Incentive Pay, Employee Performance and Employee Productivity

“Incentives are the cornerstone of modern life”(Levitt and Dubner 12). Levitt and Dubner once mentioned in their book “Freakonomics”. According to Oxford dictionary, incentives are something tends to incite to action or greater effort, as a reward offered for increased productivity (“incentives”). In business field, incentives are something given by bosses to encourage their employees to endeavour in bringing benefits to their business. For a simple example, the employee who hits the monthly or year sales target will get cash or prizes as incentives. Apparently, these incentives are something that motivates employees maintains their great performance and also to motivate other employee, whoever wants to get the incentives, work harder.

Therefore, it leads to the conclusion that in this case the main issue is appropriate employees motivation and satisfying job conditions, which could be achieved by choosing right incentives plan. However, sticking to the same incentives plan also might not be a good idea because people usually get used to such things very easily. As it can be seen from Engstrom Auto Mirror Company’s case employee’s motivation and morale can

Pay structures, regardless of the size of the organization, must have two things going for them, which are external and internal equities. In order to give employees purpose to continue to give their loyalty and retention, there must be incentives as paying for education, experience and training, job tenure, demonstrated skills, or a combination of these attributes consistently. Organizations should develop a well written compensation program which includes incentives, and addresses both external and internal equities.

Reward Management (RM) has been defined as the distribution of monetary and non-monetary rewards to employees in an effort to align the interests of the employees, the organisation, and its shareholders (O’Neil, 1998). In addition O’Neil (1998) also suggests that a RM system can serve the purpose of attracting prospective job applicants, retaining valuable employees, motivating employees, ensuring legal requirements relating to direct and indirect rewards are not violated, assisting the company in achieving human resource and business objectives, and ultimately assisting the organisation in obtaining a competitive advantage.

Incentive based compensation plans are one of the most conversed topics organizations that have been dealing with for quite some time. There have been several philosophies, formulas, and plans used but in the end, each type of plan has created unfavorable and optimistic results. The questions have always been whether the positive that comes from incentives plans are worth the challenges they create. In examining some of the plans that offer individuals, team based, and long-term incentives, they all vary in different ways that they are applicable, administered and designed, and beneficial to the organization’s objectives.

Incentive pay is defined as "compensation other than base wages or salaries, that fluctuates according to employees' attainment of some standard, such as a preestablished formula, individual or group goals, or company earnings" (Martocchio, p.133 ). According to ERI (n.d.) "the reason of switching to incentive pay plans is contained in the payment for results or performance concept. If the company relates pay to the desired outcome then this will increase the probability of obtaining that outcome." This may be through the employee working smarter, faster, or longer.

A monetary incentive can be described as a fiscal price given to top performers in a company. It is a fact that these top performers are an asset to the business and should be treated well for them to stay longer. The prize is awarded in the form of project bonuses, health insurance agendas courtesy of the company, program bonuses, profit sharing and paid vacation time among others. The bottom line here is to ensure that the company’s objectives are observed. As an organization, you cannot expect a worker with financial problems to concentrate on his job but once you take care of the problem and the employee is happy, the employer will gain, and this can be evidenced in the profits the company receives. The purpose of the assignment would offer a persuasive debate on the pros and cons of Monetary incentive plan from employee motivation perspective. Additionally, the paper would discuss two companies that have implemented successful motivation plan that does not involve Monetary reward or compensation.

Incentive Programs And Their Effect On Operations Management In spite of numerous assertions concerning the putative significance, there has been small experimental appraisal of incentive stipulation for workers. Because it is assumed that the interests of workers and their employers are not all the time equal, a grand conceptual literature has accentuated how firms map compensation agreements to persuade employees to work so as to obtain the firm’s desired objectives. Like the piece rates, efficiency wages, options, promotions, profit sharing, discretionary bonuses, deferred compensation, and others. There is an assumption that people acknowledge to agreements that compensate performance. Thus, to state whether or not the agreements look like the theory of forecasts. Firms give incentives to workers by way of the compensation applications of firms, circuitously observing, assessing, and agreeing, and applying various gadgets to put in line the objectives. A few workers like the employees that work in the sales department are principally rewarded due to their pains by way of clear-cut agreements that link the rewards to espied standards of performance. While it is also observed that other employees are rewarded but not on the personal standards of performance in contrast on more combined standards. These standards may be like the one having the profit-sharing attributes. Nonetheless, various employers abstain from the operation of clear agreements, favoring to reward

Harvard Business School Professor Michael Beer stated “I think there is an implicit negotiation going on between what management wants and expects, and what employees want and expect” (Lagace, 2003). One aspect of the ongoing negotiation between employers and employees in the workplace is the utilization of incentive pay plans. Employers utilize incentive pay plans to motivate and change employee behaviors in order to prioritize behaviors and outcomes that the employer is looking for. Pay for performance appears to be a common sense solution to motivate employees. It creates a reward system for employees that is tied to job performance and meeting criteria that the employer values (Taylor, 2013). While the idea of offering financial incentives to employees appears to be grounded in business principles and ideas that have existed for a long time, they are not always successful. In order to for pay for performance incentive tools to live up to their potential in the workplace they must be crafted to meet the needs of organization as well needs of the employee, the plan must also be maintained and evaluated on a regular basis. Failure to do so can cause more harm than not utilizing one. Furthermore, there is a growing body of research pointing to the idea that incentive or rewards are not the solution for improving employee performance that they were portrayed to be.

The article pertains mainly to employee compensations and the incentives which govern that compensation. The company due primarily to the prevailing market sentiments has incurred a steep decline in earnings and profit margins. Management therefore, wants to realign incentives to encourage both revenue and profit margin growth within the company. The companies inability to grow organically while maintain a competent work force have put downward pressure on the margin. As such, the company wants to provide incentives by which employees can grow revenue, earn money for themselves, while also helping the company grow organically.

1. Expectancy Theory: * a theory of motivation that holds that employees should exert greater work effort if they have reason to expect that it will result in a reward that they value. Employees also must believe that good performance is valued by their employer and will result in their receiving the expected reward. 2. Pay Equity Theory: * Equity is balance between the inputs an individual brings to a job & the outcomes they receives from it. * Employees inputs includes experience, education, special skills, efforts and time worked. * Outcomes includes pay, benefits, achievement, recognitions, and any other rewards. * Inputs and outcomes are in different units, and are hard to compare to each other directly. * Equity theory suggest that individuals determine whether they are being fairly treated by comparing their own inputs/outcomes ratio to the input/outcome ratio of others.

Organization reward and motivation Introduction Motivation Definition Motivating behaviors Individual characteristics and motivation Money as motivation Pay and motivation Pay administration Pricing job Wage and salary surveys Pay range 10.Evaluating the results of pay for performance Reward Definition Equity in reward Compensation as reward Objectives of compensation management Basic aspects of compensation Challenge affect compensation Merit of reward Relationship between reward and motivation Conclusion Reference Money as motivator The issue on money as a motivator first needs clear understanding on

to line up with the organization business strategy, but also with what people are looking for. If you provide it and maintain it, you will see the result in the company being productive, growth and employees motivated and happy. Noe, Hollenbeck, Gerhart and Wright mentioned it, “the pay and benefits that employees earn play an important role in motivating them. This is especially true when rewards such as bonuses are linked to the individual’s or group’s achievements”. When it comes to compensation company need to put into place compensation and incentives that will drive, motivate and challenge employees. When they have these types of compensation in place this will enhance the employees to do their best. Also it will make them push

Reward management is related to factors that can indulge the unsatisfied needs of employees. This will encourage employees to deploy themselves towards an organization to achieve organizational goal, building up trust and being committed toward the organization, which can induce them to be retained long term in the organization.

With a larger staff network spread over wider geographical area, it will be important to implement a reward structure that communicates the overall strategy of the organizational goal. An example is to focus on team productivity, profit sharing and skills based pay to enhance ability and motivation of employees to increase efficiency (Fisher, Schoenfeldt, Shaw 68).