Mgmt 343 Final Ch. 12

Front 1

Reinforcement theory

Back 1

a response followed by a reward is more likely to recur in the future

Front 2

Expectancy theory

Back 2

the theory that says motivation is a function of valence, instrumentally, and expectancy

Front 3

Agency theory

Back 3

the interests of the principals (owners) and their agents (managers) may no longer converge

types of costs:
- perquisites
- attitudes toward risk
- decision-making horizons

Front 4

Agency costs

Back 4

may be minimized by the principal choosing a contracting scheme that helps align the interests of the agent with the principal's own interests

the type of contract depends partly on the following factors:
- risk aversion
- outcome uncertainty
- job programmability
- measurable job outcomes
- ability to pay
- tradition

Front 5

Programs for Recognizing Employee Contributions

Back 5

1. Merit pay
2. Incentive pay
3. Profit sharing
4. Ownership
5. Gain sharing
6. Skill-based

- programs differ by payment method, frequency of payout, and ways of measuring performance
- potential consequences of such programs are performance motivation of employees, attraction of employees, organization culture, and costs
- contingencies that may influence whether a pay program fits the situation are management style, and type of work

Front 6

Merit pay

Back 6

these programs link performance-appraisal ratings to annual pay increases

Front 7

Merit increase grid

Back 7

combines an employee's performance rating with the employee's position in a pay range to determine the size and frequency of his or her pay increases

Front 8

Profit sharing

Back 8

payments are based on a measure of organization performance (profits), and payments do not become a part of base pay

advantage:
- may encourage employees to think more like owners

drawback:
- workers may perceive their performance has little to do with profit but is more related to top management decisions over which they have little control

Front 9

Employee stock ownership plans (ESOPs)

Back 9

most common form of employee ownership plan that gives employers certain tax and financial advantages when stock is granted to employees

Front 10

Stock options

Back 10

gives employees the opportunity to buy company stock at a previously fixed price

Front 11

Gainsharing

Back 11

these programs offer a means of sharing productivity gains with employees, and are based on group or plant performance that does not become part of the employee's base salary

Front 12

Managerial and Executive Pay

Back 12

-Top managers and executives are a strategically important group whose compensation warrants special attention.
-In some companies rewards for executives are high regardless of profitability or stock market performance.
-Executive pay can be linked to organizational performance (from agency theory).
-There has been increased pressure from regulators and shareholders to better link pay and performance through the Securities and Exchange Commission (SEC)