Incentives and Performance Monitoring in Management Writer Inserts Title of Essay

This study examines and compares two concepts that are applicable in aviation management practices; incentives and performance monitoring. In addition, the weaknesses and strengths of these two concepts are highlighted to ascertain the most effective and efficient concept.

The paper further describes the application of these two concepts in management and details their implications as well as suitability in the aviation industry and above all in management.

In organizations such as those in the aviation sector, people make the critical difference between success and failure of the operations. The key determinant of the level of performance in organizations is the effectiveness with which workers are managed, motivated, involved and engaged. It is however interesting that little research indicates the relationship between worker management and business performance. Numerous articles describe certain practices and styles which are claimed to increase motivation, satisfaction, or even productivity among employees. Managers in the aviation sector need to determine where to direct their energies in order to achieve the greatest impact upon the performance of their companies. This document provides a clear picture of the difference between Incentives Management and Dynamic Performance Monitoring and Management in regard to company performance. The paper highlights the key issues relating to accomplishment and monetary incentives and compares the theory to performance monitoring.

Literature Review

Nancy Katz in her article, Incentives and Performance Management, discusses the design of a performance-based management system. The author looks at key issues relating to accomplishment and monetary incentives. This concept or practice can be incorporated in aviation management practice. The author details the importance of goals and asks whether monetary incentives are beneficial to performance management. Goal as evident in this literature provides clear road map in conducting activities within an organization. It is an encouragement to the workers to think about the end of an activity. Despite the fact that goals enhance performance, incentives do increase the interest and persistence. A body of research suggests that extrinsic rewards added to tasks decreases intrinsic motivation. Katz (2000), explains that these findings attreacted much attention, but further research on the issue gave little support. In addition, that extrinsic rewards enhance intrinsic motivation and this greatly depended on how the rewards are viewed and structured. The weight of reward on the worker motivation is as a result of "expectancy, instrumentality, and valence." In this case, expectancy is the workers view of the relationship between work and performance. Instrumentality is the view of the importance of the relationship between work and reward. The author cites research based on individual level. On the organizational level, there are mixed evidence. Some researchers agree that there is a positive relationship associating results to improved organizational performance.

Brink, Hobson, and Stevens (2012) in the article, The Effect of Financial Incentives on Excessive Risk-Taking Behavior: An Experimental Examination Incorporating Earnings Management and Individual Factors, claim that financial incentives are causes of high risk taking by and managers are more likely to take on more risk than they would as proprietors. In fact they further argue that the power of financial incentives s directly propotional to excessive risk-taking behavior. Although management literature acknowledges the potential positive effect of financial incentives, these effects are sort-term and much over looked are the longterm effect of excessive risk taking. Brink, Hobson, and Stevens (2012) explain that there are two reasons for silence on this issue. First, most research on corporate governance are based on agency theory that looka at risks as an independent issue to be dealt with in alignment with shareholder interest. Second, research assume absolute risk aversion. In addition, there is lack of information that relates financial incentive to excessive risk-taking behavior majorly because of measurement issues inherent in archival data. In this article, the authors develop an experimental setting that is meant to investigate the potential relation between financial incentives and excessive risk-taking by managers. The results of this study are coonsistent to the fact that financial incentives are major causes of high risk taking behavior in managers. In addition, the shift from low power financial incentives to high power is directly propotional to risk taking behavior. However, the reverse is not true, there fore revealing a stickiness effect. They successfully show that decision context, preference of risk, earning management as well as personal factors also contribute to excessive risk-taking behavior, but the trigger is high financial incentives.

On the other hand, Wendy Li in her article, Dynamic Performance Monitoring and Management, looks at the importance of "meaningful...

The main purpose of the article is to outline the relationship between the use of Dynamic Performance monitoring and management and customer satisfaction. The use of this concept is expected to have an effect on behavioral change. According to Li (2011 ), it is not easy to define good management however much a body of literature stress on it. Differrence in costs and the advantages of putting in use better practice prevent organizations from adoption. In the article, the author defines performance monitoring practices as either "good" or "bad." Bloom and Van Reenen (2006), using their evaluation tool defines good practice in cases where performance is montored continously and communicated to all workers formally and informally. This can be done usng nclude visual management tools. In addition, worker performance is continually reviewed against tracked indicators including;
Follow-up of all aspects to ensure continuous improvement

Communication of results to all staff

Regular review based on problem solution and addressing root causes

The workers understand purpose, agenda and follow-up processes.

Meetings are an opportunity for constructive feedback and coaching

The methodology applied in the article is applicable to the aviation sector. The author is extending the indicators of good performance monitoring to the aviation sector.

Dimson and Jackson, in their article, High Frequency Performance Monitoring, examne the impact of frequency monitoring on the distribution of observed outcome. They explain that frequent monitoring of managers is beneficial as the mangers are not likely to be involved in manpulations that are expensive. In addition, the frequency of monitoring influences profitability. This article analyses the problems during formation of expectations of profits. It demonstrates methods that can be used to calaculate correct expectations of future performance. The authors illustrates the effect of monitoring frequency on productivity and how it can distort judgement about manager skills. Establishments continually assess past performance to form expectations of the future production this is also done to help them make investamnt decisions.The authors use quantitative methods in this study to demonstrate the importance of adjusting expectatons about the distribution of the eccess returns when moving to a high frequency monitoring process. Further analysis also indicate that dismall performance may be as a result of high frequency of monitoring of rolling of excess returns. It is critical to monitor the performance on a high frequency basis in order to enhance productivity. Failure to do this may result in expensive actions such as review of strategy or employee terminations. Therefore, evidence suggests that frequent performance monitoring in organizations leads to statistically high productivity. In addition, it is practical that organizations with frequent monitoring have reduced agency costs of capital as well as better financial performance.

Conclusion

In comparison between the two theories, performance monitor seems to have greater impact than incentive provision. Based on the literature review, both the individualistic and group based approaches have shortcomings. First, in individualistic approach, since it is on one, resources and important information can be with held rather than shared. This approach can bring about a sense of division in the organization with winners and losers. Here, only a select minority is subjected to performance appraisals. According to Drennan (1992), this can sideline those workers who need to improve. In this case, poor performers, instead of working to improve, may view their performance appraisals as bias on the part of the evaluators. This situation can also produce a section of unhappy workers who feel they owe the company nothing. In addition, top performers may also face challenges under this approach. They are more likely to endure ostracism and other negative social sanctions. Collective rewards also are prone to dysfunctional effects. According to Milkovich and Newman (1990), this situation can lead to falling back of the mean in production rather than bring about substantial gains. Poor performers will be demoralized to go through training in order to increase their output. Nonetheless, high performers will feel taken advantage of and may leave the organization or limit their productivity. Alternatively, according to Drabman, Spitalnik, and Spitalnik (1974), the high performers may pressure the under performers to work harder leading to incresed pressure and scrutiny on the under performers, further curtailing progress from them. Moreover, collective effort product could be defeated in case the under performers take advantage of their status to revolt.

Despite all the disadvantages associated with perfomance monitoring such as time consumption, the potential to discourage staff and potential of…