Sunday, 23 March 2008

Variable pay as a motivational tool

Variable-pay programs are an effective way of motivating people. For that reason, it has been implemented in many companies. For example: in IBM the Salesmen are rewarded according to such a program, while the System Engineers are not. Is that a wise decision? Why do you think it was adopted in such form? Illustrate your position by your experience.

I think that the management in IBM who decide to reward salesmen with a variable-pay program and reward system engineers with a fixed pay program understand the different personality types and motivations of these two groups of employees. From personal experience I would say that salesmen traditionally fall under the banner of extraverts, whereas system engineers fall under the banner of introverts.

Salesmen have to be social animals because their role requires them to meet with all kinds of different people all the time. It requires them to be expressive - they have to get their point across in a way that will make them hard to ignore - and to take risks. Each sales call that a salesman will make in a day is in essence a gamble; they can use their skills and knowledge to improve the odds that they will 'win' (i.e. make a sale) but they have no way of guaranteeing the outcome of the meeting or pitch. You are encouraged to bet on higher risk horses by bookmakers offering a bigger return on your bet if your gamble pays off; similarly the management at IBM know that offering variable pay will encourage their salesmen to take bigger risks with a potentially bigger pay off. Salesmen are encourage by extrinsic rewards - "valued outcomes that are controlled by others, such as recognition, promotion and pay increases" (Huczynski & Buchanan, 2007). Working in a sales - oriented job can be stressful, and variable pay is a way of compensating the employee for this stress.

Systems engineers, on the other hand, are usually textbook introverts. They enjoy the
responsibility of designing and maintaining computer systems that they understand and their superiors don't. They tend to be pretty unsociable - being able to work on their own for large periods of time. Working with computers gives them control because the computer is only ever going to do what they tell it to do. Systems engineers, I think, value intrinsic rewards ("valued outcomes within the control of the individual, such as feelings of satisfaction and accomplishment" (Huczynski & Buchanan, 2007)) much more than extrinsic rewards - they enjoy the feeling that they have implemented something that is clever or well designed, and get a kick from the fact that the people in 'userland' have no idea how it all works.

From a personal point of view I would definitely class myself as an introvert. I tried working as a telephone salesman and found all the aspects of the job - the lack of control, the need to be chatty and engaging with total strangers - a complete turn off and lasted two weeks before I quit. I was on a variable-pay (commission based) program but the money did not motivate me one iota. Contrast this with my current job where I am the technical lead on an organisation - wide change agenda, a job I would happily do for free most of the time (if I won the lottery I would probably still keep working and donate my salary to charity). Is it wise for IBM to offer salesmen variable pay and engineers fixed pay? "Mr. Garcia [a salesman at CompUSA], too, is already thinking about what's next, especially once he earns
his degree. He sells technology, but he could be selling anything, really" (Hafner, 2003). IBM have to offer the best variable pay packages to attract the best salesmen because variable pay is what motivates them. Similarly, they have to offer different incentives to engineers - which could be working environment or the chance to learn a specific technology - because that is what motivates them.


Huczynski, A & Buchanan, D (2007) Organizational Behaviour (6th Ed.) Essex: Pearson Educational Ltd.

Hafner, K (2003) A PC salesman who pushes the right buttons [Online] The New York Times Company.
Available from (Accessed 23 March 08)

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