Sales History: The Wage Stabilization Board and Sales Compensation

Can you imagine living in a time when the government was involved in determining sales compensation and seeking ways to limit it? It happened…and people seemed, for the most part, ok with it.

An article in a December 1951 edition of Sales Management Magazine, discussing a policy relating to US wages, but specifically, sales compensation, stopped me in my tracks. So, I did the homework (reference list at the bottom)…and here’s the story:

During World War II, inflation spiked. Along with it, wages also went up, based partially on a limit of labor due to the needs of the military – a low supply of workers equals a need to pay more for those workers. However, as wages went up, a company’s costs would go up, meaning they raised their own prices to maintain profitability.

The result? Uncapped inflation.

Here in the US, the peace following World War II didn’t last long. Just four years later, in 1950, the United States entered the Korean War.

Now imagine this…

You are a salesperson in the early 1950s. Every year, one of your goals is to grow your income. You can do it through your performance as a salesperson, but appreciate it when your employer raises your salary, raises your variable component, injects sales contests into the year, or maybe even provides more opportunity to you through territory adjustments.

Taking the inflation lesson from World War II, Harry S. Truman, then US President, took proactive action, and among other things, enacted something called The Wage Stabilization Board. Its task? To control wages, or in other words, keep wages from growing to keep inflation from spiraling out of control.

How would this be possible without creating a mutiny? This board consisted of 18 individuals, tripartisan—three groups of six:

• Group 1 – representing the public.
• Group 2 – representing corporate management.
• Group 3 – representing labor.

Why do I bring this up? Because this Wage Stabilization Board’s powers included creating regulations around sales compensation.

The Board’s Regulations Regarding Sales Compensation, 1951

The “Do’s and Don’ts” on sales salaries and commissions were very specific.

Keeping in mind that compensation structures for salespeople looked very much like they do today, the regulations covered the three types of plans; (1) Commission-Only, (2) Straight Commission, and (3) Salary-Plus-Commission.

Here are some of the highlights of the regulations “for the fortnight ending December 15, 1951”:

In commission-only plans
Companies were not allowed to increase earnings via an increase in commission rates or the formula used for calculating commissions. Whatever the rate was January 25, 1951 had to be the same for 1952.

For many organizations, commission-only did include a ‘drawing account”, meaning, an advance on commissions. The regulations went as far as to define how a drawing account could be calculated – “up to 77% of his total earnings in the calendar year 1950, or of the average of his total earnings in any three of the five calendar years 1946 to 1950.” And “the draw must be charged against commissions earned, but if it exceeds commission the employer is authorized to make an annual charge-off.”

In salary-plus-commission plans
Similar to the commission-only plan, commission rates couldn’t be increased, but salaries could be raised according to the like for other white-collar jobs.

Sales contests and prizes
“An employer who had an established practice on or before January 25, 1951, in the use of ‘special sales contest or prizes’ may continue or resume his established practice, but the total amount expended during the current calendar year shall not exceed the total amount expended in 1950 or the average of any three of the 1946-50 calendar years.”

In other words, if you felt a contest was needed to spur the team and sales, unless you’d done one last year, you couldn’t do one this year.

Territorial or Product Changes
The regulations here stated that commissions do “not exceed that paid by the employer in the past for such territory or product.”

Thus, the opportunity…

…what to do if you want to raise a salesperson’s pay?

There were no regulations stated that prevented a sales organization from raising a salesperson’s pay simply by expanding their territory. In other words, if a company had a rep in Wisconsin, one in Illinois, and one in Minnesota, and the Wisconsin rep left, the company could give the Illinois rep half of Wisconsin and the Minnesota rep half of Wisconsin. However, expanded territory (in my opinion) isn’t always a good thing, reducing focus and efficiency, and often reducing performance rather than adding 50% to your potential.

There were many other issues with these regulations, including:
– There was no “floor”. Companies could reduce commission rates, reduce salaries, reduce advances, and reduce any other sales expenses. The regulations prevented increasing pay, but not decreasing it.
– The regulations made it difficult to “ramp” a new hire. In other words, a new hire may be paid one way during their ramp, may not hit optimal performance right away, and these regulations made it difficult to allow for a rep to ramp into their pay.

Interesting to say the least…that in a time when we’re always looking for ways to pay people more, the early 1950s constituted a time when “stabilizing” pay as a function to fight inflation was applauded by many.

These policies didn’t last long. In early 1953, the newly elected President President Dwight Eisenhower abolished the Wage Stabilization Board.

It’s entirely possible that I’m the only person who finds this period of time in sales compensation interesting…and I hope there’s never a time when we as a country need to enact such regulations again.

Ref:

1. “Executive Order 10161, September 9, 1950,” John Woolley and Gerhard Peters, The American Presidency Project, no date
2. Horowitz, M. (1954). Administrative Problems of the Wage Stabilization Board. ILR Review, 7(3), 390-403.
3. Loftus, Joseph A. “White House Ends All Wage Control, Many Price Curbs.” New York Times. February 7, 1953.
4. https://www.presidency.ucsb.edu/documents/executive-order-10233-amending-executive-order-10161-with-respect-wage-stabilization-and
5. https://en.wikipedia.org/wiki/Wage_Stabilization_Board#:~:text=The%20Wage%20Stabilization%20Board%20(WSB,agencies%20with%20the%20same%20name.
   

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   I speak and teach revenue organizations on how to leverage transparency and decision science to maximize their revenue capacity. It’s what I do…teach sellers, their leaders, well…entire revenue organizations how we as human beings make decisions, then how to use that knowledge for good (not evil) in their messaging (informal and formal), negotiations, and revenue leadership. I wrote a book Book Authority lists as the 6th best sales book of all time (𝘛𝘩𝘦 𝘛𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘤𝘺 𝘚𝘢𝘭𝘦), and a second award-winning book (𝘛𝘩𝘦 𝘛𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘵 𝘚𝘢𝘭𝘦𝘴 𝘓𝘦𝘢𝘥𝘦𝘳).

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   Photo cred: Sales Management Magazine, February 15th, 1951 – a picture of a salesperson from the cover