June 22nd 2017

Incentives for Motivation and Performance: Current practice and future direction

PARC last looked comprehensively at incentive reward in 2010, in conjunction with WorldatWork.

The report reviewed the principal theories of motivation and findings on engagement, and
explored via survey and qualitative interviews how organisations were tackling the development of incentive plans. There was particular interest in how organisations found the right balance across a series of dilemmas inherent in designing and operating incentive schemes:

  • Using multiple measures vs keeping it simple
  • Keeping it current vs keeping it constant
  • Following market practice vs customising to strategy
  • ‘Incentives’ vs ‘rewards’
  • ‘Pay for performance’ vs ‘perceived fairness’.

The business, political and societal context for incentives has certainly moved on since then, and the subject has come under increased public and regulatory scrutiny. Executive pay, its perceived excesses, governance and future development have been the subject of much reporting and debate over the years – to which PARC has obviously contributed. But sometimes it seems as though this is the only aspect of reward and incentives that is getting any airtime.

This short report starts by recapping the evolution of theories on the link between incentives and motivation, and summarises recent evidence on the linkage (or not) between incentives and performance. Does the evidence show whether incentives make a real difference to performance? And if they don’t, why are they still so all-pervasive?

It goes on to explore what organisations are currently doing in the world of incentives in levels below the Executive Team, and why, and what the direction of travel looks like. Are the dilemmas previously explored still relevant, or have they been superseded? How do organisations, particularly complex ones, exert appropriate governance? Is there a trend towards simplification? Are people taking more account of teams, or is it still mostly about the individual? Are organisations being inventive, or are they all working with the same models?

Exploring these issues seemed to raise more questions than give easy answers, so it is probably fair to say that Reward Professionals will be in keen demand for the foreseeable future! It will be interesting to see how the emergent themes play out over the next few annual cycles.

This resource is available to PARC members only. To access, please log in with your username and password.

If you are not a member of the PARC network and are interested in membership please contact Richard Hargreaves, Commercial Director, on +44 (0) 20 3457 2630 or at richard@parcentre.co.uk.

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