Excessive
incentives from a finance industry became a major issue in the global crisis,
causing a public to rethink about the role of incentives. We all observed misaligned
incentives in major financial firms could result in economic and social
disruptions. These results drew people's attention upon overall corporations' incentives
schemes and called for a comprehensive overhaul on the necessity of incentives.
Some might argue that incentives by natural lead employees to be committed to
wrong behaviors for ones' own pocket money. On the flip-side, a great deal benefits
of well-crafted incentives, in my belief, outweigh disadvantages of those.
First,
incentives aligned with company's objectives can contribute to workers' morale,
thereby improving a company's performance as well as individuals' financial
status. Most empirical researches indicate that stretched but reasonable goals can
play a significant role in boosting company's sales and financial performance. If there is no incentive, sales
representatives, in general, are likely to invest their marginal efforts in order
to merely maintain their jobs since they do not reap any benefit from extra
work. However, if the stakes are high and their financial benefits tightly
correspond to their sales performance, they will be fully committed to
obtaining additional perks for them and their family.
Second,
supervisors can use an incentive scheme as a tool to manage their team. Most
people take fixed salary for granted and can receive the money as long as they
are employed in their current position. Furthermore, the salary is mostly decided
by their number of service years or position, not by their performance. As a
result, without incentives, their line manager might have no authority on
his/her subordinates' paychecks and their employees have no reason to follow
their manager's instructions. By developing incentive schemes associated with
performance evaluation from a manager, however, the one can influence team
members' diligence and outcomes. A manager can reflect absenteeism of employees
on their evaluation and also use it to change their teams' behaviors and
performances.
Lastly,
awards for various projects help churn out innovative ideas and products.
Without emotional and monetary incentives, most people prefer staying in their
comfort zone since they cannot find any benefit to do more than their roles. Evidently, this is a part of human nature - keep doing what
they usually do. In order to crack this mindset, many companies attempt to launch
new projects to bring ideas and thoughts on new products and business models in
exchange for rewards. Google and 3M epitomize this as employees are allowed to spare
their time for their own project without intervention from employers and
properly rewarded from results. Therefore, appropriate awards encourage
employees to go extra miles, bringing new and fresh ideas for company's future
growth.
In
conclusion, some people's argument that incentives are redundant is
ill-considered. It is a matter of how well incentive schemes are structured to
create better outcomes for individuals as well as for companies. Through
cooperating employees' interest in the creation of incentive schemes, the
organization can go beyond what they usually reach without those.