PRE-REQUISITES OF EFFECTIVE INCENTIVE SYSTEM

sunandaC

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PRE-REQUISITES OF EFFECTIVE INCENTIVE SYSTEM


All things considered, it may be concluded that in many industries or undertakings and for a large group of operations, well-designed systems of payment by results shall yield advantages to all concerned. Many of these advantages will be realized provided sufficient safeguards are provided. Such p re-requisites are:

1. The co-operation of workers in the implementation of an incentive scheme is essential because the employees somehow devise, if they do not like a scheme, ingenious ways of evading or sabotaging the plan, often with the tacit connivance of the foreman or supervisor,'' Workers' co-operation may be secured through proper discussion with their representatives. In particular, workers' co-operation is necessary in:
(i) The methods followed in measuring the results or output upon which payment is based;

(ii) The methods followed in setting wage rates for different classes of work; and

(iii) Appropriate safeguards concerning earnings, job security and settlement of disputes over piece-work rates and allotted time.

2. The scheme must be based on scientific work measurement. The standards set must be realistic and must motivate workers to put in better performance. Workers must be provided with necessary tools, equipment and materials so as to enable them reach their standards.

3. Indirect workers, such as supervisors, foremen, charge hands, helpers, crane operators, canteen staff, store keepers, and clerical staff should also be covered by incentive schemes.

4. There should be management commitment to the cost and time necessary to administer incentive schemes properly, and these must be carefully assessed before embarking on an incentive programme. There are many situations in which the potential gains are just not worth the cost and effort involved.

5. There is greater need for planning. Many incentive schemes, started hurriedly, planned carelessly, and implemented indifferently have failed and have created more problems for the organisation than they have tried to solve.

6. The other safeguards are:

(i) The incentive scheme should be appropriate to the type of work carried out and the workers employed.

(ii) The reward should be clearly and closely linked 10 the efforts of the individual or group.

(iii) Individuals or groups should be able to calculate the reward they get at each of the levels of output they are capable of achieving.

(iv) Individuals or groups should have a reasonable amount of control over their efforts and therefore their rewards.

(v) The scheme should operate by means of a well-defined and easily- understood formula.

(vi) The scheme should be properly installed and maintained,

(vii) Provisions should be made for controlling the amounts paid, to en- sure that they are proportionate to effort.

(viii) Provisions should be made for amending rates in defined circumstances

(ix) Create incentives for performance and disincentives for non-performance.

(x) Set and review specific objectives for each employee periodically.
 
Incentive system increases the competition and make the ambience competitive. There are various ways as explained above but I would like to elaborate it's benefits.

Benefits of Incentive system:

1) Increases Confidence
2)Creates Competitive environment
3)Increase Sales
4)Increase Revenue
 
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