Motivating employees: commission system
Commission systems are commonly used in commercial enterprises, less often in service enterprises. Representatives and sellers receive a lower base salary, and the remaining earnings can be obtained for the generated sales volume. The employer pays for a specific effect - the number of products sold, contracts signed, commercial transactions concluded. Does an employee performing his / her duties under such a system feel motivated to work? In which industries the commission has a real impact on the employee's motivation?
Commission system - principles of operation
The mechanism of the commission system is not complicated. When hiring an employee, the employer informs him that he will receive a lower basic salary. However, it is possible to increase the total remuneration through the commission on sales. The more you sell, the more you earn.
The commission rate must be set at a level that will be adequate to the industry in which the company operates. For example, selling food products is not difficult - in every city there are small-area local shops that are willing to cooperate with sales representatives. Their owners stock up on nutritional products on a regular basis. For this reason, the commission offered to sellers in the food industry will not be high - the representative has the opportunity to conclude many contracts on a regular basis.
The commission system does not work for everyone!
The effectiveness of the commission system depends on the personality of the employee. Chatty extroverts who find it easy to make new contacts will be spurred to greater effort by being able to earn a commission on sales. Shy people, who associate competition with dirty game and rat race, will not increase their efficiency. Working in the commission system will not increase their motivation to work.
The industry also plays a role in the effectiveness of the commission system. For example, in banking, people who work directly with the client receive commissions on the loan granted, signing an agreement for a savings and checking account or a credit card. Additionally, each employee has a specific work standard to fulfill. Most bankers do not want to increase their efficiency so as not to exceed the transaction threshold that has been imposed on them. If the number of signed contracts was much higher, the next month the employed person would receive a new work standard, which would require concluding even more contracts with clients. The sales commission does not motivate employees from the banking sector to work more effectively.
Sales reps also complain about the commission system. Enterprises most often use regionalization, i.e. they divide employees into a specific area in which they operate. It often happens that one of the traders serves communes or poviats that cannot boast a large number of independent entrepreneurs. In such a situation, the employee will have a limited field of action - a small number of stores means less compact transactions, i.e. a negligible commission on sales.
Start a free 30-day trial period with no strings attached!
The commission system and the increase in efficiency
Enterprises that have introduced a commission system notice that employee productivity increases to a certain level, and then stabilizes or declines. Why is this happening? People are only motivated to work through financial incentives for a limited time. The money received is to meet basic needs. If an employee manages to obtain a certain financial condition, he begins to pay attention to non-wage incentives. The number of days off, greater scope of duties, and free medical care are gaining in importance.
There are also situations when the best traders are taken over by the competition. Sometimes the most productive employees are promoted to managerial positions. And others change their profession because they are no longer interested in their current job. All this translates into the overall level of productivity of the employed employees.
Is it worth introducing a commission system?
The commission system can only be introduced in such enterprises where it is possible to measure the effects of the work of the employed people. It would be difficult to introduce such a way of rewarding and motivating in education. On what basis would teachers be accountable? From each student who passed to the next grade or the number of very good grades? Teaching staff could stretch their diary grades in order to earn more, and the quality of teaching would suffer.
In addition to the commission system, it is also worth introducing other incentives influencing employee motivation. The benefit package, the possibility of personal development or flexible working time also effectively affect the motivation of employees.