Financial Incentive

Question 1

“Money isn’t everything, but it is

Answer 1

the best metric” (Lazear, 1998)

Question 2

Money is the

Answer 2

instrument of commerce and the measure of value.

Question 3

A positive relationship between financial incentives and performance is deeply rooted in both

Answer 3

lay theories (Heath, 1999) and academic theories of motivation

Question 4

Pfeffer outlined four dimensions to monetary compensation;

Answer 4

amount, proportion as compared to total reward, emphasis on rate of pay and individual incentives.

Question 5

Amount and emphasis on rate of pay typically depends on

Answer 5

organizational size, location, and the type of industry (Tang et al., 2000).

Question 6

Salary and productivity don’t

Answer 6

exist in a direct relationship

Pfeffer (1998) outlines the difference between labour rate and labour cost. Where:

Labour rate = total salary / time worked

Labour costs = fn(labour rates, productivity)

Question 7

Reducing rate does not necessarily

Answer 7

reduce cost -> may negatively impact productivity

Question 8

Low labour cost

Answer 8

is not the best competitive advantae

• not largest proportion of total cost
• not a USP
• value needs to expand beyond productivity

Question 9

Fulmer 200X

Answer 9

3

positive employee attitude -> RBV -> higher than average organisational-level outcomes, in terms of accounting and stock market performance in Fortune’s 1998 ‘100 Best Companies to Work for in America’.

Question 10

+ve employee attitudes require more than just

Answer 10

financial incentive

• money not the only reason ppl work
• 39 studies - Jenkins 1998 - quantity not quality
• hygiene motivation Herzberg

Question 11

tendency to predict that others are more motivated than themselves by

Answer 11

extrinsic rewards and less motivated than themselves by intrinsic rewards is still prevalent among managers Pfeffer 1998

Question 12

Individual incentives stem from the idea that

Answer 12

not all employees put in equal effort - incentive levels will differ

Question 13

Common application of individual incentive

Answer 13

Finance

Question 14

Issue with current individual incentive schemes

Answer 14

1) financial

2) undermine teamwork and emphasis short term productivity

Question 15

Just as beauty is in the eye of the beholder,

Answer 15

so too is incentive - money often used to measure success in daily life (Tang et al., 2000). but not all individuals will be equally satisfied by pay bonus - diff people will want diff things

Question 16

Exact nature of incentive should be

Answer 16

determined by needs of employees

Question 17

A good match between supply

Answer 17

and demand from both organization and individual will lead to higher levels of job satisfation and performance (Porter, 1975)