Chap11 Slides

8/8/2019 Chap11 Slides

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Rewarding

Performance


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Pay-for-Performance (Incentive)

Systems Assume That

Individuals and teams differ in level

and quality of contribution

Firms overall performance depends on

performance of individuals and groups in the

firm

Firm should reward employees based on their

relative performance to attract, retain and

motivate high performers


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Challenges to Incentive System

Do Only What You Get Paid ForSyndrome

Adversely affects cooperation

Lack of Control

Difficulties in Measuring Performance

Psychological Contract is created that is

often resistant to change


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Challenges to Incentives (contd)

Employees question fairness and

credibility

Potential reduction of intrinsic drives

Leads to job

dissatisfactionand stress


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2004 by Prentice Hall

Terrie Nolinske, Ph.D. 11 - 6


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Developing Incentive Systems

Link pay and performance appropriately

Use incentives as part of a larger plan

Use financial andnon-financial incentives

Build Employee Trust

Promote belief that performance matters Use multiple layers of rewards

Increase employee involvement


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PERFORMANCE INCENTIVES


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Types ofperformance

incentives

Individual

Group

organization


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Individual incentive plans

Variable pay-

Employees who perform better should receive

more compensation.

Piece- work incentives

The employee is paid for the each unit of output.


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Production bonus-

Incentives that reward extra effort in the work

place.

Commission-

A percentage of the selling price given to the

seller.

Hazard pay-

Extra payment to an individual or a group for

working under dangerous/undesirable condition.

Cost-of-living adjustments- Increase to supplement payment designed tobring pay in line with the increase in cost of living


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Individual-Based Incentive Plan:

Advantages

Individuals are goal-oriented

Financial incentives can shape goals

Individual-based plans fit anindividualistic culture

Performance rewarded

may be repeated


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Tying pay to goals promotes narrow

focus

Individual pay plans may work against

achieving quality goals

Individual-based programs maypromote inflexibility

Individual-Based Incentive

Plan: Disadvantages


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Individual-Based Plans

Best When

contributions of individuals can be

accurately isolated

job demands autonomy

cooperation is less critical to

successful performance or whencompetition is to be encouraged


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Team-Based Incentive Plan:

Advantages

Foster group cohesiveness

Facilitates workforce flexibility

Reliably measure

team performance


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Team-Based Incentive Plan:

Disadvantages

Free-ride effect

Intergroup competition leads

to decline in overall performance

Social pressures limit performance

Identifying meaningful groups difficult


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Team-Based PlansBest When

it is difficult to single out who did what

firms culture / structure support teams

task objective fosters entrepreneurship

in self-managed work groups


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Organization wide incentive-

Profit sharing-

Profit sharing incentive plans are practiced

in retail and FMCG sectors. Other sectorstoo implement the plan based on

organizational policies. It refers to giving

out the share of profits the organization

earned to all the employees. Indirectly allthe organizations follow the plan by giving

out the dividends.


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ESOPs-

The scheme provides employees the

ownership of stocks in the company.


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0 10 20 0 40 50 0 70 0 90 100

Most Common Perks Received

by U.S. Senior Executives

Financial Counseling

Club Memberships

Personal Liability Ins.

Cellular Phone

Airline VIP Clubs

Home Security System

Home Computer

Company Car

First-Class Air TravelCompany Plane

Chauffeur Service

Reserved Parking

Executive Dining Room

Loans

PerkPercentage of Surveyed Companies

Offering to Senior Executives

Physical Exams

Documents

Chap11 Slides