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Incentives in business organisation, Study notes of Business Finance

Kannur UniversityBusiness Finance

Incentives in business organisation

Typology: Study notes

2019/2020

Available from 10/04/2022

kiran-avni
kiran-avni 🇮🇳

9 documents

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INCENTIVES
Managementtriestogovernthebehaviourofemployeesby
satisfyingtheirneeds.Forthispurpose,variousincentivesare
provided.Anincentiveissomethingwhichstimulatesapersonto
docertainactivity.Anyactorpromisewhichinducesanindividual
torespondin:adesiredmanneriscalledanincentive.Itisthe
meansthroughwhichanorganisationprovidessatisfactionofthe
variousneedsoftheemployees.Itactivateshumanneedsand
createsthedesiretowork.Incentivesarerewards)basedon
performancebyworkers.Incentivesleadtobetterperformance.
Incentivesmaybe.eitherpositiveornegative.Positiveincentives
seektoprovideneedsatisfaction,andworkersareinducedto
workbetter.Bonus,pension,higherpay,promotion,etc.,are
examplesofpositiveincentives.Negativeincentivesseekto
withdrawneedsatisfaction.Theyareintendedtopersuade
workerstodesistfromcertaintypesofbehaviour.Wagecut,fine,
penalty,transfer,dismissal,etc.,.areexamplesofnegative
incentives.
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INCENTIVES

Managementtriestogovernthebehaviourofemployeesby

satisfyingtheirneeds.Forthispurpose,variousincentivesare

provided.Anincentiveissomethingwhichstimulatesapersonto

docertainactivity.Anyactorpromisewhichinducesanindividual

torespondin:adesiredmanneriscalledanincentive.Itisthe

meansthroughwhichanorganisationprovidessatisfactionofthe

variousneedsoftheemployees.Itactivateshumanneedsand

createsthedesiretowork.Incentivesarerewards)basedon

performancebyworkers.Incentivesleadtobetterperformance.

Incentivesmaybe.eitherpositiveornegative.Positiveincentives

seektoprovideneedsatisfaction,andworkersareinducedto

workbetter.Bonus,pension,higherpay,promotion,etc.,are

examplesofpositiveincentives.Negativeincentivesseekto

withdrawneedsatisfaction.Theyareintendedtopersuade

workerstodesistfrom certaintypesofbehaviour.Wagecut,fine,

penalty,transfer,dismissal,etc.,.areexamplesofnegative

incentives.

Form ofincentives

Individual’sneedsarevariedinnature.Someofthem canbesatisfiedbymoneywhile othersarenot.Onthisbasis,incentivescanbeclassifiedintotwo:( 1 )Monetary incentivesand( 2 )Non-monetaryincentives. 1 .MonetaryIncentives:Incentivesdirectlyorindirectlyassociatedwith‘monetary benefitsarecalledmonetaryorfinancialincentives.Thesebenefitsareexpressedin termsofmoney.Theseincentivesaddtothemoneyincomeoftheemployees. Monetarybenefitsnotonlyfulfilthephysiologicalneedsbutalsotheneedforsocial statusandpower.Examplesofmonetaryincentivesarebettersalariesandwages, overtimeallowance,leavewithpay,bonus,profitsharing,medicalreimbursement, housingfacility,pension,etc.Financialincentivesmotivateworkersmoreatdowerlevel thanthoseofhigherlevel. 2 .Non-monetaryIncentives:IncentiveswhichcannotbemeasuredintermSofmoney arecallednon-monetaryornon-financialincentives.Inotherwords,theyareincentives whichdonotaddtothemoneyincomeoftheemployees.Employee$athigherlevelsof managementattachgreaterimportancetosocialandpsychologicalneeds.These needscannotbesatisfiedbymoneyalone.Nonmonetaryincentivesthusaim at satisfyingthem.Theseincentivesincludegivingfigherstatus,recognition,assigning challengingjobs,seekingsuggestions,participationinmanagement,delegating authorities,etc.