👎Nine times you can't

The profitability of services (or goods) declines when competition intensifies, while the average market salaries often rise in response to the same increase in competition.

Since these two factors are unrelated, organisations find themselves compelled to engage in artificial adjustments to align them. Regrettably, there is no logical explanation for the such manipulations.

It is important not to substitute the manager's work with the thesis about a "magic formula of motivation" (for example, in the form of "the right percentage"), which supposedly results in the employee transforming into an "angel” and will "spread the wings” himself (and it is crucial only to find this "magic formula").

We adhere to a simple and logical principle: a real business should not be built with "angels", but with "those we already have around us". And we must develop a system that works effectively with "regular" employees.

Of course, it would be wonderful if we had outstanding employees; we would recognise them immediately and reward them accordingly.

However, system planning and the establishment of management rules should be based on "ordinary" employees, most of whom will work without straining (minimally or average) if they are provided with a "percentage bonus".

They are unlikely to increase their own performance and the quality of their work, but will start to question not only the "fairness of the enterprise" but also margins, payments from customers, arguing about the cost of certain services, and suspecting you of sins that never occurred.

One should also not forget the following: under similar conditions, there is a maximum threshold that the employee (who works in a specific way or method, and follows specific principles, etc.) cannot exceed, no matter how much they are paid. Excessive payment, in this case, will only cause the employee to become complacent, and it may make them lazy.

Similarly, world records in the high jump over the last 30 years have increased by 15 cm, and in the next 30 years, they are expected to increase by a further 10 cm (although the salaries of jumpers have increased by several dozen times).

Another example: Russian football players who play in the national leagues in half-empty stadiums, and who were humiliated in the European Championships and lost by a score of 1:7 against the team from Portugal, still received between $400,000 and $730,000 each for the disappointing year of 2004. Meanwhile, the "low level of the Russian team" is well known.

The entrepreneur should define the technological limits of their business as it currently stands.

For instance, an employee (or team) who is actively and professionally selling will generate more revenue than a passive one. By comparing the results, one can identify the difference. However, in a well-organised business, the gap in sales is within reasonable limits.

If there are still significant variations in effectiveness (more than 20%), depending on effort, then this indicates a “hole" in the sales technology. This issue should be addressed first, before returning to the matter of salaries.

• The number of employees - 5 people.

• A salary which is sufficient for the employee, "without overworking himself" - $1,500.

• Percentage of the turnover paid to the employees - 10% (for example).

• "Spontaneous" wages fund - $5,000.

• "Standard" on turnover, spontaneously set by the employees of the enterprise - $75,000.

We can believe that "there is no benchmark" and "people are trying", but it is better to set target benchmarks for your business (by managing the business with ideas and parameters of a business plan, not the wishes of employees) and organise the work in such a way that average people might reach them without making altruistic feats.

The know-how to organise work in this manner is the key skill of the manager and entrepreneur.

The opposite is also true: while avoiding this organisational work, replacing it with the thesis about "the magical formula of motivation" in which an average employee turns into an "angel" (see above), is the well-known management laziness. The numerous "piecework theories and self-satisfaction from them" are merely philosophical justifications of this laziness.

8. In situations where the volume of orders is reduced, the 'percentage approach' conceals idle periods in manufacturing.

This model inherently masks production downtime. It reduces visibility into when and how often employees are idle or underutilised across a small number of orders. This is detrimental.

When rationing work, “downtime” must be honestly highlighted.

9. The "percentage approach" obscures the individual contributions of a specific worker.

A wide variety of factors affect profit and turnover; thus, the relationship between salary and work efficiency is not evident. The bonus, in this context, lacks transparency. It merely becomes an arbitrary figure, the origins of which are unclear to the employee.