The pros and cons of incentives

What are the incentives

Incentives are powerful tools for motivating and engaging team members. Compensation such as stock options, pensions, and bonuses push employees toward better performance (as with their regular salary) as well as other incentives such as free or low-cost meals, telecommuting, flextime, and work-life balance benefits. However, incentive programs can have the unintended consequences of diverting the workforce from the organization's goals.

Incentive positives

• Increased productivity

Offering additional money or benefits to achieve certain performance milestones is generally an effective way to increase productivity among employees. While not every employee will respond in the same way to financial incentives, creating a structure that recognizes people for delivering tangible results reinforces the idea that good work will be rewarded. Such systems are easy to explain. and treats employees fairly by emphasizing performance over more arbitrary benchmarks. When rewards and recognition are team-wide, high performers have an incentive to help their low-performing colleagues improve, which can boost overall team productivity over time.

• Strengthening skills 

When employees seek to access performance incentives, they often make an effort to improve their skills in the process. Whether they acquire these skills through experience or through the benefit of training programmes, development enables them to perform their jobs more effectively and put themselves in a better position to reach performance goals. For the organization this process is a huge benefit as it can also enhance the pool of succession candidates, preparing high potential employees even when there is no immediate opportunity for advancement.

• Encourage retention

A good incentive program increases the employee's job satisfaction and overall loyalty to the organization. Properly structured can discourage them from looking for another job elsewhere. Employees usually look for new job opportunities when they think they are not being paid enough or are not appreciated, because Incentive programs reward performance in tangible terms. These employees are more likely to remain motivated, engaged in their work, and loyal to their employer.

Disadvantages of incentives

• May  encourage deception

Results-driven incentives can sometimes spiral out of control when employees find that their current level of performance is not sufficient to achieve the incentive milestone. Actual does not align with the objective of the incentive.

• It can lead to conflict

While incentive programs are fair in the sense that they clearly define goals that a person can reach, it is far too easy for employees to become convinced that the pursuit of incentives is a zero-sum proposition, that they either follow their standards and get rewarded, or make sacrifices to help others succeed. .

The “number one” mentality is common in bad workplaces where employees feel they are in constant competition with each other for a limited share of recognition and reward. If left unchecked, it can lead to bitter resentment, accusations of favoritism, and disruptive behavior that undermines the team's success in striving for achievement. Individual goals. People may engage in bad behavior with the sole purpose of achieving their performance goal, which can make a tense conflict situation worse.

Types of incentives

There are two main types of incentives that can be divided into financial and non-financial, examples include:

Financial incentive

• rewards

A large number of companies offer a bonus to employees for achieving annual targets, depending on how achievable these targets can be, this can create an incentive to work harder to achieve those targets, for example, this could be reaching X number of sales in a year or increasing the hours of  paying  customers .

• commission

Commission incentives are usually most prevalent in sales roles. They are motivated to get more sales because these sales mean higher salaries in return. This encourages employees to work tirelessly in order to get those extra sales. As a result, the goals of the company and the employees are aligned as Both are aimed at maximizing the number of sales.

• Additional benefits

Fringe benefits are those financial benefits that an employee would normally have to pay for, but are covered by the employer. For example, companies like Google cover expenses such as child care, free housing, and free medical care facilities. All of this saves employees thousands of dollars and is not offered in competing companies. This helps develop a sense of gratitude to the company which can motivate workers.

• Profit sharing

Some companies offer a profit-sharing incentive so that the employees get a portion of the profits, this falls in line with the company's incentives in line with the employee, while the employee wants the company to do well because her job depends on it, he may not necessarily be enthusiastic about saving a few dollars for the company Here and there, through the use of the profit-sharing incentive it is now in the best interest of the employee to ensure that the company spends and saves money wisely.

• Suggestions system

Some companies offer a suggestion system where employees are rewarded financially for their ideas, and these ideas may help the company become more efficient and thus save money and increase profitability.

• wage incentives

Companies use pay structures to help motivate employees, this can be by offering a higher wage than competitors, so employees are motivated to perform as they know they will not be well compensated in a similar role in a competitor, in the same way an increase in employee pay may lead to an increase They are satisfied with their role and thus provide an incentive and incentive for performance to justify higher pay.

Non-financial incentive

• Appreciation

This is a straightforward and relatively basic but highly effective motivator. A simple thank you or other form of gratitude can go a long way. It can be most effective if it comes from senior people in the company or those with a degree of authority.

• The competition

Competition can not only provide an incentive to individuals but also to companies. Companies have to compete with each other only to survive. This means that companies need to constantly focus on efficiencies and maintain a streamlined process that reduces costs. Similarly, employees have the same incentives when facing competition. If they want to move to higher paying jobs they have to compete with other employees, and in return they have to justify the promotion.

• Delegation of authority

When tasks are delegated, the employees often feel a sense of responsibility especially if the task is important. In turn, this gives the employees a sense of importance as they have been assigned a critical task. By delegating such tasks, the employee is given a sense of importance and self-worth, which is something that everyone wants. In return, they are motivated employees to justify this trust and sense of importance.

• Participation in decision making

When management is making decisions that affect the entire workforce, but there is no input from the workers it can be very frustrating, instead when the workers feel part of the discussions it can provide motivation as they feel that the decisions made were theirs too, for example this could be The decision to move to a different system or way of working, if this is their decision then any negative effects will be partially mitigated.