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Incentive Plans Impact On Employee Motivation

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A short overview of how organizations can impact the motivational power of their incentive compensation through a few key design principles. A few key tips for anyone who creates incentive programs or contests.

Published in: Business, Technology
  • Thanks Kurt, I live to learn! Sometimes I find that I am to trigger happy in this connected world. A minute after I wrote that comment I goggled it... I need to check out the term in more detail, sounds interesting. Would love to hear your thought regarding the posts on my blog... Cheers, Elad
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  • Elad,

    Thanks for the nice comment. I checked out your blog quickly - it looks like you have some great posts out there I'll need to read!

    FYI - Locus of Control is a psychological term developed by Rotter in 1954 and further in 1966. Locus of control is the framework of Rotter's (1954) social learning theory of personality and subsequent work around perceived control situations.

    Thanks.
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  • Thanks for this.
    I was not aware of the fact that Equity theory also applies to comparing my present self to my past self... nice prescriptive
    Elad
    http://comparativeadvantage.wordpress.com/

    BTW,
    Either I don't get it or the word 'Locus' in the headline of the first slide or it is a spelling mistake...
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Incentive Plans Impact On Employee Motivation

  1. 1. How Can You Impact Motivation through<br />Incentive Plan Design<br />Kurt Nelson <br />2009 <br />
  2. 2. Locus of Control <br />The more individuals perceive that they are in control, the more motivation they will have (Rotter, 1966). Incentive plan structures need to ensure that employees feel that they are in control of their destiny. <br />Incentive plans or incentive measures that decrease perception of control can significantly undermine motivation. <br />Research shows sales people will attribute success or failure on either internal or external factors – the more external factors are involved, the less motivation occurs.<br />Self-efficacy beliefs can drive performance (Bandura, 1997). Performance not rewarded decreases perceived self-efficacy and can hurt long term performance. <br />
  3. 3. Goal Setting<br />Locke and Lathum (1990, 2004) highlight how goal setting can increase performance. Incentive plans can leverage this by utilizing specific goals in their structure. <br />Goal Based Plans provides individuals with key performance goals that increase motivation.<br />Goals need to be perceived as attainable and fair to be effective. <br />
  4. 4. PerceivedFairness<br />Perceived lack of fairness of an incentive plan is the number one complaint of sales representatives (BI, 2009). <br />Changes to plans that decrease the perception of fairness can have significant negative impact on performance and overall plan satisfaction. <br />Incentive plans need to ensure that differences between territories or roles be explained and that people understand why they are different.<br />
  5. 5. Reward <br />Expectancy theory highlights that motivation is driven by expectations – is my effort worth the reward. <br />Employees are always looking at how this equation is playing out for them and for others. <br />Effort vs. Reward is relative. Equity theory shows that if individuals believe that by exerting the same effort they will get a lesser reward than in the past, they will be less likely to exert the effort. <br />
  6. 6. To find out more on this topic – check these out! <br />Web: www.lanterngroup.com<br />Blog: http://thelanterngroup.wordpress.com<br />Twitter: www.twitter.com/WhatMotivates<br />612-396-6392 <br />©2009 The Lantern Group – use permitted with acknowledgement<br />

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