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
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
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 corporate culture.
1. Pandaily (DECEMBER 19, 2017) The Honor Changes the Way to Motivate:
Employees can Get 1 million Quarterly Bonus. Retrieved
2. Murlis, Michael Armstrong, & Helen. (2004). Reward
management: a handbook of remuneration strategy and practice (5th Ed.). London:
3. Ian Lees. (1996). Managing performance and goal achievement. Sydney:
4. Alfie Kohn. (1993). “Why incentive plans cannot work?” Harvard
Business Review: p113.