In order to create an effective incentive compensation scheme, you must have:

A. ‍adequate performance measures

B. ‍unlimited funds

C. ‍a flat management structure

D. ‍none of the above.

The correct answer is option A.

Explanation:

Incentive compensation can be defined in the most basic way as the additional amount of money that employees get apart from their base salary on the basis of their performance.

Since incentives are allocated on the basis of performance of employees, it is necessary to have adequate performance measures, in order to create an effective compensation scheme.

Performance measurements can be both internal as well as external.