Question

The factor contributes to ineffectiveness of incentive scheme by rewards discourage risk-taking. Explains

(300 words)

Answer 1

When employees know they will get a reward by following a certain method, they will tend to continue following the method instead of thinking different or trying to do things differently. The presence of a reward system kills employees’ instinct to take a risk and think differently. The creativity in the system dies a slow death due to rewards. For example – An employee finds a process that can improve his productivity by 20% however there is a 2% chance that process impacts the quality of the product. The employee will tend to maintain the status quo to get his reward instead of thinking of ways to improve the process so that product quality can be maintained. The employee will solely focus on quality numbers instead of engaging in a process that can benefit the organization much more.

Further, the reward systems discourage innovation and employees become solely focused on how to get the reward. Being innovative is a challenge and employees have no certainty that they will get the reward for being innovative. This leads to people losing interest in the organization as they might not be challenged enough even though the mundane process they follow may lead to rewards.