Incentive Pay and Benefits for a Successful Company


Motivation is the basic driver of work and development in any kind of human activity. If considered in the context of work and performance efficiency, motivation also becomes a leading factor in organizational progress. The methods of working compensation and incentive payments are crucial in this respect for any organization that aims at higher achievements and is interested in retaining its qualified and talented staff members (Berger, 2008, p. 205). Wal-Mart, Inc. is one of the leading retail companies in the world, and its success is based predominantly on its employees. Therefore, Wal-Mart needs to motivate store managers through the incentive plan and compensation strategy.

Incentive Pay Plan

Motivation Theories

To motivate employees, companies can make use of content and process motivation theories with the former being focused on the goal of the work serving as the motivation and the latter praising the process of goal achievement most of all (Mullins, 2007, pp. 256 – 257). According to Mullins (2007), the content theory explaining the motivation for store managers in the best way is the achievement motivation theory by McCelland, who defined four basic needs for a person in the work and stated that managers are primarily focused on achievement as their working motivation. Among the process theories, the goal theory by Locke is the most applicable one for store managers’ motivation as this theory views goals and intention as the best performance motivating factors (Milkovich & Newman, 2008, p. 187).

Incentive Pay Plan Elements

Further on, the elements of the proper incentive pay plan should also be considered by Wal-Mart to provide its store managers with an effective incentive and compensation strategy. Thus, an incentive pay plan, according to Berger (2008), should include such points as eligibility (define what employees will enjoy the incentive pay program), payout timing and frequency of rewards, funding (determine the sources of the funds directed at incentive pay plan), performance measurement (criteria of the success), performance mix (the set of operations and activities store managers will have to improve to be eligible for incentive pay), and allocation, i. e. definition of whether a team or individual store managers will be rewarded in case of success.


Thus, based on the above presented theoretical considerations, the incentive pay plan for the store managers in Wal-Mart, Inc. has the following implications. First of all, Wal-Mart, Inc. should take up the survey of its store managers’ opinions regarding the factors that, as these managers think, can motivate their performance best. As can be seen from the range of the motivation theories discussed by Milkovich & Newman (2008) and Mullins (2007), people have several levels of needs and goals that drive their performance at various periods of life. In case if the applicability of the Motivation Theory by McCelland and the Goal Theory by Locke is proved through this survey, Wal-Mart will have grounds to move on and develop the payout timing and frequency of rewards stage of the incentive pay plan skipping the eligibility stage as far as only store managers are eligible for the plan.

The development of the next stages of the incentive pay plan depends much on the functions store managers fulfill in Wal-Mart stores. Store managers in this company are responsible for the whole process of store operation including employment and firing of employees, interviewing and decision-making, training of the new employees, and monitoring of their success in the newly assigned positions handling the financial flows of the store, and facilitating overall store’s profitability growth (Wal-Mart, 2009). Therefore, the payout timing and frequency of rewards should be limited to annual rewards as far as the efficiency of the store managers’ work can be assessed at the end of the fiscal year only. The funding for the plan should be derived from the additional profit of the store achieved by the store manager work, and in case if there is no additional profit there should not be any incentive payment as such a situation will mean that the store manager has not reached the set performance improvement goal. Simultaneously, performance measurement and mix are determined, while the allocation issue is not applicable as there is typically a single store manager in a Wal-Mart store.

Total Compensation Strategy

Incentives and Benefits

The instrument that would allow Wal-Mart to achieve the efficiency of its incentive pay plan is the total compensation strategy whose main objectives include the enforcement of the company’s values and goals, clarification of its strategic initiatives and means of their achievement, and the attribution of higher decision-making power to the officials responsible for the company’s strategy (Berger, 2008, p. 23; Milkovich & Newman, 2008, p. 189). The main elements of the total compensation strategy, apart from incentives and benefits, are the needs to integrate the total compensation philosophy with the company’s values and mission, identification of the reasons for the total compensation philosophy, and the main drivers for its adoption by Wal-Mart.

Discussion of Employee Motivation and Retention, Conclusions

Thus, the two basic methods of increasing the motivation of the store managers employed by Wal-Mart, Inc., i. e. incentive pay plan and the total compensation strategy, are considered. The result of this consideration might be an understandable question about the reasons that make these methods effective and the guarantees that they will prove to be effective in the specific Wal-Mart case. The answer to this question, however, is simple. There is no guarantee that any business strategy will be perfectly effective, but scholarly opinion by Berger (2008), Milkovich & Newman (2008), and Mullins (2007) coincide in the point that all employees have motivations in their work and successful appeal to those motivations can boost the organization’s performance.

According to Berger (2008) incentives and benefits can be not only in the form of payment but also in the form of career development perspectives, promotions, and organizational rewards (p. 24), which is especially important for younger employees whose major motivation is not the financial side of the work but gaining experiencing and background positions for further career development and financial prosperity. Therefore, Wal-Mart can make use of the multidimensional combination of the incentive pay plan and total compensation strategy oriented on all age, motivation, and interest groups of its store managers. The same instrument can also be effective for Wal-Mart to retain its most talented and qualified employees on the whole and store managers in particular (Mullins, 2007, p. 659). The combination of financial and non-financial motivation might prove to be of great help for increasing the working committee of the Wal-Mart store managers and facilitate the retention possibilities for the Wal-Mart, Inc.


Berger, L. (2008). The compensation handbook: a state-of-the-art guide to compensation strategy and design. McGraw-Hill Professional.

Milkovich, G., & Newman, J. (2008). BUS 525: Reward systems: Theory & administration: Second custom edition (9th ed.) Boston: McGraw-Hill.

Mullins, L. (2007). Management and organisational behaviour. Pearson Education.

Wal-Mart. (2009). Official Corporate Web Site. Web.

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