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The Downside to Financial Incentives

Posted, by Deborah Merkin
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Financial incentives have become an organizational norm.  Paying employees based on their contributions has become a fairly standard practice in every business.  It has also become something that employees have grown to expect, especially high level executives.  But how can an employee trust a incentive plan where executives are achieving financial rewards while lower-level employees have gone without pay raises for significant periods of time? Employees that do not trust a financial incentive plan, or the way the plan is run, will be unhappy with it no matter how much the plan pays out.  Incentive plans that have no link to performance can have an extremely negative impact on a corporation.  An incentive can only work if the person who is receiving the incentive can affect their performance. To make things simple, Hay Group has distilled all the research they've done around incentive pay into the table below:

Financial Incentives
Table Courtesy of:  http://www.mortgagebrokernews.ca/news/the-downside-of-financial-incentives-178690.aspx?p=1

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