Incentive-Based Performance: Does It Help or Harm Your Organization's Success?

Dear Members, kindly share your practical experiences and views on whether incentive-based work performance is beneficial or detrimental to an organization.

Thank you.

There are two dimensions:

Incentive

1) Incentive: Mainly direct contribution given by the company to employees for their performance. This is a share in the business made; for example, Sales Incentive.

Performance Bonus

2) Performance Bonus: It is recognition given to an employee where the employee is aligned towards common goals and their individual goals.

Now the philosophies should be implemented depending on the organization, sector, and products.

Sales Incentives are common in FMCG industries for salespeople where direct and short-term results are expected to gain or maintain market share.

In the production department, workers are given incentives for boosting short-term production.

However, Incentives have some disadvantages.

Performance Bonus is an ongoing bonus paid yearly (or quarterly and even half-yearly) which is a part of CTC and is a variable pay based on the overall business growth and KRAs.

Both schemes are good but need to be evaluated on their own merits and demerits.

Please wait for my next article on this on my blog... with different dimensions and my practical experiences.

Regards,

Incentives as a Tool for Employee Motivation

Incentives are part and parcel of employee motivation, productivity strategies, pay packages, and sometimes even as a tool of behavioral therapy. For example, an attendance bonus is an incentive to make employees punctual and regular to work. Therefore, you cannot do away with them at any rate. You need to be careful in choosing what you should offer as an incentive. For example, overtime should not be offered as an incentive as it may lead employees to see it as a source of profit over a period of time.

Regards,
B. Saikumar
Mumbai

Monetary allowances as incentives based on performance will certainly play a major role in motivating employees. However, a clear, transparent, and comprehensive scheme needs to be formulated and implemented after obtaining due feedback from the concerned parties. Whether it is paid based on individual or company performance, only those employees whose performance is measured will receive substantial benefits. In contrast, others whose jobs cannot be easily measured will receive a relatively lesser share, despite putting in sincere efforts. These aspects need to be carefully analyzed before implementing a scheme.

Regards,
Balamurugan Sivaprakasam

I do not know how effective it will be to reduce an employee's salary to 25% and then introduce a performance-based incentive for them. Most human beings are sensitive to this issue (salary). So, should management/HR not consider this issue? Recently, this has happened to my friend who is working in a multi-specialty hospital as a cardiologist. He was drawing an okay salary, but as a part of the company's new HR policy, all doctors' salaries have been decided to be cut by 25% as part of implementing a new incentive system. My friend got agitated and decided to quit the job, saying that he was already underpaid and that the new rules would affect his financial planning.

Feedback from HR and Employee Perspectives

Dear friends, from an HR perspective and from an employee's perspective, I would like to hear your feedback regarding the above situation.

I share your view. When an employee finds that the value of the currency meant for his family is reduced by 1/4th, it can be greatly demoralizing, especially when inflation is rising without any respite. He will lose all motivation to work for those incentives. It is not a sound HR policy, and it will be self-destructive since the hospital will lose talent to others.

Regards,
B. Saikumar
Mumbai