1. Do Financial Incentives Drive Company
Performance?
BUS 4980 – Business Policy (Capstone)
Khalid ElKhereji
Tie Rong
Enzo Relaga
Mazen Kattan

3. Evidence-Based Management
1. Available Scientific Evidence – surveys, consultants, marketing
research, case studies, experiments
2. Organizational facts, metrics and characteristics – Employee
satisfaction, working stress, labor skills, the organizational
culture.
3. Stakeholders’ values and concerns – suppliers, shareholders,
employees, public.
4. Practitioner expertise, reflection and judgment – risk and
benefits, intervention feasible, the relation between decision-
makings and evidence.

4. Evidence-based Management

5. What Incentives Can Do?
1. Motivate more effort, but not ability
2. Provide information about
organizational values and priorities
3. Drive performance with the selection
effect
• Hard working & driven
• Value in organization

6. Point #1) Incentives Can Signal
What Is Important
The Commission-based Car Salesman

7. Typical Financial Incentive System
• Too blunt & narrow way of communicating
• Multiple & Interrelated dimensions of
individual performance

8. Point #2 Incentives must be
ambiguous and one-dimensional
• In 2003, CEO created a new pay system
• Employees were paid on the number of
windshields installed instead of being paid
hourly
• Productivity ^ Quality V

9. Incentives Must Be Ambiguous and
One-dimensional
Financial incentives are best applied when:
• Simple
• Clear
• Agreed-upon measures that make
cheating almost impossible

10. Point #3: Ethical Boundaries
When strong financial incentives are in place,
many employees will cross ethical boundaries

11. Point #4 Incentive Systems Do Attract
Talent—Often the Wrong Kind
• “if they come for money, they’ll leave for
money.”
• Do you go to the job you love?

12. The Doctor Question
Option A Option B

13. Alternative Financial Incentives
• Don’t Try to Solve Every Problem with
Financial Incentives
• Sometimes Less Is More Effective
• Be Careful What You Wish For, You Might Just
Get It