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The Pros and Cons of Employee Incentive Programs
The Pros Of Incentive Programs
- Increased Productivity: Rewarding the delivery of tangible results reinforces that good work will be rewarded.
- Strengthens Succession Pipeline: Employees often try to improve their skills in the pursuit of incentives, ultimately increasing their own efficiency.
- Encourages Retention: A good incentive program increases employee job satisfaction and overall loyalty to the organization.
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SIMILAR ARTICLES & IDEAS:
Incentive plans are formalized approaches to offering recognition and reward to employees for meeting pre-established goals or objectives. Incentives may include cash bonuses, profit sharing, additional paid vacation time or any range of prizes such as gift cards, corporate merchandise or other products or services. ...
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Key Ideas
Incentive Program Essentials
- Goals and objectives should be clearly defined for staffers.
- Workload should be equitably distributed to avoid resentment from staffers who feel they have to carry poor-p...
Effects Of Incentives On Business
- Motivational Tool: Incentive programs motivate employees to be more productive and consequentially increase the company’s earnings.
- Promoting Teamwork: members of teams that earn bonus according to collective productivity may support and encourage each other to perform at top levels.
- Morale Boosters: if employees see a direct correlation between effort and earnings morale and job satisfaction increases while turnover and absenteeism decreases.
- Service Levels: employees competing for or striving to meet the goals of an incentive plan may provide higher degrees of service to your customers.
The Peter Principle is the observation that if people are good at doing their jobs they will be promoted. It follows that eventually, everyone will be doing a job that they are not good at (otherwise they would have been promoted).
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Key Ideas
The Peter Principle
It refers to an observation wherein people who perform well in their job gets promoted until eventually, they will reach a stage where they are incompetent for that job.
The Evidence for the Peter Principle
A study looked at promotions and performance of some 40,000 sales workers across 131 firms.
It showed that the best salespeople as measured by sales revenue are more likely to be promoted (top figure) but their value added as managers actually declines in their sales revenues (bottom figure).
The "Purpose" of Promoting Workers
- To assign the suitable person to the managerial role.
- To motivate workers excel in their current roles.
However, If firms promoted workers on the basis of managerial potential rather than current performance, employees may have fewer incentives to work as hard.
Incentives are a great way to encourage focused results. People need to have some level of motivation in order to be productive. It may be a paycheck they can rely upon, the thanks of a supervisor, or even the satisfaction of a job well done.
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Key Ideas
What Are the Pros of Incentives?
- Having a good salary and benefits package is great, but having extra incentives for a job well done makes workers feel appreciated. That decreases turnover and increases profits.
What Are the Cons of Incentives?
- Create conflict: those who don’t receive incentives may be jealous of those who do regardless of merit. Those who receive incentives might also be upset if they worked harder than others to get the same reward.
- The focus of work becomes competitive instead of being focused on quality and people will only work as much as it takes to earn the incentive.
- It eliminates productivity for everyone except top performers who are more benefited by incentives.
- Incentives can become quite costly as they need to continue to rise on a scale of cost in order to remain effective.