The Effect of Commission Based Wages -A Case Study of the Real-Estate Industry

Abstract: Background and problem Within the real-estate industry, commission based wages has been the tradition for a very long time. This wage system demands a person to be motivated by money. At the same time, recent studies shows that humans are not soleley motivated by money, other factors are important. Still the purely commission based wage system remains the dominating. Recently a debate has been raised within this sector, regarding the need to have alternative wage systems. This has been the background to why this topic is of interest to further investigate. Research questions - How does the chosen wage and incentive system affect and motivate the work of a real-estate agent? - How does the institution manifest the wage system in the industry? - What factors support a change of the wage system? Purpose The purpose of this paper is to describe the wage and incentive system in the real-estate industry. The paper investigate why the wage system is used, and how well established the tradition is. Furthermore, the paper aims at reflecting upon the need of change of the current wage system. Method Ten real-estate agents from six different firms were interviewed. Half of the respondents were managers and half were employees. Furthermore a survey was sent to four schools graduating real-estate agents in spring 2014. An answering frequency of 52% was attained. Theoretical framework Incentive systems, wage systems, motivation theories, institutional theory and management accounting change theory. Conclusion The conclusion of this paper is that the commission wage based system works well within this sector, due to the character of the people. This system is deeply rooted in tradition and a strong institution exist guarding the current system. However, many indicators point towards a change being needed and demanded within this sector. Further research Proposed further research is to look at this same problem but for all of Sweden, due to our limitation to the Gothenburg region. Furthermore could an investigation of how an “optimal” wage system would be designed be of interest. Also an investigation of how a fully fixed wage system would work within this industry.