Long-term incentives

reward-systems-1Whereas short-term incentives usually involve an attempt to motivate performance in the short term (i.e., quarter, year) and involve cash bonuses or specific prizes (e.g., two extra days off), long-term incentives attempt to influence future performance over a longer period of time. Typically, they involve stock ownership or options to buy stocks at a pre-established and profitable price. The rationale for long-term incentives is that employees will be personally invested in the organisation’s success, and this investment is expected to translate into a sustained high level of performance.

Both short-term and long-term incentives are quite popular. Take, for example, the public sector in the United States. A survey administered in late 1998 to 25 state and 400 local governments employing more than 6 people showed that all but one of the state governments and 242 (i.e., 85 per cent) of the local governments used some type of incentives.

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