Multiple Employee Incentive Plans: Too Much of a Good Thing?

Abstract

It is becoming increasingly common for employees to have their compensation determined in part by multiple incentive plans. Many employees are covered by merit pay plans as well as individual or group incentive programs such as gainsharing, profit sharing or other bonus plans. From a strategic perspective, these plans are intended to facilitate organizational goal attainment and simultaneously to help employees reap the benefits of their efforts. While targeting specific organizational objectives and reinforcing employee behaviors, the combination of multiple incentive systems may have some unanticipated negative consequences. Careful design and implementation can increase the success of such programs.