The perceived impact of short term executive financial incentive schemes

[摘要] Organisations in South Africa are. paying out millions of Rands in financialincentives to executives without ,knowing conclusively whether or not companyperformance actually improves as a result of financial incentive schemes.Unions, tne media, workers, politicians and others are paying increasingattention to the levels of compensation that executives receive. The questionbeing asked is whether these levels ate really necessary.This, the first research of its mud in South Africa, surveys the views of 121top managers, from 17 organisations using incentive schemes, on the, impactof these schemes. There is convincing evidence that they are perceived toincrease motivation and company performance, build teamwork and areeffective in aligning the interests of managers and shareholders. The schemesare valuable in attracting, retaining and motivating executives Given thecomplexity of setting executive remuneration, it is submitted. that there be nointerference in the level of incentive scheme payouts.The factor analysis yielded a four factor solution, which was interpreted interms of the literature review and constructs in the questionnaire. The firstfactor revealed that incentives are a motivator and increase companyperformance. The) build teamwork and are effective in aligning the interestsof managers and shareholders. The second factor state; that incentives shouldbe underpinned by openness and transparency. A fundamental principle behindthis is that the relevant financial position should be known by all participants.It was also stated that the whole organisation i.e, all IfNels , should be on anincentive scheme, The third factor highlighted risk aversion in these executivesand that basic salary is most important. The fourth factor, locus of control,stressed the importance of the scheme to the individual personally in terms ofmotivation, focus, reward, retention of services and the ability to control theincentive scheme payout. 111e surprising finding was the extent to which SAexecutives were risk averse and just how important the basic salary is.Guidelines, based on the factor analysis, content analysis and oo:rrespohd~nceanalysis conducted on the questionnaires, ate offered to the designers incentive· schemes. Without correctly designed and aggressive incentiveschemes the owners oforgamsations could expect very m.ediocre, 9 to S typeof commitment from their top·management team.Incentive schemes playa vital role in the design of com.petitive remunerationsystems. Their importance should not be underestimated.

[发布机构] University of the Witwatersrand