The Relationship Between Employee Incentives & Job Performance

Managing today’s organization means embracing change and building a motivated and inspired workforce. This is primarily the responsibility of human resources executives in an organization.

The welfare of members in an organization depends on the coordination of individuals that then hinges on the effectiveness of incentives. Maximizing performance-based incentives to motivate employees’ performance in the workplace is of tremendous value under the condition of enormous competition, a great necessity in today’s organization that has led to an increase in financial incentives or pay for performance.

The success of an organization will depend on its ability to measure the performance of its members accurately and use that information objectively to optimize their performance as a vital resource. The performance of employees in an organization can be measured by some combination of quantity, quality, time, and cost. Properly planned, installed, designed, and administered incentive plans can increase efficiency and productivity, decrease costs, and increase employee pay, which leads to an increase in their motivation.


Effective incentive plans, however, do require attention to a wide range of organizational variables that are based upon the concept of cooperation among management and employees.

Incentives that are usually provided as a package of items to employees in order to motivate them and enhance performance at the workplace fall into various categories. Designing and executing these incentive programs effectively is one of the major problems faced by human resource managers. Formulating the design of a successful incentive program has become a problem for many companies in years past, and the challenge of doing so still looms in many organizations.

Incentives plans often fail due to poor design and implementation of the plans as well as a lack of knowledge about employer/employee satisfaction. Managers and employees have wrestled with the fair distribution of incentives among employers in organizations for many years. In the 1800s, Frederick Taylor popularized the use of financial incentives and paying financial rewards to workers whose production exceeded some predetermined standards. This system was created to combat what he called “systematic soldiering.”

Moreover, when organizations attempt to improve employee performance, they do so by instituting new policies involving new ways to reward or recognize workers who perform well. These policies can also be enhanced by looking at the various motivational theories and putting them into practice.

Many organizations are understandably fretful about their employees’ performance because they are the backbone of the company. Their performances, in most instances, is seen to be directly proportional to the fortunes of the company and also makes a particular organization an employer of choice, thereby attracting the crème de la crème from the labor market by using retention strategies to motivate employees to achieve higher targets in order to beat their competitors in the marketplace.

Generally, there are two types of incentives: individual and group incentives.


Reward systems tied to the performance of individual employees are known as individual incentives plans. These plans take several forms depending on the category of workers for which they are designed. They include piece work, straight piece work, standard hour, merit pay, and recognition-based awards.


A group incentive plan is a plan where production standards are set for a specific workgroup, and its members are paid incentives if the group then exceeds those production standards. In general, the purpose of group incentive plans is to encourage the teamwork and cooperation needed to attain high levels of productivity or performance.

Group plans are particularly appropriate in situations where several employees must work together to perform a single task or where the contribution of particular individuals is difficult to measure. These include profit-sharing plans, employee stock ownership plans, gainsharing plans, and annual bonuses.

It’s worth noting that many organizations have incentive packages for their employees to motivate them to achieve a higher level of productivity. These can range from promotions to end-of-service benefits, health care, housing schemes, incentives for hardworking and punctual employees, necessary tools and equipment to work effectively, increases of salaries and allowances to management, educational stipends, risk allowances, payment of extra man-hours, and training incentives.
Managers play a central role in influencing divisional and corporate profitability; therefore, most firms put considerable thought into how to reward them. Some managers occasionally receive short-term bonuses and long-term incentives in addition to their standard salary.

Most managers have accepted the idea that satisfied employees perform better, and thus the enhancement of employees’ motivation to work is one of the major challenges facing human resources management.

It’s not enough to create motivation as a means of attaining higher productivity; it’s equally important to sustain motivation among people at work through innovative incentive schemes that can reinforce job commitment and employee performance.

The difficulty many organizations have faced in HR management is the ability to sustain these incentive packages. In most instances, it may be due to a lack of adequate funds to continuously run it. This, therefore, brings into sharp focus the need to adopt innovative means of sustaining these incentive schemes since it has been identified as one of the major factors for improving productivity. For instance, in the sales department, a tripartite meeting of HR, finance, and marketing can be called to deliberate on the possibility of incorporating incentive packages into the pricing of goods and services in order for it to assume a default setting. Insurance companies have been particularly successful in implementing these models for many years. Through these models, many of these companies are spared the headache of always worrying about the funds to provide incentives to workers.

In conclusion, incentive regimes in companies, whether group or individual, should have the following characteristics to consummate their implementation:
– Commensurate to the job description
– Fairly and evenly distributed
– Put on a sustainable scheme to get the desired result

At the heart of implementing these schemes should be the Human Resource department in collaboration with unit heads to avoid any potential conflicts.


Phidelia Johnson is a global Human Resources Practitioner with eighteen years of leadership success. With a focus on streamlining Human Resources administration, she’s well-equipped to find the right solution to a myriad of concerns. Her experience as a commercial business leader gives her a unique ability to advocate for both the employer and the employee.

In her down time, Phidelia is a master of her kitchen, creating wonderful dishes filled with passion and flavor. If she’s not cooking delicious food, she’s stretched out with a good book. She hopes to use her experience to help others, guide company leaders to best practices, and help build better professionals and stronger organizations.

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