Incentive Plans, Research Paper Example

Most organizations are always looking for ways to improve their performance, customer satisfaction, cost cutting, and many other areas. In these same organizations, they have employees who were hired to do a specific component of their business. Employees will most likely do what is required of them, but may not go above and beyond the minimum expectations because they see no valid reason to do so. That is where incentive plans can play a viable role in the success of a company. “Keeping motivated employees is the best way for companies to maximize work efforts, increase productivity, and accelerate profits.” (Phoenix Business) Incentive plans can benefit the company and employees alike.

In order for an incentive plan to be successful, it has to be directly related to an organizational objective. A commonly used incentive in the past was profit sharing. This is when employees reap the benefits of the company being successful with an end of the year bonus. In my organization, it was noted that bonuses were being given to employees who did not put in any extra effort, at times they performed below standard and in a way were rewarded. That created a statement for employees who worked hard, and they company the success it was. They were rewarded equally with the employee who gave a hundred and ten percent every day. How likely is it that – that same employee will give that much extra effort the following year, if they see they could get the same bonus if they gave only eighty-percent? According to Britton, it is suggested that, “incentive programs have a negative impact on motivation when they measure the wrong things.” (Britton 1997) After evaluating the profit-sharing program, my company determined profit sharing in its current state was not conducive to promoting organizational goals and objectives. They felt that tailoring an incentive program to reward the ones who really put in the extra effort would show far greater results in the companies favor. The new incentive plan has done exactly that. The employees who give the most and try the hardest are compensated for doing exactly that. And in turn, it has motivated some of the under-performing employees to try harder. It has had a positive result so far for everyone involved.

When a recent college graduate is searching for a job, they consider many factors when determining which company to work for. They review the company’s performance, reputation, and advancement possibilities. The potential employee may also look at the employee benefits being offered when considering a position. “In exchange for top performance and working longer hours without job security, employees want companies to provide flexible work schedules, comfortable working conditions, more control over how they accomplish work, training and development opportunities, and financial incentives based on how the organization performs” (Gerhart, Hollenbeck, Noe & Wright, 2007). For example, an organization can offer an above average salary, benefits, and job perks and get average employees and output in return. However, a company that offers less in base pay, but higher opportunities in the area of incentives based on performance, flexibility, and opportunity to determine ones income, and they will most likely get the employees who will not be complacent with mediocrity. Benefits or rewards based on personal performance will more likely than not push the employee to go above and beyond the minimum requirements.

According to a survey from World at Work they determined that “70 percent of compensation professionals believe that incentive pay is “important or very important” to the success of their organization. “ (World at Work 2007) An important factor that needs to be considered in incentive pay is in its definition alone. Incentive is defined as something that encourages or motivates someone to do something. Creating an incentive plan does not cost organization money if the employees don’t produce results. This means creating an attractive package for those who perform well, and nothing for those who don’t. In all aspects of it, this is a benefit for the employee. The ones who don’t perform or try will inevitably weed themselves out by the over achievers who really want to succeed.

Incentive plans are created to motivate employees. Whether that includes bonuses, flexible time off, gift cards, or prizes are solely at the digression of the employer. Using alternate means to motivate employees will in turn maximize employees work effort and increase profitability, as well. Incentives can be both monetary and non-monetary measures. Some employees can be motivated by recognition. Implementing employee of the month, or taking the time to post a recognition in the weekly work news flyer can go along way. Just by acknowledging the employees actions. The appropriate mix of monetary and non-monetary incentive is best determined by the organization. However, incentives do require regular review and revisions. If a goal is too obtainable and you keep it at the same level year after year, it will not increase productivity or profit, the purpose will be completely null and void. In the same consideration, it a goal is too high, employees see it as unobtainable and will not put in extra effort because they don’t see the incentive as a benefit in any way. This is why incentive plans are only successful when geared towards a individual organizations goals.

Incentive plans do help organizations achieve their goals and objectives if they are utilized correctly. Rewarding employees for their positive performance creates satisfied employees. Along with increasing performance it decreases turnover, saving the company additional money on hiring and training a new staff. Clearly laid out terms and communication from the management will ensure every employee has the opportunity to be rewarded for their individual efforts. Incentive plans can directly affect organizational success and employees contributions to that. Goals have to be obtainable but still require employees to put in the extra effort. It is up to the individual company to determine which plan will be the most beneficial for their own overall success.

References

Britton, P. 1997. Beyond Carrot and Stick. Ivey Business Quarterly, 62(2): 50-55.

Gerhart, B., Hollenbeck, J., Noe, R. & Wright, P. (2007). Fundamentals of Human Resource Management. New York: The McGraw-Hill Companies, Inc.

Phoenix Business.  Incentive Plans Helps Companies Meet Objectives.  Retreived from:             http://hubpages.com/hub/Incentive-Plans-Help-Companies-Meet-Objectives

World at Work Press. (2007). Incentive pay: Creating a competitive advantage. Scottsdale, AZ: World at Work Press.