After several
Johnson Controls International salespeople from across the country filed lawsuits against the company for changes it made to its sales incentive plan last November, the company’s chief executive officer shared today how those changes tie into the company’s overall strategy.
At Citi’s 2024 Global Industrial Tech and Mobility Conference, held Thursday morning in Miami Beach, Johnson Controls chief executive officer
George Oliver explained JCI is completely revamping how it does business.
“When you’re developing a building solutions strategy and delivering what we believe is a very different value proposition and you’re changing the fundamentals of how that’s delivered, that includes updating sales plans,” he said. “We’re very competitive in how we attract, retain and develop our people across the board, and this would be in line with the enhanced strategy…the ability to incent what ultimately you’re looking to execute and do it consistently across the board.”
Under JCI’s previous incentive plan, salespeople received a portion of their commission when a project was booked and they received the remainder of their commission as the project hit key milestones. This created a backlog of commission payments that ranged in size for each salesperson.
The new sales plan does away with that commission structure not only moving forward, but also on projects booked prior to Oct. 1, 2023 that had not reached required milestones. This means backlog payments will not be paid out to JCI salespeople.
JCI salespeople upset about not receiving the backlog payments have filed lawsuits against the company in
Wisconsin,
New York and
Michigan. One of two lawsuits filed in Michigan was moved from circuit court to federal court this week.
“The success of our organization is directly tied to the success of our people, and we routinely assess our practices to best support their growth and achievements,” Johnson Controls said in response to the lawsuits in a previously issued statement. “We modified our sales incentive program to better align with our company strategy to deliver smart, healthy and more sustainable environments for our customers. We will continue to assist our sales organization to ensure a seamless transition to our revised competitive model.”
JCI’s evolving strategy
On Thursday, Oliver said Johnson Controls has been working to significantly decrease its selling, general and administrative expenses (SGNA) and simplify its IT systems now that the company relies on one operating system.
In July of 2020, JCI launched OpenBlue, which is a digital platform that stores all of the sensory data from a building’s operating systems (including HVAC, security, fire systems and more). OpenBlue then uses analytics and artificial intelligence to provide operational insights linked to sustainability and productivity.
“We have been building this over several years, but now it is effectively deployed across the globe,” said Oliver.
Oliver said he sees OpenBlue as foundational to the company’s vision of becoming a comprehensive solutions provider focused on smart buildings. The data and solutions that OpenBlue can provide clients is what will set JCI apart from competitors, he said.
"We can deliver 30%, 40%, 50% energy savings," he said. "There's a real value proposition to what we do. That is what we've been focused on. And then, taking the noise out of the system from some of these other businesses that are noncommercial, I think is also going to help."
A Bloomberg News report from late last month said JCI was considering the sale of some of its HVAC assets for $5 billion.
While the leak of this news was disappointing, said Oliver, the examination of JCI’s noncommercial product lines had been “well underway for a period of time.”
Right now, less than 10% of JCI’s services are digital. Eventually, all of the company’s services will become digital as JCI connects all of its assets to the OpenBlue platform. Once those assets are all connected, JCI will use artificial intelligence to change how its service technicians operate and help drive sustainability outcomes, he said.
“Our software-a-service, even though it’s a small percentage right now, it’s going to be into the roughly $150 million to $200 million range,” Oliver said. “And then we can utilize data to create new services.”
