Performance-based Pay

Every time I’ve been to a car dealership, a salesman immediately approaches us offering to help.  This forward behavior is necessary for these industries to engage and hold customers. Car dealerships are great examples of businesses working under a performance-based pay model.  Most companies pay their workers a certain wage, regardless of how the company did. Performance-based pay allows workers to earn what they sell. Piece rates are the money one earns based on their outputs.  In an easy sense, the more they sell, the more money they make.
This form of payment has several beneficial elements.  Other than piece rates, commissions or royalties could be given to employees with good performance.  This would then push workers to have the best results, so they could have the benefits. Similarly, companies can use profit sharing plans for their workers.  A profit sharing plan “provides direct or indirect payments to employees that depend on company's profitability”.  These bonuses depend on the companies success, and the company's success depends on its employees.  Companies will now work together in order to gain as much profit as possible.


One major argument against performance-based pay is that it can urge companies to care more about quantity sold, then the actual quality of their items.  This shows how wrapped around money our world has become. Companies value their profits over the products and customer experience. There are also idea that performance-based pay models can encourage businesses to “engage in fraud and sneaky business practices.”  If a company has a reputation for being sneaky, individuals will be less likely to use their product.


The majority of companies today follow a regular fixed pay model.  Those of us who have a job, most likely get that as well...minimum wage.  It’s most likely a good thing we don’t get paid based on how well we’re doing.  How would business function if all employees were paid was based on their performance?     

Comments

  1. AnonymousApril 12, 2019 at 11:18 AM

    Nice post! I've always noticed a stark contrast as a consumer in retail stores that pay based on performance and those who do not. Like you mentioned, I definitely think that the quality is sacrificed when quantity increases in this method of payment. However, I researched and found that there are ways to maximize the effectiveness of performance based pay. This can be achieved when combining this model with others. This would help mitigate the negatives that are seen. To offer an opinion on the question you raise, I think businesses would definitely decline and result in a lot of cut throat competition unless some compromise or regulation is reached.

    https://smallbiztrends.com/2017/02/is-performance-based-pay-effective.html

    ReplyDelete
  2. AnonymousApril 12, 2019 at 10:32 PM

    I really enjoyed this post and you did a really good job outlining performance based pay. Looking into the issue further, I found out that many of the issues with performance based pay is how the system is set up. Employers can set up a system that minimize the negative consequences of performance based pay. One of the main problems is simply that the issues faced with performance based pay depend on the workers themselves. Some workers may be frustrated by the system more easily or be less motivated by performance based pay. However, overall it is a beneficial system as it creates a sense of fairness in the industry and can sometimes cause increased motivation in workers. Overall, it's a really interesting issue that requires a lot more research and development to find an answer to what the best methodology is.

    Source: https://psycnet.apa.org/fulltext/2014-44009-011.html

    ReplyDelete
  3. AnonymousApril 14, 2019 at 6:35 PM

    Great post. With performance based pay, it makes an impact in a workers attentiveness. For a company, it allows to determine its best workers. Also, it allows workers in a company to be fairly compensated. It all depends for what a companies goals and desires financially in regards to whether or not they chose to use this method of pay.

    https://www.apspayroll.com/blog/does-performance-based-pay-make-sense-your-company/

    ReplyDelete
  4. AustinApril 19, 2019 at 2:46 PM

    I agree with what you're saying. While performance pay promotes competition within the company and increase worker efficiency, there will be many loopholes that some employees can exploit for their own benefit. Overall, it is a fair and benefiting system for some industries that rely on employees to have maximum productivity.

    ReplyDelete

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