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59 Cards in this Set
- Front
- Back
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Incentive Pay |
Variable Pay, Cash Bonus, Wide variety of p;ans |
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Best Approach to Incentive Plans |
Piece-rate: Productivity increases (36%), quality may suffer, provide quality standards -for each additional product/service you complete, the higher the bonus pay |
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Time Savings Incentive Plans |
Individual level: standard hour- fast completion, better pay but quality decreases Group level: Improshare- team working, bonus for fast work |
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Productivity Increases Incentive Plans |
Individual level: piece-rate, for each additional product/service complete, the higher the bonus, decreases quality Group level: cash split, achieve team goals |
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Cost Savings Incentive Plans |
Individual level: Suggestion system- suggestions for cost effectiveness, bonus for good ideas Group level: Scanlon Ruckers- bonus based on cost reduction Organization level: Gain sharing, the less it costs to produce product/service, the more bonus given |
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Profit Increases Incentive Plan |
No individual level Group level: Goal Sharing- on the basis of revenue generation Organization level: Profit Sharing stock options- level of entire corporation, no line of sight |
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Successful Incentive Plans |
Have individual Performance evals to find out who free rides/loafs |
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Social Loafing |
Slack off performance because I know I will still get paid (unintentional) |
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Free Riding |
Less effort by one person because the others work hard (intentional) |
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Conditions to work Incentive Plans |
1) Accurate Measurement 2) Adequate Line of Sight (people need to see the contributions being made) 3) Adequate base pay 4) Pay and Participation both valued 5) Trust 6) Ratcheting of Standards |
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Promotion Pay |
Increase to base pay, less researched than merit pay, more desirable (higher than merit), happens sooner rather than later |
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Promotion Pay relationships |
Manager Performance, Current job tenure, and tenure in previous job correlate to managers promotability rating, which determines if the manager is promoted |
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Average Promotion Increases |
Non Exempt- 7.1% Exempt- 8.3% Executive- 9.5% |
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Variables Considered with Promotion Increased |
1) pay range of new position (66%) 2) pay of others in new range (60%) 3) External Pay data (36%) 4) Performance Rating (34%) 5) Average percent promoted (7%) 6) Budget for promotions (44% promotional, 24% merit) 7) Promotional guidelines when asked by the employee (63%) 8) Promotional guidelines to employees who are actually receiving promotion(6%) |
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Effectiveness of Promotions |
Motivation- 62% Engagement ( commitment to work)- 59% |
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Merit Pay |
most used addition to base pay, done on a yearly basis, determined by management |
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Practice of Merit Pay |
Confusion- confusion about merit pay and what it involves Types of Plans- compounded plans, lump sum merit cash bonus (re-earned each year) |
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Increase Ranges |
Performance level Outstanding- 10-12% Very Satisfactory- 7-10% Satisfactory- 5-7% Marginally Satisfactory 3-5% Unsatisfactory- 0% |
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Merit Pay Framework |
-Assess if merit pay is effective: Establish a pay/performance relationship -correlate performance increase and pay -wait to measure perceived relationship , typically a smaller correlation -motivation increases, see relationship between pay and performance |
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Merit Pay context, process, outcomes |
Context: 1) Environment ( unemployment low, substitutes low, merit increase high. Unemployment high, substitutes high, merit increases low) 2) Organization 3)Evaluator and recipient Process: 1) Pay and Performance Relationship (evaluations who have high board scores = low pay raises because of higher standards) Outcomes: Performance and satisfaction levels (govt sector gets paid more merit than private. but govt has lower base pay) |
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Conditions for Merit Pay to Work |
1) Accurate Measurement- rating errors are high and system efficiency is low 2) Lump Sum Used 3)) Just Noticeable Difference between high and low performance (5%-1%) 4) Adequate Budget |
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Variable Pay latest reasearch |
-16 articles past 10 years -mix of lab and field studies -mix of students and managers -mainly private rather than public sector |
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Context of Variable Pay |
-The more uncertain the business environment, the more likely it is that organizations will put more pay in variable pay and less pay in base pay, good for recessions -"Tough cities" with tight labor markets supplement base pay with variable pay (San Fran, D.C) -Companies with high employee involvement strategies are more likely to use variable pay -Market organized by short line of sight are more likely to use variable pay -More when quantity, rather than quality, of performance is measured -managers and professionals receive larger amounts of variable pay than laborers |
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Process of Variable Pay |
-Variable pay works best when it is both a "lead" and "lag" system -Produces organizational learning -recognition programs are as important as variable pay -results are inconsistent where the pay system is "transparent" -Management and employee involvement in the variable pay plan and implementation is critical |
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Outcomes of Variable Pay |
-Goalsharing plans are very effective -Goal sharing plans have been associated with return on assets, quality, sales growth, performance ratings, perceived effectiveness, productivity, cost reduction, customer service, net income -Social recognition programs have been associated with increased franchise performance, improved customer service, and decreased turnover |
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Pay Administration: Knowledge of Pay |
Avoid ignorance of pay information like most managers -people less engaged in work -a web page is not enough |
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Pay Administration: Cost of Living |
Organizations dont pay for this anymore Consumer price index increases so pay increases |
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Pay Administration: Living Wage |
Above min wage wage to survive on Retains lower level employees |
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Pay Admin: Geographic pay differentials |
cost of living differences in different areas economic research institute provides cost of living info |
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Pay admin: Comparative Salary Info |
Cost Control Compa-ratio: Actual Salary Paid/Midpoint Salary Paid...should be = 1....less than means people are under paid and more than means you pay more than budgeted |
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Pay Admin World at Work |
Professional Association for People interested in Comp -Rigorous training -sponsors research -good resource |
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Special Pay Groups |
1)Executives (highly paid, 300x normal people, based on stock) 2) Lawyers and Consultants (partners that run the organization/become owners) 3)Engineers and Scientists (Dont have to become managers- career based on technical skills) 4)Professional Sports (large pays. Tv contracts, unions increase pays, short careers) 5)International Employees (make people pay the equivalent of what you would make in US) 6)Unionized Employees (bargaining, slower, less innovative, paid more) |
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Laws and Regulations: Benefits |
-Social Security Act: employer required to contribute, used for retirement/medicare/total disability -Federal Unemployment Tax Act- contribute unemployment, money to govt -Workers Comp Laws- temp and perm disability -Employee Retirement and Income Security Act- Only applied to employers with pension plans |
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Laws and Regs: Wage and Hours |
-Fair Labors Standards Act: Min wage, overtime pay -exempt from overtime: supervisors, managers, professional workers, casual workers -Walsh-Healy Act- only applies to govt sub/contractors...over 8 hours a day = 1.5X rate -Prevailing Wage Laws- applies to govt contractors, govt has to pay what local contractors receive |
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Laws and Regs: Equal Rights |
1)Civil Rights Act 2) Equal Pay Act 3) Age Discrimination Act 4) Pregnancy Discrim Act |
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Laws and Regs: Applications |
-Job evaluations -performance appraisals -comparable worth -unisex pension plans |
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Benefits History |
40's- 4% 80's- 20% Now- 40% Dates back to WW2 (war labor board in charge of pay, pay increases down, money to war) |
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Benefits: Insurance and Retirement |
1) Insurance: - Life- shared with family upon death up to 50,000 -Disability- Required by Laws (workers comp), protected against income loss: total disability,impairment, death, med expense, rehab 2)Retirement- baby boomer retiring, people living longer -Social Security -Private Pension Plans- not necessary, not common in small businesses- supplement for social security -ERISA ( Employee Retirement Income Security Act)- governs how private pensions are to be used. Eligibility, vesting and portability, transfer funds, governs funding, financial responsibility |
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Benefits: Income Maintenance |
Provides money for the amount of time of employment -Unemployment Insurance (willing to accept a similar job, actively looking for job, no personal fault, employed for a period of time)- 50% of previous income for 26 weeks -Mandatory and Voluntary- group sets aside money (severance pay. supplemental unemploy benefits-union) -Time not worked (vacations, holidays, military leave, jury duty, sick leave, funeral) -Employee Stock Ownership Plans |
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Discouraged Workers |
Lost job but no longer seeking a job |
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Benefits: Employee Welfare |
Physical/Mental Welbeing -HMO's (Group of doctors for lower expense) -PPO's (Doctors distributed in an area, employer tells you who to use for lower costs) -HSA (money set aside for employee to use) -Coaches for employees (assign for each employee to set up a plan to stay healthy, gets cash benefit, pay money to prevent sickness -EAP (Employee assistance programs, alcohol/drug addictions, financial problems, marital issues, counselor assigned) |
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Cafeteria Style Benefits |
Select what kind of benefits you want, increases motivation |
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Sections 125 & 129: Benefits |
125: Pay Pre Tax $ for healthcare 129: take out money to use for dependent care |
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Efficiency Wage Theory |
to motivate people, pay them above market averages could be costly could offset costs with a reduction in performance management |
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Equity Theory |
Theory of pay fairness People look at others to see what they are paid Differentials must make sense Persons outcomes/inputs should equal other peoples outcomes/inputs |
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Under reward equity |
other persons outcomes is higher or the input is lower but they make more or the same as you |
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over reward inequality |
people feel guilty that they make more or do not work as hard |
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Reinforcement Schedules |
Admin the system fairly: 1) fixed interval- give people their base pay after a fixed amount of time: lower level- bi weekly, upper level- monthly (most frequent, low motivation) 2) Variable interval- pay people after a variable period of time, ex: promotions (works better than fixed) 3) Fixed Ratio- people rewarded after performing a fixed number of tasks (piece-rate pay system) good for new employees 4) Variable ratio- rewarded after performing a variable amount of tasks (least frequent but most motivational, almost like a form of gambling) |
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Expectancy Theory |
Effort->Performance: Expectancy- motivation increases when effort leads to good performance rating Performance-> Outcomes: Instrumentality- positive outcomes linked to good performance Outcomes: Valence- outcomes of effort and performance are attractive to people |
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Goal Setting Theory |
-Good when there isnt money for motivation -works in virtually any job/person/org -goals need to be set -no promise of reward needed for high motivation 1)Specific- "do your best" not ok 2)Challenging "stretch goals"- need to work hard to get your goals, but dont set too high 3)Acceptable- get employees involved, commitment to goals |
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Characteristics of good Performance Appraisal |
Reliable- Consistent evaluations, inter rater reliability Valid- matches up to strategic goals of the organization Differentiates- narrative summaries of employees by immediate supervisors Fair- no discrim Practical- systems have to be user friendly Relevent- PA system |
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Performance Standards |
Traits: personality characteristics -groups people by personality -hard to measure in a reliable manner -legal issues (used alone is discrim) Behaviors: what the activities are that they actually do on the job -more concrete, look for people doing a good job -good for legal defense Results: bottom line indicator of performance -make goals specific through results |
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Evaluation Sources |
1) Self- job incumbent rates own performance, tend to be inflated but good for development 2) Immediate supervisor- usually do this, held accountable for the person, but very busy and usually have other things to do. most used. 3) Superior- manager of supervisor, not advisable because they do not see employee performance 4) Subordinate- provide good assessment,good development for supervisor 5) Peer- more likely to see employee performance 6) Customer- ratings. A-E grading system. Timeliness of responses, usefullness, information 7) 360 Feedback- use multiple parties, 2 or more of above, capture all employee performance, used in compensation and t&D |
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Rating Errors |
1) Halo- sources of contamination, generalizing from one aspect to another for performance, peoples promotion because of one good skill 2) Leniency- positive or negative. All 5's or 1's. some people are good at some things and not at others 3)Central tendency- supervisor gives average ratings to eliminate any enemies or artificial friends 4) Similar to Me- appraise others at the same as yourself, gives higher ratings to who are similar to them along non-job related reasons (my team is great so i should have a good rating) 5) Contrast Effect- first 3 performers have high ratings, next is just average but gets rated poor in comparison. works both ways |
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Ratings Solutions |
Training- use video screen to trick others to make rating errors in practice, make sure it teaches how to eliminate errors Diary- effective/ineffective behaviors/results seen. combats memory decay Multiple raters- 360 assessment- consensus Accountability- have consequences for performance appraisal skills Consensus- talk about appraisals in a group, no technology |
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Rating Scale Development |
1) Job Analysis- behaviors/results needed, break the job into dimensions 2)Dimensions 3)Standards- what reports are supposed to be generated 4) Scaling- scale used for evals |
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Group Comparison Rating Scale |
How well people do to the average person in a group |
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Descriptive Comparison Rating Scale |
Most widespread used, unsatisfactory-excellent |
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Standards Comparison Rating Scale |
Held accountable to actual job description |
