Interdisciplinary Approach to Organizational Effectiveness

Evaluating a Corporate Incentive Plan

A large technology firm with over 50,000 employees announces a new company-wide profit-sharing plan. At the end of the year, if the company meets its ambitious revenue targets, every single employee, from the CEO to the entry-level software engineer, will receive a bonus equivalent to 5% of their salary. Which of the following statements best analyzes the likely effect of this plan on the motivation of an individual entry-level engineer?

The Free-Rider Problem in Corporate Incentives

Critique of Company-Wide Incentive Structures

A company-wide profit-sharing plan, where each employee receives a bonus based on the firm's overall profitability, is likely to be a more powerful motivator for an individual employee in a 15-person startup than in a 50,000-person multinational corporation.

Match each type of employee incentive plan with the primary challenge or behavioral outcome it is most likely to create for an individual employee within a large organization.

For an individual employee in a very large corporation, the perceived connection between their personal effort and the company's overall annual profit is often so weak that it fails to act as a significant motivator. This illustrates the principle that the effectiveness of a financial incentive diminishes as the employee's perceived ______ on the rewarded outcome decreases.

A large manufacturing company, with 10,000 employees, wants to increase the output of its 50-person car door assembly team. Management is considering four different bonus plans to motivate the individual team members. Based on principles of incentive design, which of the following plans is most likely to be effective in motivating an individual worker on this specific team?

Evaluating an Incentive Plan's Rationale

Consultant's Dilemma: Choosing an Incentive Structure