"These collective risks are being operationalized in incentive programs that often impact as much as 30% of a manager's income" (Tully, 1995; Schraeder and Becton, n.d.).
As the threat of global trade liberalization looms, "competitive pressures" on business organizations will continue to expand. Therefore, business organizations must take the necessary steps in order to become more "innovative, productive, and efficient". [In order to remain more competitive], business organizations have to make use of all its "resources" in order to maximize the usefulness of its "operations" (Scharaeder and Becton, n.d.). And labor, being the most essential part of expenditure of the business, must be utilized to the fullest by developing and adopting "compensation strategies such as incentive programs [in order to] align individual motivation and goals with the objectives of the organization (Scharaeder and Becton, n.d.). This caused the organizations to "continually faced" with problems of maintaining and energizing excellent employees and "elevating additional business units into the upper echelon of excellent performance". "It is within the confines of these two separate, but related challenges that an organization must differentiate between employee recognition and performance improvement" (Driving excellence to the bottom line, n.d.).
U.S. business organizations are now being encouraged to adopt employee's incentive programs in order to improve and encourage employees' performance, improve overall operation of the firm, and thereby promote peace and harmony among the work force especially on management-employees relationships. It has long been proven by a variety of research and studies that the performance of the employees can be enhance or influence by the way they are managed (Delaney and Huselid, 1996). The "National Organizations Survey" survey on 590 profit and non-profit companies has proven the "positive associations between human resource management (HRM) practices, such as training and staffing selectivity, and perceptual firm performance measures. [The study also] further suggests the methodological issues for consideration in examinations of the relationship between HRM systems and firm performance" (Delaney and Huselid, 1996).
Now, it is evident that more and more companies are tapping into the advantages of employee incentive programs in order to remain competitive. "The National Association of Manufacturers surveyed 4,500 companies to follow up on prior studies examining skill level of workers and common human resource practices. They found that 54% of these companies offered some type of bonus plan and another 35% offered some type of gain-sharing or pay for performance program" (Micco, 1997; Schraeder and Becton, n,d,). Furthermore, employee incentive programs are now being use by the reputable U.S. companies. "As an example, Pagoago and Williams (1993), by using the Hay survey to study 1,256 hospitals and 350,000 individuals in the healthcare field, has found out that more than half of the surveyed hospitals are adopting various kinds of employee incentive programs and "that a growing number of these organizations used contingent pay such as discretionary bonuses, skill based pay, and team based pay. It is also interesting to note that survey results indicated a significant