Designing an incentive plan is essential in an organization’s day to day operations. To pick the best results we should look first at the “do’s and don’ts” of this recommendation plan. The main criticism is based on cognitive research which stresses that extrinsic rewards reduce intrinsic motivation. On the other hand, proponents of performance-based pay agree that base compensation does a little more than motivate workers to show up for work and do enough to avoid getting fired. In developing an incentive plan for L&M, the following theories will be incorporated to make the incentive plan.
First, the new incentive program with takes into account the principles suggested by the equity theory. Workers are always concerned with fairness in the rewards towards their contributions (Shields, 2015). Base on the equity theory, it is postulated that employees compute the ratio of the outcome, which in this case is pay, with input which is performance. Therefore, in the application of this theory in L&M, employees who perform better that their colleagues will receive more rewards than those whose performance is low.
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The incentive plan will also incorporate the expectancy theory. According to this theory, to perform well workers depend on three factors; their efforts will lead to a certain level of performance, belief that level of performance will lead to a certain outcome and the attractiveness of the outcome. In putting this theory to work, L&M workers will be made to understand the performance standards and how they can achieve them. They will be able to link their level of performance and pay and finally, value the additional amount of rewards.
The third theory that will inform the incentive plan is the goal setting theory which emphasizes the importance of performance goals to an organization. In L&M it is important that workers should not only be motivated by incentives in their level of performance. According to Shields et al (2015) setting up goals by individuals is very important in ensuring commitment. Also, research has also indicated that the ability to attain difficult goals increases the intensity of the performance.
Fourth is agency theory which indicates that the interests of employees and managers tend to differ. It is important that managers adopt measures that seek to merge the employees’ interests and company’s objectives. In the organization L&M the theory can be applied in the form of pay per performance scheme that is effectively linked to company’s objectives.
Last, there is reinforcement theory which is based on the fact that when behavior is rewarded it is more likely to occur in the future. Therefore, the new incentives plan will seek to enforce positive behavior the lead to best performance among the employees. This will seek to ensure that the employee kept the same trend in the future so as to attain the same level of rewards.
Incentives are meant to encourage employees to enhance their performance. Thus it is important to find the best way to do it. The five theories above provide insights into what motivates employee and therefore help to develop the means of determining the necessary incentive for the organization appropriately. The help design employee performance and determine the incentive to encourage the employees to achieve the performance objectives (Milkovich &Gerhart, 2008)
References
Milkovich, G. & Gerhart, B. (2008). Compensation . Irwin/McGraw hill.
Shields, J., Brown, M., Kaine, S. Dolle-Samuel C. North-Samardzic …. Plimmer, G. (2016). Managing Employee Performance & Reward: Concepts, Practices, Strategies . Cambridge : Cambridge University Press
