Analysis of Amazon operating commission system: balance between existing and incremental commissions

In Amazon’s operations team, the design of the commission system is crucial to overall performance. Different teams usually develop corresponding commission models and KPI assessment standards based on their own conditions. Although good results will be achieved in the early stage, various potential problems will gradually emerge as time goes by.

Basic framework of commission system

For Amazon teams, there are three main ways to calculate operating commissions:

1. Calculating commission based on profits: This is the most common method and is fair even in the event of losses. By tying the interests of employees to the overall interests of the company, they are more attentive to operational details. However, there are complications with this approach as there are more costs involved and it may lead to a decrease in employee motivation.

2. Calculate commission based on withdrawal amount: This method motivates employees to a great extent and can deduct advertising operating costs in advance. Employees can clearly see the specific data on withdrawal amounts, reducing dissatisfaction caused by opacity.

3. Calculate commission based on sales: Although sales calculation is easy to obtain intuitive data, it can easily cause employees to ignore profits, which may not be conducive to the company’s profit growth.

Demands for existing commissions and incremental commissions

In order to motivate the team to better promote new products and enhance overall performance, stock commission and incremental commission are proposed as a system innovation. The stock commission is mainly for popular products that are already profitable. The commission points will be reduced after one year after the product is launched to stimulate the enthusiasm of old operating employees and encourage them to actively create new products.

Incremental commission is based on the profitability of new products. If the new product can become a hit, higher commission points will be given to promote the overall innovation ability of the team. This change aims to optimize resource allocation and allow experienced operations employees to be more involved in product innovation, thereby improving the team’s performance growth.

Problems and Challenges

However, this system adjustment is not without risks. Old operating employees may be dissatisfied with the change in commission methods and choose to leave. In addition, if those employees who have been stable in the company for a long time, although they have rich experience and skills, are unwilling to try new product marketing, it may affect the overall performance of the team in the future.

In general, the Amazon team needs to take into account both innovation and stability when setting up the commission system. Through a reasonable combination of existing commissions and incremental commissions, the team’s vitality and market competitiveness can always be maintained.