8/8/2019 571 Week 9

1/48

Performance Based PayPerformance Based PayPerformance Based PayPerformance Based Pay

8/8/2019 571 Week 9

2/48

Todays class brought to

you by China/Hong Kong

8/8/2019 571 Week 9

3/48

Real excitement of

Compensation How do you create Performance base

pay system that works. Companies

extoll their Performance based paysystem, yet none seems to beuniversally strong.

8/8/2019 571 Week 9

4/48

Skill based pay Determine compensable competencies

for type of work. Tie to strategic

issues. Provide training opportunities to get

increased competencies!

Offer competency tests eitherselection or post selection. Floorperformance standards.

8/8/2019 571 Week 9

5/48

Sauer Danfoss- base pay and thenadded pay for skills.

8/8/2019 571 Week 9

6/48

Why not rely on external

market only? Or Why is this important?

8/8/2019 571 Week 9

7/48

Strategic issues Relative importance of base pay vs

performance pay.

Company emphasizing innovation,customer service, teams, internallabor markets etc.

8/8/2019 571 Week 9

8/48

Pay for perf Benchmark

8/8/2019 571 Week 9

9/48

Pay for performance Video

8/8/2019 571 Week 9

10/48

Controversial

Intrinsic vs extrinsic motivation

Does extrinsic motivation alwaysprevail?

If so, then must people be paid to do

everything? When do they sacrificeself-interest for organizationalinterest?

8/8/2019 571 Week 9

11/48

Pay is but one tool for

performance management Strategic HR relies on Performance

management--which tools used. How

to create an organizational culturerelated to performance management.

Do you wish to pay for performance?

What are problems/advantages?

8/8/2019 571 Week 9

12/48

Medical Care McFarland Clinic

Medical care is hot because of

culture change. Doctors, lab, x-ray, receptionists.

Pay for performance or other

motivators? What type of climate are you

building.

8/8/2019 571 Week 9

13/48

What type of culture is Most likely to link pay and

performance.

Least likely to link pay andperformance (rely on othermotivators).

8/8/2019 571 Week 9

14/48

Other ways to link pay

and individualperformance Bonuses

Commissions

Stock options

8/8/2019 571 Week 9

15/48

How Incentives for

teams? P-G fit

PO fit

Brainstorm in teams Consider types of incentives, group,

organizational individual.

8/8/2019 571 Week 9

16/48

Kerr Case

8/8/2019 571 Week 9

17/48

ISSUE Folly of Hoping for A but no extrinsic

rewards.

Folly of Hoping for A but rewardingfor B.

Outcome measures.

8/8/2019 571 Week 9

18/48

Summary What is pay used for?

What influences the relative use in

different organizations. If primarily motivation--how can it be

used to recruit and retain or visa-

versa.

8/8/2019 571 Week 9

19/48

Goal Current trends towards flexibility

Cost Issues (cost containment and

cost benefit). Benefits management

8/8/2019 571 Week 9

20/48

Types of benefits Security (Income protection)

Convenience (time/stress

management).

8/8/2019 571 Week 9

21/48

Why are benefits

important? From an employee perspective

From an employer perspective

8/8/2019 571 Week 9

22/48

Employers Quality of life and the impact on

productivity (spillover of work and

family). Recruitment

Retention

8/8/2019 571 Week 9

23/48

Trends towards Flexibility in

electing benefits Cafeteria benefits. $ allocation may

elect variety of benefits given costs.

ISU offers health, disability,accidental death, life, dental.

What do you need. Either pay for

more coverage or elect. Not reallycost management issue--just helpretention and recruitment.

8/8/2019 571 Week 9

24/48

Towards Flexibility in

Coverage

0

1020

30

40

50

60

70

80

90

vacation

options

health

options

1990

1995

8/8/2019 571 Week 9

25/48

What is the basis for

this?

8/8/2019 571 Week 9

26/48

Trends towards

Increasing coverage Prepaid legal

adoption benefits

Hopefully more in benchmarking

8/8/2019 571 Week 9

27/48

Benchmark reportsBenchmark reportsBenchmark reportsBenchmark reports

8/8/2019 571 Week 9

28/48

Family Benefits

Increasing Job as family benefits administrator

More benefits

8/8/2019 571 Week 9

29/48

Change over time

0

10

20

30

40

50

60

flextime job share

1990

1995

8/8/2019 571 Week 9

30/48

Cost issues Do Benefits pay for themselves?

Costs/benefits ratio. How do you

determine? Increasing trend towards results

Getting into the rankings

8/8/2019 571 Week 9

31/48

Reducing claims

8/8/2019 571 Week 9

32/48

Pay for themselves

Why do companies offer preventative

medicine-- smoke enders, weightwatchers, free shots

What about Wellness programs

Should Ford Keep up Volvosbenefits?

8/8/2019 571 Week 9

33/48

Should you offer Fertility medical coverage and child

care?

Car pooling and disability insurance?

8/8/2019 571 Week 9

34/48

Should you For health insurance, verify not

covered under other insurers

8/8/2019 571 Week 9

35/48

Family Benefits Chubb estimates from exit

interviews that 50 employees left for

childcare reasons It cost 97% of wages to replace non-

exempt and 150% of wages to replace

exempt. $3 million dollars in replacementcosts

8/8/2019 571 Week 9

36/48

8/8/2019 571 Week 9

37/48

8/8/2019 571 Week 9

38/48

8/8/2019 571 Week 9

39/48

offers Paid time off

Child-care for snow days

telecommuting Flexibility

8/8/2019 571 Week 9

40/48

In spite of popularity Few firms offer

People strongly value Security

benefits. New benefits excluding child care

are modest cost.

8/8/2019 571 Week 9

41/48

Who offers Unions

Larger employers

Industry Corporate image

8/8/2019 571 Week 9

42/48

Benefits of Benefits Does it help?

8/8/2019 571 Week 9

43/48

Problems with Benefits Employee backlash especially family

benefits.

Not clear that benefits have muchimpact on recruitment unless clearlyone of the 100 best places to work or

equivalent in a region.S

ome evidencefor retention. Would the money bestbe put elsewhere?

8/8/2019 571 Week 9

44/48

Will these go away in

times of highunemployment

8/8/2019 571 Week 9

45/48

Eldercare, spouse care,

parent care

8/8/2019 571 Week 9

46/48

Linking Benefits to

Strategy/Labor Markets Retailer relies on students for

seasonal sales. Evidence is clear that

sales is more than double if return.How to increase retention throughbenefits.

Vacation days could be example forretention of employees.

8/8/2019 571 Week 9

47/48

Benefits Management Benefits communication

Have it and want people to take

advantage of them. ISU hasproblems with wellness.

How to communicate? Just in time.

8/8/2019 571 Week 9

48/48

Summary Importance of benefits increasing.

Portion of benefits as total

compensation increased over the pastthirty years.

Purpose is critical and getting the

most for your dollar.