Incentive Schemes

So if we understand this properly, organisations introduce an Incentive program that is [ostensibly] designed to motivate its employees to work harder and return improved profits/benefits to the business, and in return, the employee gets more money. Sounds reasonable, don’t you think?

In its purest form an Incentive Scheme is ‘a system of remuneration whereby payments are contingent upon [the individual] meeting certain targets in relation to production and profitability.’ And as such are considered an ‘At Risk’ component.

Conceptually an effective Incentive Scheme is based upon the employee understanding the business and how it works. It is therefore important that employees know how their actions affect Company performance. Employees should also be aware of [company] costs and customer satisfaction.

The principle underlying the focus on the work situation is that the intention of an incentive is to ensure that employees receive a reward for delivering an improved performance.

Of concern though is that providing such a program suggests [apparent] agreed targets will be met. However it can lead to failure! And failure to reach goals can be demoralising and can lead to accusations from both the manager and employee regarding the lack of integrity, capacity and commitment.

Therefore, effective incentive schemes need to be based on more than a superficial understanding of employees and the work situation. Incentives must be seen as a part of the larger picture of the relationship between performance and reward, which of course can be quite complex in itself.

So the task ahead for organisations is not to just decide on the type of rewards it provides, rather it is about creating a worthy system of initiatives that will help support organisational performance. In addition, organisations must take time to explain the details of such a scheme to ensure it is fully understood.