An incentive (synonym: stimulus) refers to the part of a situation perceived by individuals that activates existing motives and promises rewards, ultimately aiming to trigger behavior (→ performance determinants concept). The key condition for this process is the compatibility between perceived incentives and individual motives. Incentives can be classified in various ways:
- By object: Material and immaterial incentives. Material incentives (also known as financial or monetary incentives) include direct compensation and other company-provided benefits with material value, such as security and pension systems, company housing, loans, and more. Immaterial incentives cannot be directly measured but carry intangible value. These can be further categorized into incentives stemming from the work itself (autonomy, identity, challenge, purpose, etc.), social incentives (colleague and supervisor behavior), and environmental incentives (image, prestige, etc.). Material incentives sometimes convey a stronger immaterial value, acting as outward signs of recognition or having an image effect on third parties.
- By source: Intrinsic and extrinsic incentives. Extrinsic incentives are more environment-dependent and less task-related. They are provided by the environment, often in material or immaterial form, to encourage certain desired behaviors or outcomes. Intrinsic incentives arise directly from a person’s tasks, based on personal success and failure experiences, especially when corresponding motives are active.
- By recipients: Individual, group-based, and company-wide incentives. Additionally, incentives can be differentiated based on specific control purposes and target groups, such as operational and strategic incentives, adaptation and innovation incentives, and incentives for leadership, clerks, and others. These classifications can be further divided, with particular attention paid to the first two.Source:
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