Incentives can be a useful way to reward performance but they need careful thought and robust guidelines. Unlike a bonus – a discretionary, informal reward – an incentive is usually contained in a policy that indicates a certain reward will be paid if performance outcomes are achieved. An incentive program aims to introduce thoroughness into the reward determination process, through budgeting and financial goal-setting. It also provides an employer-of-choice feature in a competitive labor market and helps to reinforce a success mentality and conversely penalize failure A sound framework is needed to ensure success and in my experience, programs should be: Clear and simple. Take account of the shareholder/owner perspective. Focus on a small number of key measures. Be realistic. Include both financial and non-financial measures (weighted towards the financial). Recognize competitive realities. Align with agreed strategies, actions and budgets. Deal fairly with uncontrollable events. Encourage teamwork and cooperation. Consistent. The bottom line is that a properly planned incentive program will meet corporate governance requirements, fairly reward employees and include provisions that help to ‘expect the unexpected’. Incentive Compensation Program Nature of Business: Electricity Market Purpose The purpose of this Incentive Program is to motivate and reward key employees for accomplishing individual performance goals established in accordance with the business targets of the organization and the Company. Guidelines Organization managers nominate key individuals who are crucial for, and have leverage on, the success of the organization to participate in the incentive compensation plan. Nominations must be made prior to the beginning of the plan year. Key employees hired prior to July 1 may be added to the plan for the calendar year in which they are hired. Their award will be prorated based on their amount of service. The President must approve each nomination and the incentive award target, based upon the nominees’ potential and expected contribution to achieve near-term health and long-term growth of the Company. The plan participant must be employed by the company at the time of the incentive plan payout (which will occur within 75 days after the close of the plan year) to receive a payout. As an exception, participants who had a full-time regular status for at least six full months during the plan year, and who terminated due to death, retirement, permanent disability (as certified by a medical doctor), or reduction in force, will receive (or their beneficiaries will receive) an incentive award, prorated based on their length of service, within 75 days of the close of the plan year. Participants may be removed from the incentive plan due to reassignment or poor performance. At the beginning of the plan year the President will publish business targets, and approve the incentive plan participation list. The amount of the incentive award will range from 0% to 150% of target and will be determined by the employee's manager, based on actual performance relative to the participants' goals. Incentive awards must be approved by the President prior to payment. Participants may choose to defer the payment of their incentive award (or a portion of their award in 25% increments) beyond the vesting date. There are two deferral options: a) 5 years beyond the plan year, and b) 10 years beyond the plan year. The deferral election must be made in writing prior to the beginning of the plan year. If no deferral election is made, the award will be paid as indicated above. The deferral election cannot be modified once the plan year has begun. Deferred incentive plan awards will earn interest based on <a standard index>, as calculated by Finance Department. Employees who elect to have their incentive award deferred, and who terminate prior to the deferral payment date but after the payment date of non-deferred awards, will receive the award, as soon as administratively feasible, after their termination. Explain why merit increases may fail to motivate employees. What can you suggest to increase the employees’ motivational value? Every person has his own wants and desires, for that purpose he/she works to get fulfill them. It is not enough for an employee to be satisfied materially but non material aspects are as essential as material aspects, an employee need both to be fulfilled. Material means his salary, bonuses, allowances, job security and other facilities. While non-material aspect includes leaves, excellent working environment, good understanding among colleagues and top management, all these elements have much to do with motivation of employee. Employee’s play very important part in the daily operations of any organization especially where the markets are very competitive and have ever-changing environment which is supported by majority of the academics. The fate of an organization is usually determined by its employee’s so it sounds logical to understand how employees can be motivated. As far as the employee’s motivation is concerned, employee motivational incentive programs have been found to be the most commonly adopted technique among organizations. The purpose of the program is to reward productive employee’s productivity, reinforce positive behavior and stir interest in employee. Employee’s productivity and how it could be enhanced is central to the concern of industries and organizations, therefore many organizational scientists, are very much interested in different schemes and techniques related to employee’s productivity and its growth incentives are one of those techniques used in workplaces to stimulate employee’s in order to get desired employee’s productivity. Human resource provides basis for an organization to achieve sustainable competitive advantage. Since organizations are operating in a dynamic and competitive business environment, they need to develop strategies to acquire and retain the competent workforce. Human asset is considered to be the most important asset of any organization and in order to get the efficient and effective result from human resource, motivation is necessary (Zaman, 2011). Researchers divide motivation into two categories, intrinsic and extrinsic. Extrinsic motivation comes from external factors such as financial rewards and needs to be refilled at regular intervals not to lose its effect. Intrinsic motivation comes from inside of an individual and is the kind of motivation every organization wishes their employee’s would have. To answer the question why merit increases, fail to motivate employees let us just say that merit increases are not significant or consistent enough to make a positive impact. The key word here is “sustained” or “continuous”. Merit increases might have a temporary positive effect on performance, but it typically does not last long enough to make a true difference. For example, consider the following: when an employee who earns 50,000Php a month has a salary increase of say 6 percent. That means an employee who earns 50,000Php a month will receive a 3,000Php merit increase which translates to 136.35Php per day, or 17.04Php per hour. Workers who just received their raise are undoubtedly happy. After all, they’re earning more money than they used to. But at some point, they will forget about the extra 17 pesos in pocket money they’re receiving each day. The question then becomes how to keep employees encouraged and inspired throughout the rest of the year. Moreover, it’s important to remember that merit increases represent just one factor in your overall compensation strategy. Consider the following points as well, giving an employee a merit increase when his or her base pay isn’t properly aligned internally or with pay rates in similar positions in the broader job market does not promote sustained performance. In fact, it may do just the opposite, given that more employers are moving toward greater salary transparency. Employees are starting to talk more among themselves about salary as well. The days when people’s earnings were a closely held secret may soon be behind us. There is more to compensation than a paycheck. Organizations should take a holistic approach to their total rewards systems and communicate to employees that benefits including professional development and training have a tangible value associated with them. Employees want rewarding work, but they also want a rewarding life. An increasing number of employees are saying “no” to long hours and unfulfilling jobs, even when the money is way above market. Merit increases will not entice people into working harder and longer, especially if the alternative is to spend more time with their families. So what will promote sustained performance improvement? Research suggests that managers play the greatest role in unlocking engagement and yet [Gallup, 2015] data show that only 35 percent of managers feel engaged themselves, and just 1 in 10 have the requisite skills and talent to effectively lead a team. The trickle-down effect is unfortunate, with just 31.5 percent of U.S. workers reporting that they feel engaged in their job. Boosting performance starts by selecting the right people to be managers and then equipping them with the training and tools they need to hire and manage the best talent. Managers must become coaches and mentors instead of hiding in their offices looking at spreadsheets. They need to recognize the excellent work of employees, encourage direct reports’ development and work on their own professional growth as well. While doing all this is more complicated than simply handing an employee an extra 17Php a day, it’s an investment that will continue to pay off all year long. Reference: http://www.gallup.com/businessjournal/182228/managers-engaged-jobs.aspx https://courses.lumenlearning.com/boundless-business/chapter/managing-employees/ https://www.incentivemarketing.org/IMA/IMA/Resources/How_to_Develop_an_Incentive_Program.a spx http://www.cornellhrreview.org/effective-employee-incentive-plans-features-and-implementationprocesses/#_edn4 https://sprigghr.com/blog/hr-professionals/extrinsic-intrinsic-motivation-examples-whats-thedifference/ Zaman, K., Nadia, S. H., Shah, S. S. & Jamsheed, H. (2011). Relationship between rewards and employee’s‟ motivation in the non-profit organizations of Pakistan. Business Intelligence Journal, 4(2),
