Business leaders that are trying to drive
sustained performance inevitably come face to face with this question:
“Will incentive plans help?” “If we allocate these financial
resources to incentives, will we build enough additional shareholder value to
merit that investment? Will performance improve?” Incentive is just like a
coin, which have positive and negative sides. This article will analysis on
both sides of this argument.
Analysis and discussion of key point
Most managers believe in the redemptive power
of rewards. However, in the paper “Why incentive plans cannot work?” the
below 2 key points support an opposing view.
1. Pay is not a motivator. Studies have
shown that although too little money can irritate and demotivate, that does not
mean that more money will bring about increased motivation. Studies show that
when people are asked to guess what matters to their coworkers or subordinates,
they assume money heads the list. But put the question directly – “What do
you care about?” – And pay typically ranks only fifth or sixth.
2. Rewards rupture
relationships. The surest
way to destroy cooperation is to force people to compete for rewards or
recognition or to rank them against each other.
For each person who wins, there are many others who carry with them the
feeling of having lost. Furthermore, when employees compete for a limited
number of incentives, they will most likely see each other as obstacles to
their own success. Worse still, few things threaten an organization as much as
a hoard of incentive-driven individuals trying to curry favor with the
Incentive is essential for business operations. Employees’ abilities and
talents do not directly determine their value to the business. Its ability and
talent to play to a large extent depends on the level of motivation. No matter
how much technology and equipment an organization owns, it cannot be fully
utilized and will not do its utmost unless employees are motivated by
motivation. A survey found that in the absence of incentives for a person’s
ability to play only 20% to 30%, if fully motivated, his ability can be played
to 80% to 90%, so “the depth of management is an incentive “. Such
plans promote exceptional behavior during a specific period. In addition, they
attract potential employees to an organization and encourage company loyalty.
There are two kinds of rewards: extrinsic rewards and intrinsic rewards.
Extrinsic rewards are concrete rewards that employee receive, which include
bonuses, salary raise, gifts, and so on. It is more focus on the performance
and activities of the employee in order to attain a certain outcome. On the
contrary, intrinsic rewards are tending to give personal satisfaction to
individual, which made of feedbacks, recognition and trust. It makes the
employee feel better in the organization.
Within different lifecycle, the requirement of them are totally imparity.
Pay is a great motivator to young generation who just get start of their career
path. It is because their salary must cover all the expense of their daily
consumption. If they are planning to get married, the burden will be heavier.
According to the report from Pandaily (DECEMBER 19, 2017), HUA WEI employees
can get 1 million quarterly bonus. The employees work at Huawei Telecommunications
Equipment Company all get high wage and incredible bonus but take the cost of
their freedom. HUA WEI employees’ average overtime working hour is 3.96hrs/day.
On the other hand, pay is not a motivator is because everyone have
different requires and for the elderly population, they don’t need to worry
about their income anymore so they will bias a job which is relaxed and less
It shows that young people prefer extrinsic rewards and elder people
prefer intrinsic rewards.
There are easier way to incentive employees then pay. In addition to
company programs or incentive processes, managers have the opportunity every
day to provide incentives for employees. A simple thank you, even asking the
employee how they spent their weekend to indicate care and interest, doesn’t
cost anything and goes a long way in helping employees experience positive
According to Murlis, Michael Armstrong, & Helen. (2004), reward
management is concerned with the formulation and implementation of strategies
and policies that aim to reward people fairly, equitably and consistently in
accordance with their value to the organization. Rewards aim to create and
efficiently operation and do have huge impact on organization development and
change. But reward and performance gap are closely linked and interact with
each other. From employees’ performance, managers can the requirement of each
worker and after that can find the way to reward.
Management must considered the required performance standards and
compare these requirements to the actual performance of the team member in the
needs to know exactly what is required and how well they are actually achieving
are many possible reasons why people don’t achieve the required performance
standard. Possible reasons include: personal problems at home, not fully
understand their role, physical conditions in the workplace, lack of job
knowledge, ineffective management or leadership structural problems within the
Company can suit the remedy to the case to reward, for example give more
annual leave, more training to workers, make workplace more comfortable,
enhance management ability and adjust the operation’s structure.
Incentives can be tricky for employers. Depending on what is
incentivized, employers can encourage teamwork and cooperation or damage it. If
you provide an individual sales incentive to sales staff, for example, you
guarantee that your sales force will not work together to make sales. Alternatively,
provide a team incentive and employees will follow up each other’s leads, share
best methods, and work as a team to make sales.
When you design an incentive program, make sure you are rewarding the
actual behaviors that you wish to incentivize. It is so easy to emphasize the
wrong behaviors—often unwittingly.
Furthermore, if the pie of rewards is only so big, the granting of some
pie to one individual will reduce the amount left for the rest. Incentive
programs tend to pit one person against another in the scramble to get as much
of the “good stuff” as possible. This can lead to all kinds of
negative repercussions as people undermine each other, even outright sabotage
sometimes occurs. Since the company will do better if there is harmony and good
teamwork, the granting of specific performance rewards works at cross purposes
to corporate well-being. Alfie Kohn puts it this way, “Very few things
threaten an organization as much as a hoard of incentive-driven individuals
trying to curry favor with the incentive dispenser.” (Kohn, 1993, p 113)
So what is a manager to do? Rewarding people for good performance is
important to keep that stream of performance going, but if it causes people do
undermine each other, it is a net negative force for the organization. I think
a good solution is to have both team and individual rewards. They do not both
have to be monetary. One time you might give a party for a team that performed
well along with individual financial incentives for the few players who did the
most to get that performance. Another time, reverse the logic and give a cash
bonus to the entire team for a job well done, but couple that with social
recognition (no cash) to the lead people on the effort.
Traditionally, manufacturing companies incentivized productivity or
achieving quantity targets. They found that unless they added the quality back
into the equation, they were delivering shoddy, poor quality parts—although
lots of them.
By using positive reinforcement to motivate employees, a manager may
build a good relationship with his employee that fosters a sense of trust. In a
good manager-subordinate relationship, employees may feel respected and
comfortable in their working environment. Providing rewards, both tangible and
in the form of praise, can make employees happier. Happier employees often
perform better at work.
Using negative enforcement as a form of motivation could cause employees
to become dissatisfied with their jobs. Unhappy workers typically produce less
quality work, become sluggish or fail entirely to meet deadlines. Applying too
much motivation or offering too many rewards can also have a negative effect.
Employees can become over-confident. They may feel that they are the bosses’
favorite workers, even if they start to slack off on their projects or test the
limits of their working relationship with their supervisors.
Incentives provide a powerful, affirming recognition. Reward management
in business organizations is extremely important as the reward package helps to
attract potential employees, assist in retaining good employees, motivate
employees, contribute to human resource and strategic business plans. The
direct impact a reward system can have on the organization as a whole is
influence on performance, influence on motivation, and influence on the