...Do financial incentives drive company performance? Theoretically, monetary incentive is the most powerful motivator for aligning individual behaviour with an organization’s mission. Based on several assumptions, there are three outcomes from financial incentives. Firstly, motivational effect; which is financial incentive to motivate more effort, however, if certain factors cannot be controlled by the individual then employee efforts do not make a difference. Secondly, informational effect, financial compensation that provides employees with information of what the organization values and what their main priorities are. Lastly, selection effect; based on recruiting people who share similar values and traits as the culture of the company based on pay incentives. Incentive pay is fairly widespread across Canada and the United States, both in corporate and non-corporate employment. Interestingly enough, based on survey results, a higher percentage of individuals believe that other people are motivated by financial rewards, and underestimated other motivational factors that the individual ranked as more important (i.e. reputation, appreciation, interesting assignments). This could be attributed towards the fact that individuals think more positively and superiorly about themselves, this is known as the self-enhancement effect. In terms of company growth, I do agree that not all individual financial rewards align with increased business worth. Increasing customer loyalty over...
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...Perez Incentives for customer satisfaction DrainFlow Company has brought up an idea to use financial incentives in order to improve their customer service satisfaction. For example, they are proposing to give their order processors a minor compensation for every 20 calls that are successfully completed. In addition, they are giving cash rewards to those workers that are out doing the jobs. How do they determine how well the plumbers did? The company will have the billing representatives call the customers and collect feedback regarding the service they received. If the customer was satisfied then the plumber or assistant would be given a cash reward. Furthermore, if the customer was highly satisfied then the cash reward would be much higher. These kinds of incentives make a company more lucrative and attractive to other employees. Companies may get well qualified applicants that are interested in the companies because of the great incentives they offer to their employees. Advantages of incentives The advantages of having financial incentives can have a great impact on the company and employees in a positive way. For instance, the profits of the company will grow because employees are trying harder in their jobs because they want to earn extra money. Also, not only will the employee be working harder but they will also be working smarter since their choices can have a big effect on their pay check. Another advantage the company will gain by giving incentives or bonuses...
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...Most will agree that knowledge is the ‘key’ resource in this post-industrial economy. The challenge for many companies is developing an organization that creates and cultivates knowledge and learning. Pay plays a significant role in shaping workplace behavior. Most of the traditional pay systems reward the job, but don't always incite the employees who are willing and able to go above and beyond to want to actually want to do so. There are many ways to accomplish this and one of those ways is by implementing the the resources and abilities of HR. Corporations are looking for new ways to improve employee performance as well as remain competitive. Pay for performance is one method some businesses are utilizing to improve employee performance. Performance-based compensation exists when compensation is tied directly to that portion of an individual’s performance that can be effectively measured. There are a number of ways in which this may be accomplished and a number of examples as well how it is applied. One popular pay for performance structure is the merit pay system. In the merit pay system an employee is paid a higher rate within their respective salary range, based on her/his achievements or high level of performance. Another performance structure is the Rating Scale. For each performance factor, an employee is assigned a position on the scale in relation to that factor. Performance factors are the key duties and responsibilities of particular position. If the performance...
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...FISCAL INCENTIVES, THE COST OF CAPITAL AND FOREIGN DIRECT INVESTMENT IN PAKISTAN: A NEO-CLASSICAL APPROACH Submitted by ZAHIR SHAH Assistant professor, Government College of Commerce Mansehra, N.W.F.P A research paper submitted to Pakistan Institute of Development Economics (PIDE) to be presented in the Annual Conference 2003. FISCAL INCENTIVES, THE COST OF CAPITAL AND FOREIGN DIRECT INVESTMENT IN PAKISTAN: A NEO-CLASSICAL APPROACH1 By ZAHIR SHAH• Abstract This paper analyses the attractiveness of Foreign Direct Investment (FDI) in Pakistan with special emphasis on the cost of capital element in effecting the rate of return and the internal cash flow for investment of the investing firms. Using the Jorgenson’s Neo-classical Investment Model the cost of capital is computed after considering the taxation policy and the treatment of invested capital. The paper elaborated fiscal provisions and their implications on the investment environment specifically available to foreign investors in Pakistan. The computed results show consistent and influencing impact of the cost of capital on FDI inflows. The objective of the study is to explore the a realistic and in depth investigation of the tax concessions and the response of investors. The paper argues that fiscal incentives are more appropriate in attracting FDI as these have no direct drain over public resources and are increase the after tax return by availing the tax holidays and depreciation allowances. 1. Introduction ...
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...Designing Staff Incentive Schemes to Balance Social and Financial Goals September 2006 By: Mattias Grammling and Martin Holtmann Using Staff Incentive Schemes to Balance Social and Financial Goals ii Contents Acknowledgements..................................................................................................................................... iii 1 Introduction: The Role of Staff Incentives to Balance Social And Financial Goals.......................... 1 2 Balancing Social And Financial Goals................................................................................................... 2 2.1 Social and financial goals of MFIs .................................................................................................... 2 2.2 Operational perspectives on balancing social and financial goals ..................................................... 3 3 Designing Staff Incentive Schemes That Balance Social And Financial Goals.................................. 6 3.1 Principles for designing staff incentive schemes ............................................................................... 6 3.1.1 Fairness .........................................................................................................................................................................6 3.1.2 Transparency ........................................................................................................................................................
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... (2) incentive or reward value of the goal, and (3) expectations of the individual and of his or her peers. These factors are the reasons one has for behaving a certain way. An example is a student that spends extra time studying for a test because he or she wants a better grade in the class. What type of non-financial rewards might a company use to motivate employees ? Every employee certainly appreciates more money, but money does not buy happiness, nor does it buy engagement and loyalty. Non-financial incentives inspire and engage employees in ways that money is incapable of doing. Non-financial incentives are the types of rewards that are not a part of an employee’s pay. Typically, they cost the company little or no money, yet carry significant weight. Incentives of this nature are particularly effective for workers who are comfortable with their salaries or have been in the position for a long time. As companies continue to make cuts to employee compensation, non-financial incentives for employees are more crucial than ever. Relationships Matter All too often, workers feel abused and unappreciated by the companies for which they toil day in and day out. Layoffs, stressful work conditions, ever-increasing demands, unappreciative bosses, and unsupportive peers contribute to employee disengagement. At the heart of the matter is the employee-employer relationship. To perform at their best, workers must feel welcomed, valued, and appreciated. Non-financial incentives help companies...
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...to Christopher Columbus when he discovered the Americas. There is not one common theme in Freakonomics, instead the book is structured around four essential ideas: incentives are the basis of modern life, conventional wisdom is often wrong, dramatic effects often have distant (even subtle) causes, and experts use their information advantage to serve their own interests. Each consequent chapter is titled with an intriguing question, such as, “what do school teachers and sumo wrestlers have in common” and then answers are provided based on Levitt’s economic research and analysis. One of the primary points emphasized in Freakonomics is that economics is essentially the study of incentives; why people behave in certain ways and how they benefit from the things that they do. The authors explain that there are mainly three varieties of incentives that motivate human decision-making: moral, financial, and social. When people make decisions based on moral incentives they are doing what they feel is “the right thing to do”. Financial incentives exist when decisions are made based on money, economic gain, and/or some other sort of material reward. Lastly, people make decisions based on social incentives, which exist because of societal or group norms and expectations. The authors claim that when incentives are high enough, even naturally ethical people will behave unethically to get what they want....
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............................................... 4 3 References .................................................................................................................... 9 PQHRM/KDY/12 Page ii Module -4 Compensation Management 1 Question 1 WHAT ARE THE MANAGEMENT ISSUES FACED BY THIS COMPANY? Inability to achieve the 40% of production rate. The company’s initial target was to achieve 40% or above increase in production. At the first 3 months they gradually reached up to 32%. There after it was dropped up to 20% during the latter three months. Increase of the lower quality products during the 6 months. The lower quality and rejects rate was increased by 10 -15% during the 1st 6 months of implementation of the new incentive scheme. As Blue Flowers (Pvt.) Ltd is engaged in manufacturing of high quality artificial flowers to both local & international market quality of the product is a very critical factor. Therefore this considerable rate of quality drop has a large effect on its profit. Demotivation among employees. Due to the...
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...Importance of alignment [300 words]: The role of incentives in securing execution Employees are the agents of the firm’s owners since they take actions or make decisions that impact the payoff to the owners. The difficulties in the agent-principal relationships arise when the objectives of principal and agent are different and the actions taken by the agent or the information possessed by the agent are hard to observe. Employees care about the job in terms of the value the job generates for themselves. Thus providing the right incentives to employees would secure execution of the firm’s plans to meet the firm’s objectives. There are financial and non-financial incentives. Non- financial incentives are social and moral incentives. Which incentives are appropriate depends on the objective of the company. Since motivation comes from within the employees, the personality, needs and interest of each employee determine the right incentives that will influence employees to self motivate and produce the best work possible that will contribute to the firm meeting its objectives. Reward and recognition is concerned with the range of practices an organisation undertakes (financial and non-financial) to compensate employees, maximise employee engagement and encourage behaviours that lead to organisational success. A good reward and recognition system should motivate employees while aligning their goals with those of the organisation. Such a system involves balancing employee remuneration...
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...in that variation is the healthcare setting itself. Another key determinant is the design of the pay for performance incentive, such as what aspect of performance is awarded, as well as the size of the reward. Studies have also shown that public reporting initiatives, or requiring hospitals and physicians to provide data on their own performance, have been effective in reducing preventable injuries in the hospital setting. (Leake 2010) There are two types of pay-for-performance initiatives that have been implemented in recent years: processed-based performance measures and outcome-based performance measures. Processed-based performance measures indicate whether protocols were followed in specific situations. For instance, whether or not patients with acute myocardial infarction received aspirin upon arrival to the emergency department is a process-based measure. Outcome-based performance, however, is measured based on patient outcomes, mortality rates, for example. Studies have shown that patients gain the most value from pay-for-performance initiatives in the hospital setting. The two main studies corroborating this claim are Maryland’s Quality-Based Reimbursement Program (QBRP) and the Center for Medicaid and Medicare Services’ study entitled High Quality Incentive Demonstration (HQID). In 2008, Maryland launched its QBRP, which provided financial incentives (both rewards and penalties) to Maryland hospitals in an attempt to encourage improvements in...
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...Incentive programs are one of many ways organizations motivate employees. Our goal is to design an incentive program that is aligned with the company’s goals, needs, skills, and abilities. Incentive pay can be determined by merit pay and performance bonuses. Studies have found that pay-for-performance plans help achieve organizational goals and desired performance results. Merit pay is a reward in which employees receive permanent pay increases such as raises as a function of their individual performance ratings. Although it can be different across industries, some recent surveys have demonstrated that 80% to 90% of organizations use merit pay plans (Heneman & Werner, 2005) Merit raises should be fair and based on performance ratings and the biggest increase is given to the best performers. Performance bonuses are monetary rewards for performance and not rolled into base pay. Bonuses must be earned and re-earned during each performance period. Bonuses are attractive to many organizations because the one-time cash reward links pay to performance and motivate employees. (Lawler, 1981; Lowery, Petty, & Thompson, 1996) There are several core legal requirements that will affect our employee’s benefits. These legal requirements include tax treatment of benefit, anti-discrimination laws, and accounting requirements. The federal and state governments require various forms of social insurance to protect workers from the financial hardships of being out of work. The IRS...
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...company is doing as a whole. Some commentators had the following perspectives about this pay plan: Maggie Coil, vice president of compensation of Motorola, thinks that the employees of Top Chemical should have some input on if and how to change the pay plan since they are the majority that will be affected and by allowing them to be part of the process of designing and implementing the pay plan, it will make it more accepted. Donald Berwick, associate professor at the Harvard Medical School and Harvard School of Public Health in Boston, thought the new pay plan is moving in the right direction, but still needs improvement; there is no focus on customer satisfaction, the numerical goals may be inaccurate and discouraging, and there is no incentive for employees learning new skills. Tom Nyberg, senior business systems specialist for Monsanto, thinks the employees of Top Chemical need to be more involved in creating and designing the new pay plan including...
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...Incentive Plans Paper Danyiel Brown MGT/431 University of Phoenix March 29, 2012 Demetrius Holt Incentive Plans Paper Incentive plans are reward plans that are used to motivate employees to perform past the common values of their company and increase their productivity created by their company. . There are three types of incentive plans recognized by the experts in the HR and development field; they are enterprise, group and individual. One of the incentive plans that most organizations provide these days is merit pay. Merit pay is determined by the employee’s work performance and achievements set forth by the organization’s standards. “Merit raises can serve to motivate if employees perceive the raise to be related to the performance required to earn it” (Al-Nsour, 2012). There can be a downsize to providing employees with merit raises because over years the employees performance may decline but they will still feel that they are obligated to receive the raised whether they performed or not. There are other issues that can occur with merit pay incentives such as no rules put in place for managers to calculate work performance, not enough funds obtainable to increase the base pay for the entire staff and some employees may assume merit pay has nothing to do with their work performance and overall productivity. Merit pay sometimes does not motivate employees of an upper level because of the lack of honesty on both the managers and supervisors and the employees which...
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...Job-satisfaction • Team work, etc. Incentive: Incentive is an act or promise for greater action. It is also called as a stimulus to greater action. Incentives are something which is given in addition to wagers. It means additional remuneration or benefit to an employee in recognition of achievement or better work. The need of incentives can be many:- 1. To increase productivity, 2. To drive or arouse a stimulus work, 3. To enhance commitment in work performance, 4. To psychologically satisfy a person which leads to job satisfaction, 5. To shape the behavior or outlook of subordinate towards work, 6. To inculcate zeal and enthusiasm towards work. Types of Incentive: management has to offer the following two categories of incentives to motivate employees: 1. Monetary incentives- Those incentives which satisfy the subordinates by providing them rewards in terms of money. Money has been recognized as a chief source of satisfying the needs of people. Money is also helpful to satisfy the social needs by possessing various material items. Therefore, money not only satisfies psychological needs but also the security and social needs. 2. Non-monetary incentives- Besides the monetary incentives, there are certain non-financial incentives which can satisfy the ego and self- actualization needs of employees. Non- financial incentives can be of the following types:- a. Security of service- Job security is an incentive which...
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...well in their studies, financial incentives has been given to students who perform well. From a different perspective, some people said that giving financial incentives to students is a bribes, as stated by (Quinonez.N, n.d) giving money to the students they might think of it as the bribes and they can go morally wrong. However, there are more benefits by giving financial incentives to students such as financial rewards to boost performance, encourage students to work harder and a self-reward. Normality human like to receive rewards because as stated by (Harms.W, 2012) it can help them to boost their performance and also increase their effort to score in education. The prospect by giving rewards to students who perform well can created a stronger desire to be constant in their education plus their possibility to receive a reward nor trophies. A students score in his first semester in college and then he was rewarded with a financial incentives, because of the reward the student will keep up with his good performance in his studies. Thus, financial incentives can work as a booster to the students to keep their good progress in education. In addition, giving financial incentives also can help students who perform well in education to encourage the students to get good grades. As stated by (Cameron, 2011) financial incentives can help the students to increase their initiative to achieve well in their education or examination in collage. Financial incentives it can also be used by...
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