Budget cuts? Lower my expense account but don’t touch my bonus!

America’s businesses have trimmed the fat (and then some) from their expenses. The federal government has found a way to (barely) cut spending, cover (for now) its debts and (again, for now) avoid tax increases. With a pending double dip, where can companies cut? I read early last week about that Sprint continues to cut back internally. Somebody wanting to travel across the country for business must get an approval from a vice president. Want to travel abroad? A senior vice president has to sign off. Increasingly, such trips are replaced by teleconferencing.

Mid-week, I happened to sit down next to a sales manager from Sprint on a long-haul flight. After a quick introduction to this very candid super star from Sprint (we’ll call him Brad), I had to ask about the travel approval process. He confirmed, “The policy is strictly enforced. I am headed to a customer-facing appointment with a high-value client and if it had been just an internal meeting, no way this would have been approved.”

I asked how he felt about the new policy. Brad was quick to back up the plan, saying, “We are a mature industry and every year profit margins get smaller and smaller, cuts have to be made. Honestly, it has made me more efficient. Less internal meetings, better use of technology and my sales team makes better choices about how to invest in the right prospects.”

But Brad pointed out any plan like this takes awhile for everyone to adopt. For example, early in the rollout, he said, “My boss would ask all the sales managers to get in their car and drive to a monthly meeting since flying would require approval. Many had to drive 3-4 hours, costing the company more in mileage than the plane ticket. Now we have made it over that hurdle.”

I was about ready to don the noise cancelling headphones and relax, but Brad had to tell me the part of the cost reductions that was really making his job hard. He said, “The sales incentives had been cut. Not across-the-board, but on the topside. Previously a few top reps could earn $400K a year in commissions.” He always had one or two of his team members make the top pay echelon. As I have seen often in setting incentive plans, many stakeholders want to hit as few people as possible when making cuts to incentives.

Brad stated, “I wish they had cut everyone’s incentives by 5% rather than top performers by 50%. Not only are my best sales people bringing in big sales, but when they earn those big bucks, it motivates the rest of the team to aim for that bar. Now I don’t have that carrot to dangle in front of everyone.”

Brad had a great point and I am sure he is the type of leader who will make his voice heard in his organization. I hope he read the Wall Street Journal Article at the end of last week that said, “Business travelers are eating well, spending an average of $39 per meal when dining alone, an analysis of corporate expense reports shows.” Sounds like there is still room for some cuts.

photo by Katrina Snaps

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