The Psychology of Incentive Plans

Incentive plans, by definition, are supposed to affect people's behavior on the job, day in and day out.

If people know their job performance is linked to an incentive like a quarterly bonus, they'll likely develop new ways to produce better results. They'll naturally innovate to become more efficient--finding ways to finish work faster or improve quality without sacrificing cost. They'll seek new approaches to better serve customers. In short, engaged employees live in a world of cause and effect. They understand how their actions contribute to the success of the entire venture.