How would you use the knowledge of incentives to manage a business - Essay Example

To be effective for business, incentives should clearly link performance to pay and should directly link performance to specific standards and objectives. If a teams objective is customer satisfaction, that should be the measure of performance, rather than volume or duration of service calls, which may bear little relation to whether the customers needs were actually met (Laffont and Marthmort 45). Incentives (rewards and punishments) should relate directly to the nature of performance required at each level of the organization.

For example, in order to develop a true team perspective among top executives, the bonus plan for each member of the senior team is based largely on the entire companys success in meeting certain specific financial goals, such as stock price (Campbell 61). In other situations -fund managers in an investment firm, for example -- its more appropriate to base rewards on each persons individual performance. Incentive plans should match measurement periods for rewards to relevant performance periods; some goals can be assessed after three months, while it might not be practical to evaluate others in less than a year.

Some incentive programs recognize that fact by containing both short- and long-term goals. Because performance Incentives can provide bonuses equaling up to 13 percent of a workers base pay, teams are sharply attuned not only to the performance of their own members but to other teams as well. Between each shift there is a brief "hand-off" meeting between the team thats leaving and the one thats coming on (Laffont and Marthmort 51). Some organizations may want to grant direct incentives for worker avoidance of nonwork, anti-work, and semi-work.

Tying incentives directly to usage of time is not reward for performance. But in certain cases, particularly where effort distribution issues are involved,