This article by Joel Spolsky convincingly argues that incentive plans will always fail damagingly,
As some of your workers substitute making the most of an incentive program for serving customers the best way they know how, the customer experience will suffer. Your best employees will find themselves fighting with incentive seekers to keep the business on track.
Co-incidentally I had a bad experience, caused by an incentive plan, at Best Buy a few days ago. I bought a GPS navigator, because I needed one then, and couldn’t wait for one to be shipped to me (even though it would have been cheaper to get one online). The cashier keep trying to push an “extended warranty” on me, even after I said “no” repeatedly. Undaunted, she switched tactics, and tried to scare me by telling me how often the model I was buying failed. At this point the sale hadn’t yet been made. But the cashier was trying to convince me that the thing I was about to buy broke all the time. Unbelievable!
If the cashier’s story is to be believed, she sees about one GPS unit returned every (6 hour) day, and sells about 20-30 in the same time. So now you know what I know about Best Buy’s quality and service.