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HUMAN RESOURCE MANAGEMENTEleventh Edition GARY DESSLER
Citation preview
© 2008 Prentice Hall, Inc. © 2008 Prentice Hall, Inc. All rights reserved.All rights reserved.
PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama
1
Human Resource Human Resource ManagementManagement
ELEVENTH EDITIONELEVENTH EDITION
G A R Y D E S S L E RG A R Y D E S S L E R
Pay for Performance andPay for Performance andFinancial IncentivesFinancial Incentives
Chapter Chapter 1212
Part 4 | CompensationPart 4 | Compensation
© 2008 Prentice Hall, Inc. All rights reserved. 12–2
After studying this chapter, you should be able to:After studying this chapter, you should be able to:
1.1. Discuss the main incentives for individual employees.Discuss the main incentives for individual employees.
2.2. Discuss the pros and cons of incentives for Discuss the pros and cons of incentives for salespeople.salespeople.
3.3. Name and define the most popular organizationwide Name and define the most popular organizationwide variable pay plans.variable pay plans.
4.4. Describe the main incentives for managers and Describe the main incentives for managers and executives.executives.
5.5. Outline the steps in developing effective incentive Outline the steps in developing effective incentive plans.plans.
© 2008 Prentice Hall, Inc. All rights reserved. 12–3
Motivation, Performance, and PayMotivation, Performance, and Pay
• IncentivesIncentives
Financial rewards paid to workers whose production Financial rewards paid to workers whose production exceeds a predetermined standard.exceeds a predetermined standard.
• Frederick TaylorFrederick Taylor
Popularized scientific management and the use of Popularized scientific management and the use of financial incentives in the late 1800s.financial incentives in the late 1800s.
Systematic soldieringSystematic soldiering
Fair day’s workFair day’s work
© 2008 Prentice Hall, Inc. All rights reserved. 12–4
Employee Incentive PlansEmployee Incentive Plans
Individual Employee Incentive and Recognition Programs
Sales Compensation Programs
Organizationwide Incentive Programs
Executive Incentive Compensation Programs
Team/Group-based Variable Pay Programs
Pay-for-PerformancePlans
© 2008 Prentice Hall, Inc. All rights reserved. 12–5
Incentives for SalespeopleIncentives for Salespeople
• Salary PlanSalary Plan Straight salariesStraight salaries
Best for: prospecting (finding new clients), account Best for: prospecting (finding new clients), account servicing, training customer’s salesforce, or participating in servicing, training customer’s salesforce, or participating in national and local trade shows.national and local trade shows.
• Commission PlanCommission Plan Pay is a percentage of sales results.Pay is a percentage of sales results.
Keeps sales costs proportionate to sales revenues.Keeps sales costs proportionate to sales revenues. May cause a neglect of nonselling duties.May cause a neglect of nonselling duties. Can create wide variation in salesperson’s income.Can create wide variation in salesperson’s income. Likelihood of sales success may be linked to external factors Likelihood of sales success may be linked to external factors
rather than to salesperson’s performance.rather than to salesperson’s performance. Can increase turnover of salespeople.Can increase turnover of salespeople.
© 2008 Prentice Hall, Inc. All rights reserved. 12–6
Incentives for Salespeople (cont’d)Incentives for Salespeople (cont’d)
• Combination PlanCombination Plan Pay is a combination of salary and commissions, Pay is a combination of salary and commissions,
usually with a sizable salary component.usually with a sizable salary component.
Plan gives salespeople a floor (safety net) to their Plan gives salespeople a floor (safety net) to their earnings.earnings.
Salary component covers company-specified service Salary component covers company-specified service activities.activities.
Plans tend to become complicated, and Plans tend to become complicated, and misunderstandings can result.misunderstandings can result.
© 2008 Prentice Hall, Inc. All rights reserved. 12–7
Specialized Combination PlansSpecialized Combination Plans
• Commission-plus-Drawing-Account PlanCommission-plus-Drawing-Account Plan Commissions are paid but a draw on future earnings Commissions are paid but a draw on future earnings
helps the salesperson to get through low sales helps the salesperson to get through low sales periods. periods.
• Commission-plus-Bonus PlanCommission-plus-Bonus Plan Pay is mostly based on commissions.Pay is mostly based on commissions. Small bonuses are paid for directed activities like Small bonuses are paid for directed activities like
selling slow-moving items.selling slow-moving items.
© 2008 Prentice Hall, Inc. All rights reserved. 12–8
Team/Group Incentive PlansTeam/Group Incentive Plans
• Team (or Group) Incentive PlansTeam (or Group) Incentive Plans Incentives are based on team’s performance.Incentives are based on team’s performance.
• How to Design Team IncentivesHow to Design Team Incentives Set individual work standards.Set individual work standards. Set work standards for each team member and then Set work standards for each team member and then
calculate each member’s output.calculate each member’s output. Members are paid based on one of three formulas:Members are paid based on one of three formulas:
All receive the same pay earned by the highest producer.All receive the same pay earned by the highest producer. All receive the same pay earned by the lowest producer.All receive the same pay earned by the lowest producer. All receive the same pay equal to the average pay earned All receive the same pay equal to the average pay earned
by the group.by the group.
© 2008 Prentice Hall, Inc. All rights reserved. 12–9
Team/Group Incentive Plans (cont’d)Team/Group Incentive Plans (cont’d)
• ProsPros Reinforces team planning and problem solvingReinforces team planning and problem solving Helps ensure collaborationHelps ensure collaboration Encourages a sense of cooperationEncourages a sense of cooperation Encourages rapid training of new membersEncourages rapid training of new members
• ConsCons Pay is not proportionate to an individual’s effortPay is not proportionate to an individual’s effort Rewards “free riders”Rewards “free riders”
© 2008 Prentice Hall, Inc. All rights reserved. 12–10
Organizationwide Incentive PlansOrganizationwide Incentive Plans
• Employee Stock Ownership Plan (ESOP)Employee Stock Ownership Plan (ESOP) A firm annually contributes its own stock—or cash A firm annually contributes its own stock—or cash
(with a limit of 15% of compensation) to be used to (with a limit of 15% of compensation) to be used to purchase the stock—to a trust established for the purchase the stock—to a trust established for the employees. employees.
The trust holds the stock in individual employee The trust holds the stock in individual employee accounts and distributes it to employees upon accounts and distributes it to employees upon separation from the firm if the employee has worked separation from the firm if the employee has worked long enough to earn ownership of the stock.long enough to earn ownership of the stock.
© 2008 Prentice Hall, Inc. All rights reserved. 12–11
Gainsharing PlansGainsharing Plans
Philosophy of
Cooperation
Involvement System
Identity
Scanlon Plan
CompetenceSharing of Benefits Formula
© 2008 Prentice Hall, Inc. All rights reserved. 12–12
At-Risk Variable Pay PlansAt-Risk Variable Pay Plans
• Put some portion of the employee’s Put some portion of the employee’s weekly pay at risk. weekly pay at risk.
If employees meet or exceed their goals, If employees meet or exceed their goals, they earn incentives. they earn incentives.
If they fail to meet their goals, they forgo If they fail to meet their goals, they forgo some of the pay they would normally have some of the pay they would normally have earned.earned.
© 2008 Prentice Hall, Inc. All rights reserved. 12–13
Incentives for Managers and ExecutivesIncentives for Managers and Executives
• Short-Term Incentives: The Annual BonusShort-Term Incentives: The Annual Bonus
Plans that are designed to motivate short-term Plans that are designed to motivate short-term performance of managers and are tied to company performance of managers and are tied to company profitability.profitability.
• Issues in Awarding Bonuses Issues in Awarding Bonuses
Eligibility basisEligibility basis
Fund size basisFund size basis
Individual awardsIndividual awards
© 2008 Prentice Hall, Inc. All rights reserved. 12–14
K E Y T E R M SK E Y T E R M S
financial incentivesfinancial incentives
fair day’s workfair day’s work
scientific managementscientific management
expectancyexpectancy
instrumentalityinstrumentality
valencevalence
behavior modificationbehavior modification
variable payvariable pay
pieceworkpiecework
straight pieceworkstraight piecework
standard hour planstandard hour plan
merit pay (merit raise)merit pay (merit raise)
team or group incentive planteam or group incentive plan
organization wide incentive plansorganization wide incentive plans
profit-sharing planprofit-sharing plan
employee stock ownership plan (ESOP)employee stock ownership plan (ESOP)
Scanlon planScanlon plan
gainsharing plangainsharing plan
at-risk variable pay plansat-risk variable pay plans
annual bonusannual bonus
stock optionstock option
golden parachutesgolden parachutes