How to Manage Incentives

Ariane Chapelle

Incentive management is a crucial issue for all parties involved in the risk management of organisations. Regulators face the constant challenge of inciting banks to pay proper attention to operational risk management. Operational risk managers and quality specialist struggle to make their voice heard in many sectors. Line managers try countless remuneration structures and levels to see staff working as they expect.

This paper combines findings of some of the best research in incentive management, corporate culture and behavioural psychology. It proposes the MESAR model, an original approach articulated around five actions to manage incentives: Motivate, Enable, Support, Assess and Reinforce.

Incentive management is more than remuneration structure, reward is more than money, deterrent is more than fines.

Motivating people goes beyond remuneration; we all thrive to be valued, in our own eyes and in the eyes of others. We need to feel that what we do is important, or at least that it makes a difference. We need to be recognised by our peers and mentors in what we do well. Money is one way to show value but is by no means enough. Research shows that money is a powerful