Mike Andes argues that compensation for labor should be structured to align incentives between employees and business owners. He claims paying by the hour encourages employees to lengthen jobs (more pay for more time) while owners prefer speed; instead, pay should incentivize completing work quicker and with high quality to avoid cultural problems caused by misaligned incentives.
I genuinely believe when you're selling labor, you want to tie it to how long the job takes. And instead of the employee wanting to make the job take as long as possible because they're getting paid by the hour. So the longer the job takes, the more money they make. And then the business owner, the faster it goes, the more money they make. You're going in different directions. And this is why ultimately a bad compensation plan will affect the culture, is because your incentives are not aligned, incentivize everyone to get the job done quicker and to a high degree of quality and compensate effectively.
