Incentive Structure

Examples of Incentive Structure in the following topics:

• Principle-Agent Problem

  • Incentive structures are used in business relationship in order to bridge the gap between best interests of the principal and the agent.
  • Principals offer various incentive structures, which are rewards or motivating factors that drive the agent to work in the best interest of the principal and complete tasks efficiently.
  • Incentive structures include price rates/commissions, profit sharing, and efficiency wages.

• Individuals Respond to Incentives

  • Incentives are ways to encourage or discourage certain behaviors or choices.
  • The study of incentive structures is central to the study of all economic activities (both in terms of individual decision-making and in terms of cooperation and competition within a larger institutional structure).
  • Incentives come in many other forms, however.
  • Natural Incentives: Things such as curiosity, mental or physical exercise, admiration, fear, anger, pain, joy, or the pursuit of truth, or the control over things in the world or people or oneself cause individuals to make certain decisions.

• Incentive Systems for Employees

  • An incentive system is a business management tool that introduces a structured motivation system to promote desired employee behaviors.
  • Incentive systems are often implemented to prevent and overcome poor performance, failure to meet organizational goals, poor morale, increased turnover, and the stress of increased demands on employees.
  • Incentive systems are grounded in the idea that employee effort increases as workers perceive that they are making progress towards reaching set goals.
  • Incentive systems only work when they are closely tailored to the goals of the organization.
  • Incentive systems should use the carrot (reward) as opposed to the stick (punishment) to motivate employees.

• Financial Rewards for Managers

  • Incentive programs, also known as "pay for performance," provide employees, consumers, or providers with financial rewards as a way of motivating better performance.
  • This contrast may be a result of the differing pay structure often associated with upper management.

• Incentivizing Saving and Investment

  • The government can incentivize savings and investment by changing the relative cost of taking each action.
  • There are a number of ways in through which a government can incentivize savings and investment.
  • The government can also incentivize savings and investment in a number of ways.

• Why Study Organizational Theory?

  • Organizational theory studies organizations to identify the patterns and structures they use to solve problems, maximize efficiency and productivity, and meet the expectations of stakeholders.
  • These developments make it easier for a company to produce and thus incentivize firms to aggregate and utilize more efficient methods for running their companies.

• Investing in Research and Development

  • The government can do so by creating a good structure of intellectual property protection, called, broadly, patent law.
  • The government incentivizes the researches by making the research financially affordable (or more affordable).

• SIVA: Solution, Incentive/Information, Value, and Access

  • Information/Incentives → Promotion The "Promotion" in the four Ps model is replaced by "Information," which represents a broader focus.
  • The "I" also stands for "Incentives," such as trade promotions.

• Incentive Theory of Motivation and Intrinsic vs. Extrinsic Motivation

  • Incentive theory argues that people are primarily extrinsically motivated—meaning that most motivations stem from extrinsic sources.
  • Incentive theory is based on the idea that behavior is primarily extrinsically motivated.

• Reinforcement as a Management Tool

  • Incentive programs can reduce turnover, boost morale and loyalty, improve wellness, increase retention, and drive daily performance among employees.