Compensation strategy lesson from ‘The Office’

by: Nichole Gunn April 12, 2010

What is the perfect balance between commission and salary? Should all your employees be entitled to commission? Or should only sales staff be rewarded with commission as they are the ones who sell? Getting this wrong can have a negative effect on employee morale. High commissions can create tension in the workplace as employees become competitive. And while salary based compensation would mean no tension in the workplace, commissions are a great way to motivate employees by offering an incentive for every sale they make.

A recent episode of ‘The Office’ gives great insight into this rather complex quandary.

The episode titled "New Leads" perfectly captures the essence of the commission dilemma facing every employer. Dunder Mifflin, the infamous paper company, adopts a new compensation model, after being acquired by Sabre, a company that sells printers. The new compensation model rewards the sales team members for selling printers with high commission. It encourages all staff members to engage in promoting its product, yet, it compensates only the sales staff.

John Lovig writes in Conducive Chronicle that "This policy change has an apparent affect on other employees. Seeing the sales staff as arrogant other employees are losing their motivation to help support the sales team. Sabre wants employees to engage in behaviors that promote printer sales, yet only compensates sales staff for sales made.” Lovig continues by saying, “This may seem intuitive, but it does not align everyone in the office with one purpose. Morale in the office is low; left alone, this problem will result in counter productive behaviors from staff."

The Sabre model was later modified by its employees after the morale took a dive. As we saw in the recent Office episode, sharing commissions can go a long way.

Compensation strategies vary from company to company depending on the industry, and culture, however, a mix of salary and commission could be applied to most companies.

The key for any organization is to recognize that each employee contributes to achieving its goals. It is imperative that each employee understands why the company is rewarding them. Employee recognititon is vital, and as long as ethics are taken into account, a good balance between commission and salary can be found.