Paid by performance - A study about factors of motivation and risk acceptance

Abstract

Background and discussion of the problem: In order to make an individual work for the same aims as the company, the management has to appeal to the individual worker’s needs and factors of motivation. To overbuild existing differences between individual and company aims, incentive systems are designed. These can have different formulations, and rewards given can take different forms depending on individuals’ motivating factors. These forms should be designed with consideration to the different needs and behaviours of individuals. As people are different they also have different levels of risk aversion, which means that not all individuals like their reward to depend on their performance. Research question: What motivates individuals to be paid by performance and take the risk involved? Limitations: We have chosen to narrow this essay down to solely study a line of business, which will be representative for others with similar systems. Method: We have compared interviews with six estate agents from different firms. We have chosen to apply a qualitative method when gathering the primary data. When utilising this data for the study we had a hermeneutical approach, meaning that we will try to interpret the individuals’ subjective apprehensions in order to reflect the most representative picture. Result: We found the most motivating factors for accepting the risk involved with a performance-based pay to be: money, achieving something and feeling important. The question is if individuals consider the risk being a risk. We were told that they do not consider the performance-paid system to be a risk but an opportunity to earn more, but we came to the conclusion of it being a negative aspect even though not verbally stated. Individuals have proven their awareness of the existence of the risk, by considered team constellations risk reducing. In this line of business individuals are aware of the risks, but motivating factors such as money, achieving something and feeling important make the risk seem insignificant. Suggestions for further research: The increase in discontent among buyers and sellers has been augmented and can also be considered a reason for continued investigation. Therefore, we find it of interest to study the effects that a combined fixed and variable wage system may provoke. It would also be of interest to investigate the possible outcome if today’s system was totally eliminated from this line of business. It would also be interesting to implement a similar study when the line of business is not experiencing the blooming period the business is experiencing today.