I recently hired someone* to handle my advertising on Money Spruce. She gets paid 100% on commission, so if I’m not making money, she’s not getting paid by me.
She’s doing a great job so far, too. A few times I’ve felt bad asking her to check on things for me or send emails, but then I realized: I shouldn’t feel bad. She must want to do this work because she gets paid a portion of everything I get paid.
That’s the beauty of commission-based earning.
On the opposite end of the spectrum, I’ve never had a job offering any significant commission, and that’s de-incentivized me from doing my best work.
I worked in retail, where I always got paid close to minimum wage. Store managers often threw weekly sales goals for the store at us employees, but I never really cared since I would get paid the same wage whether the store brought in $30 or $30,000,000 that week.
When incentives were offered, the best they could muster was giving cashiers $2 every time we convinced someone to pay $20 to sign up for a store membership card. Needless to day I didn’t put much of an effort on selling the memberships.
No Motivation to Work Hard
Many jobs don’t offer much in rewards for working hard and doing your best.
I guess the possibility of being fired or laid off is somewhat of an incentive to do your best at a job, but I’m still not convinced that’s the best incentivizer to get employees to try their hardest.
Other jobs offer the opportunity to advance to a better position with higher pay, which seems like it would be another good reason to do you best at work. But there are some jobs where there are really no opportunities or ability to achieve a higher position no matter how hard you work.
Some employees may not desire to advance from their current job anyway and instead plan to move on to other companies or places in stead.
Incentives = Entrepreneurship?
If you’re a really into working based on incentives, even if there are no guarantees that you’ll make anything, is entrepreneurship the way to go?
Short answer: I say “yes.”
What you earn is 100% tied to your own efforts. You aren’t restricted in what you can do (whereas you probably are restricted in at least some way by your job), and you can adapt your projects to changing markets and conditions.
For the driven, deriving what you earn almost solely based on your own effort and knowing that’s how you’re going to be paid is the greatest incentivizer of all, especially if all the profits are coming your way, too.
For those of us that like to work hard and put in whatever hours necessary to meet our goals (like me), having performance tied to pay is crucial.
But, of course, it’s not all great news.
Not all good
I realize that working for incentives isn’t going to be amazing all the time. If a majority of your pay is based on incentives or commissions, I imagine it can be unsettling at times not to know you’re definitely going to earn a certain amount on our paycheck.
I also bet that working with commission-based sales can be tough based on a lot of factors like the product you’re selling, the market for that products, the current economic climate, and more. This CNN article points out that earning based on commission is great, but you can’t simply “coast from paycheck to paycheck. Needless to say, working on commission isn’t well-suited for the unmotivated.
As far as waitstaff working for tips, that may not be completely related to work performance, either. According to this Planet Money Podcast on why we tip, many customers tip because they feel guilty and not because their server did an exemplary job. This is surprising and goes against intuition, but based on my tipping habits, I can definitely see some truth in it.
I’ve never worked at a job where a significant portion of my wages are based on performance or commission, but I would imagine that the best combination of pay involves a base salary with bonuses attached. Working entirely on commission is a little scary, but I can see doing it if it’s something I’m confident I can succeed at.
Have you had a job with performance incentives? Did you or would you prefer it? Am I missing any important considerations?
* that “someone” is Crystal, and you can check out her services here
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photo by: Kumar Appaiah
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