Question

what are a some short comings of a short-term production incentive program?

Answer 1

Disadvantage: Employee Resentment

Employees who do their best and still don't qualify for incentives may become resentful of the star performers. Some workers find the rewards a disincentive. When they see they can't compete, they give up, and their performance suffers. If you substitute an incentive scheme for part of their pay, the action can alienate your staff. From the perspective of workers who don't qualify for the bonuses, you've imposed a pay cut.

Disadvantage: Built-In Limitations

Incentive programs are easier to apply to some departments than others. If you're in manufacturing, you can tie the incentives to the amount of product made or to minimizing errors. You can reward salespeople for the amount of sales revenue they bring in.

With other workers, it's hard to come up with a metric that works. A newspaper can reward salespeople for above-average advertising income, but how should they incentivize reporters? Number of stories? Length of stories? The relationship between writing and revenue is hard to assess.

Disadvantage: Side Effects

Employees who want to earn incentives may do so in ways that hurt the company as a whole. If factory output is the benchmark, workers on the shop floor may prioritize speed and let quality slide. If sales volume is what counts, salespeople may offer customers discounts or deals that eat into your profit margins.

Cons to Using Monetary Incentives to Motivate Employees

There’s a downside as well. Here are some of the potential pitfalls to using a monetary incentive program:

• When used continually, a bonus or other incentive can come to be seen as an entitlement rather than a motivator.
• It’s easy to get unintended consequences if an employer is not clear enough on the behaviors it is hoping to incentivize. The classic example of this is creating an incentive (or commission) for salespeople based solely on revenue generated, without any regard to profitability. Goods sold at a loss are not usually beneficial!
• This type of program can sometimes actually become de-motivating—unfortunately, incentive schemes don’t always work the way they were intended. For example, consider an employee who just barely missed his or her goal (and therefore did not get the extra money). That employee may be less motivated going forward.
• When monetary incentives are tied to group performance, it can create frustration if there are perceptions of unequal contribution among group members.
• If incentives are based on competition among employees, it can lead to an environment where employees are actively trying to out-do their colleagues. On the surface that sounds like it could lead to high performance, but in reality, it can lead to employees sabotaging the efforts of their teammates or working on their individual goals to the detriment of the company’s goals.
• Implementation comes with costs. It takes time and effort to set up and track incentive programs and ensure they’re paid out accurately.
• Monetary incentives may be less effective than nonmonetary incentives, especially over time.