Incentive theory is an element of human resources or management theory. It states that firm owners should structure employee compensation in such a way that the employees’ goals are aligned with owners’ goals. It is more accurately called the principal-agent problem.
Published in Chapter:
The Power of Incentives in Decision Making
Geraldine Ryan (University College Cork, Ireland) and Edward Shinnick (University College Cork, Ireland)
Copyright: © 2008
|Pages: 8
DOI: 10.4018/978-1-59904-843-7.ch081
Abstract
The organisation of the workplace is evolving. In many industries, mass production by large, vertically integrated, hierarchically organised firms is being replaced with more flexible forms of both internal organisation and industrial structure (Brynjolfsson & Mendelson, 1993). Work is increasingly accomplished through networks of smaller, more focused enterprises. Added value is generated by ever-changing coalitions, where each member of a coalition specialises in its area of core competence and controls it through the use of strategic partnerships. The information systems (IS) revolution has had an enormous influence on how organisations are managed. Electronic access, communication, and decision support influence several managerial processes and systems including the nature and scope of managerial roles, organisational structure, strategic planning systems, budgeting, performance measurement and review, incentive compensation systems, and knowledge management.