Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. For incentive pay to motivate employees to contribute to the organization’s success, the pay plans must be well designed. Because incentive pay is linked to particular outcomes or behaviors, the organization is encouraging employees to demonstrate those chosen outcomes and behaviors. However, if incentive pay is extremely rewarding, employees might focus only on the performance measures rewarded under the plan and ignore measures that are not rewarded.
Organizations may combine a number of incentives so employees do not focus on one measure to the exclusion of others. Attitudes that influence the success of incentive pay include whether employees value the rewards and think the pay plan is fair. The stronger the intensity of the incentive, the stronger the motivation. Although most, if not all, employees value pay, it is important to remember that earning money is not the only reason people try to do a good job. People also want interesting work, appreciation, flexibility, and a sense of belonging.
A complete plan for motivating employees has many components, from pay to work design to developing managers.
