Game Theory Based Incentive Program

Managers in many cases are presented with sales incentives in a retail environment. These incentives may range from free products, to cash prizes, to trips, bonuses, etc.

The purpose for the organization Walgreens is to stay put in a dynamic, self-motivated and energetic business environment. Walgreens is a successful business looking to progress overall presentation and place the company for potential expansion. In order for this to follow through, a total rewards program needs to be created. The incentives and compensation plan must connect with the goals of the organization. A solid rewards program will build motivation in the work place. As the text states, “The notions that rewards are means to motivate employees assuming that the rewards are distributed fairly. Rewards seem to be part of many different perspectives in motivation

Although, short-term or outcome based financial incentives may be profitable to some, they may not be an effective approach always. For example, some individuals in desire to receive a large amount of incentive to reach the specific health outcome such as weight loss, he/she might choose to starve to reach the target, followed by potential adverse effects later. On the other hand, many individuals fail to maintain healthy behaviors after attaining the health outcomes and on receiving the incentives. Furthermore, Incentives tied exclusively to health outcomes may discriminate those who are in utmost need of health improvement such as the elderly and socioeconomically backward individuals, as outcome-based incentives may unintentionally overcompensate

However, because human behavior suggests that rewards motivate people, the manager – Bent - implemented an incentive plan, Scanlon, to boost productivity and sales. Identification and Analysis of Root Causes of Known Organizational Issues The manager chose the Scanlon plan because it engages the employees in decision-making processes and rewards their creativity. Since human beings find it difficult to accept significant changes, the employees showed little enthusiasm in the plan (Wagner III, 2014). Nonetheless, after engagement with workers from another firm that implemented the same plan, it was accepted.

Organizations have to be very careful and very creative when it comes to utilizing bonus pay in order to motivate employees and drive production.

Having buy-in from key stakeholders is crucial for the success of an incentive pay system. For example, if top management does not support such a program, lower-level managers will place little importance on effectively administering the program. Hence, a lack of top management support often leads to a lack of accountability. (Gordon, Kaswin)

Using a consequentialist perspective, I can understand to a certain degree why Sears implemented their new productivity incentive plans in all of their auto centers. This approach focuses on the results, or consequences, of the action or decision. Upper management’s primary goal was to increase profits as much as possible after years of declining sales and profits. In order to achieve this result, they decided to develop more of a commission based pay for everyone involved in the auto center in order to motivate employees to achieve higher sales. Using this new approach would likely result in positive results for all stakeholders

Piliavin et al. (1969) conducted a filed experiment in a New York subway to support the cost-rewards model. There were two conditions and 4450 participated in total. In one condition a victim appeared as a drunk man carrying a bottle of alcohol whereas in the second condition the victim gave the impression of an ill person holding a cane. After several minutes the victim fell on the ground interested in observing how much time it would take for people to help. If no one did a confederate went and assisted. It was revealed that out of the 65 times the sick man was helped 62 whereas the drunk victim was helped 19 from the 38 times. What is also noteworthy, is that 90% of helpers were males showing that the costs are higher for a female who would

After reading and studying the case, I recommend that Sally considers the option of team based incentive program for the staff. While, there are several advantages to both the piece rate compensation system and team based incentive plan, Sally could consider the piece rate system as an alternative route. The idea of following the action plan of another very successful business can be rewarding and give the company an opportunity to see where they can also improve. Jack Hopson is a very experienced employee that can give Sally insight on the best approach to a successful business. It appears that employees have individually defined roles and team efforts as well. It would be beneficial to communicate the goals and missions to the team as whole.

Many Problems in Organizations are created because of Faulty Incentives and Flawed reward systems that are setup to accomplish one thing but actually does the opposite.

Bank of America has an open compensation plan that allows individuals to see what kind of pay and compensation plan they can expect to receive upon starting their jobs at Bank of America. Presently, the company uses incentive programs to motivate and entice their employees. Incentive programs are a formal scheme often utilized to support and persuade unambiguous actions by a particular group of individuals throughout a specified amount of time. Most of the time, incentive programs are utilized in business management so staff members can be encouraged and in retail so customers can be retained and drawn towards the company. The company also utilizes person-focused pay programs, which signify

Situation Overview- Our organization, Rewards, Inc., is a company that provides reward services to clients who use our particular DCover card. Rewards, Inc. (RI) has contracted with DCover to provide services to clients in the manner of earning reward points for travel, shopping, hotels, etc. as a reward for using the branded card (see right). The advantage for the credit card company is that they do not need to manage the rewards program, and there is cross-incentive for the client to choose that card. The incentive for RI is that there is a negotiated fee with the credit card companies and X% of different types of sales goes directly to RI. In addition, RI contracts with other partners to provide the gift incentives, which also require that the RI card be used. The operational concern revolves around getting enough merchants to agree to subscribe to DCover Card services so that a needed number of consumers can shop, earn rewards, and prefer using DCover over MasterCard, Visa, or American Express.

Instead of jumping to different achievement goals as problems arise, the visions and beliefs should have been determined first and that would help shape the overall goal of the company. While working towards goals such as profitability and growth, the visions and beliefs help keep employees in line and to some extent control the minimum expectations of the development of products, thus possibly lessen or avoid problems that did arise. The incentive scheme were not properly designed to take into account effects of employee actions and the impact it would have on the company as a whole and other stakeholders. It should some what reflect and reiterate these visions instead of promoting and motivating employees to be self interested in their own affairs and achieving the targets at “all costs”. All in all, there were minimal controls and checks in place, it was more of a one way push towards the goals and not looking back

Keeping employees motivated in addition to creating incentives and/or additional ways for employees to receive more compensation will create better performance overall within an organization. Contrary if company B gives their employees incentives to perform, without any motivational tactics they probably will not have as many top performances as company A, in addition the company may only seek short term rewards verses have long term success. Lack of motivation for employees within an organization, can cause long term damage for the company’s success. Different things motivate everyone; therefore there should be a system in place to keep employees motivated for the long term success of the company. In the MBM textbook under the concept of incentives, compensation, and motivation, there are a couple of different views of how it should be applied within an organization. We will discuss The Social Role of Profit, Personal Profit and Losses, and the way Market-Based Management view how incentives, compensation, and motivation should be applied and the things that effectively drive employees’ actions while at work.

Today, competition between the businesses is extremely high thus companies need to find ways to be competitive. Organizations prepare the best market strategy to increase the company performance and the ways to keep their employee motivation on the highest level to perform well within the competition. At that time, several incentive pay programs play an important role for every organization to perform well within the competition.