Fig. 3.
Ideal incentive construction. Example of a work productivity financial incentive structure. Characteristics: 10 to 15% of total compensation so it is “enough to notice,” a slight stretch target, variable increase after hitting target, and a secondary target above which the variable bonus rate increases to offset the wealth effect. Pay incentives as soon as practical after the work is done.

Ideal incentive construction. Example of a work productivity financial incentive structure. Characteristics: 10 to 15% of total compensation so it is “enough to notice,” a slight stretch target, variable increase after hitting target, and a secondary target above which the variable bonus rate increases to offset the wealth effect. Pay incentives as soon as practical after the work is done.

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