When Organisations Incentivise Poorly, They Punish

Nov 14 , 2020
By Halima Abate (MD)

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Certain things that organisations should strive to do are obvious but when critical, they deserve restating. One of these is the need for adherence to the commitment and practices that contribute to a strong performance by creating significant impacts on their employment practices.

An array of design methodologies to capture the outcome of practices, rather than encapsulate every business activity as an independent metric, should be outlined to track the job quality. There should be systems in place to measure the salient dimensions including use of standards, progress and performance improvement to debate the mission and ensure that there is continuous learning and an adaptive structure. Every single one of these contributes to performance or a results-based management system.

These arrangements will be designed for strategically managing the implementation of agreed-upon activities, assessing the performance, and formulating new or revised strategies.

However, it is difficult to overstate the power of rewards on performance. Certainly, many organisations use some sort of approach intended to motivate employees by tying compensation to one index of performance or another. Such programmes include piecework pay, stock options for top executives, special privileges accorded to “Employees of the Month,” and commissions for salespeople.

Indeed, organisations devise fresh formulas for computing bonuses for employees both in monetary and in-kind approaches. Today many people who are regarded as forward-thinking - those who promote team-work, participative management and continuous improvement - are eligible for the use of rewards to institute and maintain these very reforms.

But it is often the case that rewards might succeed at securing only temporary compliance. Hence, the perception to rely on incentive programmes should be carefully examined as rewards do not create a lasting commitment in the workplace but merely a temporary change to how we carry out tasks.

Besides, there is also the probability that organisations have incentive programmes and implementation details not suited to the business or the organisation. When it comes to producing lasting organisational performance and culture, indeed, most rewards are usually strikingly ineffective. Once the rewards run out, employees lose an inducement to create an enduring commitment to any professional value.

There should be a paradigm shift in incentive conditions, such as pay-for-performance based financing approaches, to relate organisational performance and productivity to the quality of performance where payments are allowed only upon the verified achievement of agreed-upon results.

It is plausible to assume that punishment and rewards are two sides of the same coin.

“Rewards have a punitive effect because they, like outright punishment, are manipulative. ‘Do this and you’ll get that' is not really very different from 'Do this or here’s what will happen to you,'" argues a Harvard Business Reviewop-ed, “Why Incentive Plans Cannot Work.”

When it is an incentive, the reward itself may be highly desired, continues the piece. But this time by making an additional payment contingent on certain key qualitative and quantitative performance indicators, it could serve as a punitive approach.

Performance management is often trumpeted as a value-neutral reform, an apolitical, objective alternative to politically biased forms of decision making that facilitate transparency, coordinated efforts, accountability and conflict resolution.

A pay-for-performance system, a term associated with efficiency improvement systems within the healthcare sector, will create the intended purpose. A salary system that ties wages to performance and output, it will improve the system for collective gain by creating a workplace where employees do not feel controlled. Instead, they would be allowed an environment to do productive, explorative, and collaborative work – fitting to the organisation’s commitment to excellence – of their choosing.

This gives substantial opportunity to examine many concepts related to the impact and importance of giving employees greater incentives to be entrepreneurial and result oriented.

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PUBLISHED ON Nov 14,2020 [ VOL 21 , NO 1072]

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