Many organizations offer a substantial contingent compensation component (incentive bonus schemes) to many employees as part of the overall pay package – 20-50% of total compensation is ‘at risk’. This is especially the case for executive level staff and sales staff. (It is noted that most not-for-profit associations do not use contingent compensation, or where done it is typically only 5% of base salary.) Somehow this ‘risk factor’ is supposed to be motivational.
In my view such contingency plans are fraudulent – they don’t create a motivated workforce, only a cynical one. Many scholars see such bonus schemes as counter productive (See Daniel Pink, Frederick Herzberg). Such ‘incentive’ schemes may cause the executive to lose focus on what the organization truly values or distract them from real opportunities the organization may encounter. Moreover bonuses often are paid out even though the organization failed to meet objectives, and so are expected; there is no ‘risk’. We should not make our employees into