Understanding Financial Incentives

Individual and team-based financial incentives

Individual, team-based, and organizational

To focus employees’ motivation and attention

<p>Bonus plans and stock options</p> Signup and view all the answers

<p>Loss of the bonus</p> Signup and view all the answers

<p>Due to their common features compared to organizational rewards</p> Signup and view all the answers

<p>Incentive schemes are usually linked to performance at a global level, such as a team, or at the level of each individual unit.</p> Signup and view all the answers

<p>Quota, budget-based, piece-rate, and tournament schemes are the types of incentive schemes that were examined for management accounting.</p> Signup and view all the answers

<p>Quota schemes had the strongest impact on incentive effectiveness, followed by piece-rate schemes and tournament schemes.</p> Signup and view all the answers

<p>Incentive intensity is the overall magnitude of the incentive as a proportion of total pay. Some studies have demonstrated positive relationships between incentive intensity and effort mainly for individual incentives.</p> Signup and view all the answers

<p>Rynes et al. (2005) proposed that one disadvantage of strong incentives may be an increase in risk aversion behavior to avoid the risk of a downside in earnings.</p> Signup and view all the answers

<p>The optimal intensity of incentives depends on the extent to which higher performance can be created by additional effort, which, in turn, depends on the type of task, the performance measure, and team characteristics.</p> Signup and view all the answers