Potential problems with incentive based compensation are

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All of the aforementioned problems are potential issues that can arise with incentive based compensation. If the relevant performance measures are not thoroughly evaluated, employees may receive rewards for meeting goals that do not actually contribute to the success of the company. Similarly, if outcomes that are not included in the performance evaluation are rewarded, then employees may not focus on meeting the most important goals. Finally, if rewards are not properly funded, employees may become disillusioned with the incentive system and lose motivation to perform at a high level. Therefore, it is important for companies to carefully design their incentive programs to avoid these potential problems.

Potential Problems with Incentive Based Compensation Are