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Dear Workforce Should Employees Receive Higher Incentives Than Supervisors

I would like to develop an incentive system for our section, but I believe managers should receive less of a reward and those under their supervision should receive more. How common is this practice and what are the advantages/pitfalls?
January 16, 2004
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Related Topics: Recognition, Dear Workforce
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Dear Idealistic:

A situation where the manager receives less of an incentive than subordinates is the exception rather than the rule. Generally, when you do find this situation, it will be in an organization's sales group. Such plans typically do not have capped awards and are designed to drive profitable revenue performance. The primary advantage of a plan where participants can earn more than their boss is that the plan can successfully support high levels of performance.
You had better have sufficient rationale for this or you will have a very difficult time recruiting anyone into the department manager role. Many incentive plans provide increasing target awards as you move higher in the organization. Regardless of how the award levels are set, the fundamental principle at work here is risk and reward. As you move higher in the organization, the level of responsibility increases, and with it the impact on the organization (that is, the risk).
Thus under risk/reward, higher level employees typically accept more risk and therefore have commensurately greater reward opportunity. The market usually bears this out when you examine total cash compensation survey data for positions.
It also is common, however, for target award opportunities to be set equally across different groups and levels of participants in a plan. You will find this in team-based incentive arrangements, such as gain-sharing and goal-sharing incentive plans. They are constructed under the premise that all members of the work group, team, or facility should share equally in any gains resulting from their efforts. This type of plan can take many forms, but can be found in organizations that want to support a culture of teamwork and sharing of business success.
SOURCE: Robert Fulton, managing director,The Pathfinder's Group, Inc., an affiliate of The Chatfield Group, Chicago, Illinois, Jan. 31, 2003
LEARN MORE: ReadIncentives and the Art of Changing Behavior.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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