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SECTIONAL TRANSACTIONS.—I™. 423 
The selection of the right incentive. 
Arousing enthusiasm. 
The part played by leadership. 
Non-financial incentive. 
The sense of loyalty and ownership. 
The sense of achievement. 
The sporting element. 
Financial incentive. 
As compensation for ineffectual leadership. 
Limited application. 
Combined financial and non-financial incentives. 
Prof. J. H. Ricnarpson. 
The application of satisfactory labour incentives is a central problem of industrial 
relations, and the establishment of mutual confidence and goodwill between manage- 
ment and workers is an essential preliminary for the effectiveness of such incentives. 
Mutual confidence and goodwill are facilitated by regular joint machinery (e.g. works 
councils) for frequent discussion about changes in methods of work and conditions 
of labour, and consideration of workers’ suggestions, by the application of agreed 
principles for dealing with labour problems, and by the joint review of information 
about the economic position of the industry and undertaking. 
Among the chief direct incentives are (1) the allocation of definite responsibility 
to the worker or group of workers; (2) systematic promotion based on records of 
performance ; (3) payment by results. Whichever incentive or combination of 
incentives is applied, it is necessary to establish a reasonable relation between the 
earnings of different grades of workers. Allocation of responsibility has been 
practised more among supervisory grades and clerical staff than among manual 
workers, but there are wide opportunities for organising manual work so as to confer 
definite responsibility upon the individual worker or group of workers. The incentive 
of responsibility, with a time wage or time wage plus output bonus, has moral advan- 
tages over the mere monetary incentive of piece rates, while group responsibility 
introduces valuable esprit de corps in place of the rivalry especially of individual piece 
work. The application of the incentive of responsibility involves the grading of 
workers according to capacity and should be combined with promotion, based on 
proved ability, to higher wage or salary levels. For promotion, transfer or discharge 
it is essential that adequate performance records should be used and favouritism 
eliminated. The incentives of responsibility and promotion, which can be applied 
to time work, should receive close attention, as very large numbers of workers are 
paid on a time basis. 
Systems of payment by results are of value where the workers control speed of 
work and where the product is uniform and readily enumerated. The most widely 
used and generally effective system is the straight piece rate, usually with guaranteed 
time minimum. With regard to more complicated so-called scientific systems, it 
should be recognised that there is nothing scientific in the rates themselves ; these 
are inevitably fixed arbitrarily. The scientific side is in the time and motion studies 
and in the psychological effects of different systems on the worker. The various 
systems of differential piece rate or task and bonus systems, as variants from the 
time or straight piece rate systems, may be applied reasonably or seriously abused. 
They have received relatively small application; their complication is often a 
disadvantage, especially in small and medium-sized plants, and their use is likely to 
be limited to certain industries and processes where circumstances are specially 
favourable. Though foremen and other supervisory grades are chiefly influenced 
by the incentive of responsibility, they should participate in additional monetary 
rewards based on output, especially where their workpeople are paid on results. 
Evidence shows that piece rates, bonuses and other systems of payment by results 
have resulted in increased production and earnings, and lower labour costs, and also 
in improvement of relations between management and workers (largely because of 
the need for less supervision and pressure from above). There is, however, need for 
more systematic investigation and the pooling of experience about the effectiveness 
of these and other labour incentives. 
