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Individual and Group Incentive Plans Research Paper

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Updated: Apr 9th, 2022

The need for incentive rewards as a form of promoting quality and productivity has made companies across the global village to adopt different incentive plans.

Often, these plans are aimed at enticing the workforce to perform above the normal standards. HR professionals have noted enterprise, individual, and group incentive plans.

Thus, this reflective paper adopts a deductive approach presenting the pros and cons of individual and group incentive plans review from refereed journal articles on the perspectives of quality and relevance.

In addition, the treatise looks into the key quality measures that are considered important by incentive plan implementers.

Incentive plan is one of the most discussed topics in the human resource management. Depending on the plan adopted, every group has an interpretation of the term ‘quality’ as a result of incentive plan implementation.

However, there is usually a lot of difference in people’s perspectives about quality depending on the type of incentive plan adopted. As the oldest form of incentive plan, piecework is “an incentive plan under which employees receive a certain rate for each unit produced” (Brink, Fruytier, & Thunnissen, 2012, p. 219).

Generally, piecework plan’s merit is that “employees are paid based on their performances” (Kaynak, 2003, p. 429). Thus, it inspires underperformers to improve on their service delivery upon witnessing top achievers receiving rewards.

However, piecework plan “may not motivate employees especially when employees believe that the above average performance will provoke disapproval between the fellow coworkers” (Brink, Fruytier, & Thunnissen, 2012, p. 219).

Moreover, this type of incentive plan is restricted to specific situations and may not present quantifiable results in long term. Generally, it requires “constant administration as well as industrial engineers and/or industrial engineering technicians to maintain the system” (Brink, Fruytier, & Thunnissen, 2012, p. 220).

Group incentive plans are aimed at giving rewards to a group or a team for an outstanding achievement. Instead of concentrating on an individual, these plans attempt to promote quality through team encouragement.

Often, based on the group’s overall performance, many firms pay the same quantity of incentive to all members of the group. This type of incentive plan is best suited “when quality is more important than quantity” (Kaynak, 2003, p. 432).

Thus, group incentive plans “differ from the individual ones as they encourage employees to cooperate each other in order to achieve companies’ goals” (Brink, Fruytier, & Thunnissen, 2012, p. 220).

Among the merits of group incentive plans include minimization of envy between employees, acquisition of different learning skills from several interacting teams, and collective responsibility in execution of duty.

Besides, member of these teams are likely to adopt healthy competition as group interest will override that of self interest.

However, it has the disadvantage “of pushing each other to the limit to perform or the free ride effect when one team member is putting less effort to succeed but he or she shares equally the reward with the other team members” (Kaynak, 2003, p. 429).

In addition, this plan is likely to be affected by inter group social misunderstandings and group incompatibility.

The initial step towards implementing a quality management tool like an incentive plan is to identify the activities that constitute quality for any specific goal.

This would lead to identification of key performance indicators which should be benchmarked in initiating the plan. It is important to note that perception of the important indicators varies according to the frame of the incentive plan adopted.

For example, perspective of piecework plan about what constitutes quality and activities that will help to improve it could be different from that of group incentive plan.

Therefore, before formulating a framework of incentive plan for an organization, it is imperative to ascertain the attitudes and perceptions of individuals working in that organization towards what they consider quality performance.

Therefore, a good incentive plan should address the requirements and concerns of majority of the stakeholders. This will help in converging everyone’s perceptions towards shared goals. Firms are always trying to meet the above requirements.

However, the absence of formal initiatives to ensure comparability of provision and procedures impose a human resource management challenges.

In the absence of flexible incentive benchmarking initiative in an organization, “there is lack of clarity regarding areas where the institution is following best practices and the areas where there is a significant need for improvement” (Kaynak, 2003, p. 430).

A need therefore exists to define a mechanism for quality improvement in the firm based on sharing of the best practices between firms and learning from each other. The first step in devising an incentive plan mechanism is to learn how the quality is perceived within the firm.

This should be followed by determining measures that are considered as important benchmarks. Within the context of human resource management, aspects of quality improvement as a result of incentives should be linked with the institutional strategy.

A skeptical approach “in reviewing effectiveness of incentive plans identifies lack of proper measures” (Schneider, Chung, &Yusko, 1993, p. 198).

Conclusively, the term ‘incentive plan’ is of significance in promoting performance. Often, the results are determined by the type of incentive plan adopted.

Once the understanding of quality improvement is realized, incentive plans facilitate better quality management practices.

References

Brink, M., Fruytier, B., & Thunnissen, M. (2012). Talent management in academia: performance systems and HRM policies. Human Resource Management Journal, 22(2), 201-223.

Kaynak, H. (2003). The relationship between total quality management practices and their effects on firm performance. Journal of Operations Management, 21(4), 405–435.

Schneider, B., Chung, B., &Yusko, K. (1993). Service Climate for Service Quality. Current directions in Psychological Science, 12(2), 197-200.

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IvyPanda. 2022. "Individual and Group Incentive Plans." April 9, 2022. https://ivypanda.com/essays/incentive-payment-plans/.

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