if you want to assess profit, financial transparency is essential, allowing salespeople to clearly understand product ex-factory prices, retail prices, and company expenses. At the same time, performance assessment design should be simple and effective, easy for employees to understand and calculate. Second, make rewards and punishments public, and once relevant systems are established, do not change them easily without necessary reasons. A public reward and punishment system can effectively avoid under-the-table operations and opaque decision-making, enhancing employees' enthusiasm and sense of responsibility; a stable system can also ensure organizational stability, avoid chaos caused by long-term changes, and enhance authority. Third, salary and performance should be tailored to the business, avoiding a one-size-fits-all approach. Management requires effort to research. When formulating salary systems, distributors should fully consider employees' positions, customize assessment methods based on actual conditions, targeting the market, products, and people, and use reasonable incentive mechanisms to align employee goals with corporate goals. New Distribution has previously published many articles and industry cases on salary and performance. I have summarized a few points for reference. 1. Base salary design should be reasonable. If the base salary is too high, salespeople become lazy; if too low, they lack basic security. The base salary should be slightly higher than the local industry average. The optimal salary structure is base salary accounting for 20-25%, commission/dividends for 40-45%, and KPI rewards for 20-25%. Salespeople have basic security while also having sufficient incentives to pursue higher performance. 2. Dynamic KPI assessment, concise and clear. Fixed KPI assessment items reduce salespeople's enthusiasm. It is recommended to adjust KPI assessment items monthly based on peak and off-season changes, ensuring KPIs match current business priorities and market environment. At the same time, the number of assessment items should not be too many; assess 3-4 items per stage, with simple and clear assessment standards, easy for salespeople and financial personnel to understand and execute. 3. Result-oriented, emphasizing process management. Relying solely on sales results as the orientation will make salespeople focus on short-term goals while neglecting long-term development and customer relationship maintenance. In assessment, process action assessment can be strengthened, assessing both results and process, linking salesperson compensation to the quality and results of work processes. 4. Balance reward and punishment systems. Focus on rewards, with appropriate punishment. Employees are not enemies; punishment should be an auxiliary means to correct mistakes and improper behavior, not the primary management method. 5. Salary system should be competitive. A lack of competitiveness in the salary system will lead to the loss of excellent salespeople. In previous New Distribution reports on excellent distributor cases, one of the key factors in maintaining team stability was that frontline salesperson salaries were 20% higher than local peers. 6. Salary models should change with the company's different development stages. In the early stage, a commission system can be used to motivate salespeople; in the stable development period, it is necessary to shift to management efficiency, adopting growth-based salary models such as sales task assessment and comprehensive evaluation systems. 7. Learn from successful cases and exchange with peers. Go out more, learn from the salary models and advanced management experience of excellent peers in the industry, and combine them with your own company's actual situation and business characteristics to flexibly adjust and optimize the salary structure, ensuring its applicability and effectiveness, and reducing trial-and-error costs. In the salary and performance reform of the FMCG industry, many distributor bosses have experienced trial and error. Common pitfalls include being swayed by employee opposition, overly crude management methods, and insufficient process management. But in the final analysis, most failed reform attempts are due to a lack of deep understanding of the underlying logic, directly copying successful cases without adaptation, resulting in "acclimatization problems." To fundamentally help distributors understand and solve problems in salary and performance reform, Mr. Zhao Bo provided a thinking model commonly used in the industry: "Product + Tool + Method" . That is, a product that can sell, a method that can sell, and a set of actions that drive salespeople to effectively place products in stores and ultimately be bought by consumers. The three are indispensable; doing only a single dimension of performance assessment will inevitably lead to pitfalls. All products should be based on the logic of sell-through; blind distribution will cause inventory backlog and return problems. At the design stage, each product should have its market positioning, target consumer group, and suitable sales channels clearly defined. When we clearly know which channel the product is suitable for, what display methods, price bands, and promotions to use, we can more effectively achieve sell-through. These actions can be quantified into assessment mechanisms for salespeople. For example, Product A is designed for the dining scene, with the core channel being restaurants. In performance assessment, salespeople can be rewarded 5 yuan for each restaurant they place the product in, and display rewards can be set up for placement, such as 5 yuan for each floor display and another 5 yuan for each table setting. What salespeople want is to earn money without hassle. When actions are broken down and quantified and placed in front of them, salespeople only need to execute , and if they do it, they get the corresponding reward. After completing the actions, then discuss sales commissions, profit sharing, etc. Through effective process management, achieve results and properly distribute benefits. In execution, proceed step by step, give employees an adaptation period, introduce necessary sales tools to salespeople, and organize relevant training. In the months before the reform, continuously optimize sales strategies and methods based on product characteristics and market feedback. Make it clear to employees that the purpose of salary and performance reform is not to deduct wages but to work together to do well in the market, seek costs from the market, and also improve salespeople's abilities and salary levels. Final Thoughts Salary and performance itself is not complicated; many distributor bosses understand it at a glance. The difficulty lies in deeply understanding the underlying logic of the reform while gaining the team's trust, understanding, and support. When policies are difficult to push forward, the first thing to consider is not how to reform salary and performance, but whether the distributor himself can improve and change first, go out to learn more, exchange with excellent peers in the industry, broaden horizons, and enhance cognition. From August 20 to 22, 2024, the "2024 6th China FMCG Conference" with the theme "Crossing the Era of Shrinkage" will be held grandly in Shanghai. Concurrently, the "3rd China FMCG Distributor Conference" will also be held, where the "Report on B2B Platformization Strategy Guidelines for FMCG Industry Distributors" and the "2024 Survey Report on the Operating Conditions of FMCG Distributors" will be released. Interested friends are welcome to scan the QR code to inquire about the details of this conference!