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Types of incentives

What are Types of incentives? Clark and Wilson (1961) differentiate between three types of incentives: 1. Material incentives : tangible rew...

What are Types of incentives?

Clark and Wilson (1961) differentiate between three types of incentives:

1. Material incentives:

tangible rewards often monetary -- wages, fringe benefits, patronage

2. Solidary incentives:

intangible rewards from the act of association -- sociability, status, identification

3. Purposive incentives:

intangible rewards related to the goals of the organization --- e.g., working on an election of a supported candidate.

Apart from that, you can classify incentives by:

• Top executive

• Manager level

• Supervisor level

• Office staff level

• Worker level

Other methods

Material incentives: monetary or property rewards in forms of wages, fringe benefits, allowance, insurance benefits, etc.

Solidarity incentives: typically intangible rewards as result of an act by the organization such as acknowledgement, appraisal, status, title, etc.

Utilitarian organizations are those offering monetary incentives (or material ones). They may be business firms, labor unions or political associations. According to Clark & Wilson, utilitarian organizations normally set up a precisely cost accounting system (Scott, p.172), in which, managers focus on material incentives, conflicts are resolved among distribution manners, and organizational objectives are secondary to individual incentives.

Solidarity organization or service-oriented ones/social clubs are those organizations in which people sacrifice their personal interest and make contribution in turn for social acknowledgement, status and appraisal (Scott p.173). In these organizations, managers focus on maintaining the prestige, publicity, goodwill and public acknowledgement. Organizational objectives are generalized to individual ones and publically accepted. These organizations have more flexibility since everyone works toward the same goals.

Purposive organizations establish goals and objectives for its employees to retain them (Clark & Wilson, 1961). The role of managers is to set realistic goals while maintaining incentives for employees to reach those goals. The goals should be common and address basic needs of employees such as living standards, hunger, travel, etc. or else such effort of managers may fall apart. The goals must be realistic and address the interest of majority.

Selective incentive

Selective incentive is a method used by organizations, from educational schools to top-tier trade schools. Incentives are deducted from a fund contributed to by an “elite” group consisting of leaders and managers of the organization and distributed among other members to increase their loyalty toward the organization. Selective incentive is a good way to improve members’ satisfaction and loyalty (Clark & Wilson in Scott p. 172). By offering selective incentive, corporations may establish special relationships with professors and students in schools and universities.

System theorists such as Barnard, Simon & Olsen (Scott p. 171) were very interested in this subtle reward type. According to Barnard, it was emphasized that organizations should offer various incentives to retain the members to contribute to them (p.171) while in Simon’s opinion, incentives and contribution were interdependent and should be balanced to ensure the survival of organizations (p.171). Monetary reward is the most common type of incentives, however, it is only effective to certain level of contribution. In the meanwhile, status of membership could be a more effective and strategic incentive.

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