Incentive Contribution Theory

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The incentive-contribution theory , known in English as "Barnard-Simon Theory of Organizational Equilibrium", is a theory of work motivation. The basic idea of ​​this theory is to create or maintain a balance between the “ incentive ” (reward, prestige) and the “ contribution ” (work performance). Only in this way can the organization exist.

In addition to the human relations approach, the incentive-contribution theory represents an important part of behavioral organizational theory. Previous approaches (e.g. bureaucracy approach , administrative approach, ...) are summarized under the concept of classical organizational theory. Approaches that follow chronologically (e.g. human resources approach, structuralist approaches, ...) are assigned to the modern organizational theory concept.

The most important representatives are Herbert A. Simon , James G. March and Chester I. Barnard .

Key message

Central statements of the incentive-contribution theory are:

  • In this context, the company is interpreted as a cooperative system.
  • Organizations encourage individuals to participate through incentives. Individuals contribute as part of their participation.
  • The existence of an organization depends heavily on the willingness of its members to make contributions and thus to form a cooperation network.
  • Thus, there should be a balance between incentives and contributions.
  • Individuals only make contributions until they perceive the incentives offered to be at least equal to or greater than their contributions.
  • The contributions of the participants represent the resource to offer so-called "remuneration" or "remuneration" to the participants as an incentive.
  • Organizations are only in balance as long as the contributions are sufficient to create enough incentives to motivate individuals to continue making sufficient contributions.
Organization participant Contribution incentive
Customers money Products and services
Entrepreneur Risk assumption, equity Profits, "conservation values"
Employee Time and power material: remuneration

intangible: "Prestige"

Suppliers Products and services money
Executives (management) Time and power (im) material: "Conservation values"
Incentives and contributions (according to Simon)

"The individual is always the basic strategic factor in an organization. Regardless of his history or his obligations he must be induced to cooperate, or there can be no cooperation "(Barnard 1938)

Interpretation and continuation of the key message

From this it can be deduced that the survivability of organizations depends on whether a balance can be struck between satisfaction and stress. The satisfaction of the participants is influenced by the subjective motives and needs of each individual. Added to this is how different possible alternatives to satisfaction are evaluated. Since motives, needs and alternatives are subject to constant changes, the incentives provided must always be adapted. In order to survive, a company has to constantly adapt to the new circumstances. (Simon 1957)

As already shown, incentives are related to the needs of the individual. In order to create incentives, according to the classic view, material needs are the main focus. From the neoclassical perspective, however, according to Barnard, immaterial needs are also important. Barnard, Simon and March (Barnard / Simon 1976, March / Simon 1958) list some immaterial needs, but point out that these are more likely sources of incentives that are not to be applied to every organization in general, but rather the respective situation must be taken into account. Social relationships can be given as an example of a source of non-material relationships. Reference should be made to the first paragraph, which already presents the so-called "human relations approach" as an influencing topic of the incentive-contribution theory. (Barnard 1938)

As already mentioned, not only material and non-material “remuneration” play a role in the decision-making process of an individual, the perceived alternatives mentioned above are also decisive. This phenomenon was analyzed by Simon and March based on contemporary empirical research. (March / Simon 1958)

Barnard then turned to the subjective perspective of the participants. He turned his attention to the attempt to influence the needs and utility functions of individuals in such a way that they perceive the remuneration offered as sufficient incentives.

criticism

Critics of the incentive-contribution theory describe the following arguments as weaknesses of the theory:

  • There is no clear definition of what incentives and contributions are.
  • The distinction between incentives and contributions is fuzzy.
  • No specific design recommendations are given.
  • The incentive-contribution theory favors a psychological reductionism (closed consideration of individual elements without considering the overall meaning).
  • The incentives and contributions are reduced to a single utility .
  • Individual characteristics of the participants are not included (e.g. career planning).
  • It does not specify which incentives and contributions are important in a particular situation.

literature

  • Chester I. Barnard: The Functions of the Executive. Cambridge (MA) 1974, ISBN 0-674-32803-5 .
  • Herbert A. Simon, DW Smithburg & VA Thompson: Public Administration. New York 1950.
  • Herbert A. Simon (Ed.): Models of Man: Social and Rational. New York 1957.
  • Herbert A. Simon: Administrative Behavior. A Study of Decision-Making Processes in Administrative Organizations. 3. Edition. Free Press, New York 1997, ISBN 0-684-83582-7 .
  • James G. March & Herbert A. Simon: Organizations. 2nd Edition. Cambridge (MA) 1993, ISBN 0-471-56793-0 .