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Employee Incentive Programs Pros and Cons

Employee Incentive Programs Pros and Cons

Planning to start with an employee incentive program? If yes, the following article which discusses the pros and cons of such programs, will prove to be of immense help to you.
Aastha Dogra
Last Updated: Mar 19, 2018
The aim of any given business is to make profits. To achieve this goal, the management comes up with various innovative strategies and plans, from time to time. As humans are considered to be the most valuable resource of an organization, the management introduces some of the best incentive programs, to keep the employees motivated, so that their productivity improves and the business can make profits.

Employee incentive programs can be in the form of higher salary for the employees based on performance, certain perks or appreciation by the seniors, managers, co-workers and subordinates. Although, these programs are aimed to enhance the employees' performance, they are not without their drawbacks. The following Workspirited article discusses in detail, the pros and cons of employee incentive programs.


Increases Productivity
An employee incentive program increases the productivity of the employees. Everyone knows how important money is. To buy comfort in life, to take care of the day-to-day needs, each and every person needs money. The employees too feel motivated to give their best, if they know that the more they perform, the more salary they get to take away home.

Employee incentive plans can contribute immensely to group productivity as well. If planned well, they can bring the team together. For instance, if instead of keeping individual incentives, an organization plans to give team incentives, the employees will be more willing to help one another. The high performers will understand that they will get incentives only if the low performers up the quality of their work, and thus will be more willing to help their slow performing teammates.

Enhances Performance
There is no doubt about the fact that incentive programs enhance the employees' performance. If the employees have been working in the organization for some time, they might feel bored with their work. For such employees, an incentive program, which promises to pay them more for their work or gives them incentives like a family holiday to a foreign location, can act as a major performance booster.

Contributes to Employee Retention
If a lucrative incentive program is in place, the employees who perform more, would not want to switch jobs. Thus, an incentive program which offers more salary and conveniences to the employees, contributes to employee retention, saving a lot of hiring and training costs for the organization.


De-motivates Employees
On the flip side, employee incentive ideas can sometimes de-motivate certain employees and backfire. If individual incentives are given by an organization and some of the employees are unable to meet their goals, they would obviously not get the incentives. On the other hand, their colleagues, who outperform, can benefit a lot from the incentives. This can greatly de-motivate the low performers and they might not even make the efforts to reach their target. This can be detrimental to the organization as a whole.

Creates Conflicts
Another drawback is that if incentives are based on group performance, the top performers, who obviously contribute more to team goals, might feel that they are working more but are being given the same incentives as the low performers. This can create many conflicts in the team, which can affect the team's work and ability, in the long run.

Contrary to Teamwork
Incentive programs can sometimes create an environment of extreme competitiveness. This is not good for offices in which most of the jobs are done in teams. Competitiveness can create resentment and hence, affect the relationship between the team members. This decreases the ability of the employees to work in teams.

On the bright side, such programs motivate employees and help the organization achieve its goals. On the flip side, they create conflicts, may sometimes lower the quality of work and can hamper team work. In spite of these weaknesses, if employee incentive programs are well-planned, simple, realistic, measurable and timed well, they can contribute immensely to an organization's success.