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Incentive Pay Beats Salary as Top Motivation, Retention Tool

Companies say incentive compensation is one of the best strategies for retention and employee motivation, says a compensation survey.

Companies say incentive compensation is one of the best strategies for retention and employee motivation, says a compensation survey.

Pay for performance is the No. One way companies retain employees, according to a survey of 100 companies by  Ann Bares, a compensation expert and managing partner at Altura Consulting Group.

Companies also rely on competitive salary and benefits packages and “frequent, open and honest information sharing” to reward and retain employees, Bares wrote on her “Compensation Force” blog.

This year has been especially tough on most companies’ revenues and employee compensation, and employees have noticed.

A May 2009 report on employee morale by Watson Wyatt, revealed that 41 percent of  employees “believe that pay and benefit changes made by their employer in the past year have had a negative effect on work quality and customer service.” That’s backed up by a Mercer consulting report that shows many sales and commission structures have shifted base salaries down and commissions up.

The Watson Wyatt report concluded:

More than six in 10 (61 percent) say their companies have reduced or suspended bonuses, while only 35 percent agree their employers reward top employees for performance. Additionally, 43 percent of top performers said individual performance expectations have increased since last year, while one-third (32 percent) say their company’s financial performance goals have increased.

[Image by Steve Wampler via Flickr cc 3.0]

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Discussion

One comment for “Incentive Pay Beats Salary as Top Motivation, Retention Tool”

  1. pay for performance doesn’t work to improve performance.

    competitive salary and benefits packages and then shut up about it — does work … if “frequent, open and honest information sharing” also happens. Pay enough, shut up about money, and then make the work environment a good one.

    See this talk by Dan Pink, embedded here:
    http://mathcurmudgeon.blogspot.com/2010/06/incentives-ill-make-teacher-merit-pay.html

    Posted by Curmudgeon | August 19, 2010, 10:43 am

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