On a Wednesday morning last November, thousands of
Johnson Controls sales representatives across the country tuned in to an impromptu video conference that was dropped onto their calendars without warning.
During that call, company leadership unveiled a new sales incentive plan that could reduce employees' anticipated incomes by between 25% and 35% on average, according to five Johnson Controls employees who spoke with BizTimes Milwaukee under the condition of anonymity. The company disputes that contention.
The new plan eradicates a system of backlog payments that were previously due to each salesperson under the old plan.
Under the previous system, salespeople received a portion of their commission when a project was booked and the remainder of their commission as the project hit key milestones. This created a backlog of commission payments that salespeople for the company say ranged in size from a little over $1,000 to more than $400,000 per salesperson at the time the new system was unveiled.
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.
The new system instead sets a sales quota for employees and then offers an incentive payment based on the percentage of the quota a salesperson reaches.
In a statement provided to BizTimes, Johnson Controls disputed the idea that salespeople would see their earnings cut 25% to 35%.
"In this revised plan, sellers can meet and potentially exceed their annual quotas resulting in uncapped earning opportunity," the statement reads.
Johnson Controls, which is technically based in Ireland but has its operating headquarters in Glendale, touted the new system as a simplified plan that focuses on core commercial objectives while also linking to the company’s financial plan, according to a frequently asked questions document reviewed by BizTimes.
“The overarching goal of the FY24 sales incentive plan is to allow us to accelerate growth and reward our sales organization accordingly for doing so,” the document says.
A group six of Johnson Controls salespeople
filed a class action lawsuit against the company in U.S. District Court for the Eastern District of Wisconsin last week. None of the plaintiffs in that case are among the Johnson Controls salespeople who spoke with BizTimes.
“We’ve lost all faith and trust in the company right now,” said one sales rep, who has been with Johnson Controls for 11 years in the western region and had a backlog of $30,000. “Our core values are out the window.”
While salespeople would not be receiving commissions they may have planned on from their backlog, the company did provide a bridge payment that it said was “to assist with this transition.” The payment was not meant to substitute for unearned commissions, but backlog and projects booked in August and September were considered.
The first bridge payment represented approximately 22% of each person’s remaining backlog, according to salespeople who spoke to BizTimes.
Last December, Johnson Controls announced two additional bridge payments would be sent out in 2025 and 2026, according to documents obtained by BizTimes.
Employees were told Johnson Controls leadership wanted to standardize payment methods across different business units, especially within the business units that were added following the 2016 merger with Tyco, according to a sales rep based in the Midwest. He’s been with the company more than a decade and had a backlog of $171,000. He believes the company intended to create a massive backlash and a mass exodus of high-performing salespeople.
“They’re banking on our business being so simple that they can just plug in a new person,” he said.
After being recruited to Johnson Controls by a regional vice president who became a parent-like figure to him, he said he’s seen a shift in the company over the last seven years from prioritizing culture to focusing solely on financials.
“There were comments made in executive briefings about how people were ready to just fire the whole sales staff and get new people,” said the rep from the Midwest. “That just shows where peoples’ heads are at.”
The FAQ document obtained by BizTimes states many of the company’s sales incentive plans had become “overly complex” and had “misalignments” to its commercial objectives.
Lingering confusion
In past years, Johnson Controls leadership would typically announce any changes to the payment structure prior to the start of a new fiscal year. So, last November’s call was an unexpected one – especially when the sales force learned the new plan would be retroactive from the start of fiscal year 2024.
“You’d need a damn PhD in differential equations to be able to figure out what they’re doing, because it continues to change,” said an employee in the company's southeast region. He had a $60,000 backlog. “They’ve demanded that we sign retention paperwork and non-competes based on the new plan. Most everyone is saying we’re not signing anything until we have an official policy.”
All the projects he booked from Oct. 1, 2023, through Nov. 18 were sold at a pre-determined minimum margin, he said. A margin measures the amount of profit made on the sale of a product after taking into account all costs related to that product.
The new plan introduces an increased minimum margin that employees say they were not informed of until well into the new fiscal year. After selling millions of dollars below that new target margin, the southeast regional salesperson said he must now sell even more projects at a higher margin to dig himself out of a hole.
“I had one of the best months in the region since October. Well over $4 million in sales,” said the rep with the $60,000 backlog. “I’ll be honest, it was a very lucrative plan. The problem is now, they’re trying to stuff the genie back in the bottle.”
After averaging out his monthly income, the rep with the $60,000 backlog said he expects his monthly cash flow to be down 55% under the new sales incentive plan.
“It’s unethical as hell,” he said.
More than 3,000 salespeople in North America alone are impacted by this plan, which was rolled out globally, and legal documents show millions of dollars in backlog payments are in question.
“Right off the bat, I took a $30,000 pay cut from fiscal year 2023 to fiscal year 2024,” said the sales rep from the western region. “I’ve had to tighten some purse strings around the house and make some decisions about some luxuries I have that I can no longer afford.”
He considers himself lucky. At the end of September, he had close to $70,000 worth of backlog payments. Several of his contracts were completed in time for him to receive payments for a portion of his backlog.
He believes the elimination of employee backlogs are only a part of a larger problem. The completely revamped incentive plan, which now pays out incentives at the end of the fiscal year instead of when a project is completed, simply doesn’t encourage sales reps to go out and win new contracts.
“The company is using my money to go make investments and make money for them, not give that money to me,” said the rep from the western region. “Essentially, we’re giving the company an interest free loan for the year.”
For another sales representative in the southwest region, who has been with Johnson Controls for seven years and had a backlog of over $400,000, the changes to the payment plan have upended his personal life.
He said he understands the company has the right to change its compensation plan, but the real gut punch was the elimination of the backlog payments, something his colleagues would often refer to as golden handcuffs. For him, backlog payments represented about 30% of his yearly income.
Growing up, the rep with the $400,000 backlog says his childhood was rough and marked by financial struggles. Joining Johnson Controls gave him the financial security he had craved for most of his life, and he attained a level of status and wealth that he never imagined he’d be able to reach.
He was able to buy a home that he was renting out to his parents and other family members at a loss. With the new incentive plan in place, he had to sell that home and kick out his family last December. He also had to sell a car he recently purchased.
“The continuity my backlog provided was more than just a number—it was the financial bedrock for my family, a consistent assurance that buffered us through the market’s ebbs and flows,” said the rep with the $400,000 backlog. “The abrupt revision of this compensation mechanism has not just left me in financial disarray; it has forced me into heart-wrenching decisions, like selling my home, uprooting the life we’ve built.”
Left in limbo
To say the unveiling of the new payment plan caused complete confusion would be an understatement, according to a second sales rep in the company’s southwest region. He’s been with Johnson Controls for eight years and had a backlog of over $100,000.
There had been rumors circulating about possible changes to the incentive plan, but nothing concrete was known until the November call, he said.
Then, all communication with the company stopped. Weeks went by without any new information.
“Questions were pouring in and none of them have been answered,” said the sales rep with the $100,000 backlog. “None of them have been answered since that time.”
Adding to the confusion was the fact that a commission calculator sent out by the company initially gave sales representatives the wrong figures and used inaccurate formulas. Once that calculator was updated, several of the anonymous sales representatives said their calculations showed between a 25% to 35% pay cut -- if they sell as much as they did in fiscal year 2023. The sales rep with the $100,000 backlog said he’s anticipating a 56% percent pay cut.
At this point in time, all five anonymous Johnson Controls sales reps say no one has received their quota or base salary under the new plan. The second employee from the southwest region believes the plan was created to push out high producing salespeople and replace them with talent that’s younger and cheaper.
“I’ve got to pay for college for two of my kids,” he said. “Even if I wanted to stay with Johnson Controls, I don’t think I could. I can’t afford it.”
In a previously issued statement, Johnson Controls said it will continue to supports its salesforce during this period of transition.
"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," according to the company. "We modified our sales incentive program to better align with our company strategy to deliver smart, healthy and more sustainable environments for our customers."
