You are on page 1of 6

1. Discuss how effective is provision of incentives in firms and organizations.

INCENTIVES are part of Modern Day business. There are many claims about their apparent benefits and importance but they are really never assessed empirically. Opposed to that the interests of the employees and the employers are not on the same boat always and aligned completely differently. But it’s a well known fact that Workers are always lured with more incentives to work towards the achievement of Firms goals and interests. In fast-paced , continuously evolving , high performance oriented organizations, the eternal emphasis revolves around finding the people who not only bring requisite skills, competency, and experience but also willing and able to apply them in a variety of situations and projects. Almost everywhere , flexibility and adaptability are desired and essential, and continually people are viewed as most important resources whose abilities contribute to the core capabilities and overall performance of the organization. A competitive compensation and benefits package is key to a company’s ability to attract and retain top talent. As the economy shows increasing signs of improvement, employees at all levels are likely to have more career choices. There is difference of opinions about the functions of compensation in an organization. As the compensation is provided for two reasons including as a reward for the past services and also stimulus to increased performance in the future. Accordingly, financial compensation has two functions—the equity function and the motivational function. First financial compensation serves as a standard for evaluating the individual’s past performances and current effectiveness. This necessitates that wages are linked with the ability and motivation with which the work has been performed in the past. Explicitly, compensation forms the reward for the past productive performances on the part of the employee. The equity function tends to be equality regarding the compensation is concerned. The rational of this function is that the individual tends to feel that the existing compensation system of the organization in the form salary, wages incentives and bonuses etc. provides them adequate compensation for the physical and mental efforts and contributions. In other words, the compensation is perceived as ―equitable‖

that differential increase in the remuneration cause direct and proportional differential increases in efforts. Motivation interacts with several factors such as individual perception and social comparison. the remuneration serves a motivator to the future initiatives. that employee performs varies in the terms of the rewards obtained from the group and the management. commissions based on completion of projects and any other modified version of cash enrichment programmes. It has been indicated that there is exist a multiplicity of motivational factors causing individual behaviour. it should be kept in mind that although financial compensation provides the required impetus for Motivation . human motivation in as highly complex issue. even for new college graduates. and that the individual perceptions of ―fairness‖ of their remuneration determines its motivational effects of performances. which would ultimately defeat the purpose of hiring the best. annual bonuses . Second. Many corporations like INFOSYS . ½ after they finish half a year on the job and the balance when they complete one year. Moreover. But the difficult part is Setting up an incentive-based compensation program itself starting with the basic base package.You’ll still adhere to the basic salary structure and topping up that by adding quarterly bonuses . It has been presumed. Incentive-based compensation plans has become a common phenomenon in the corporate sector and has started emphasising performance over talent and also at the same time highlighting the need for competition among talent. Bonus upon Hiring are also very frequently used now-a-days. However.it exerts motivational effects depending on prevailing needs of the individuals.leading to the formation of effective groups and reinforcement of desirable behaviour of the employees to attain organizational goals. one could run the risk of the employee leaving your organisation after the first check they receive . For example. GE and TCS has developed the culture of incentive payment based upon their knowledge management systems and their experience goes on to prove that apart from good working . Likewise. However the hiring Bosses tie a time bound programme for the newly hired people to encash the bonus. WIPRO .

what matters most to the workers(skilled and semi skilled) is how well they are paid and treated.ac.nber. econ.pdf 5.law.columbia. ideas.org/p/upf/upfgen/1134.repec.html 4. http://iveybusinessjournal.com/topics/the-organization/how-businesses-can-profit-fromraising-compensation-at-the-bottom .environment etc.lse.org/papers/w7334 2.pdf 3.uk/staff/mghatak/carr. REFERENCES 1. http://web.edu/sites/default/files/microsites/contract-economicorganization/files/working-papers/mcglob1006. But there is nothing to suggest that incentives will always succeed or increase efficiency. Various other things will also come into play for overall Human Resource Development. www.

Corporations like Microsoft and BP applies these types of packages to motivate work groups. In this individuals are not a priority rather teams are given the same. Eventually this is designed to increase coherence between individuals in a team and lets individuals to work as a tight neat group to achieve excellence. But before the pay for performance is implemented.2. The best thing about pay for performance packages are their friendliness to Budgets these companies prepare in advance. if effectively construed and build the pay for performance plan shall focus on the followings : 1. Further if the goals are failed or not met then the money reserved for pay will go into the budget for next possible target. Because the assured payment increase will come only if it is accentuated by increase in performances of the teams and overall the corporation. Because each individual knows the importance of the group as a whole at times the laziest of them all will wake up and work to achieve the unlikeliest of the goals. But when performance is difficult to measure. Many CORPORATIONS OF today are adopting pay for performance provision to give emphasis to the employees of production goals. It is also linked with meeting certain team goals. there is a need to reward performance with pay. Recruit and then Retain the best employees view to that of one emphasising team game and . quality measurement benchmarks and company performance overall. then pay for performance is effective. In the pay for performance structure the salary or incentive structure of an employee will increase step by step along with that of his team and the corporation he works for. these are easier to monitor. These types of packages change the overall culture of a firm from an individualistic cooperation. Discuss the following: When preconditions for market supply of goods and services are satisfied. one needs to understand the intricacy and the desired results.

On the other hand performance for pay plans are used where overall employee performance ( individual and group) can’t be measured effectively. Effectively communicate the company goals and culture it strives to build 3. For example when in a Public Sector undertaking sales increase marginally over the last year . Try to engage each of the employees into the future of company’s success 5. Pay for performance can be applied effectively only when it can be measured otherwise the purpose will be lost in itself. Performance for pay is an incentive driven financial reward to an employee whose efforts at work is deemed to have reached a particular standard and is normally considered to be above average performance. Reinforce the idea of values and objectives 4. Even if most of the performance for pay details vary from one to another corporations most of the plans feature some common elements: 1. Reward all for successfully achieving target goals. it’s difficult to predict how much of that is because of contributions from marketing teams and how much as a result of hard work of sales teams. Performance appraisal is done for individual assessments normally once in a year. . The logic behind this method is that the employee will feel secure that his positive performance is being rightly evaluated and likely to be rewarded irrespective of what his superior thinks of him.2. For example a car salesman or a worker in a production or assembly line. In some cases quarterly assessments are done. This becomes difficult when they can’t be calculated either in terms of sales or output.

www..wikipedia. www.uk/49/1/Mwita03PhD. REFERENCES 1.org/./9781933286297-Levine-performance-incentives. Even if widespread it does possess several lacunas: 1.. employees are categorised into various groups for the purpose of compensation and incentives.org/wiki/Economic_democracy 2. The methods of incentives vary from one place to another but generally involves payment of cash bonus and sometimes involve incremental wage. That’s basically why it does bring the desired result.com/pmezine/designing-compensation-system-motivates 6. In the absence of credible performance appraisal it’s not established perfectly whether one individual has done enough to be rewarded financially. This was used to measure and reflect individual brilliance but always seen as subjective. 2. It is seen as creating rivalry among management leaders.pdf 5.edu/1430234/CONSUMER_BEHAVIOUR 4. This sort of pay does not create team work and work culture. After performance appraisals are done . aubreydaniels.2. Management thinkers are however not equally satisfied about the effect that performance for pay brings to the table and the way it motivates employees.academia.compensationgps. Performance for pay has grown over the years all over the world – specifically in the public sector undertakings. One of the reasons might be that performance element actually is a very small percentage of the total remuneration.bham.pdf 3.cgdev.ac.com/steps-for-pay-for-performance . 3. etheses. en. In the last year though Indian Government has stalled the Performance for pay incentive to 226 public sector undertakings and currently looking for a better appraisal for the sector. 3. www.