Linking goals to monetary incentives

Locke, Edwin A.
November 2004
Academy of Management Executive;Nov2004, Vol. 18 Issue 4, p130
Academic Journal
The article discusses the complexities of designing an employee incentive plan that works. The author argues that first and foremost, incentive systems must be paired with clear goals. Four methods of goal-based incentive programs are presented, as are their pros and cons. The first method involves assigning stretch goals with bonuses for success. The second method creates several goal levels with corresponding bonuses. Method three creates a linear systems with goals attached to incremental performance goals. The fourth method is a reward system determined by management based on several factors, such as individual performance, company performance, how much of the goal was achieved, etc. Further discussion of how these systems should be constructed is presented.


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