Organizations use incentives to connect employee rewards with desired performance. This lesson introduces the two main ways of organizing incentive plans: around individual results or around the results of a team or organization.
These plans can make the relationship between effort, results, and reward visible. When employees can influence the measured outcome, an incentive may encourage them to improve performance.
All flashcards
What is an individual incentive plan?
A compensation plan that ties an employee’s reward fairly directly to that individual’s performance or results.
What is a piece-rate incentive?
A plan in which pay is determined by the quantity of output an employee produces.
What are common forms of individual incentives?
Merit-based compensation, piece rates, bonuses, and commissions.
What is a group incentive plan?
A plan that bases at least some employee rewards on the performance of a team, department, or organization.
Why can an individual incentive harm performance?
It may encourage unhealthy competition or focus on quantity at the expense of quality, especially when teamwork or quality controls are weak.
Quiz questions
Under a Scanlon Plan, how is performance organized for measurement?Answer: Each department or division is treated as a business unit.
What typically determines pay in a skills-based compensation system?Answer: The employee’s skill level, often measured by the jobs they can perform.
What is one potential benefit of involving employees in pay decisions?Answer: Their input can improve decision quality and confidence in fairness.
How can managers prepare to give performance feedback across cultures?Answer: Research relevant expectations, communicate clearly, and check for shared understanding.
What does the payout test of an incentive plan assess?Answer: Whether rewards go to desired results and are withheld for undesirable ones.
Based on Organizational Behavior by J. Stewart Black, David S. Bright, Donald G. Gardner, Eva Hartmann, Jason Lambert, Laura M. Leduc, Joy Leopold, James S. O’Rourke, Jon L. Pierce, Richard M. Steers, Siri Terjesen, Joseph Weiss (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.