Hourly pay kills productivity because workers have no reason to work faster or better. Piece-rate and bonus-based compensation align tempo, quality, and customer satisfaction with earnings, letting businesses scale when everyone paddles in the same direction.
like from a very first principles thinking mindset, like what is like, how do you win? Okay, well, you win by charging the most. How do you charge the most? By doing the best. How do you do the best? By having the best people on your team. How do you have the best people on your team? You find a way to reliably, predictably, and still profitably pay them the most. So what's wrong with paying hourly? Nothing technically, Most of the world does it that way still and probably will for a long time yet. But I have seen enough instances where business owners are just getting very clever. And instead of just saying, "Okay, well, this project's 100 hours, your hourly rate is $25 an hour, try to do it in 100 hours or less," there's no incentive structure, there's no dopamine hit, there's no dangling carrot for that worker, try your best ain't doing it. There needs to be a structured approach. So, I think that people that are exploring how to do piece rate, which is essentially like find a way to pay your employees in a similar way that you pay your subs so that they make more by working faster. Now, a lot of people go, how do you ensure quality? Well, there's bonuses for quality, there's bonuses for Google reviews, there's a way to manufacture this. And you know, these industries that we talked to were sort of too sprawling and different in different markets for me to like give a prescriptive approach on how you do this for your specific business wherever you live. But what I can say is that entrepreneurs who are getting on the front edge of this and thinking about how do I— and by the way, I should, I should make this distinction. There's two levels of it. So there's like the crew level, which is like, how do I estimate and project plan and project manage and execute work in a way that ties tempo, intensity, and quality and customer satisfaction with payment? Yeah, how do I do that for the crews? And then on another level, it's like, how do I do this for my management staff? When your business grows and scales, one of the things that I'm sure some of your listeners are experiencing right now and probably thought about this morning before they listen to this podcast is this idea of a bloated overhead. In other words, I have a whole bunch of non-revenue-producing roles who I need to pay a salary, who, yes, I have a job description and yes, we talk at the beginning of the year about what they should go do. But, at the end of the day, they get paid $70,000 a year or $120,000 a year whether we build a little or we build a lot. If you look at how nature works, literally the fundamental laws of physics, that's not how animals function, that's not how primates function. To the victor goes the spoils, eat what you kill, these old adages that we sort of say and know to be true. We certainly know it to be true in sales, and that sales has operated like that forever because it's— the math is very easy. But when it comes to production, the math is like slightly harder, not impossible, just like needs a little bit more thought. And I see people who are doing that thinking both for their crew level— find a way to incentivize your worker bees to work faster and keep your customers really happy— and then find a way to incentivize your managers, whether they whether they be production managers or marketing managers or whatever, to also think that way, these businesses grow at an alarming rate because everyone is paddling in the same direction.
