What Is Incentive Motivation?

Properly-administered incentive programs can significantly boost employee performance.
Properly-administered incentive programs can significantly boost employee performance. (Image: Jupiterimages/Photos.com/Getty Images)

The demographic makeup of a company's employees plays a major role in determining the effectiveness of an incentive motivation program. Well-executed incentive programs motivate employees of various age groups and at all levels of the company to perform their best work. A properly-conducted incentive program can improve employee performance by 25 to 44 percent, according to a 2008 report published by the Incentive Research Foundation.

Incentive Motivation Defined

Incentive motivation provides concrete rewards for tangible performance that either achieves or demonstrates progress toward attaining a predetermined goal. Incentive motivation differs from attitude motivation, which targets thoughts rather than action. Incentives may be positive: a "carrot" in the form of bonuses, paid time off, or gifts for employees who meet stated goals. Negative incentives take the form of a "stick": a pay cut, demotion or even dismissal directed toward employees who fail to meet minimum performance standards. Companies frequently use negative incentives as a last resort.

Standards for Incentive Motivation Programs

An incentive program may apply to everyone within the entire company, or programs may be modified and targeted to specific departments or even individual employees. Many companies offer a combination of incentives. Though the specifics of each particular incentive program vary according to a company and its employees, there are three major factors that shape the ultimate success of any incentive program: do the employees value the incentives, are the goals realistically achievable and are the incentives sufficiently valuable to warrant the effort necessary to obtain them?

Problems With Incentive Motivation Programs

Many incentive motivation programs fail because employees don't understand what is expected of them, or they receive infrequent feedback, or worse, none at all. Other problems arise when managers aren't on board with an incentive motivation program and continue to supervise as they always have. Providing employees with clear instructions on how to address specific performance issues and rewarding progress along the way enhances the effectiveness of incentive motivation programs. The most effective incentive motivation programs address situations where performance is inadequate in ways that can be measured concretely, with deficiencies that are related to lack of motivation. Incentive motivation programs should also be compatible with day-to-day operations.

Incentive Versus Commission

Although some incentives are monetary, this is not always the case. This is one way in which incentive motivation programs differ from commission-based pay. Commission provides pay-for-performance: higher performance levels translate directly into a larger paycheck. Incentives may also provide higher pay in the form of bonuses, but they have the added purpose of focusing employee efforts on benefits beyond the paycheck. Commission pay and incentive motivation programs are not mutually exclusive; many companies combine both in a bid to obtain a consistent level of performance from their employees.

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