Premium Essay

Incentives

In: Business and Management

Submitted By shellskj
Words 552
Pages 3
To decide on a company’s incentive plan, the organization has to have a strategic reason identified. It usually depends on the size of the organization that gives key reasons for establishing incentive plans. The reasons for incentive could include; attracting employees or keeping current ones, reducing absenteeism, or lateness. The organizational objectives should coincide with the incentive to make the company’s better. Citizens has had a problem with employee’s coming in late and have established a disciplinary policy, but also has established a reward incentive for the employees who are always on time. The company gives time off quarterly to one employee per department; they will receive a half day off. The half day off is restricted during the busiest days, but has to be done on other occasions with a supervisor’s approval. The time off incentive is offered to all employee’s part and full time employees and also temporary personnel when permitted. The company also gives one full day off reward incentive to handle the absenteeism that is a reoccurring problem. Giving a day off ensures that employees will come to work and take fewer days off for sick or other various reasons. At the end of the quarter the company throws all the names of employees in a box and one person will have the day off that they want with supervisor’s approval. The employees strive to get that extra day off and get paid for it, this has kept employees from taking too many days off. The incentive plan that is used by Citizens keeps employees coming to work by given these rewards. The time off given to employees is used by employees for extra day vacation days or to leave on early on Fridays. It gives employees a reason to stay with company and keeps the organizational objectives by keeping absenteeism low and employees coming on time. It keeps the employees productivity and morale up...

Similar Documents

Premium Essay

Management Incentive

...Job-satisfaction • Team work, etc. Incentive: Incentive is an act or promise for greater action. It is also called as a stimulus to greater action. Incentives are something which is given in addition to wagers. It means additional remuneration or benefit to an employee in recognition of achievement or better work. The need of incentives can be many:- 1. To increase productivity, 2. To drive or arouse a stimulus work, 3. To enhance commitment in work performance, 4. To psychologically satisfy a person which leads to job satisfaction, 5. To shape the behavior or outlook of subordinate towards work, 6. To inculcate zeal and enthusiasm towards work. Types of Incentive: management has to offer the following two categories of incentives to motivate employees: 1. Monetary incentives- Those incentives which satisfy the subordinates by providing them rewards in terms of money. Money has been recognized as a chief source of satisfying the needs of people. Money is also helpful to satisfy the social needs by possessing various material items. Therefore, money not only satisfies psychological needs but also the security and social needs. 2. Non-monetary incentives- Besides the monetary incentives, there are certain non-financial incentives which can satisfy the ego and self- actualization needs of employees. Non- financial incentives can be of the following types:- a. Security of service- Job security is an incentive which...

Words: 795 - Pages: 4

Free Essay

Premium Incentive

...Tournaments and Piece Rates Revisited: A Theoretical and Experimental Study of Premium Incentives Werner Guth Rene Levnsky Kerstin Pully Ori Weiselz June 22, 2010 Abstract Tournaments represent an increasingly important component of organizational compensation systems. While prior research focused on xed-prize tournaments, i.e., on tournaments where the prize or prize sum to be awarded is set in advance, we introduce a new type of tournament into the literature: premium incentives. While premium incentives, just like xed-prize tournaments, are based on relative performance, the prize to be awarded is not set in advance but is a function of the rm's success: the prize is high if the rm is successful and low if it is not successful. Relying on a simple model of cost minimization, we are able to show that premium incentives outperform xed-prize tournaments as well as piece rates. Our theoretical result is qualitatively con rmed by a controlled laboratory experiment and has important practical implications for the design of organizational incentive systems. JEL Classi cation: C72, C91, J33 Keywords: Tournaments, Incentives, Economic experiments Max Planck Institute for Economics, Kahlaische Strasse 10, 07745 Jena, Germany. yEberhard Karls Universitat Tubingen, Faculty of Economics and Business Administration, Nauklerstrasse 47, 72074 Tubingen, Germany. zThe Hebrew University, Center for the Study of Rationality, Giv'at Ram, Jerusalem 91904,......

Words: 5213 - Pages: 21

Premium Essay

Incentives in Contracting

...contracts are several types of incentives; cost, performance, and delivery that encourage contractors to perform within contract requirements. Burleson states that cost-incentive contracts are the most common and the target profit or fee is established at the start of the contract. “Full profit or fee is paid when the actual cost meets the target cost. A fee reduction results when the actual cost exceeds the target cost, and an increase in profit or fee results from actual cost that is below the target cost” (Burleson & Wilson, 2007). Performance incentives are appropriate when the results of a contract, service or delivery, are considerably important. Performance incentives can be compared with the contractor’s performance on a service contract, or measured against performance data of a delivered system or product. Both cost and performance incentives also may “include positive and negative performance evaluations and a similar fee increase or reduction using a fee adjustment formula” (Burleson & Wilson, 2007). The FAR states, “No incentive contract may provide for other incentives without also providing a cost incentive (or constraint)” (Federal Acquisition Regulation, 2012). If improvement in the contract delivery schedule is the Government’s focus, then it is appropriate to negotiate a delivery incentive contract. “Deliveries can be objectively measured by the delivery data and quantity delivered; as in other incentive structures, delivery incentives may also......

Words: 1533 - Pages: 7

Premium Essay

Incentive Compensation

...bonuses will be awarded, all employees will receive the bonus regardless of their performance for that year. Although bonuses are awarded based on the company’s profit margin, most employees tend to feel obligated to receive a year-end bonus and are hardly ever satisfied with the amount given. Pay for performance is not the same as a bonus. Pay for performance is usually an incentive plan that is based on the performance of each individual as well as the performance of the company. The incentive plan supports the pay-for-performance philosophy by aligning a percentage of total compensation with the attainment of annual business goals and individual performance objectives. The plan is also designed to increase awareness, understanding, and commitment to the business goals, as well as promote employee retention. Moving from a bonus plan to a pay for performance plan will require a lot of work for any organization and union. An effective pay for performance plan will need to be reviewed and negotiated periodically to ensure that the plan works for the organization and for the employees. The incentive plan will need to meet the company’s core objectives while retaining employees. “Too often I have seen organizations lose key people...

Words: 1100 - Pages: 5

Free Essay

Incentive Pay

...the reading that I also found interesting was Incentive Pay. The article I found further discusses this topic by weighing the benefits and drawbacks of incentives. What drew me to read this particular article was its title “Why Incentives are Irresistible, Effective and likely to Backfire” This article discusses that though incentives are irresistible to employees and are effective in increasing job performance, it sometimes has negative consequences. For example, the authors states in the article that “Ken O'Brien was an NFL quarterback in the 1980s and 1990s. Early in his career, he threw a lot of interceptions, so one clever team lawyer wrote a clause into O'Brien's contract penalizing him for each one he threw. The incentive worked as intended: His interceptions plummeted, but that's because he stopped throwing the ball.”(Heath & Heath 2009) Another example this article describes is Paul Stiles experience as a new trader at the venerable investment bank. “Merrill Lynch wanted Paul to trade complex international bonds in volatile markets. He tried asking advice of the seasoned traders, but they ignored him, a minute spent helping Stiles was a minute spent not adding to their monthly bonuses. It surely never dawned on the person who set up Merrill Lynch's incentive system that the traders bonuses would make training new employees impossible.” (Heath & Heath 2009). Prior to reading this article, it never occurred to me that incentive pay can have negative implications and......

Words: 298 - Pages: 2

Free Essay

Incentive Plans

...CheckPoint: Incentive Plans Peggy Harrington HRM/240 J. Scott Lodge March 8, 2012 Axia College CheckPoint: Incentive Plans Companies utilize various incentive plans to acquire the best and most skilled employees. The incentive plans can be broken down into individual incentive plans and group incentive plans. Below are a few of the pros and cons for each type. Individual Incentive(s) Piecework Pros - Individuals receive a certain rate for each unit produced Computing rate of pay is simple Labor costs are more accurately predicted Cons - Not an effective motivator Quality may be lacking Standard Hour Plan Pros - Based on “standard time” for job completion, even if completed in less time Best for non-repetitive tasks and requiring varied skills Cons - Quality can suffer due to employees not taking enough time to do the job properly High equipment maintenance due to employees not exercising proper care of the equipment Bonuses/Spot Bonuses Pros - Not part of base pay Typically given at end of year Useful as a retention and motivational tool Cons - Hard to predict labor costs Employees may come to expect the bonus Merit Pay Pros - Based on performance Can be a motivator if increase is large enough Cons - May be perpetuated even if performance declines Employees see it as an......

Words: 441 - Pages: 2

Premium Essay

Financial Incentives

...Do financial incentives drive company performance? Theoretically, monetary incentive is the most powerful motivator for aligning individual behaviour with an organization’s mission. Based on several assumptions, there are three outcomes from financial incentives. Firstly, motivational effect; which is financial incentive to motivate more effort, however, if certain factors cannot be controlled by the individual then employee efforts do not make a difference. Secondly, informational effect, financial compensation that provides employees with information of what the organization values and what their main priorities are. Lastly, selection effect; based on recruiting people who share similar values and traits as the culture of the company based on pay incentives. Incentive pay is fairly widespread across Canada and the United States, both in corporate and non-corporate employment. Interestingly enough, based on survey results, a higher percentage of individuals believe that other people are motivated by financial rewards, and underestimated other motivational factors that the individual ranked as more important (i.e. reputation, appreciation, interesting assignments). This could be attributed towards the fact that individuals think more positively and superiorly about themselves, this is known as the self-enhancement effect. In terms of company growth, I do agree that not all individual financial rewards align with increased business worth. Increasing customer loyalty over...

Words: 589 - Pages: 3

Free Essay

Incentive Plans

...Companies use incentive plans as a way to motivate and compensate employees’ remarkable levels of professional accomplishment. It can also be a used to boost production levels and reward employees for a job well done. The objective of incentives awards is to motivate employee goal-setting, cooperation, and group interaction. For the most employees will perform according to how they are measured and compensated. When employees work as a team, they should be paid as a team. And if the employees don’t get compensated as a team they probably won’t performed as a team. Business has different incentives awards, these incentives can begin at the beginning of a pay period, quarter or the start of the year. Employees could receive a lump-sum payment ranging from $100.00 to $10,000 or Time-Off Award. According to online source “Compensation alone won’t guarantee high levels of performance; however, reward programs can produce the behaviors most likely to lead to success. Employees living more balanced lives tend to be more productive.” (Caruth & Caruth, 2013) The Academic Journal, Team Performance Management was written by Jody R. Hoffman and Steven G. Rogelberg. In this Journal the authors wrote the article “A Guide to Team Incentive Systems” the article was about the seven major categories of a team incentive plan. The seven categories are: 1) team gainsharing profit-sharing, 2) team goal-based incentive systems. 3) Team discretionary bonus systems, 4) team skill incentive......

Words: 592 - Pages: 3

Premium Essay

Incentive Pay

...ACCOUNTING STRATEGY AND CONTROL (AC 411) ESSAY 1: Do you believe that incentive pay is truly effort-inducing; that is, drive employees to perform at their best? Discuss In recent times, companies are faced with a lot of competition and they need to constantly devise strategies to tackle this competition. They are continuously looking for ways to increase the performance of the company and ways to keep their workers and other employees motivated so that they deliver their best in such a competitive atmosphere. Incentive pay is one such strategy used by companies to perform well. Incentive pay is pay based on specific performance of an employee, which may take the form of gift vouchers, stock option, bonus, profit sharing, commission etc. It is generally used in companies where the performance is measurable. It is compensation that rewards results rather than time spent on a job. It is a method adopted by employers to motivate employees to perform better and continue delivering good results, which directly leads to the success of the company. I believe that structured monetary incentives are truly effort inducing. Incentive pay motivates employees and maintains high work performance. Employees find it hard to keep themselves motivated at work. Implementing a good incentive pay program helps to keep the employees engaged and motivated to do well by rewarding them for all the good work they do. For instance, in the Lincoln Electric case employees were paid based on piecework....

Words: 1131 - Pages: 5

Premium Essay

Incentives Plan

...Incentive Plans Travis Green MGT 431 Human Resources Management May 26, 2012 Incentive Plans Providing job satisfaction and incentives for employees should be a priority for employers because incentive pay is often related to job satisfaction. Job satisfaction helps retain valuable employees and contributes to a companies continued success. According to Noe, et al, 2007, “An effective performance plan should be linked to an organizations goal and employees should believe they can meet performance standards.” (Noe, Hollenbeck, Gerhart, & Wright, 2007). This paper will examine incentive plans at EMCOR Mechanical Services and how these plans do or do not help the organization achieve its goals and objectives. At EMCOR Mechanical Services, the organizational objectives are to “go above and beyond promoting a profitable and sustainable business that meets the customers’ expectations, while maximizing opportunities.” The organization also places focus on career satisfaction, integrating employee’s values, integrity, teamwork, effective communication, and empowerment to make the job fun. As a nationwide organization, that continues to grow in a down economy, many employees are committed to the organization. These employees care about the quality of work they produce and are more productive because the company seems to care about them. Salary, flexibility, growth, interpersonal relationships, and a since of value should be taken into consideration when planning...

Words: 832 - Pages: 4

Premium Essay

Benefits of Incentives

...INCENTIVES An incentive is something that motivates an individual to perform an action. The study of incentive structures is central to the study of all economic activities (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structuresfaced by individuals involved in these collective efforts. Ultimately, incentives aim to provide value for money and contribute to organizational success. Benefits of Incentives Some benefits of incentives are: 1.) Spill-over Effects: The decision to employ incentives will not only influence the immediate behavior of the target, but will also have a "spill-over effect" on relations in general. 2.) Legitimacy: It is generally much easier and less controversial to increase another's prosperity in return for a desired action, than to forcibly deprive them of something if they do not conform. 3.) Market Forces: Eileen Crumm argues that market forces work against sanctions, while incentives can be tailored to maximize their value to the targeted actor. 4.) Addressing Needs: Conflict largely arises out of political, economic or security-related need. Sanctions increase that need; by subtracting from the target's political, economic, or security baseline, they exacerbate the......

Words: 3169 - Pages: 13

Premium Essay

Incentives Channel of Dis

...EMPIRICAL RESEARCH When do incentives work in channels of distribution? David I. Gilliland & Stephen K. Kim Received: 31 December 2012 / Accepted: 1 November 2013 / Published online: 7 December 2013 # Academy of Marketing Science 2013 D. I. Gilliland Aston University, Birmingham, UK B47ET incentive offers because monetary rewards offset the agent’s risk and unpredictability of its income stream (Jensen and Meckling 1976). Despite general support for this logic, researchers have been puzzled by a substantive dilemma: Incentives often do not work. Benabou and Tirole (2003); Bouillon et al. (2006), and others have found that agents do not always respond positively as incentives increase. Other findings indicate that monetary incentives are sometimes demotivational (Ryan and Deci 2000), lead to dysfunctional activities by rewarding the wrong behavior (Baker 2002; Oyer 1998), are an inefficient control mechanism (Akerlof and Kranton 2005), promote shirking rather than compliance (Gibbons 1998), and are unpredictable under turbulent industry conditions (Prendergast 1999). The idea that incentives often do not work has been substantiated in the practitioner literature as well. Kesmodel (2008) reports in the Wall Street Journal that even dominant firms find it difficult to structure effective incentive portfolios with the resellers of their products. These and other findings motivate our research question: When do incentives work in a channels of......

Words: 8849 - Pages: 36

Premium Essay

Incentive Pay in Workplace

...December 6, 2012 Incentive Pay This topic was picked as a local health organization is going to be implementing this for their employees in the 2014 fiscal year. They have decided after many years of debate to finally make the decision to include this when they do annual reviews to determine if the employee will receive an additional pay raise over the normal market percentage that they receive on a yearly basis. This is a new device that employers are beginning to use to coax employees to do more in their everyday functions than just what is required of them by their employer. There are several steps to implementing a successful incentive compensation program. The six steps mentioned here that are worth exploring further to make sure the process goes accordingly to help the organization to reach their goal of more revenue, increased patient satisfaction and increased motivation from employees. The process was written by D. Kevin Berchelmann of Triangle Performance LLC. 1. Determine what the plan intends to accomplish-Identify in detail what the desired conditions should be and the reasonable behaviors necessary to achieve them. It’s important to make sure that the organization analyzes the appropriateness for the environment for which the plan will be implemented and to make sure that the plan clearly states what it is that the organization wants, be specific as possible. 2. Determine Participants- Every employee is key component to making the plan...

Words: 3633 - Pages: 15

Premium Essay

Incentive Plan Paper

...Employee Relations: Incentive Plans Paper Katrina J. King MGT/431 - Human Resources Management University of Phoenix July 19, 2011 Dr. Cassandra Molavrh Employee Relations: Incentive Plans Paper Money motivates employees. Cold hard cash. Cash money will always and forever be the most important factor in motivating employees. However, money is not the only solution. Developing solid incentive techniques for Texas Sports Beat require the organization to take a deeper look within the organizational culture to find ways to offer and introduce the ‘Incentives Plan Program.’ “How can the organization attract and keep quality staff ensuring everyone is involved and interested?” As mentioned in the above paragraph, cash is not always the answer and in countless cases not even the best response. According to the Law of Individual Differences; People differ in abilities, needs, personality, and values. Thus people react to different incentives in different ways. Because TSB Sports, is a small organization, it cannot afford to pay salary wages to employees. The organization employs contract workers to perform specific tasks. For an example: A staff photographer would be paid hourly wages per game worked.. Usually, three to 12 games per week (home games only). Photographers are paid by the hour, no matter staff, or freelance. Photographer’s incentives are opportunities to take images of players and......

Words: 799 - Pages: 4

Premium Essay

Financial Incentives

...Perez Incentives for customer satisfaction DrainFlow Company has brought up an idea to use financial incentives in order to improve their customer service satisfaction. For example, they are proposing to give their order processors a minor compensation for every 20 calls that are successfully completed. In addition, they are giving cash rewards to those workers that are out doing the jobs. How do they determine how well the plumbers did? The company will have the billing representatives call the customers and collect feedback regarding the service they received. If the customer was satisfied then the plumber or assistant would be given a cash reward. Furthermore, if the customer was highly satisfied then the cash reward would be much higher. These kinds of incentives make a company more lucrative and attractive to other employees. Companies may get well qualified applicants that are interested in the companies because of the great incentives they offer to their employees. Advantages of incentives The advantages of having financial incentives can have a great impact on the company and employees in a positive way. For instance, the profits of the company will grow because employees are trying harder in their jobs because they want to earn extra money. Also, not only will the employee be working harder but they will also be working smarter since their choices can have a big effect on their pay check. Another advantage the company will gain by giving incentives or......

Words: 674 - Pages: 3