How to Design Incentive Plans Badly (& Well)
Michael J. Gibbs, Clinical Professor of Economics and Faculty Director, Executive MBA Program
Incentive compensation, when used effectively, can be a powerful motivator. However, when designed poorly, it can fail to motivate, or it can even lead to disastrous consequences. Professor Gibbs will give a short taster lecture drawing from his research and teaching on pay for performance. He will use examples of incentive plan designs that firms actually use (including from the banking sector). He will analyze their weaknesses, and conclude with a brief summary of principles for effective incentive plan design.