The presentation would help understand the science behind Incentives covering the various aspects of it with giving a brief idea on creating an effective incentives plan

1. Understanding
INCENTIVES
© Sagar Gaikwad
sagargaikwad577@gmail.com

2. What are Incentives?
• An incentive is
something that
motivates an
individual to
perform an action.

3. Do a Reward & an Incentive mean
exactly the same thing???
• A reward, unlike an incentive or disincentive, is always
understood to be merited or deserved. Though offering
a reward may function as a motivator to action, or as
an incentive in that sense, rewards do not always
function in this way.
• For example, people are sometimes rewarded
unexpectedly for past achievements. They deserve the
reward, but, since they did not anticipate it, it does not
serve as a motivator.
• Very basically, Reward is given to you if you have done
something appropriate & Incentives are provided so
that you do something appropriate.

4. Why are Incentives Provided??
• Incentives are provided to employees / workers /
salesmen so that they work intensively.
• An incentive program is used to promote or
encourage specific actions or behavior by a
specific group of people during a defined period
of time (which otherwise may or may not be
performed without an incentive program).
• Incentive programs are particularly used in
business management to motivate employees
and in sales to attract and retain customers.

5. Why incentives are effective??
• Reinforcement Theory:
Behavior that is rewarded will be repeated.

6. Why incentives are effective??
• Expectancy Theory:
Expectancy
If I attempt this level of
performance, am I likely to
succeed?
Motivational Force =
Instrumentality
If I achieve this level of
performance, am I likely to be
rewarded?
E * I * V
Valence
What value do I place on the
rewards available to me?

7. What are the Aspects of Incentives??
Incentives, strictly speaking, share a certain set of core characteristics,
and the concept has a distinctive meaning. Incentives are a particular kind
of offer employed in a negotiation:
1) an offer is made which is an extrinsic benefit or a bonus, neither the
natural or automatic consequence of an action nor a deserved reward or
compensation;
2) the offer is a discrete prompt expected to elicit a particular response;
3) the offer is usually made in the context of an authority relationship—for
example, adult/child, employer/employee, government/ citizen or
government/organization; and
4) the offer is intentionally designed to alter the status quo by motivating a
person to choose differently than he or she would be likely to choose in
its absence. If the desired action would result naturally or automatically,
no incentive would be necessary. An incentive is the added element
without which the desired action probably would not occur.

8. How are Incentives Classified??
Incentives can be to classified according to the different ways in which they
motivate agents to take a particular course of action
• Remunerative / Financial Incentives:
are said to exist where an agent can expect some form of material reward –
especially money – in exchange for acting in a particular way
• Moral Incentives :
are said to exist where a particular choice is widely regarded as the right thing to
do, or as particularly admirable, or where the failure to act in a certain way is
condemned as indecent.
• Coercive Incentives :
are said to exist where a person can expect that the failure to act in a particular
way will result in physical force being used against them (or their loved ones) by
others in the community – for example, by inflicting pain in punishment, or by
imprisonment, or by confiscating or destroying their possessions.
• Natural Incentives :
such as curiosity, mental or physical exercise, admiration, fear, anger, pain, joy, or
the pursuit of truth, or the control over things in the world or people or oneself.

9. What are the Different Incentive
programs??
• Employee Incentive programs:
Employee incentive programs are programs used to increase
overall employee performance. Employee programs are often
used to reduce turnover, boost morale and loyalty,
improve employee wellness, increase retention, and drive
daily employee performance.
• Consumer Incentive programs:
Consumer incentive programs are programs targeting the
customers of an organization. Consumer programs are
becoming more widely used as more companies realize that
existing customers cost less to reach, cost less to sell, are less
vulnerable to attacks from the competition, and buy more
over the long term.

10. What are the Different Incentive
programs??
• Sales Incentive programs:
These programs are primarily used to drive sales, reduce sales
costs, increase profitability, develop new territory, and
enhance margins. A sales incentive plan (SIP) is a business tool
used to motivate and compensate a sales professional or sales
agent to meet goals or metrics over a specific period of time.
• Dealer Incentive programs:
Dealer incentive programs are used to improve performance
for dealer, resellers, channel partners and other types of
brokers using sales incentive programs. These programs help
companies capture market share, launch new products,
reduce cost of sales and provide momentum for new launches
by incentivizing an external party to drive additional sales.

11. What are the different Incentives
provided??
• Monetary
Bonuses, Profit-Sharing,
Share-ownership, Gift-cards,
Merchandise,
Travel, Experiential etc.
• Non-Monetary
Better opportunities,
flexible work hours,
payroll or premium
contributions, training,
recognition etc.

12. What are the different incentive
schemes??
There are four general types of tangible incentive
program types
or schemes widely in use. These include the following,
• Quota-Based Programs -- incentives are given for
meeting or exceeding a performance goal.
• Piece-Rate Incentive Programs -- for increasing rates of
performance – doing more of something.
• Tournament Programs -- where individuals and/or
teams compete with each other for incentives.
• Fixed-Rate Incentives – salary-based compensation.

13. Individual vs. Group based incentive plans

14. Why Incentive Plans Fail??
• Performance pay can’t replace good management.
• You get what you pay for.
• “Pay is not the only motivator.” (Maslow’s Hierarchy of
needs)
• Rewards may rupture relationships.
• Rewards can have unintended consequences.
• Rewards may undermine responsiveness.
• Rewards undermine intrinsic motivation.

15. Implementing Effective Incentive Plans
• Ask: Is effort clearly instrumental in obtaining the
reward?
• Link the incentive with your strategy.
• Make sure effort and rewards are directly related.
• Make the plan easy for employees to understand.
• Set effective standards.
• View the standard as a contract with your employees.
• Get employees’ support for the plan.
• Use good measurement systems.
• Emphasize long-term as well as short-term success.
• Adopt a comprehensive, commitment-oriented
approach.

16. When can an Incentives Plan be called
successful??
• A strong incentive is one that accomplishes
the stated goal and,
• Incentive plan is economical to the
organisation.