The effect of mixed wage incentives on performance: an action research report

Abstract

The purpose of this paper is to analyse whether a mixed incentives scheme can positively influence company performance. The research report documents the design and implementation of a mixed wage incentives scheme to an apparel manufacturer in Serbia. The scheme was designed as a combination of individual- and group-based incentives with the wage fund based on group performance and allocated based on individual performance. The effects on performance were measured continuously over a period of forty-four months through labour productivity when applying individual, group, and mixed incentives, respectively. The results show that mixed incentives resulted in significant labour productivity increase, and outperformed both the individual- and group-based wage incentives schemes. The scheme promotes cooperation, team effort, information, and knowledge sharing, while maintaining individual accountability. Apart from the effect on performance, mixed incentives implementation positively affected employees’ attitude towards work, their motivation to improve, and learn new skills.