Sales rep problem

From my mail:

I have a dilemma concerning how to deal with a sales rep and I am facing a situation which has been bothering my conscience for many days now:

My company has changed sales reps recently because we have not been happy at all with the level of service and of the quality of the sales rep’s work. The rep did a very poor job and has caused a few (but major) highly negative issues for us. Since we’ve changed reps, I won’t have to deal with this rep for much longer but I still put great value on my reputation and also care about doing things in all fairness.

One store called me recently after receiving their Fall 2007 order, saying that what they received was not what they ordered. The customer said they had modified their order, canceling about 2/3 of their order about one week after making the original order, over the phone with the sales rep. The sales rep never sent me the modified information on this order, even though I sent them a sales report at the end of the selling season (before my production cut-off date – we produce according to orders) for them to verify that I was not missing any orders, modifications or cancellations. The sales rep acknowledged this error came from them (although they did not have much of a choice).

Another point that annoys me is that I had to get the rep to do their job. I actually had to tell the rep that they should call the client to try to see if the customer would be willing to keep some of the styles they had canceled instead of returning the 2/3 of the canceled order. In the end, the client kept 2/3 of the order and only sent back about 1/3. Of course I will not be paying the commissions on the goods the client will be sending back. I already had two large canceled orders at the very last minute (late August and early September) from clients of this sales rep so I’m already stuck with too much merchandise that probably won’t sell during the Fall as reorders. So for me, this is just more merchandise that I will be stuck with.

My dilemma is, should I deduct the wholesale cost of what it cost me to produce the canceled order the rep didn’t tell me about from the Fall 2007 commissions of this Sales Rep or should I assume these losses even though the mistake was clearly made by the Sales Rep? I have been wrestling with my conscience for many days now and have been unable to find much information over the internet or from people I know. Your, your collaborators or readers point of view would be quite welcomed.

First my gut reaction, don’t. The adage “if in doubt, don’t” holds true (wish I could always remember that). I think you know this too. On one hand, you feel the pinch of injustice to say nothing of the costs, you’re entitled to feel you’ve been wronged. The situation you’re pondering is whether you have the right to make things whole, as you should have been had the rep been doing his/her job.But is that all you feel? I think we often want the egregious party to recognize they’ve caused us ill in addition to making us whole. Assuming it were forthcoming, would a genuine apology suffice? Think about that. You strike me as a fair, disciplined person, not unkind or vengeful -and not that we should let people walk over us either .

As a practical matter, you have two choices. One, you can discuss the matter with the potential of a possible solution to your liking because you do have some cause due to negligence and dereliction of duty although I can’t say how much.

Second, you can deduct the direct costs of the unnecessary excess production from the owed commissions and most likely, the rep isn’t going to fight it in any substantive way because it doesn’t amount to enough money to fight over in court [dollar figures were discussed privately]. The problem is, people talk and as we all know, the grapevine is our lifeblood. Do you want this rep to have the opportunity to have any kind of a gripe against you that’d be blabbed around? I mean, he/she most likely already has a gripe since you’ve let them go but at least there’s no specific monies due. It is doubtful a complaining rep is going to tell your side of the matter in private discussion. The rep is only going to say you didn’t pay them commissions that were contractually owed and legally, this would be true.

Let’s assume you do deduct the costs from the rep’s payment. Further, let’s assume you end up selling the excess goods, most likely at discount down the road. In that scenario, I think you are the sort of person who’d feel guilty if you didn’t refund the rep the appropriate percentage of the difference. In such case, I’d ask whether you want the hassle of further dealings with this person. Painful though it may be, maybe it’s just better to cut all ties.

Have you had a similar experience? What say all of you?

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9 comments

  1. MW says:

    can deduct the direct costs of the unnecessary excess production from the owed commissions and most likely, the rep isn’t going to fight it in any substantive way because it doesn’t amount to enough money to fight over in court [dollar figures were discussed privately]

    Good issue! I would say play fair and square, if the contract doesn’t call for this type of deduction from commissions, don’t do it. I would also say being from a state with strict employment laws (California), if the rep wanted to do anything about it, it wouldn’t necessarily need to go to court to be litigated. In the state of California (not knowing where this person is but speaking of where I am), a simple call to the labor commissioner would cost the company more headache than they would want to deal with. This type of action is usually a violation of labor law in California, and could possibly be illegal in the state where the person does business. Additionally, if the rep is in a different state than the company, there is the potential added complexity of dual state laws.

    I took the liberty of googling such info just to back up my point:

    What are permissible deductions against commissions?

    As stated above, commissions arise out of contract between the employer and the employee. The commission may be based on either gross sales figures or net sales figures.

    However, under California law, the employer’s cost of doing business cannot be deducted from commissions or any other pay plan. For example, one California case holds that an employer cannot deduct damages to goods caused by the customer or returns of products that were credited to other employees. As with all other wages, California law prohibits deduction from commission for cash shortages, breakage, loss of equipment, and other business losses that may result from the employee’s negligence.

    http://www.harriskaufman.com/californiacommissionswages.htm

    (just a side rant– I find it necessary for most small businesses to either take a short course in basic employment or labor law or just get some type of education on the issue. Small businesses are likely to voilate many employment laws and get themselves into trouble through fines and other such penalties. I’m sure most people don’t think “does this voilate employment laws” when debating such issues. Even though sales reps are not necessarily “employees” they are, in most states, covered under employment/labor laws).

    For the inventory, I would PROactively market it to existing accounts instead of REactively waiting for reorders. Companies would get rid of a lot of excess stock if they would just TRY to sell instead of just waiting for orders to trickle in.

  2. Rocio says:

    In general when it comes to “fuzzy areas” I think it’s best if you don’t give the other party any opportunities to bad mouth you… Not to say that you should tolerate those who blatantly try to take advantage, but if it’s not big enough to go to court, I think your reputation is more valuable.
    Like Kathleen says, in this business is all about word of mouth…

    We are in CA and used a great book: “Small Business Kit for Dummies”…
    It was written by a California Business Lawyer, and it comes with a lot of templates…
    When it came time to hire a lawyer to review and update our contracts, the book saved us a lot of money because there wasn’t too much for him to change :-)

    Best of luck and don’t sweat the small stuff!

  3. a says:

    The first thought that popped into my head in reading your story is why you never made contact with the store shortly after the orders were placed to confirm it? Some store owners and some reps are shady. Many reps will write paper even when its not good. And some store owners are not honest people, see Retail Beef. My rule is to always, always confirm all orders right before things go into production, whether I wrote the order or my rep.

    Ok to answer your question, I don’t feel you should deduct from the rep’s commission except for commissions not earned.

  4. Ann Krier says:

    As a form VP of Sales my little laws were:

    1. ALWAYS confirm your orders whether rec’d from rep or directly from store with a written acknowledgement. (Even if it is stock stuff).

    2. Require PO’s OR written acceptance of acknowledgements.

    3. The Rep’s main job is supposed to find sales and find more sales. The factory/ manufacturer is supposed to make the product and do the paperwork.

    4. All sales people stink at paper work. See 3.

    5. see 1. and repeat.

  5. katie says:

    hi,

    We’ve had this problem too and it certainly is frustrating. On the flip side, though, most reps won’t hold you accountable for goods you cancel (ie, dropped styles)…do you have to compensate for styles you’ve cancelled? I wouldn’t want that.

  6. Marie-Christine says:

    It’d be best to keep in mind that just because you’re not at fault someone won’t be going around bad-mouthing you :-). So don’t expect the rep to go singing your praises just because you behave correctly. In fact, they may badmouth you -more- because of a bad conscience.

    That said, I tend to agree with Kathleen, if you have any doubt it’s best to behave the best way you know how and leave it at that. It’s good practice :-).. even if you don’t see an immediate return. You won’t have any potential legal worries, you can just let it slip right out of your mind, and that’s priceless.

  7. EvelynC547 says:

    A few months ago I found a site that sold industrial sewing machines that also sold them by showing examples of what you would need. For instance, they had a set up on the page, bottom left I believe, that showed what machinery was required to sew lingerie, then another set up to sew let’s say dresses and skirts maybe, then a set up to sew something else. They also sold these machines as a set offering a slight discount for purchasing them all. Do you have any idea where I saw this? I have been searching for three days now “google” and haven’t found it. I know I saw it because I wished that I’d have seen it before I bought the machines I did buy. I don’t know why I didn’t save it in my favorites but I don’t think I did for some reason.

    Thanks,
    Evelyn

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