The Advantages of Analysing Organizations as Incentive Mechanisms

In other words, it has been made clear that organizations can operate as incentive mechanisms for achieving the goals set by their strategic planners. Such perspective of modern organizations would be particularly important in order to understand the changes in organizational needs through the years and to identify an effective framework of action – meaning a plan for updating existing organizational policies – that would be the best suit to the organizational aims. flexibility would be one of the key characteristics of such plan indicating the ability of the plan to be alternated in order to allow the development of the organization involved as an incentive mechanism.The potentials of organizations to act as incentive mechanisms have been taken into consideration by theorists who studied the relationship between the organization and its environment. It has been proved that the use of organizations as such mechanisms would require the use of specific principles and rules – for criticizing these organization’s initiatives in the context of the specific role. In accordance with Herbert Simon (1991) the organizational behavior should be primarily based on organizational loyalty (in Knack 2003, p.237). using the above view, the following assumption can be produced: organizations cannot act as incentive mechanisms if loyalty across their units isnot strong. Another requirement of the development of organizations as incentive mechanisms has been introduced through the study of Ledgerwood et al. (2006). In the above study, it is explained that organizations can operate as incentive mechanisms only under the terms that the communication in the internal organizational environment is at high levels. It is further explained that such organizations can be easily transformed as of their structure, goals, and operational activities, without being negatively affected as of their performance. The transformation of an organization from an NGO to a Micro Finance Institution is used as an example of the above phenomenon (Ledgerwood et al. 2006, 292).

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