Do Corporate Incentive Programs Pay - Thesis Proposal Example

?  Do Corporate Incentive Programs Pay? Proposal for a study on the relationship between corporate incentive programs and the workers’ productivity and organizational efficiency DO CORPORATE INCENTIVE PROGRAMS PAY? A study of the relationship between corporate incentive programs and the workers’ productivity and efficiency in an organization By Submitted to (October 2010) Table of Contents List of Tables 6 List of figures 6 Photo credit 6 Introduction 7 1.1 Background 7 Literature Review 9 2.1 Corporate incentive programs 9 2.1.1 Incentive versus recognition 11 2.2 Workers’ productivity 12 2.2.1 The concept of productivity 12 2.2.2 Productivity Improvement techniques 13 2.2.3 Current research on impact of incentive on productivity 13 2.3 Organisational efficiency 13 Problem Definition 14 3.1 Problem definition 14 3.2 Problem statement 14 3.2 Theoretical framework 15 3.4 Hypotheses to be tested 16 Research Design and Methodology 17 Anticipated Findings 19 Summary of Proposal 21 Initial References & Bibliography 22 List of Tables Table 1: Incentives that impact on motivation of staff 10 Table 2: Types of Non-Sales Employee Incentive & Recognition Programs 12 List of figures Photo credit Cover Page: http://3.bp.blogspot.com/_euq4iPQ9iQk/TSRY-NLYXtI/AAAAAAAACsE/kYt7qAti8DM/s1600/low-wage-factory-workers.jpg Introduction 1.1 Background The present rendering is a proposal to explore the relationship between corporate incentive programs on the workers’ productivity and efficiency in an organization. For long, corporates have been engaged in providing incentives to employees to enhance productivity and infuse efficiency in their organisations (Landry, 1995). According to a survey conducted by Incentive Federation in 2005, organizations implement incentive programs with aim to: boost morale; show concern for workers; generate leads; improve customer service; improve quality and productivity; foster teamwork (Incentive Performance Center, 2008). Of these, increase in workers’ productivity and efficiency is an important corollary of the corporate incentive programs. A Russell Index study on publicly held stocks of Fortune magazine’s list of “100 Best Companies to Work For” observed that since 1998, these companies have returned to the investors five times that they could have earned by a broader market index, such as the S&P 500 (Incentive Performance Center, 2008). This undoubtedly exemplifies the relationship between “best places to work for” and return on investment (ROI) viewed from the stand point of investors. But does the same relationship hold good for productivity and efficiency; more importantly in organisations that are outside the gambit of Fortune magazine’s list of 100 best companies to work for; though, the researcher personally believes it to be. Further, does “best-place-to-work-for” include corporate incentive? Therefore, it becomes necessary to empirically verify that corporate incentive programs invariably do have a strong positive correlation with workers’ productivity and overall organisational efficiency. In other words, do corporate incentive programs work well in enhancing workers’ productivity and organizational efficiency? It also becomes necessary to understand about the elements that are contained in the recipe of “best-place-to-work-for” and their interrelationships; and how they are correlated? Literature Review In pursuit of this research question, it is intended that a thorough understanding of the current conditions in the field of study is made so that besides being familiar with the studies undertaken so far and current thinking on relevant issues, the researcher is also aware of the general problems and opportunities existing in this field of research. Nonetheless, the necessity of identifying the key gears of this study and developing sufficient insight on how they work cannot be overestimated. The researcher identified a three-component assembly for this research: (1) corporate incentives, (2) workers’ productivity, and (3) organisational efficiency. Each of these three components in turn is made up of several elements. The following is a short exploration of the key terms of this research. The idea is to seek direction so that further exploration on these key terms and their concepts can be undertaken so that the relevant research can be critically reviewed. 2.1 Corporate incentive programs Incentive Performance Centre, a non-profit organisation focusing on research on incentives quoted research findings in their website explained that corporate incentive programs are a form of reward as recognition extended to employees and staff of an organisation to induce reward behaviour (Incentive Performance Center, 2008). Corporate incentive systems do have a significant influence on the performance of staff and employees and consequently the organization overall (UNDP, 2006). Corporate incentives can both be financial and non-financial in nature. The table below provides the financial incentives popularly adopted by organisations. Table 1: Incentives that impact on motivation of staff Pay, Salaries, “efficiency wages” etc. Direct financial benefits, such as Pension, illness/health/life insurance; allowances (clothing, housing, etc.), subsidies, gain sharing, Indirect financial benefits such as subsidized meals/clothing/ accommodation/ transport, scholarships, tax breaks; etc., deferred compensation such as seniority pay, Flexible schedules, part-time/ temporary work; sabbatical, study leave, holidays, vacation, etc. Work environment/conditions, occupational health, safety, recreational facilities Amenities, school access, infrastructure, transport, etc. Job security; Career/ professional development/ training opportunities Feedback, coaching, valued by organization Solidarity, socializing, camaraderie, affection, passion Status, prestige, recognition Sense of duty, purpose, mission Security, opportunities, stability, risk Source: UNDP. (2006). Incentive Systems: Incentives, Motivation, And Development Performance. United Nations Development Programme. It further explains that employee productivity increases when they are provided with a work environment in which they can have: (1) clear goals, (2) derive value from their job, (3) feel the support of their organization, (4) enjoy a positive mental state, and (5) have the capability to do the job. In a study conducted by International Society of Performance Improvement suggested that employee incentive and recognition programs can be effectively deployed to address many of these factors by providing direction and assisting employees to acquire skills that are relevant to their jobs, providing a sense of task value, focusing attention on positive behaviours and feeling of support, which forms the basis of motivation (Incentive Performance Center, 2008). 2.1.1 Incentive versus recognition Even though both incentive and recognition are intended to induce reward behaviour in the employees and staff, there are several intrinsic differences between the two. Firstly, incentive programs are intended to promote financial or physical benefits before demonstration of the reward behaviour. On the other hand, recognition of a staff or employee’s efforts or performance stimulates a psychological benefit after a staff or employee demonstrates a particular behaviour. Secondly, incentive programs are more specific action oriented, while recognition are value oriented. Non-sales incentive program goals may even focus on such aspects as productivity, safety and quality. On the contrary, the recognition programs usually aim at awarding employees for exemplifying organizational values. Some of the non-sales recognition programs may involve recognition of such aspects as idea generation, length of service, attendance and the like (Incentive Performance Center, 2008). The table below provides a clue on the different types of non-sales employee incentive and recognition programs. Table 2: Types of Non-Sales Employee Incentive & Recognition Programs Incentive Programs Recognition Programs Involvement in Training, Certification Promotion of Suggestions / Ideas Product or Service Quality Initiatives Productivity Improvement Programs Work Efforts Demanding Increased Teamwork Initiatives to Increase Customer Service or Quality Company Drive For Referrals Anniversary / Length-of Service Awards On-the-Spot Awards for Exemplary Actions Nominated Recognition Employee Appreciation Special Employee of the Month/Year Peer-to-Peer Recognition Attendance and Safety Results Source: Incentive Performance Center. (2008). Incentive Performace Overview. Retrieved October 01, 2011, from www.incentivecentral.org: http://www.incentivecentral.org/employees/overview.1867.html 2.2 Workers’ productivity 2.2.1 The concept of productivity The role of workers’ productivity as a major driver for a company’s competitiveness and national welfare is universally recognised (Kubr, 2002). Productivity is traditionally considered as a measure of the quantity and quality of what is produced both human and physical. Kubr (2002) stated that productivity is affected by the quality of the whole human and business environment. Kubr (2002) reiterates that “the principal area where productivity growth is created is the enterprise, as it is here that the whole range of available resources and conditions come together to produce goods and services. The effectiveness of the combined functioning of these resources in a given macroeconomic, institutional, social and natural environment is reflected in productivity” (Kubr, 2002, p. 437). 2.2.2 Productivity Improvement techniques Productivity improvement tools have been frequently used by corporates since quite some time, numbering over 80. Of these, a survey by Bain & Company to identify the top 10 improvement tools in 1999 included pay-for-performance (Kubr, 2002, p. 461). However, subsequent surveys by Bain & Company in the year 2006 and in 2010 pay-for-performance did not feature as the top 10 productivity improvement tools (Bain & Company, 2011). This delineates that corporate incentive as a means of productivity improvement is out of fashion during the last decade. 2.2.3 Current research on impact of incentive on productivity In a recent preliminary study entitled, “Getting What You Pay For: The Productivity Impact of Incentive Pay Optimization”, (Levenson, Zoghi, Gibbs, & Benson, 2010) the authors found no evidence of increased distortion of effort or manipulation of the performance measure. The authors stated that in their study, workers did not substantially change in the number of hours worked, the distribution of time spent on different tasks, or perform any tasks worse (Levenson, Zoghi, Gibbs, & Benson, 2010). 2.3 Organisational efficiency Organizational efficiency is defined as a measure of the relationship between resources of the organisational usually the inputs and the goods and services produced by the company (output) (sielearning.tafensw.edu.au). Problem Definition 3.1 Problem definition Traditionally it is believed that corporate incentive programs have been known to improve motivation. But does that translate into workers’ productivity, which in turn improves organisational efficiency? From the preliminary review of literatures the researcher however could not generate sufficient conviction to belief that corporate incentive programs can indeed improve workers’ productivity and organisational efficiency. This study therefore poses a clear problem and provides an equally glaring opportunity to investigate how corporate incentive programs, workers’ productivity and organisational efficiency are correlated. Eventually, the present study would lead to the extent to which corporate incentive programs, and which incentive programs in particular are responsible for improving workers’ productivity and eventually organizational efficiency. Findings of this study will be a great pointer to the billions of dollars corporates spend under corporate incentive programs. 3.2 Problem statement The formal problem statement for this study integrates three embedded opportunities to investigate (1) does corporate incentive programs is correlated with workers’ productivity, mediated through motivation; (2) does corporate incentive programs is correlated with organisational efficiency, mediated through motivation; (3) how workers’ productivity is correlated with organizational efficiency. 3.2 Theoretical framework Alfie Cohn in his classic Harvard Business Review article “Why Incentive Plans Cannot Work” stated that the assumption and the practices associated with the belief that people do a better job if they have promised some sort of incentive are pervasive, “but a growing collection of evidence supports an opposing view” (Kohn, 1993). Kohn stated that “Incentives do not alter the attitudes that underlie our behaviours” (Kohn, 1993, p. 2). The theoretical framework for the study is based on the fact that incentives motivate workers, which is reflected in enhanced productivity, which in turn improves the organisational efficiency. On the basis of this theoretical underpinning, the researcher developed the operation plan as placed in the figure below. 3.4 Hypotheses to be tested The insight generated from the preliminary review of critical literatures and the consequent theoretical underpinning further reinforced the researcher’s initial belief that corporate incentive programs do not motivate workers to a large extent, which in turn would be reflected into works’ productivity, and organisational efficiency. Accordingly, three sets of hypotheses were developed for testing as follows: H1A: There is no correlation between corporate incentive programs and workers’ productivity H1B: There is a positive correlation between corporate incentive programs and workers’ productivity H2A: There is no correlation between corporate incentive programs and organizational efficiency H2B: There is a positive correlation between corporate incentive programs and organizational efficiency H3A: There is no correlation between workers’ productivity and organizational efficiency H3B: There is a positive correlation between workers’ productivity and organizational efficiency Research Design and Methodology The purpose of the study is to explore the relationship between corporate incentive programs and workers’ productivity and organizational efficiency. The researcher believed that corporate incentive programs do not motivate workers to such a large extent that it in turn would be translated into works’ productivity, and ultimately reflect in enhanced organisational efficiency. The study will be nomothetic exploratory empirical in nature which will examine the correlation between four groups of variables (1) corporate incentive programs, (2) motivation, (3) workers’ productivity and (4) organisational performance. The study will test three sets of hypothesis as mentioned earlier. The investigation will be framed on a case study model and will be based on one single context company. The variables will have one independent variable (corporate incentive programs) and the rest dependent variables. The population will constitute the employees of the organisations in all categories, of which a cross-section of the employees comprising in the appropriate proportion will be drawn from every class and cadre of the organisation will be drawn as sample of willing workers. The study will employ both quantitative survey methods for collection of the data. The researcher will initially look for pretested instruments for collection of the quantitative data. In the event of non-availability of such an instrument, the researcher will develop an instrument and will conduct a pilot study, ensuring that the respondents participated in the study do not take part in the main study. The reliability of the variables used will be tested by using Cronbach’s Alpha Coefficient confirmed the reliability of the measured variables. Face validity and content validity of the variables will also be measured. All ethical principles such as: (1) the principle of voluntary participation, (2) the principle of informed consent, (3) principle of risk of harm, (4) principle of confidentiality, and (5) principle of anonymity will be observed strictly during the collection of data. Employees will be provided with written questionnaires to which they will respond. For measurement of the variables contained in the instrument, the study will employ unidimensional scale types such as Likert- and Thurstone and Guttman scaling techniques. For the qualitative study the researcher will employ the semi-structured interview method to interview about 25 staff and employees, of which at least 50 % in the management cadre. Subsequently, the data will be analysed using both descriptive and inferential statistical tools available with Microsoft Excel Spreadsheet. Anticipated Findings The present proposal intended to explore the relationship between corporate incentive programs on the workers’ productivity and efficiency in an organization. Even though, corporates all over the world have been engaged in providing incentives to employees to enhance productivity and infuse efficiency in their organisations (Landry, 1995), the researcher believed that there may not be any significant strong positive correlation between corporate incentive programs and workers’ productivity and between corporate incentive programs and organisational efficiency. The researcher’s belief were founded upon the following premises based on Kohn’s (1993) assertions: 1. Most managers too often believe in the redemptive power of rewards. 2. Incentives do not alter the attitudes that underlie our behaviours. 3. Rewards do not create a lasting commitment. They merely, and temporarily, change what we do. 4. Punishments and rewards are actually two sides of the same coin. Both have a punitive effect because they are manipulative. 5. The number one casualty of rewards is creativity. As late John Condry put it, rewards are the “enemies of exploration.” 6. Do motivate people? Absolutely. Rewards motivate people to get rewards. During the course of the preliminary review of literatures, the researcher found contradicting claims on the impact of and relation between corporate incentive programs on one hand and workers’ productivity and organisational efficiency on the other. Therefore, the current state of research could not generate sufficient conviction to believe the contrary of his belief. In contrast, the researcher feels that the findings of the proposed study would provide conclusive evidence in the context company that corporate incentive have little to do with workers’ productivity and organisational efficiency. It would be interesting to see during the study if any conclusive evidence could be found proving Kohn’s nearly two decade old assertions. The researcher’s conclusion are likely to support the contrarians’ standpoint regarding the role of corporate incentive on workers’ productivity and organisational efficiency by way of reinforcing their view, and therefore, is likely to be an important milestone in this field. The hypotheses of the study if tested to be correct, they are likely to bring a new round of scepticism to the billions of dollar corporate incentive programs industry, which is the researcher’s earnest desire. Summary of Proposal This proposal delineated the need to explore the relationship between corporate incentive programs on the workers’ productivity and efficiency in an organization. The identified problem statement for this study integrated three embedded opportunities to investigate (1) does corporate incentive programs is correlated with workers’ productivity, mediated through motivation; (2) does corporate incentive programs is correlated with organisational efficiency, mediated through motivation; (3) how workers’ productivity is correlated with organizational efficiency. Based on the preliminary review of literatures, and the theoretical underpinning that “Incentives do not alter the attitudes that underlie our behaviours” (Kohn, 1993, p. 2), the researcher believed that corporate incentive programs do not motivate workers to a large extent, which in turn would be reflected into works’ productivity, and organisational efficiency. Accordingly, three sets of hypotheses were developed for testing. To test these hypotheses, the researcher proposes to design a nomothetic, exploratory, empirical correlational study comprising of four groups of variables. Using a cross-sectional study in a single context organisation, the researcher proposes to draw a suitable sample from every class and cadre of the employees of the organisation. The study will employ both quantitative survey methods for collection of the data. Subsequently, the data will be analysed using both descriptive and inferential statistical tools available with Microsoft Excel Spreadsheet. Based on this findings will be made and conclusions will be drawn. A set of recommendations will also be made for furtherance of this study. Initial References & Bibliography Ahmad, S., & Schroeder, R. G. (2003). The impact of human resource management practices on operational performance: recognizing country and industry differences. Journal of Operations Management, 19–43. Bain & Company. (2011). Top 10 Management Tools. Retrieved October 01, 2011, from www.bain.com: http://www.bain.com/management_tools/BainTopTenTools/default.asp Basso, L. F., Teixeira, E. G., & Martin, D. M. (n.d.). Improving Productivity with Employee Participation Program. Retrieved October 01, 2011, from www.iamot.org: http://www.iamot.org/conference/index.php/ocs/4/paper/viewFile/495/36 Collins, D. J., & Montgomery, C. A. (1998, May-June). Creating Corporate Advantage: How can you tell if the company is more than sum of its parts? Harvard Business Review, pp. 71-83. Collins, J. (2001). Good to Great: Why Some companies Make the Leap... and Others Don't. New York: HarperCollins Publishers Inc. Collins, J., & Porras, J. I. (2005). Built to Last: Successful Habits of Visonary Companies. London: Random House Business Books. Corporate Leadership Council. (2003). Linking Employee Satisfaction with Productivity, Performance, and Customer Satisfaction. Retrieved October 01, 2011, from www.corporateleadershipcouncil.com: http://www.keepem.com/doc_files/clc_articl_on_productivity.pdf Department of Human Resource Management. (2000). Employee Recognition Programme HandBook. 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