Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
47 Cards in this Set
- Front
- Back
|
Scanlon plan |
a gain-sharing plan that creates mechanisms for employee participation in developing productivity improvements and shares the financial benefits of those improvements with the employee group that generated them. |
|
|
major modification has been the inclusion of the additional costs besides labour: two reasons for this: |
1. many possible cost savings do not show up in labour costs, such as reductions in raw material waste; 2. it is usually possible to decrease labour costs by increasing other costs |
|
|
Improshare: |
a gain-sharing plan that focuses on labour hours per unit of output, and that does not usually include worker participation. - does not take other cost savings into account - does not make employee involvement integral to the system |
|
|
Rucker plan: |
a gain-sharing plan similar to the Scanlon plan but that expresses labour costs as a percentage of value added. |
|
|
Family of measures: |
a gain-sharing plan that uses a variety of measures to determine the extent to which a bonus payout is justified. - describes any gain sharing formula that uses multiple independent measures - key features: flexibility and focus |
|
|
Issues in Designing Gain-Sharing Plans |
- defining the group or work unit to be included in the plan - establishing the bonus formula - defining the baseline against which to measure improvement - deciding on the share between the company and the employees - deciding on the split among employees - deciding on the frequency of payout - developing procedures for communicating results - deciding whether and how to incorporate employee participation |
|
|
Issues in Designing Gain-Sharing Plans: Defining the group or work unit to be included in the plan
|
generally: all employees that can significantly affect the results should be included |
|
|
Issues in Designing Gain-Sharing Plans - establishing the bonus formula |
in general: the simpler, the better must capture all factors that affect performance
|
|
|
Issues in Designing Gain-Sharing Plans - defining the baseline against which to measure improvement |
have to see if there is an actual improvement
|
|
|
Issues in Designing Gain-Sharing Plans - deciding on the share between the company and the employees |
- the formula for dividing the bonus pool generated by productivity gains - typically between 25 and 50%, but can go as high as 75% in Scanlon plans |
|
|
Issues in Designing Gain-Sharing Plans - deciding on the split among employees |
is everyone getting an equal share really fair?
|
|
|
Issues in Designing Gain-Sharing Plans - deciding on the frequency of payout |
technical and behavioural issues |
|
|
Issues in Designing Gain-Sharing Plans - developing procedures for communicating results |
no compensation system will have an impact if employees don’t understand it, and how their behaviour affects it |
|
|
Issues in Designing Gain-Sharing Plans - deciding whether and how to incorporate employee participation
|
- some gain sharing plans incorporate a mechanism through which employees can participate in making productivity improvements |
|
|
GOAL SHARING PLANS
|
- very costly - very popular in the 90’s - not so much anymore goal setting is in profit share - essence of goal sharing is that work groups or teams receive a bonus when certain pre specified performance goals are met gain sharing has an expectation of continuity, but goal sharing is more flexible explicit expectation of employee involvement |
|
|
Single goal plans: |
simpliest, focus on one key goal, like customer service. |
|
|
Multi goal plans: |
many goals to incorporate the range of desired behaviour. |
|
|
Financially funded plans: |
combine two sets of criteria |
|
|
What is the total amount of the goal-sharing bonus available typically based on? |
- some indicator such as company profit, where the actual amount of the payout is based on the achievement of specified goals. |
|
|
Issues in Designing Goal Sharing Plans
|
- define the group to which goal sharing applies (anyone who can play a significant role in goal achievement) - decide on the nature of the goals to be sought (important to the organization and controllable by the work group) - determine levels and time frames for goal achievement (probably the single most important factor of the goal-sharing plan establish the bonus amounts) - decide on the split of the bonus across employees (allocating the bonus on an individual level addresses the free-riding problem) |
|
|
Current distribution: |
a profit-sharing plan that distributes the profit-sharing bonus to employees in the form of cash or shares, at least annually. - also known as a “cash plan” |
|
|
Deferred profit-sharing (DPSP):
|
A profit-sharing plan in which the profit-sharing bonuses are allocated to employee accounts but not actually paid out until a later date, usually on termination or retirement. |
|
|
Combination profit-sharing: |
a plan that combines the current distribution and deferred profit-sharing plans by paying some of the profit-sharing bonus on a current (cash) basis and deferring the remainder. |
|
|
research shows the majority of Canadian profit-sharing plans are... how many are combination cash/deferred plans? how do they tend to pay these? |
research shows the majority of Canadian profit-sharing plans are current distribution (cash based) plans and that most of the remainder are deferred plans about 5% are combination cash/deferred plans about 2% of firms pay the profit sharing mix in a mix of cash and company stock, and 1% pay out the bonus only in company stock |
|
|
no requirement of any approvals by the government, unless they want to register as .... |
“employee profit-sharing plan” (EPSP) until the federal income tax act no real benefit to registering
|
|
|
What is DPSP, and are top hat plans eligible for them? |
- DPSP is a tax-deferred plan, registration with federal government is required - top hat plans (only senior management is eligible) are not eligible for registration as a DPSP as there is a requirement for wide employee eligibility |
|
|
Issues in Designing Profit-Sharing Plans
|
- the formula for bonus determination (fixed or discretionary) - employee eligibility - the basis for allocating the profit-sharing bonus across employees - payout frequency - communicating financial results and profit sharing |
|
|
Issues in Designing Profit-Sharing Plans - Formula for Bonus Determination
|
- management simply looks at the profitability at the end of the year and decides on an amount - the problem with discretionary plans is that the link between performance and reward becomes even more tenuous than otherwise, since employees do not really know to what extent (if at all) better performance will be rewarded - for motivational reasons, fixed formula plans are strongly recommended |
|
|
Issues in Designing Profit-Sharing Plans - Employee Eligibility
|
usually the more inclusive the better - casual and contract employees tend to be excluded, also unionized employees |
|
|
Issues in Designing Profit-Sharing Plans - Allocation for Profit-Sharing |
- allocation of the profit-sharing bonus can be based on: salary, seniority, individual performance, some combination of these, or equal distribution - the advantage of salary-based allocation is that it maintains the same proportion of profit-sharing pay in the compensation mix for each employee - tends to provide a greater reward to those who are more able to influence profits - advantage of allocating the bonus on individual performance is that is addresses the free-riding problem |
|
|
Issues in Designing Profit-Sharing Plans - Payout Frequency |
- results must be based on financial statements - suggests that payouts shouldn’t occur no more than quarterly - annual basis is best, so to avoid payout profit sharing in unprofitable years |
|
|
Issues in Designing Profit-Sharing Plans - Communicating Profit Sharing
|
- Communicating profit sharing: important to the success of profit sharing - most profit sharing firms distribute financial statements and profit sharing newsletters on a regular basis, but some firms go beyond this - eg. westjet holds a profit-sharing party every six months, at which employees receive their profit sharing cheques and are treated to a company celebration |
|
|
Employee stock bonus: |
a plan through which employees receive shares in their employer firm at no cost to the employee. |
|
|
Share appreciation rights: |
a plan through which employees are awarded shares in their employer at no cost to themselves if the price of employer shares rises during a specific period. - taxation is an issue |
|
|
Employee stock purchase: |
a plan through which employees may purchase shares in their employer firm. usually have incentives to buy shares in the plan |
|
|
Employee stock option: |
a plan through which employees are provided with options to purchase shares in their employer at a fixed price within a limited time period. |
|
|
Phantom share plan: |
a plan through which employees participate in the appreciation of company shares and any associated dividends, without every owning any company share |
|
|
Phantom equity plan: |
a plan that helps retain key employees by providing rewards based on the stock performance of a portfolio of promising new high-tech firms. |
|
|
Issues in Designing Stock Plans
|
- vary depending if the corporation is public or private - effectiveness of employee share ownership increases with the proportion of the employees who hold shares, the proportion of the firm owned by employees, and the degree of employee consultation in the development of the share plan |
|
|
Design Issues for Stock Plans: Public Corporations |
- eligibility - criteria for allocating stock among employees - the type of holding period |
|
|
Design Issues for Stock Plans: Private Corporations |
- no external market to place value on shares - or to serve as a mechanism got purchasing or selling the shares |
|
|
NONMONETARY REWARD PLANS
|
Social reinforces Merchandise awards Travel awards Symbolic awards Earned time off |
|
|
Issues in Designing Non-monetary Reward Plans |
- recognition must be truly deserved - structured so that all deserving employees are recognized - how to recognize employees |
|
|
Types of Gain-Sharing Plans:
|
Scanlon plan Rucker plan Improshare Family of Measures |
|
|
Types of Goal-Sharing Plan |
single-goal plan multi-goal plan financially-funded plan |
|
|
Types of Profit-Sharing Plans
|
- deferred profit-sharing plan (DPSP) - current distribution plan - combination plan |
|
|
Employee Stock Plans |
- Share Bonus Plan - Share Purchase Plan - Stock Option Plan - Phantom Share Plan |
