A story is told about Don Drysdale the famous pitcher for the Los Angles Dodgers. One year the Dodgers offered Mr. Drysdale a bonus if he kept the amount of walks under a certain number for the year. Management desired to keep the number of opponent base runners to a minimum. It seemed like a good idea to offer a bonus on limiting the number of free passes to first base.
As the story goes, on occasion when he had a three ball no strike count, facing the fact that one more ball and the batter would walk hurting his chances of receiving the bonus, he would throw AT the batter. If he hit the batter, they would reach first base on a hit batter charge, not a walk. A hit batsman did not count in his contract, only walks.
Don Drysdale received his bonus that year, and the Dodgers learned to be more careful in establishing what they want to accomplish in setting their bonuses.
Many retail jewelers have felt the same disappointment as the Dodger management. Wanting to accomplish more work out of their shop, they put their jewelers on commission or other incentive program. However, what they found is the quality of work dropped as the jeweler hurried to finish more work. In addition, large time-consuming jobs lay around the shop unfinished as quicker jobs are finished earning the jeweler more money.
Yes, putting jewelers on commission can have its benefits, and many jewelry stores have found it advantageous to do so. However, doing so may create problems for many stores.
First, it puts all the responsibility of increasing productivity on the jeweler. Granted, there are those jewelers who need this motivation to get work done in a reasonable amount of time. However, there are many issues that influence productivity that are beyond the control of the jeweler. These include take-in procedures, shop design, job information control, interruptions, lack of equipment, work conditions, etc.
The front-end of many stores are so disorganized that it is impossible to run a productive shop. For management to put their jeweler on commission in these circumstances is irresponsible.
In addition, many jewelers do not know how to be productive. They are not taught in school how to schedule jobs and organize work to be more productive. To put them on commission and make it their problem without providing training is also irresponsible.
Before management puts any jeweler on commission, they need to take a long hard look at these issues and make necessary changes. You need a store with the front-end set up efficiently before you can expect jewelers to function under a commission system.
The second problem is pricing. Many stores have their prices on repairs set far too low. They lose money on repairs and make-up for it through sales of new merchandise. Putting jewelers on commissions in these circumstances is totally irresponsible of management. If the price you charge is too low – then the commissions you pay would also be too low, and your jeweler would have no method to make-up for it as you do with sales. Before putting your jewelers on commission make certain your prices are set correctly for your store. Do Not Just Copy Someone Else’s Prices. Do the work and make certain your prices are right for your area. My computer program “From Fee to Shining Fee” can help you set your prices properly.
The third problem with jewelers on commission is it only motivates the jeweler to produce more work. However, most stores want more from their jewelers. In addition to quantity, they want quality, they want jobs finished on time (when promised), they want a team player, they want a jeweler to come to work on time, etc. A jeweler on commission will have the natural tendency to do the work that pays more and not do or procrastinate on the others.
As the saying goes: What Gets Rewarded Gets Repeated. A problem arises when management says one thing but rewards something else. For example: you can preach till you are blue in the face about quality but if you reward only quantity then speed is what you are going to get. For example: A jeweler may hurry through 10 jobs performing mediocre work and receive only one or two back because of not reaching standards. He can re-do those two jobs in less time than it would take to slow down and do all ten jobs correctly.
Or a jeweler sizes a ring, checks all the stones, and tightens the loose ones, as you would expect him to do. However, if you only reward speed (by paying commissions) then it would be faster for him (and more profitable) to size the ring and turn it in. When you check it and find loose stones and return it to him he tightens them. He spends no more time sizing the ring or tightening the stones. However, he saves a lot of time by not checking the stones on all the rings he sized.
If you want both (quantity and quality) you need to reward both. If you try to gain both by rewarding one and punishing the other when not received (making them do it over without pay) you will not get the second item if they think the added reward out weighs the punishment. You are only fooling yourself if you think you will get something just because you ask for it, yet reward something else (ask for quality but reward speed regardless of quality). To run an efficient shop you must be consistent with what you say you want, and what you reward.
In addition, just because work is up in the shop does not mean profits are. For example, a jeweler may solder a crown and set a stone, but in his haste he melts three crowns. The job may be done quickly, the shop’s output increases, and the jeweler’s commissions are up, but profits are down. Or it may be quicker to use too large a piece of gold stock to size a ring up and then file down (a waste of inventory) then to roll out the correct size gold stock. The work gets done quickly but profits are down because of it.
Tying performance together with compensation is a good method of motivation. Just be certain you know what performance is being compensated. Don’t pay your jewelers for limiting walks, and allow them to hit the batters!
An incentive program such as paying commissions is not a one size fits all. It may or may not work for you. Just like there are different ways to re-tip a prong, set a stone, or size a ring, there are different methods to run a shop and motivate a jeweler.