Engineering Compensation Systems:

A commissioned payment system was installed at a small business to study a pay-for-performance system. Self-generated feedback, traditional wage payments, and contingent commissions were investigated in combination to assess their effects on daily productivity (in dollars billed) for two machinists. Results showed increases in dollar productivity for both feedback and commissions. The commission system, however, when combined with feedback, produced the largest increases in production. The intervention lasted for 40 working days. Moreover, organizational time and expenses in implementation were minimal. Implications for the management of organizations include: 1) the effects of feedback administered alone and in combination with contingent commissions, 2) the high ratio of benefits to costs, and 3) the potential savings that could be realized in quality of performance and staffing areas. The need for replication is also discussed.