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How Incentives Affect Employee Engagement and Productivity

An additional incentive on top of base pay is one of the things that enhances employee productivity and motivates them to get more done in less time. Employees are motivated to push themselves and bring out the most in their skills when they have additional perks like incentives such as extra salary, paid leaves, rewards, and acknowledgments. Workers who think their efforts or talents are undervalued or unrewarded tend to be less engaged, which leads to burnout and quiet quitting, both of which are significantly detrimental to both the employees and the company. Hence, this UCLA Anderson Review article focuses on how incentives affect employee engagement and productivity.

The article suggests that it is normal for executives to be skeptical about the efficacy of financial incentives owing to their inherent disadvantage of weakening the processes they are meant to improve in the first place, as well as their ability to motivate personnel. According to McKinsey, one of the most effective strategies available for executives to motivate employees is providing substantial and customized financial incentives. As offering financial incentives has both a drawback and a success, its value ultimately comes down to whether it works to encourage employees to put in extra effort or not.

According to the article, this largely depends on how these incentives are designed. Research by Cornell’s Nur Kaynar and UCLA Anderson’s Auyon Siddiq suggests that incentives affect employee engagement and productivity. According to the study, a financial bonus can really lead to higher-quality work, but only up to a certain threshold of bonus. However, the article emphasizes that the influence of incentives cannot be precisely identified because managers typically do not have direct oversight over staff. This lack of monitoring creates a classic “moral hazard” situation, the article suggests, in which the outcomes of employees’ activities are obvious but the amount of effort they put into performing a good job is invisible to management. The lack of insight into employee effort makes developing an effective incentive scheme difficult. The article argues that in order to build an incentive for employees, managers must first understand their own operation, including what an individual worker performs to accomplish a result and how it may relate to other workers. As a result, there is still a need for more knowledge, particularly an understanding of how effort converts into production. Finally, the article concludes by stating that while raising the bonus payment might boost quality, the effect is greatly reduced when the basic payment is already large.

Increasing employee productivity can be tough since not all rewards are appealing to employees. The above are some pointers on how incentives affect employee engagement and productivity and how executives must recognize the need to design a successful incentive plan to meet each individual’s unique demands.

Technology affects our world in many ways. To dive deeper into technology’s role in the business world, visit UCLA Digital Business Leadership Program (UCLA DBLP).

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