Company Incentives
COMPANY INCENTIVES
Amber Logan
Ohio Christian University
The purpose of company incentives is to motivate employees to increase sales, increase profits, improve product quality, or cut costs. Incentives are also a way for management to know that employees are putting 100% effort into their work and can be trusted to perform in the best interest of the company without monitoring every move of employees. When companies are too controlling over their employees it can hurt the creativity and market responsiveness that comes with independence of action. Incentives that can be used to facilitate a product differentiation strategy include: salary, bonuses, promotions, profit sharing, stock options, and sales commission. Incentive programs can push workers to perform more efficiently, which results in the maximization of the company value. Incentives such as profit sharing give the employees a more personal investment in the company’s mission because if the company does well, the employee benefits. Individuals must understand how their performance can affect the company’s goals. Companies create incentives by measuring the employee’s performance and monitoring the way tasks are performed by workers. A requirement for the successful implementation of strategy is the provision of incentives. Managers must examine the company’s resources and evaluate competencies, allowing them to determine if the organizations abilities are matched correctly with goals and activities; they must look at things such as whether or not the goals are set high. Incentives must give management a way to measure performance while also giving the employee something attainable to work towards.
A company must design incentives to be directly linked to only the outcomes that reflect good strategy execution. If the strategy of a company is to be a low-cost provider, the incentive system must reward actions and achievements that result in lower
Amber Logan
Ohio Christian University
The purpose of company incentives is to motivate employees to increase sales, increase profits, improve product quality, or cut costs. Incentives are also a way for management to know that employees are putting 100% effort into their work and can be trusted to perform in the best interest of the company without monitoring every move of employees. When companies are too controlling over their employees it can hurt the creativity and market responsiveness that comes with independence of action. Incentives that can be used to facilitate a product differentiation strategy include: salary, bonuses, promotions, profit sharing, stock options, and sales commission. Incentive programs can push workers to perform more efficiently, which results in the maximization of the company value. Incentives such as profit sharing give the employees a more personal investment in the company’s mission because if the company does well, the employee benefits. Individuals must understand how their performance can affect the company’s goals. Companies create incentives by measuring the employee’s performance and monitoring the way tasks are performed by workers. A requirement for the successful implementation of strategy is the provision of incentives. Managers must examine the company’s resources and evaluate competencies, allowing them to determine if the organizations abilities are matched correctly with goals and activities; they must look at things such as whether or not the goals are set high. Incentives must give management a way to measure performance while also giving the employee something attainable to work towards.
A company must design incentives to be directly linked to only the outcomes that reflect good strategy execution. If the strategy of a company is to be a low-cost provider, the incentive system must reward actions and achievements that result in lower
References: Spulber, D. F. (2013). Economics and Managment of Competitive Strategy. Hackensack, NJ: World Scientific Pulishing Co. Pte. Ltd. Arthur A. Thompson, A. J. (2009). Managing Internal Operations. In A. J. Arthur A. Thompson, Concepts and Techniques for Crafting and Executing Strategy (pp. 404-413). McGraw-Hill Companies.