Lessons in Compensation from “The Office”

© Alexandr Denisenko

When watching last week’s episode of NBC’s The Office, I couldn’t help but see parallels between what occurred at Dunder Mifflin Paper Company and what happens in everyday organizations around the country. Some organizations design compensation models that undermine their organizational goal or even an ethical code. One need only look at risky spending practices on Wall Street to see how the wrong compensation model can encourage dangerous behaviors from employees. 

The episode titled, “New Leads” (Originally aired 3/18/10) revolves around Dunder Mifflin’s sales team. A new compensation model sees the sales staff receiving higher commissions for selling printers instead of paper, as a printer company called Sabre recently acquired Dunder Mifflin. Not only are salespeople reaping the majority of the rewards of the entire groups collective effort, but they are suffering from inflated egos.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 compensate sales staff for sales made. 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. An excellent example that may help illustrate this problem can be found in restaurants. Imagine if waitresses, who receive tips, did not tip their bus boy? Do you think the bus boy would help that waitress very much? Lets not even get started about the animosity that would bubble up.

Organizations need to take a critical look at their compensation strategies. In most cases salespeople make a commission, but striking the right balance between base salary and commission may be difficult. A solely commission based employee is bound to be extremely competitive. A little competition never hurt anyone, but too much can damage your work environment. Having only salary will likely reduce tension between employees, but will fail to provide employees with incentives to make sales. There is also the question on how to compensate those who support salespeople. Do you provide them with some compensation as they enable salespeople to do their jobs? This may reduce potential animosity directed at salespeople, but it may put undue pressure to succeed. What about compensating the group as a whole for total sales? This scenario will likely result in social loafing from some, and put the workload on a few. In all likelihood this would stress an employee out. So what is the perfect balance?

Finding the perfect balance may take time. It requires more than just looking at performance, but also behaviors and attitudes. While the compensation practice should vary based on industry, product, and organizational culture, most companies would do well to ensure a good mixture of base salary and commissions. Should a position depend mostly on commissions, or commissions are extremely high, it is likely to say that an organization is creating an environment where ethics are not the first think considered. If you fear ethical misconduct, it is important that an ethical focus be included in determining commissions or bonuses.

No matter how you compensate your employees, it is important that each person understands why they are compensated the way they are. A different compensation model may not be necessary if the organization refrains from treating different groups of employees differently. Everyone contributes to an organization’s goals, whether it is a receptionist, Vice President or middle manager. If employees are aware of how they contribute and are compensated to reward their effort, then the workplace can thrive and tensions could be avoided. Sabre would do well to take another look at their compensation models, or even how the model is branded to employees, before the environment at Dunder Mifflin is damaged permanently.

Related Posts:

Wal-mart posts $14.34 billion in profits for 2009, why do workers still have to organize for a livable wages and health care?

Save Money, Live Better

Supreme Court Helps Make Elections Better

Blame Canada