Are Individual or Manager Incentives Better at Improving Work Performance?

Clayton Reid Foxwell OneMain Financial

100 International Drive, Baltimore, MD 21202

(Kelly Reeves, CPA & Reymundo Martinez)

Incentives and bonus programs are most commonly used in financial and

healthcare settings to encourage better work performance and work quality. A

recent study found that the number of Pay-for-Performance program sponsors

has increased from 39 in 2003 to 148 in 2007 (Shaman, 2008). Another study

found that out of 161 companies using incentives, they all measured work per-

formance in different ways (Hill & Stevens, 2001). Many companies use dif-

ferent methods for incentives: individual, group, manager, director, and even

prosocial bonuses (Anik et. al, 2013).

While companies want to encourage workers to perform better, they also do

not want incentive programs to cost their company too much money, so sales

targets are set and adjusted as needed to keep participation and bonus dollars

from getting too large. Some companies feel that individual and group bonuses

are enough to keep workers incentivized and working beyond their set targets

(Mikuliċ, Šimuniċ, & Nikoliċ, 2013).

My main duties at my internship included:

Work with Excel to examine incentives and targets on the monthly, quarterly,

and yearly levels.

Create, manipulate, and analyze data sheets

Report findings to my mentor, Reymundo

Create PowerPoint Presentations to display results to Kelly

During My internship, I gained many skills including:

How to communicate with co-workers on projects

Proficiency in Microsoft Excel, Word, and PowerPoint

A better understanding of OneMain Financial and their operations

A better understanding of incentives, sales, delinquencies, and how targets are

set.

Organization and effective time management skills

Companies are constantly looking for ways to increase sales and the productiv-

ity of workers. One way that many companies attempt to reach these goals is

by motivating workers through the possibility of a bonus for doing more than

what their salary is asking of them.

Many companies have incentive programs, but with so many different pro-

grams and methods to use to control and monitor performance, many compa-

nies do not know which incentive program is best. Some companies reward in-

dividual workers, some reward their managers, and some reward both the

workers and their supervising managers. Many companies are willing to spend

a great deal of money for more production from their workers, but it may be

possible for the company to get this production while being smarter and more

efficient with their money. Some companies have begun paying their managers

a bonus on a quarterly or yearly basis to spend more effort encouraging work-

ers to be more productive in their jobs. Many companies believe they get better

production when managers tell workers to do something rather than hope that

the prospect of a bonus drives them to work harder (Maslen & Hopkins, 2014).

OneMain Financial is a lending company that han-

dles small, personal loans. Their typical customer

base is middle class Americans who need medium-

sized loans for costs like car repairs, home refi-

nancing or improvement, and wedding bills. They

have 1139 branches in 43 states. OneMain is cur-

rently in the process of merging with Springleaf

Holdings after being sold by Citi earlier in 2015.

While it is a common belief that individual targets are the best method for mo-

tivating workers, I observed at my internship that each salesperson at

OneMain usually fit into one of three groups: hardworking and good salesper-

son, hardworking and average salesperson, and unmotivated salesperson. Of

these three groups, the first group will consistently make a bonus, the second

group will hit their bonus around half the time, and the third, unmotivated

group, will hit their bonus around once or twice a year. This distribution of

types of workers is common everywhere, but in incentives, paying an unmoti-

vated worker for occasionally being successful is as effective as giving a stu-

dent a sticker for attempting a problem in class and getting the wrong answer.

This is why I believe that manager bonuses deserve more attention and focus.

Managers are much more likely to be hardworking since it takes hard work to

rise to that level. Rewarding managers for their branches success is better from

a cost effectiveness standpoint and a performance standpoint when compared

to individual incentives.

Anik, L., Aknin, L. B., Norton, M. I., Dunn, E. W., & Quoidbach, J. (2013). Prosocial Bonuses Increase Employee Satisfaction and Team Performance. Plos ONE, 8(9), 1-8. doi:10.1371/journal.pone.0075509

Hill, N. T., & Stevens, K. T. (2001). STRUCTURING Compensation TO ACHIEVE BETTER FINANCIAL RESULTS. Strategic Finance, 82(9), 48-51.

Maslen, S., & Hopkins, A. (2014). Do incentives work? A qualitative study of managers’ motivations in hazardous industries. Safety Science, 70419-428. doi:10.1016/j.ssci.2014.07.008

Mikuliċ, I., Šimuniċ, A., & Nikoliċ, M. (2013). ATTITUDES TOWARD WORK AND THE ORGANIZATION IN THE CONTEXT OF A BONUS REWARD SYSTEM. Advances In Business-Related Scientific Research Journal, 4(1), 55-70.

Shaman, H. (2008). what you need to know about pay for performance. Hfm (Healthcare Financial Management), 62(10), 92-96.

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% Effective-Branch Staff

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% Effective-Branch Performance Rated by Managers

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% Effective-Individual performance by Managers

Figures 1-4. Results from OneMain Financial survey analysis completed by branch staff and branch managers looking spe-

cifically at Incentives and their opinions on whether these programs affected their work efforts.

Abstract During my internship, I spent most of my time calculating and analyzing vari-

ous targets for sales and delinquent accounts while determining bonus payouts

for these targets. When I started this work, I found that many companies have

several bonus programs, but not many of them understand what programs work

well and which ones do not. From my internship and research articles, I found

that bonus programs for managers are more effective at increasing work perfor-

mance than individual performance bonus programs.

Internship Site

Job Description and Outcomes

Introduction and Background

Current Issue

Recommendations

Works Cited

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% Effective-Group Bonus Program by Managers

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Yes