Monetary Incentives and Business Strategy
How do monetary incentives affect the strategy of an organization?
Starting from this basic question I have developed my Master Thesis and the following research question: how is the method of compensation of the executives affecting the resource strategy of the firm?
The research is based on three main elements, the first element is the manager decision making process. The second element is the method of compensation represented by base salary and performance bonus. The last element of the research is the business strategy represented by the Resource Based View (Barney, 1991).
The results of the analysis focus on two main areas: the effects of the incentive on the resource strategy and the problematics of the incentive use. The discussion highlights how the method of com- pensation affects the motivation and the demotivation of the human resources. Moreover, the bonus drives the attention of the decision makers toward specific targets. The method of compensation supports the increasing of high risk strategies by the managers. The manager is incentivized to take risks because he/she is economically rewarded for them. The incentive structure affects the consumption of the resources. Employees’ individualistic behaviors make them loose the corporate focus, preferring to it their personal success. The length of the strategy is affected as well, the incentives target short term results affecting the sustainability of the resources, that might be overused.
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