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Unlock This CourseMoney talks! Financial rewards are one of the most direct ways businesses can motivate their workers. When employees know they can earn more money or climb the career ladder, they often work harder and perform better. Two key financial methods are commission and promotion - both can be powerful motivators when used correctly.
Key Definitions:
Most people work to earn money to live. Financial rewards tap into this basic need, making employees more likely to put in extra effort when they know it will directly benefit their wallet. It's simple psychology - reward good behaviour and you'll see more of it!
Commission is like a bonus payment that employees earn when they hit certain targets or make sales. It's widely used in sales jobs, from car dealerships to estate agents, because it directly links pay to performance.
Commission systems reward employees with extra money based on their results. The more they sell or achieve, the more they earn. This creates a direct link between effort and reward, which can be incredibly motivating for the right type of person.
Employees earn a percentage of every sale they make. For example, a car salesperson might earn 5% of each car's selling price. No sales = no extra pay!
Workers get a basic salary plus commission on top. This provides security with the chance to earn more. Most common in retail and insurance.
Commission rates increase as targets are met. Sell 10 items = 2%, sell 20 items = 4%. This encourages employees to push for higher targets.
John Lewis gives all employees (called 'Partners') an annual bonus based on company profits. In good years, this can be worth several weeks' salary. This system motivates staff to provide excellent customer service because they know company success directly benefits them financially.
Commission can be a win-win for both businesses and employees when implemented correctly. Here's why many companies love using commission-based pay:
Employees work harder when they know extra effort means extra money. Sales teams often exceed targets when commission is on offer, boosting company revenue significantly.
Companies only pay commission when results are achieved. If sales are low, commission costs are low too. This helps manage wage costs during tough periods.
However, commission isn't perfect. It can create problems that businesses need to carefully manage:
Commission systems can sometimes encourage the wrong behaviours or create unfair situations for employees.
Employees may struggle with unpredictable pay, especially during quiet periods. This can cause stress and financial difficulties.
Staff might compete aggressively with colleagues, refusing to help each other or share leads. This can damage teamwork.
Employees might prioritise quick sales over building long-term customer relationships, potentially damaging the business reputation.
Promotion means moving up the career ladder to a job with more responsibility, status and usually better pay. It's a powerful motivator because it offers multiple benefits beyond just money.
Businesses can offer different types of promotion depending on their structure and the employee's skills and ambitions.
Moving up the hierarchy - from assistant to manager, manager to director. This usually means more pay, responsibility and status within the company.
Moving to a different department or role at the same level. This offers new challenges and skills development without necessarily more responsibility.
McDonald's has a strong promotion culture - many of their senior managers started as crew members. They offer clear progression paths and training programmes. This motivates employees because they can see a real future with the company, not just a temporary job.
Promotion offers advantages that go beyond immediate financial rewards, making it an attractive motivational tool for many businesses.
Promotion gives employees prestige and recognition for their hard work. Job titles matter to many people and can boost self-esteem significantly.
New roles bring new challenges and learning opportunities. Employees develop valuable skills that benefit both them and the business.
Higher positions usually mean better salaries, pension contributions and benefits. This provides long-term financial security.
While promotion can be highly motivating, it also presents challenges that businesses must carefully manage to avoid problems.
Promotion systems can create unexpected problems if not handled properly, potentially demotivating employees rather than inspiring them.
Not everyone can be promoted - there are fewer senior positions available. This can demotivate employees who feel stuck in their current role.
Good employees might be promoted beyond their abilities. A great salesperson might make a poor sales manager, leading to stress and poor performance.
Commission and promotion don't work equally well in all situations. Understanding when to use these methods is crucial for business success.
Sales roles, estate agents, insurance brokers and any job where individual performance can be clearly measured and directly impacts company revenue.
Large organisations with clear hierarchies, businesses wanting to retain talented staff and companies with complex roles requiring experience and training.
Avon uses both commission and promotion effectively. Representatives earn commission on sales, but can also be promoted to team leaders, earning commission from their team's sales too. This creates multiple income streams and clear progression paths, motivating representatives to both sell and recruit others.
Many successful businesses don't rely on just one method - they combine commission and promotion opportunities to create comprehensive motivation systems that appeal to different employee needs and career stages.
The best financial motivation systems often combine immediate rewards (commission) with long-term incentives (promotion), giving employees both short-term and long-term reasons to perform well.