Bus 381 - Hr - Ch 12

Front 1

Variable Pay and why? whynot?

Back 1

Tying pay to some measure of individual, group, or organizational performance.

Purposes:
To motivate employees to assume “ownership” of their jobs, thereby improving effort and job performance.
Support a compensation strategy to attract and retain top-performing employees.
Reduces fixed costs and increases variable costs.
Can foster teamwork if incentives are group-based

whynot? economic downtown = out of ee control

Front 2

Types of Incentive Plans (5)

Back 2

Incentives for operations employees
Incentives for senior managers and executives
Incentives for salespeople
Incentives for other managers and professional employees
Organization wide incentives

Front 3

Piecework (straight type & guaranteed)

For who?

Back 3

for Operations EE.
- a system of pay based on the number of items processed/hr

Straight Piecework = set payment for each piece produced

Guaranteed Piecework Plan = the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour

Front 4

Standard Hour Plan

for who?

Back 4

for operations ee

a worker is paid a wage incentive plan in which standard work times are expressed as standard hours and the worker is paid for standard hours instead of the actual work hours.

Front 5

Team or Group Incentives

for who?

Back 5

for operations ee

a production standard is set for a specific work group and its members are paid incentives if the group meets or exceeds the production standard

Front 6

Exectutive & senior manager incentives

Back 6

ST Incentive- annual bonus
LT Incentive - stock options (motivate exec)

Front 7

Salary Plan for Salespeople (Adv + disadv.)

Back 7

Advantages:
- Encourages building consumer relationship.
- Reduces employee competition and improves teamwork or cooperation.
- Provides compensation during periods of poor sales.
- Reduces turnover.
Disadvantages
- May not provide sufficient motivation for maximizing sales volume.
- Higher fixed costs to the employer

Front 8

Commission Plan for Salespeople (adv + disadv)

Back 8

Advantages are:
Links strongly with performance
Minimizes employers obligation to pay employee in bad economic times

Disadvantages of straight commission incentive
Emphasis is on sales volume rather than on profits.
Customer service after the sale is often neglected.
Earnings tend to fluctuate widely between good and poor periods of business.

Front 9

Combination Plan for Salespeople (adv + disadv)

Back 9

Advantages
Combines the advantages of straight salary and straight commission forms of compensation.
Offers greater flexibility for both sides.
Motivates sales force to achieve specific company marketing objectives in addition to sales volume.

Disadvantage:
Can be complicated, if formula changes often.

Front 10

Merit Pay/Merit Raise
for who?

Back 10

Other Managers and Professionals
Any salary permanent increase awarded to an employee based on his or her individual performance. Usually during performance appraisal.

Front 11

Profit Sharing Plans

Back 11

A plan whereby most or all employees share in the company’s profits.
Payout is often proportional to individual pay.

Front 12

Employee Share Purchase/Stock Ownership Plan
adv. + disadv.

Back 12

- A trust is established to hold shares of company stock purchased for employees after they quit, retire, or with a benefits plan.
- Adv:
Gives employee pride of ownership, motivated performance
- DIsadv:
Falling stock price
Lack of investment diversification
liquidity issues

Front 13

Gainsharing Incentive

Back 13

An incentive plan that engages employees in a common effort to achieve productivity objectives and share the gains with the employer
May be also applied to individual or group level.

eg. Team makes a Plan. Savings of company become earnings for the team.

Front 14

What to be cautious about when using Incentive plans?

Back 14

- performance pay cannot replace good management
- firms get what they pay for
- pay is not always a motivator
- rewards may rupture relationships
- rewards may undermine responsiveness

Front 15

How to implement incentive plans

Back 15

- link incentives to other activities that engage employees in the business
- link incentives to measurable competencies that are valued by the organization
- match incentives to the culture of the organization
- keep group incentives clear and simple
- communicate
- remember that the greatest incentive is the work itself

Front 16

Non Monetary Recognition why?

Back 16

- Often used to recognize productivity gains, special contributions or achievements, and service to the organization.
- Employees feel appreciated when employers tie awards to performance and deliver awards in a timely, sincere and specific way.
- Are most effective as motivators when the award is combined with a legitimate and meaningful employee recognition program.