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Paying employees, Commission?


#1

This is something all store owners struggle with–how to motivate
their employees.

Personally I am a big believer in paying commission, otherwise
employees will simply “babysit” the business.

I used to pay all employees an hourly wage plus 5% of their personal
sales. However, this resulted in employee’s fighting over sales (“I
showed her that pair of earrings yesterday–that’s my sale!”) and did
nothing to encourage teamwork. Also, keeping the showcases clean, the
displays looking nice, and the jewelry polished are all very
important, but these tasks take time and take an employee’s attention
off of sales, so these things sufferred, too.

Now I pay all employees an hourly rate (some more or less than
others depending primarily on how long they’ve worked for me), plus
all employees split 5% of the weeks total sales based upon the total

of hours they worked.

For example: suppose that the weeks sales were $10,000; 5% of
$10,000 is $500.00

If the total # of hours worked by ALL the employees that week equals
150 hours, and employee A worked 40 hours that week, employee A would
receive 26% of the $500 commission, or $130.00 (40 hours divided by
150 hours equals 26%).

Now all the employees work together as a team, and Employee A is
happy when employee B makes a big sale because he/she is going to
make money off of that sale too! Also, employees don’t mind working
on displays, cleaning and polishing the jewelry today when it’s slow,
because they know that this weekend, when it gets busy, since the
displays look nice, everyone is going to sell more!

Two exceptions:

  1. I make all employees track their individual sales, and I never
    pay an employee more than 125% of 5% of their personal sales. This
    prevents an employee from completely slacking off and relying on the
    rest of the employees to make their commission for them.

  2. I pay the employee with the highest personal commission earned
    per hour (it is important that you based it upon "commission earned
    per hour) and not on their total commission, as your full time
    employees will have an unfair advantage over part time employees) a
    bonus! This is very important, because you don’t want your "star"
    salesperson getting frustrated that they never earn as much in
    commission as they actually sell.

Finally, in my experience no matter what you do someone will be
unhappy! Just goes to prove–YOU CAN’T PLEASE EVERYONE!

Hope everyone had a GREAT holiday season!!

Doug


#2

You’re a clever person, Doug. Seems like you’ve maximized all your
variables. Actually, it sounds like the solution for a nice
Operations Research problem for a class of nascent engineers.

Tas
http://www.earthlywealth.com/


#3

Doug described the same system my husband’s casino uses to share
tokes/tips among all the dealers. The new guys on the graveyard
shift aren’t disadvantaged and since luck has a lot to do with the
tips, things are evened out. In case you don’t know (as I didn’t),
it is customary to give a buck or two tip out of each winning hand
or pot. If the pot is large, the tip should reflect that. I liked
Doug’s added bonus for the star sales person. The psychology of
intermittent positive reinforcement creates the stongest learning
bond.

Amazing what we share here on Orchid. Thanks again to Hanuman and
Ton. Looking forward to seeing everyone in Tucson in a month or so!
Judy in Kansas