Why do some organizations link incentive pay to the organization\'s overall performance? Discuss the advantages or disadvantages of using incentive pay for overall organizational performance over individual performance. Solution Incentive and performance-based construction contracts rewarded contractors who completed projects by prescribed deadlines or ahead of schedule. Employee incentives are rewards doled out to workers at a company based on their individual or team performance, or the overall performance of the company. Incentives come in the form of raises, commission payments, one-time bonuses, stock options and indirect incentives such as plane tickets, concert tickets and extra vacation time. Incentives typically are determined and implemented by managers. Managers also determine which benchmarks will be used to determine which employees are eligible for the incentive offered. Advantage: Healthy Competition Employee incentives can generate healthy competition between individuals or teams of employees within a company. If only a certain number of employees receives incentives based on individual or group performance, that can make everyone work harder, if the incentive is compelling enough. Concurrently, commission schemes, which are another type of incentive, can spur sales staff to work smarter and harder, because a significant portion of their pay depends on performance incentives. Advantages: Retention Intelligently designed incentives can be a boon to companies looking to retain employees for the long term. Lucrative incentives, whether these are in the form of stock or bonuses, make it worthwhile for employees to stay at your firm, even if a salary offer from a competitor is more attractive. Incentives can also make employees feel as if their hard work is appreciated, thus reflecting well on their managers and the company as a whole. Disadvantage: Employee Resentment In a perfect meritocracy, where the employees who work the hardest always reap the most rewards, incentives pose little problem. But no companies operate in an ideal world and thus incentives can breed resentment and discord among teams and employees. While it\'s easy to quantify a salesman\'s performance, it is harder to quantify a staff writer\'s contribution to the department, even if the writer is adding just as much value to the company. That can lead those under an incentive scheme to feel unappreciated or the recipients of unfair treatment. .

1. Why do some organizations link incentive pay to the organization's overall performance?
Discuss the advantages or disadvantages of using incentive pay for overall organizational
performance over individual performance.
Solution
Incentive and performance-based construction contracts rewarded contractors who completed
projects by prescribed deadlines or ahead of schedule.
Employee incentives are rewards doled out to workers at a company based on their individual or
team performance, or the overall performance of the company. Incentives come in the form of
raises, commission payments, one-time bonuses, stock options and indirect incentives such as
plane tickets, concert tickets and extra vacation time. Incentives typically are determined and
implemented by managers. Managers also determine which benchmarks will be used to
determine which employees are eligible for the incentive offered.
Advantage: Healthy Competition
Employee incentives can generate healthy competition between individuals or teams of
employees within a company. If only a certain number of employees receives incentives based
on individual or group performance, that can make everyone work harder, if the incentive is
compelling enough. Concurrently, commission schemes, which are another type of incentive, can
spur sales staff to work smarter and harder, because a significant portion of their pay depends on
performance incentives.
Advantages: Retention
Intelligently designed incentives can be a boon to companies looking to retain employees for the
long term. Lucrative incentives, whether these are in the form of stock or bonuses, make it
worthwhile for employees to stay at your firm, even if a salary offer from a competitor is more
attractive. Incentives can also make employees feel as if their hard work is appreciated, thus
reflecting well on their managers and the company as a whole.
Disadvantage: Employee Resentment

2. In a perfect meritocracy, where the employees who work the hardest always reap the most
rewards, incentives pose little problem. But no companies operate in an ideal world and thus
incentives can breed resentment and discord among teams and employees. While it's easy to
quantify a salesman's performance, it is harder to quantify a staff writer's contribution to the
department, even if the writer is adding just as much value to the company. That can lead those
under an incentive scheme to feel unappreciated or the recipients of unfair treatment.