Title: Dynamics of incentives and value creation in (de-)centralised incentive systems

Authors: Nicole Zimmermann

Addresses: UCL Institute for Environmental Design and Engineering, University College London, London, UK

Abstract: When young and small organisations grow into medium-sized organisations they often implement monetary incentive systems with unclear consequences. Whilst implemented to increase employee (innovative) output and value creation, they have ambiguous effects and may even reduce value creation. Due to the different effects of monetary incentives, this paper distinguishes reciprocal and opportunistic employees' different reactions to incentives. It analyses the effects of decentralised incentive systems - and thus of incentive systems targeted better at opportunistic vs. reciprocal employees - on value creation. Here, it proposes a causal feedback structure explaining opportunistic and reciprocal employees' different reactions and it investigates by simulation how incentives and value creation interact over time. The analysis reveals that behaviour is not pre-determined by employee disposition. It shows how dynamics evolve dependent on the interrelationships of employee dispositions and the organisational context. As such, it exemplifies the usefulness of studying dynamics of incentive systems and employee behaviour.

Keywords: monetary incentives; centralised incentive systems; pay for performance; centralisation; decentralisation; innovation; value creation; organisational dynamics; system dynamics; modelling; performance-related pay; decentralised incentive systems; reciprocal employees; opportunistic employees; simulation; employee behaviour.

DOI: 10.1504/IJEV.2016.074407

International Journal of Entrepreneurial Venturing, 2016 Vol.8 No.1, pp.5 - 23

Available online: 28 Jan 2016 *

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