Incentive plans

Incentives can come in many forms. Before you formulate your motivational program, it would help to understand different types of incentive plans. Stock Options A stock option is an incentive offered to employees that want to invest their money into the company stock by purchasing stock with pre-tax money.

Incentive plans

Motivation Employee incentive programs are programs used to increase overall employee performance. Points programs[ edit ] Points-based incentive programs are a type of program where participants collect and redeem points for rewards.

Points programs may be used to incentivize both employees or consumers. Depending on the program type and the organizational objectives, points can be awarded on a number of criteria including positive employee behavior, the demonstration of organizational values, repeat customer purchases, the sale of new products, increased overall sales, or even the use of proper safety precautions.

In addition to point awarding, the levels at which points can be redeemed can be customized by the organization. Loyalty programs are a frequently used points-based incentive program in which customers that exhibit a certain behavior are rewarded with points, reinforcing that behavior.

Sales[ edit ] These programs are primarily used to drive sales, reduce sales costs, increase profitability, develop new territory, and enhance margins.

Sales incentive programs have the most direct relationship to outcomes. SIPs are used to incent sales professionals where total sales are not a precise measure of sales productivity. This is usually due to the complexity or length of the sales process or where a sale is completed not by an individual but by a team of people, each contributing unique skills to the sales process.

SIPs are used to encourage and compensate each member of the sales team as they contribute to the team's ability to sell. It is not uncommon for the members of such teams to be located in different physical locations and for the product introduction to happen in one location and the purchase of such a product to occur in another location.

Dealer[ edit ] Dealer incentive programs are used to improve performance for dealer, resellers, channel partners and other types of brokers using sales incentive programs.

These programs help companies capture market sharelaunch new products, reduce cost of sales and provide momentum for new launches by incenting an external party to drive additional sales.

Companies that run their programs online experience efficient communication, reporting, and awards fulfillment. Online incentive programs pose an attractive alternative to traditional offline programs since online programs save money and time and allow organizations to have greater control.

Affiliate marketing A website which pays people in gifts or cash for completing provided offers and referring other people and frequently use an [Affiliate marketing affiliate] model.

These sites are typically sponsored by companies in order to advertise their products.

Incentive plans

The sites are in turn paid for advertising and attracting new clients. By collecting user data that the user submits, companies can target certain areas of clientele and offer products accordingly. This usually requires viewing advertisements, signing up for a site, entering a PIN code through a mobile devicepurchasing trial products or full products or completing surveys.

This in turn rewards the specified user in cash, points, check, or its equivalent. Alternately, an offer may entail referring website visitors by inviting them to a target site under a referral link unique to every user.

Referrers in turn are either paid for every person they invited or as percentage of resulting revenue. Monetary rewards[ edit ] Selecting the appropriate rewards is vital to any program's success. Effective rewards will both motivate short-term behavior and provide motivation over time.

There are several types of rewards. Pay for performance human resources While incentive program participants often state that they prefer cash to non-cash rewards, research has shown that cash is a poor motivator due to its lack of "trophy value.

Given that most people do not generally talk about cash awards, cash programs do little to generate the interest required to create an effective incentive program. Research shows that pay for performance often gives only short term gains, frequently gives no gains at all, and may give reduced performance.

Accordingly, non-cash rewards tend to stand out as rewards for performance, which enhances their long-term effect. Branded merchandise and other non-cash rewards have high trophy value, bringing greater recognition to the recipient at the time of the award and possessing a long-term lasting effect that can result in increased engagement in the organizations goals.

In general, they are available in two types: In the Incentive Federation Study of Motivation and Incentive Applications, gift cards were ranked as the most frequently used type of corporate reward.

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This form of reward gives organizations the ability to offer their employees and customers interesting experiences as incentives.According to Business Town, profit sharing is another incentive plan done with pre-tax dollars.

The company sets aside a portion of their pre-tax profits and distributes that money to the employees. In this video, learn about the powerful effects of incentive plans at individual, team, and organization-wide levels, including both short-term .

Short and Long-Term Incentive Plans It believes that incentives should take the form of value sharing which are paid out of the productivity profit of the company.

This is a "self-financing approach" that rewards individuals for their contributions to value creation while protecting shareholders.

Sep 19,  · Management Incentives. Management incentive plans can also be difficult to create. While it is the duty of managers to work to maximize shareholder wealth by working for what is in the best.

Incentive plans motivate employees to perform their best. Companies reward employees with incentives such as a share of the profits or specialized training.

Combining incentives for individuals, teams, departments and the company as a whole can be particularly effective. Aug 24,  · The New York Times reported not long ago that variable compensation—payment of short-term incentives and bonuses—is on the rise.

In these incentives accounted for close to 4% of payrolls.

Incentive program - Wikipedia