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Unformatted text preview: ty­based compensation systems. Support a compensation strategy to attract and retain top­ performing employees. Incentive Plan Effectiveness Evidence that there is a relationship between incentive plans and improved organizational performance. Types of Incentive Plans Types of Incentive Plans Advantages of Incentive Plans • Focuses employee efforts on specific performance targets. • Costs are variable and linked to the achievement of results. (Base salaries are fixed costs largely unrelated to output.) • directly related to operating performance. • objectives met, incentives are paid, objectives not met, incentives not paid. • Can foster teamwork and unit cohesiveness when payments to individuals are based on team results. • Distributes success among those responsible for producing that success. • Provides reward or attracts top performers when salary budgets are low. Do Incentive Plans Work? Do Incentive Plans Work? Successful Plans Use important organizational metrics Use payout formulas...
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