I think you get some data and lay it all out showing them how things change out don your control and how it would negatively impact you.

Maybe try and annualized it and ask if they’ll consider putting you on more base comp to make up for it.

What is sounds like is that they are tying to protect their downsize risk (ie - if the profit goes down your commission eats into their margin). At the end of the day though, they need to focus on why the profits going down not on purely protecting themselves.

Having said all that, it’s their company so they get to choose...but a data based approach might help you.

This sounds like nothing more than a way to pay you less. Recently, I went to grad school to change careers. Previously, I spend the last 10 years doing inside sales for a large software company. Every change to our comp plan was simply a way to pay us less. I'd say something to the effect of "Can you help me understand how it makes sense to penalize the sales staff for things that are out of their control?"

You are correct with your assessment and the poster above me is also correct in that the owners are trying to hedge their downside risk. I would ask for an increase in base pay, make your case for why you should not have your commission cut for the mistake of others, or contemplate moving on to greener pastures if that's an option for you. It will depend on industry but good sales people are hard to come by.

Ready for this to be an unpopular opinion, but it's a good counterpoint:

As an owner, I've been on the receiving end of far too many easily-avoidable fuckups for which there's no recourse but to grab my ankles and open my wallet. I can point to several of these cases where all it would have taken was for a few key players upstream (not necessarily the engineers) to care about the outcome instead of caring about their paychecks.

So yeah, I get it, an engineering mistake isn't your mistake, and that shouldn't affect your bottom line, BUT, instilling a company culture where everyone's looking out for each other and where the consequences of mistakes are felt within the company like they're felt by the ankle-grabbing customers...that's probably a good thing for the industry. If you're excluded from that, then you are free to focus on closing deals no matter the outcome, and that may not be the best thing for the projects as a whole.

Hope that makes sense.

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Eliot
blog thing - strava thing

Great point, but I wouldn't really call it is a counter. That's kind of what the OP alluded to, a profit-sharing plan, where everyone is exposed and has an incentive for the whole project to be successful through its entire lifecycle. I'd also be willing to bet there are more cases than not where the sales guys "oversells" the product and then in their mind when this causes a problem later it is because the engineers screwed up, even though they were the root of the problem. I'm an engineer and we screw up sometimes too.

For the original poster, I think there are some great suggestions others have provided. My point on it, is challenge (maybe that's too strong a word) the owners/management to think about a compensation structure that rewards the whole team for success (higher profits), so everyone is incentivized in the same way. I'll admit this is tough with respect to sales people, because just based on how they have to work, you really do need special incentives for them to bring in and sell business. But a data driven, team oriented approach as others have suggested is the most objective and proven way to be successful in business and is something smart and reasonable owners should be able to consider.

Playing devils advocate:

I used to work in a completely different industry but I was the finance guy keeping track of the profitability of a multi year services contract. More than once we found that the revenue (if T&M) and profit margins of the contract were more than realistic at the time of the sale. This helped the sales guy and the person doing the pricing of the contract but the project manager got screwed on their bonuses because they couldn't meet the targets from the time of sale. I remember one contract factored in a 3% inflation clause but our labor was in a country that was 10%+ inflation a year.

Maybe the goal of the employer is to avoid these types of issues?

Are you part of the original quoting process at all? Are you only the middleman who gets the bid and submits the quote?

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TEAM HD
Each day is what you make of it so make it the best day possible.

The questions I have are why are there cost overruns after the sale? Is it truly a mistake, or was the client sold vaporware that they are trying to engineer during implementation.

I have seen it many times with software projects where the sales people sell features that don't exist and it costs a fortune to try to develop at the last minute, working overtime, and often times it just isn't possible, so now the client is mad, but the sales people are out on their yachts sipping champagne from the commission they already collected.

Yes,
I'm somewhat involved in quoting. I write the project scope and then the engineer designs the system to meet the scope. Then the proposal goes to the client.

How much of a hit to your income would it be?
I’ve been in tech sales for 25 years- rarely do comp plan changes pay the sales person more money. I’m used to shrinking territories, higher quotas and less % of the deal every year. You just gotta sell more to keep up.

I read a stat the other day that 10 years ago, about 75% of sales people hit their annual quotas. Today, it it closer to 40%. Yet companies are still growing at a rapid pace. My company has grown 35% quarter of quarter for the past 5 years. We just hit a billion in annual revenue at the end of 2019. Our stock has done amazing. I think we have about 40-50% of our reps hit their annual quota. How do you have half of your people hit quota but still grow at 35%?

From your answer it seems you are not really in Sales but more in Product Management. if you were in Sales the change would be completely unfair. Normally a commission plan for Sales should be based on discount level eventually: higher the discount given, lower the commission percentage. Obviously this implies a decent Listing Price in place. For a Product Management in charge of writing the project scope and I guess also evaluating the planned cost, if a commission plan has to be devised (I have never seen that job paid mostly with commission, this is unfair) it should be more tailored to reach the target of margin.
So in that respect I could understand a little bit more the change in the commission plan. In other words you should have an incentive that you do a very accurate planning of cost (if it is part of your job, not sure about that), for instance being sure that any customized proposal is well evaluated by engineering upfront before finishing the quotation. Using an example of one answer above, planning an inflation of 3% while in that specific country the inflation is clearly 10% is a mistake by the office who is doing the planning cost, not the Sales.
In my opinion, since I think the decision will not be reversed, you should try at least to agree that your commission should not be lowered automatically with lower actual margin than planned margin but excluding clear mistakes out of your responsibility (a service tech breaks a costly component for instance) and keeping only lower margin due to incorrect planning (if under your responsibility). Not easy to do anyway without a good planning system.
Good luck. Not easy situation.

Common sense says if 40-50% of the sales team isn't hitting their quota, either they suck or the quota is unreasonable. In this case, it sounds like the quota is unreasonable. I spent 10 years at Oracle and they were constantly sticking it to people with every quota change. It made for an unhappy workforce. I had a friend closing in on retirement and after the fiscal year ended they decided to weight their quota toward cloud deals. Their team focused on government and cloud accounted for maybe 20% of their deals. As a result, he only received a third of his average year end bonus. He went ahead and retired after that. His manager tried several times to get him back, but she couldn't change the comp structure to make it worth his while.

I worked for a company that unrealistically upped the numbers required every year. When the auto industry crashed in 2000, they almost doubled the requirements for the sales people. It hit our area so bad, companies I would regularly have over $20K per month in sales were now at $1K tops. This happened across the board at all customers. 200 men shops quickly became 50 man shops and 50 man shops were back to the mom and pops they used to be. We had dedicated territories so it wasn't like there were new customers popping up.

That was the last year with that company.

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TEAM HD
Each day is what you make of it so make it the best day possible.

Not long before I left, a friend in another division said they increased their quota while shrinking their territories. Everyone started looking for another job.