Which Statement about Incentive Compensation Plans Is True

Contrary to popular belief, the use of rewards is not a response to the extrinsic orientation that many workers display. Rather, incentives help to focus on financial considerations. If an organization uses a Skinnerian management or compensation system, people are likely to be less interested in their work and will need extrinsic incentives before making an effort. Then the supervisors shake their heads and say, “You see? If you don`t offer them a reward, they won`t do anything. This is a classic, self-fulfilling prophecy. Barry Schwartz, a professor of psychology at Swarthmore College, acknowledged that behavioral theory seems to offer us a useful way to describe what`s happening in American workplaces. However, this is not because work is a natural example of behavioral principles, but because behavioral principles. played an important role in transforming work into an example of behavioural principles. Another analysis took advantage of an unusual situation involving a group of welders at a Midwestern manufacturing company. At the request of the union, an incentive system that had been in place for several years was abruptly abolished.

Now, if a financial incentive provides motivation, its absence should dampen production. And that`s exactly what happened first. Fortunately, Harold F. Rothe, former head of human resources and assistant to corporate personnel at Beloit Corporation, tracked production over a period of several months, providing the type of long-term data rarely collected in this area. After the initial recession, Rothe found that welder production began to increase rapidly without incentives, eventually reaching levels as high or higher than before. To learn more about the benefits of an automated data-driven sales performance management platform, check out our white paper with Hobson ROI, “Driving ROI: The Business Case for a Comprehensive Sales Performance Management (SPM) Solution.” In addition, it is also indistinguishable from not receiving a reward that was expected from punishment. Whether the incitement is intentionally held or withdrawn, or simply not received by someone who hoped to receive it, the effect is identical. And the more desirable the reward, the more demoralizing it is to miss something. Under the Skills Incentive Program, employees are paid according to their skill level (i.e., the number of jobs they can perform), regardless of the actual tasks they are authorized to perform. This approach has proven itself in organizations such as Procter & Gamble and General Foods.

Employees are encouraged to acquire additional skills and are rewarded appropriately. The organization has a better trained and more flexible workforce. However, training and compensation costs are necessarily increased, so the program is only appropriate in certain situations. Technology is most often seen as part of a larger programme to improve the quality of work, where it is combined with efforts to redesign the workplace. Even if people were mainly concerned about their salaries, this does not prove that money is motivating. There is no solid basis for assuming that paying more people will encourage them to do a better job or even do more work in the long run. As Frederick Herzberg, a distinguished professor of management at the University of Utah`s Graduate School of Management, argued, just because too little money can irritate and demotivate doesn`t mean more and more money leads to increased satisfaction, let alone increased motivation. It is plausible to assume that if someone`s take-home pay were cut in half, their morale would suffer enough to hurt performance. But it does not necessarily follow that doubling that person`s salary would lead to a better job. Competency-based incentives. Typical compensation programs are linked to job evaluations.

In these, jobs are analyzed to assess their characteristics, and then each job is assigned wage levels based on factors such as job difficulties and shortages in the labor market. In other words, wage levels are set according to the job and not to the individual. This approach does not encourage employees to improve their skills in the workplace, as there is no reward for improvement. This reflection also keeps all employees in their place and minimizes the possibility of transfers between workplaces. However, Xactly Incent isn`t just a calculation engine – it`s a comprehensive platform that revamps your sales department and incentive compensation program so you can both calculate compensation more easily and meet and exceed business goals. Earlier in this article, I described how sales plans can quickly become cumbersome when too many measures are involved. With Xactly, you can handle even the most complex calculations and formulas with ease and flexibility. Do the rewards work? The answer depends on what we mean by “work.” Research suggests that, overall, rewards can only ensure one thing: temporary compliance. However, when it comes to bringing about lasting change in attitudes and behaviors, rewards, such as punishment, are surprisingly ineffective. Once the rewards are exhausted, people return to their old behaviors.

Studies show that incentives to lose weight, quit smoking, wear seat belts, or (in the case of children) act generously are not only less effective than other strategies, but often prove worse than doing nothing at all. Incentives, a version of what psychologists call extrinsic motivators, do not change the attitudes that underlie our behavior. They do not create a lasting commitment to a value or action. On the contrary, incentives only – and temporarily – change what we do. Recently, we`ve seen several innovations in how companies treat reward systems. These efforts aim to facilitate the integration of the interests of employees and businesses in a way that maximizes both productivity and quality of life at work. Five of these creative compensation practices should be considered: (1) profit-sharing plans, (2) competency-based incentives, (3) general salary increases, (4) participatory salary decisions, and (5) flexible benefit programs. These approaches and their main advantages and disadvantages are summarized in Table 8.7. The surest way to destroy collaboration, and thus organizational excellence, is to force people to compete for awards or recognition, or to pit them against each other. For every person who wins, there are many others who carry with them the feeling of having lost.

And the more these awards are published using memos, newsletters, and awards banquets, the more damaging their impact can be. If employees compete for a limited number of incentives, they will most likely begin to see themselves as barriers to their own success. But the same result can occur with any use of rewards; The introduction of competition only makes one bad thing worse. To overcome some of these shortcomings, many companies have turned to group or organizational incentive plans. Group incentive programs are based on at least a portion of an employee`s rewards on the performance of groups or organizations. Therefore, employees are encouraged to work with each other and with the company so that all employees can benefit from it. Programs such as profit-sharing or profit-sharing schemes (see below) are designed to link employees` future rewards and wealth to those of the company, thereby reducing the age-old antagonism between the two. The results are often spectacular.

Compensation for sales incentives may vary, but generally sales reps receive incentive compensation and/or bonuses when they close a sales deal. Therefore, incentive compensation management is the process of tracking the calculation and payment of variable compensation and adjustments to improve sales motivation and performance. If you want to build a dedicated, collaborative and creative workforce, you have to pay employees for excellence, right? Not necessarily. Although most U.S. companies use incentive programs, trying to reward quality can be a fool`s job. Other theorists prefer a simpler explanation of the negative effects that rewards have on intrinsic motivation: anything that is presented as a prerequisite for something else – that is, as a means to another end – is considered less desirable. The recipient of the reward assumes, “If they have to bribe me to do it, it must be something I don`t want to do. In fact, a number of studies published in 1992 by psychology professor Jonathan L. Freedman and his colleagues at the University of Toronto confirmed that the more the incentive offered to us, the more negatively we will see the activity for which the bonus was received. (The activities themselves do not seem to matter; in this study, they ranged from participating in a medical experiment to eating unknown foods.) Whatever the reason for the effect, any system of incentives or pay for performance tends to make people less enthusiastic about their work and therefore less likely to approach them with a commitment to excellence.

The reporting tools and dashboards that Xactly Insights customers have access to to provide real-time visibility to leadership roles and salespeople, allowing them to monitor patterns and opportunities to track sales incentive guidelines. Executives can also identify and report sales reps who are at risk for sales and take steps to prevent this. .