Read the following news story on the problems associated with paying employees by commission. Then respond to the questions that follow.
Veteran auto mechanic Mike Bishop could have told Sears' chairman, Edward A. Brennan, that the giant was asking for trouble when Sears slashed hourly wages and put its auto mechanics on a commission system three years ago.
Sure enough, in June, the California Department of Consumer Affairs accused Sears of seriously overcharging customers and threatened to revoke the licenses of 70 Sears auto-repair shops statewide. The department's chief declared the overcharges a systematic looting of the public, giving Sears a black eye from which it is still recovering.
The Sears scandal prompted many business owners to question whether paying people on commission is a good idea. According to union officials representing some of the workers, Sears required mechanics to reach sales quotas of at least $147 an hour. That represents a lot of brake pads and shock absorbers.
In recent years, more big and small business owners have begun paying employees on a commission basis in an attempt to boost productivity and to cut payroll costs. But, as Sears learned, putting too much pressure on employees to sell products and services can backfire.
"Whenever you put people on a commission basis, you are asking for trouble," said Elaine Locksley, founder of the Locksley Group of Pacific Palisades, Calif., which specializes in providing market research on customer-service issues. "The minute you put that kind of pressure on people, you make them dishonest."
Although about 95 percent of auto-repair shops pay mechanics on a commission basis, you will find only salaried employees at Richard's Accurate Import Auto Service in Santa Barbara, Calif. The tidy shop has a wall full of awards that prove customers like it that way. "When repair shops pay mechanics on commission, morale is poor, and it becomes a cutthroat place to work," said Bishop, owner of the shop that was named a "living legend" by readers responding to a recent consumer poll conducted by the Santa Barbara Independent newspaper. Why do customers love Bishop's shop? "I tell my employees to treat each car like it's their own," said Bishop, who worked as a mechanic for several major auto dealers before buying the shop from a friend. Bishop said his salaried mechanics have no motivation to replace parts that don't need replacing. In fact, he encourages people to repair or clean original, but functional, parts.
Critical Thinking Questions
Sources: Reprinted from Applegate, J. "Sears' woes spur debate on paying by commission." Arizona Republic, 7 September 1992.