Incentive pay is spreading across companies and industry lines. A report for Hewitt, which was published in September of 2003, shows that 77% of companies now offer some form of productivity-based bonus system compared with 59% in 1995.

The pay programs are no longer limited to executive ranks and sales positions. Today, many incentives programs are being introduced to other jobs such as computer programmers (how many bugs can be found), merit pay for federal civil services employees, and teacher salaries tied to test scores.

But incentive pay can affect customer service and customer loyalty. When results of sales are tied to dollars alone the result may be an employee who disregards a customer who will not purchase fast enough, or disregard one who has questions or a special request. Although the loss of customer loyalty may not affect the salesperson right away it will affect the company in the long run.

Where companies have expanded incentive programs to include non-sales people the results have been mixed. In some cases, cheating has been the result. They have resulted in more accidents for incentive-based drivers in completing their runs because they were rushing, and drivers have weighed down loads so they had less runs to make. Teachers who have pay tied to the success of their students' test scores have been found cheating to improve their grades.

Individual incentive schemes should reflect the complexities of the business, not just sales and productivity. One way to accomplish this is through ongoing feedback. Another method is to offer collective incentives such as profit sharing that reward people on company performance. And most important, leadership and company culture should never take a back seat to pay.