Dessler HRM12e PPT 12

8/19/2019 Dessler HRM12e PPT 12

1/41

PowerPoint Presentation by Charlie CookThe University of West Alabama

Chapter 12

Pay for Performanceand FinancialIncentives

Part Four | Compensation

Copyright © !"" Pearson #d$cation% Inc&p$blishing as Prentice 'all


2/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2

W'#(# W# A(# )*W+


3/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"

"&"& #,plain how yo$ wo$ld apply five motivation theories in#,plain how yo$ wo$ld apply five motivation theories in

form$lating an incentive plan&form$lating an incentive plan&

&& -isc$ss the main incentives for individ$al employees&-isc$ss the main incentives for individ$al employees&

.&.& -isc$ss the pros and cons of commissions vers$s-isc$ss the pros and cons of commissions vers$s

straight pay incentives for salespeople&straight pay incentives for salespeople&

/&/& -escribe the main incentives for managers and-escribe the main incentives for managers ande,ec$tives&e,ec$tives&

0&0& )ame and define the most pop$lar organi1ationwide)ame and define the most pop$lar organi1ationwide

variable pay plans&variable pay plans&2&2& *$tline the steps in designing effective incentive plans&*$tline the steps in designing effective incentive plans&

LEARNING OUTCOMESLEARNING OUTCOMES


4/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!#

Motivation, Performance, and PayMotivation, Performance, and Pay

3 IncentivesIncentives

Financial rewards paid to workers whose prod$ction e,ceeds aFinancial rewards paid to workers whose prod$ction e,ceeds a

predetermined standard&predetermined standard&

3 Frederick Taylor Frederick Taylor

Pop$lari1ed scientific management and the $se of financialPop$lari1ed scientific management and the $se of financial

incentives in the late "4!!s&incentives in the late "4!!s&

5ystematic soldiering5ystematic soldiering

Fair day6s workFair day6s work

3 7inking Pay and Performance7inking Pay and Performance

Understanding the motivationalUnderstanding the motivational

bases of incentive plansbases of incentive plans


5/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!$

The Hierarchy of NeedsThe Hierarchy of Needs

3 8aslow6s 'ierarchy of )eeds98aslow6s 'ierarchy of )eeds9

Physiological :food% water% warmth;Physiological :food% water% warmth;

5ec$rity :a sec$re income% knowing one has a $ence% each of the higher=level needs&


6/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!%

Herzberg’s Hygiene–MotivatorHerzberg’s Hygiene–Motivator

TheoryTheory3 'ygienes :e,trinsic


7/41Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!&

Demotivators and Edward DeciDemotivators and Edward Deci

3 Intrinsically motivated behaviors are motivated by theIntrinsically motivated behaviors are motivated by the

individ$al6s $nderlying need for competence and self=individ$al6s $nderlying need for competence and self=determination&determination&

*ffering an e,trinsic reward for an intrinsically=motivated act*ffering an e,trinsic reward for an intrinsically=motivated actcan conflict with the acting individ$al6s internal sense ofcan conflict with the acting individ$al6s internal sense of

responsibility&responsibility& 5ome behaviors are best motivated by


8/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!'

Victor Vroom’s E!ectancy TheoryVictor Vroom’s E!ectancy Theory

3 8otivation is a f$nction of98otivation is a f$nction of9

E(pectancy)E(pectancy) the belief that effort will lead to performance&the belief that effort will lead to performance&

Instrumentality)Instrumentality) the connection between performance andthe connection between performance and

the appropriate reward&the appropriate reward&

*alence)*alence) the val$e the person places on the reward&the val$e the person places on the reward&

3 8otivation @ :# , I , ;8otivation @ :# , I , ;

If any factor :#% I% or ; is 1ero% then there is no motivationIf any factor :#% I% or ; is 1ero% then there is no motivation

to work toward the reward&to work toward the reward&

#mployee confidence b$ilding and training% acc$rate#mployee confidence b$ilding and training% acc$rate

appraisals% and knowledge of workers6 desired rewards canappraisals% and knowledge of workers6 desired rewards canincrease employee motivation&increase employee motivation&


9/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!+

"ehavior Modi#cation $"ehavior Modi#cation $

%einforcement Theory%einforcement Theory

3 B& F& 5kinner6s PrinciplesB& F& 5kinner6s Principles

To $nderstand behavior one m$st $nderstandTo $nderstand behavior one m$st $nderstand

the conse>$ences of that behavior&the conse>$ences of that behavior&

Behavior that leads to a positive conse>$ence :reward;Behavior that leads to a positive conse>$ence :reward;tends to be repeated% while behavior that leads to a negativetends to be repeated% while behavior that leads to a negativeconse>$ence :p$nishment; tends not to be repeated&conse>$ence :p$nishment; tends not to be repeated&

Behavior can be changed by providing properly sched$ledBehavior can be changed by providing properly sched$led

rewards :or p$nishments;&rewards :or p$nishments;&


10/41


&ncentive Pay Termino'ogy&ncentive Pay Termino'ogy

3 Pay=for=Performance PlanPay=for=Performance Plan

Ties employee6s pay to the employee6s performanceTies employee6s pay to the employee6s performance

3 ariable Pay Planariable Pay Plan Is an incentive plan that ties a gro$p or team6s pay to someIs an incentive plan that ties a gro$p or team6s pay to some

meas$re of the firm6s :or the facility6s; overall profitabilitymeas$re of the firm6s :or the facility6s; overall profitability

#,ample9 profit=sharing plans#,ample9 profit=sharing plans 8ay incl$de incentive plans for individ$al employees8ay incl$de incentive plans for individ$al employees


11/41


Em!'oyee &ncentives and the (awEm!'oyee &ncentives and the (aw

3 F75A Wage Calc$lations and Incentive PaymentsF75A Wage Calc$lations and Incentive Payments

Bon$ses incl$ded in overtime calc$lations9Bon$ses incl$ded in overtime calc$lations9

Those promised to newly hired employeesThose promised to newly hired employees

Those provided for in $nion contracts or other agreementsThose provided for in $nion contracts or other agreements

Those anno$nced to ind$ce employees to work moreThose anno$nced to ind$ce employees to work more

prod$ctively% steadily% rapidly% or efficiently or to ind$ce themprod$ctively% steadily% rapidly% or efficiently or to ind$ce themto remain with the firmto remain with the firm

Bon$ses e,cl$ded from overtime calc$lations9Bon$ses e,cl$ded from overtime calc$lations9

Christmas and gift bon$ses not based on ho$rs worked&Christmas and gift bon$ses not based on ho$rs worked&

Bon$ses so s$bstantial that employees don6t consider themBon$ses so s$bstantial that employees don6t consider thema part of their wagesa part of their wages

P$rely discretionary bon$ses in which the employer retainsP$rely discretionary bon$ses in which the employer retains

discretion over how m$ch% if anything% to paydiscretion over how m$ch% if anything% to pay


12/41


Ty!es of Em!'oyee &ncentiveTy!es of Em!'oyee &ncentive

P'ansP'ans

Individual EmployeeIncentive and Recognition

Programs

Sales CompensationPrograms

Organizationwide

Incentive Programs

Executive IncentiveCompensation Programs

Team/Group!ased"aria!le Pay Programs

Pay#orPer#ormance

Plans


13/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1"

&ndivid)a' &ncentive P'ans&ndivid)a' &ncentive P'ans

3 Piecework PlansPiecework Plans

The worker is paid a s$m :piece rateD;The worker is paid a s$m :piece rateD;

for each $nit he or she prod$ces&for each $nit he or she prod$ces&

5traight piecework5traight piecework

5tandard ho$r plan5tandard ho$r plan


14/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1#

Pros and *ons of Piecewor+ Pros and *ons of Piecewor+

3 #asily $nderstandable% e>$itable%#asily $nderstandable% e>$itable%

and powerf$l incentivesand powerf$l incentives

3 #mployee resistance to changes#mployee resistance to changes

in standards or work processesin standards or work processes

affecting o$tp$taffecting o$tp$t

3 E$ality problems ca$sed byE$ality problems ca$sed by

an overriding o$tp$t foc$san overriding o$tp$t foc$s

3 Possibility of violating minim$mPossibility of violating minim$m

wage standardswage standards3 #mployee dissatisfaction when#mployee dissatisfaction when

incentives either cannot be earnedincentives either cannot be earned

or are withdrawnor are withdrawn


15/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1$

&ndivid)a' &ncentive P'ans cont’d-&ndivid)a' &ncentive P'ans cont’d-

3 8erit Pay8erit Pay

Is a permanent c$m$lative salary increase the firm awardsIs a permanent c$m$lative salary increase the firm awards

to an individ$al employee based on his or her individ$alto an individ$al employee based on his or her individ$al

performanceperformance

Can detract from performance if awarded across the boardCan detract from performance if awarded across the board

Becomes permanent ongoing reward for past performanceBecomes permanent ongoing reward for past performance

3 8erit Pay *ptions8erit Pay *ptions

ive ann$al l$mp=s$m merit raises that doive ann$al l$mp=s$m merit raises that do notnot make themake theraise part of an employee6s base salary&raise part of an employee6s base salary&

Tie merit awards to both individ$al and organi1ationalTie merit awards to both individ$al and organi1ationalperformance&performance&


16/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1%

-/E 12!1 8erit Award -etermination 8atri, :an #,ample;

o determine the dollar alue o each employees incentie a3ard) 415 multiply the

employees annual, straight6time 3age or salary as o 7une "0 times his or her ma(imum

incentie a3ard and 425 multiply the resultant product by the appropriate percentage igure

rom this table.

E(ample) i an employee had an annual salary o 820,000 on 7une "0 and a ma(imum

incentie a3ard o &9 and i her perormance and the organi:ations perormance 3ere

both ;e(cellent,< the employees a3ard 3ould be 81,120 4820,000 = 0.0& = 0.'0 > 81,1205.

Company Performance (Weight = 0.50)

Employee Perormance?ating 4@eight > .$05 Autstanding E(cellent Bood arginal Dnacceptable

Autstanding 1.00 0.+0 0.'0 0.&0 0.00

E(cellent 0.+0 0.'0 0.&0 0.%0 0.00

Bood 0.'0 0.&0 0.%0 0.$0 0.00

arginal

Dnacceptable


17/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1&

&ncentives for Professiona'&ncentives for Professiona'

Em!'oyeesEm!'oyees3 Professional #mployeesProfessional #mployees Are those whose work involves the application Are those whose work involves the application

of learned knowledge to the sol$tion of theof learned knowledge to the sol$tion of the

employer6s problems&employer6s problems&

7awyers% doctors% economists% and engineers7awyers% doctors% economists% and engineers

3 Possible IncentivesPossible Incentives Bon$ses% stock options and grants% profit sharingBon$ses% stock options and grants% profit sharing

Better vacations% more fle,ible work ho$rsBetter vacations% more fle,ible work ho$rs

Improved pension plansImproved pension plans

#>$ipment for home offices#>$ipment for home offices


18/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1'

Non#nancia' and %ecognitionNon#nancia' and %ecognition

.wards.wards3 #ffects of (ecognition=Based Awards#ffects of (ecognition=Based Awards (ecognition has a positive impact on performance%(ecognition has a positive impact on performance%

either alone or in con


19/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!1+

FIBD?E 12!1 5ocial (ecognition and (elated Positive(einforcement 8anagers Can Use

3 Challenging work assignments3 Freedom to choose own work

activity

3 'aving f$n b$ilt into work

3 8ore of preferred task

3 (ole as boss6s stand=in when heor she is away

3 (ole in presentations to topmanagement

3 ?ob rotation

3 #nco$ragement of learning andcontin$o$s improvement

3Being provided with ampleenco$ragement

3 Being allowed to set own goals

3 Compliments

3 #,pression of appreciation in

front of others3 )ote of thanks

3 #mployee=of=the=month award

3 5pecial commendation

3 Bigger desk

3 Bigger office or c$bicle


20/41


/n'ine and &T01)!!orted .wards/n'ine and &T01)!!orted .wards

3 Information Technology and IncentivesInformation Technology and Incentives

#nterprise incentive management :#I8;#nterprise incentive management :#I8;

5oftware that a$tomates planning% calc$lation%5oftware that a$tomates planning% calc$lation%

modeling% and management of incentivemodeling% and management of incentive

compensation planscompensation plans

#nabling companies to align their employees#nabling companies to align their employeeswith corporate strategy and goalswith corporate strategy and goals

3 *nline Award Programs*nline Award Programs

Programs offered by online incentives firms thatPrograms offered by online incentives firms that

improve and e,pedite the awards processimprove and e,pedite the awards process Broader range of awardsBroader range of awards

8ore immediate rewards8ore immediate rewards


21/41


&ncentives for 1a'es!eo!'e&ncentives for 1a'es!eo!'e

3 5alary Plan5alary Plan

5traight salaries5traight salaries

Best for9 prospecting :finding new clients;%Best for9 prospecting :finding new clients;%

acco$nt servicing% training c$stomer6s sales force%acco$nt servicing% training c$stomer6s sales force%

or participating in national and local trade showsor participating in national and local trade shows

3 Commission PlanCommission Plan Pay is a percentage of sales res$lts&Pay is a percentage of sales res$lts&

Geeps sales costs proportionate to sales reven$esGeeps sales costs proportionate to sales reven$es

8ay ca$se a neglect of nonselling d$ties8ay ca$se a neglect of nonselling d$ties

Can create wide variation in salesperson6s incomeCan create wide variation in salesperson6s income 7ikelihood of sales s$ccess may be linked to e,ternal7ikelihood of sales s$ccess may be linked to e,ternal

factors rather than to salesperson6s performancefactors rather than to salesperson6s performance

Can increase t$rnover of salespeopleCan increase t$rnover of salespeople


22/41


&ncentives for 1a'es!eo!'e cont’d-&ncentives for 1a'es!eo!'e cont’d-

3 Combination PlanCombination Plan

Pay is a combination of salary andPay is a combination of salary and

commissions% $s$ally with a si1ablecommissions% $s$ally with a si1able

salary component&salary component&

Plan gives salespeople a floorPlan gives salespeople a floor

:safety net; to their earnings&:safety net; to their earnings& 5alary component covers company=5alary component covers company=

specified service activities&specified service activities&

Plans tend to become complicated%Plans tend to become complicated%

and mis$nderstandings can res$lt&and mis$nderstandings can res$lt&


23/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2"

1!ecia'ized *ommission P'ans1!ecia'ized *ommission P'ans

3 Commission=pl$s=-rawing=Acco$nt PlanCommission=pl$s=-rawing=Acco$nt Plan

Commissions are paid b$t a draw on f$t$reCommissions are paid b$t a draw on f$t$reearnings helps the salesperson to get thro$ghearnings helps the salesperson to get thro$gh

low sales periods&low sales periods&

3 Commission=pl$s=Bon$s PlanCommission=pl$s=Bon$s Plan

Pay is mostly based on commissions&Pay is mostly based on commissions& 5mall bon$ses :spiffsD; are paid for directed5mall bon$ses :spiffsD; are paid for directed

activities like selling add=ons or slow=movingactivities like selling add=ons or slow=moving

items&items&


24/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2#

Maimizing 1a'es 2orce %es)'ts3 1etting 1a'esMaimizing 1a'es 2orce %es)'ts3 1etting 1a'es

4)otas4)otas3 5ho$ld >$otas be locked in for a period of timeH5ho$ld >$otas be locked in for a period of timeH

3 'ave >$otas been comm$nicated to the sales force'ave >$otas been comm$nicated to the sales forcewithin one month of the start of the periodHwithin one month of the start of the periodH

3 -oes the sales force know e,actly how its >$otas are setH-oes the sales force know e,actly how its >$otas are setH

3 -o yo$ combine bottom=$p information :like acco$nt forecasts;-o yo$ combine bottom=$p information :like acco$nt forecasts;

with top=down re>$irements :like the company b$siness plan;Hwith top=down re>$irements :like the company b$siness plan;H

3 -o 2! to J! of the sales force generally hit their >$otaH-o 2! to J! of the sales force generally hit their >$otaH3 -o high performers hit their targets consistentlyH-o high performers hit their targets consistentlyH

3 -o low performers show improvement over timeH-o low performers show improvement over timeH

3 Are >$otas stable thro$gh the performance periodH Are >$otas stable thro$gh the performance periodH

3 Are ret$rns and debookings reasonably lowH Are ret$rns and debookings reasonably lowH

3 'as yo$r firm generally avoided compensation=related laws$itsH'as yo$r firm generally avoided compensation=related laws$itsH

3 Is "! of the sales force achieving higher performance than previo$slyHIs "! of the sales force achieving higher performance than previo$slyH

3 Is 0 to "! of the sales force achieving below=>$ota performanceIs 0 to "! of the sales force achieving below=>$ota performanceand receiving coachingHand receiving coachingH


25/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2$

&ncentives for Managers and&ncentives for Managers and

Eec)tivesEec)tives3 #,ec$tive Total (eward Package#,ec$tive Total (eward Package Base salary :cash;Base salary :cash;

5hort=term incentives :bon$ses;5hort=term incentives :bon$ses;

7ong=term incentives :e&g&% stock options;7ong=term incentives :e&g&% stock options;

3 5arbanes=*,ley Act of !!5arbanes=*,ley Act of !! 8akes e,ec$tives and the board of directors8akes e,ec$tives and the board of directors

personally liable for violating their fid$ciarypersonally liable for violating their fid$ciary

responsibilities to their shareholders&responsibilities to their shareholders&

(e>$ires the C#* and CF* to repay bon$ses%(e>$ires the C#* and CF* to repay bon$ses%

incentives% or e>$ity=based compensationincentives% or e>$ity=based compensationreceived following iss$ance of a financialreceived following iss$ance of a financialstatement that the firm m$st restate&statement that the firm m$st restate&


26/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2%

1hort0 and (ong0Term &ncentives1hort0 and (ong0Term &ncentives

3 5hort=Term Incentives9 The Ann$al Bon$s5hort=Term Incentives9 The Ann$al Bon$s

Plans intended to motivate short=term performancePlans intended to motivate short=term performanceof managers and tied to company profitability&of managers and tied to company profitability&

Iss$es in awarding bon$sesIss$es in awarding bon$ses

#ligibility basis#ligibility basis

F$nd si1e basisF$nd si1e basis

Individ$al performance awardIndivid$al performance award

7ong=term incentives7ong=term incentives

5tock options5tock options

Performance sharesPerformance shares

Inde,ed optionsInde,ed options Premi$m price optionsPremi$m price options

5tock appreciation rights5tock appreciation rights

PerksPerks


27/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2&

-/E 12!2 8$ltiplier Approach to -etermining Ann$al Bon$s

Company’s Performance (Based on Sales Targets Weight = 0.50)

Indiidual Perormance4ased on -ppraisal, @eight > .$05 E(cellent Bood Fair Poor

E(cellent 1.00 0.+0 0.'0 0.&0

Bood 0.'0 0.&0 0.%0 0.$0

Fair 0.00 0.00 0.00 0.00

Poor 0.00 0.00 0.00 0.00

!ote" o determine the dollar amount o a managers a3ard, multiply the ma(imum possible4target5 bonus by the appropriate actor in the matri(.


28/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2'

*reating an Eec)tive*reating an Eec)tive

*om!ensation P'an*om!ensation P'an"&"& -efine the strategic conte,t for the e,ec$tive-efine the strategic conte,t for the e,ec$tivecompensation program&compensation program&

&& 5hape each component of the package to foc$s5hape each component of the package to foc$s

the manager on achieving the firm6s strategic goals&the manager on achieving the firm6s strategic goals&

.&.& Check the e,ec$tive compensation plan forCheck the e,ec$tive compensation plan forcompliance with all legal and reg$latorycompliance with all legal and reg$latory

re>$irements and for ta, effectiveness&re>$irements and for ta, effectiveness&

/&/& Install a process for reviewing and eval$atingInstall a process for reviewing and eval$ating

the e,ec$tive compensation plan wheneverthe e,ec$tive compensation plan whenevera ma


29/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!2+

Team$5ro)! &ncentive P'ansTeam$5ro)! &ncentive P'ans

3 Team :or ro$p; Incentive PlansTeam :or ro$p; Incentive Plans

Incentives are based on team6s performance&Incentives are based on team6s performance&

3 'ow to -esign Team Incentives'ow to -esign Team Incentives

5et individ$al work standards&5et individ$al work standards&

5et work standards for each team member5et work standards for each team memberand then calc$late each member6s o$tp$t&and then calc$late each member6s o$tp$t&

8embers are paid based on one of three form$las98embers are paid based on one of three form$las9

All receive the same pay earned by the highest prod$cer& All receive the same pay earned by the highest prod$cer&

All receive the same pay earned by the lowest prod$cer& All receive the same pay earned by the lowest prod$cer& All receive the same pay e>$al to the average pay All receive the same pay e>$al to the average pay

earned by the gro$p&earned by the gro$p&


30/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"0

Pros and *ons of Team &ncentivesPros and *ons of Team &ncentives

3 ProsPros

(einforces team planning and problem solving(einforces team planning and problem solving

'elps ens$re collaboration'elps ens$re collaboration

#nco$rages a sense of cooperation#nco$rages a sense of cooperation

#nco$rages rapid training of new members#nco$rages rapid training of new members

3 ConsCons Pay is not proportionate to an individ$al6s effortPay is not proportionate to an individ$al6s effort

(ewards free ridersD(ewards free ridersD


31/41


/rganizationwide &ncentive P'ans/rganizationwide &ncentive P'ans

3 Profit=5haring PlansProfit=5haring Plans

C$rrent profit=sharing :cash; plansC$rrent profit=sharing :cash; plans

#mployees receive cash shares of the firm6s profits#mployees receive cash shares of the firm6s profits

at reg$lar intervals&at reg$lar intervals&

-eferred profit=sharing plans-eferred profit=sharing plans

A predetermined portion of profits based on the A predetermined portion of profits based on theemployee6s contrib$tion to the firm6s profits isemployee6s contrib$tion to the firm6s profits is

placed in each employee6s retirement acco$ntplaced in each employee6s retirement acco$nt

$nder a tr$stee6s s$pervision&$nder a tr$stee6s s$pervision&

#mployees6 income ta,es on the distrib$tions are#mployees6 income ta,es on the distrib$tions are

deferred% often $ntil the employee retires&deferred% often $ntil the employee retires&


32/41


5ainsharing P'ans5ainsharing P'ans

P$ilosop$yo#

cooperation

Involvemen

t system

Identity

Scanlon PlanComponents

Competenc

e

%ene&tss$aring

#ormula


34/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"#

.t0%is+ Variab'e Pay P'ans.t0%is+ Variab'e Pay P'ans

3 P$t some portion of the employee6sP$t some portion of the employee6s

weekly pay at risk&weekly pay at risk& If employees meet or e,ceedIf employees meet or e,ceed

their goals% they earn incentives&their goals% they earn incentives&

If they fail to meet their goals% theyIf they fail to meet their goals% theyforego some of the pay they wo$ldforego some of the pay they wo$ld

normally have earned&normally have earned&


35/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"$

/rganizationwide &ncentive P'ans/rganizationwide &ncentive P'ans

cont’d-cont’d-3 #mployee 5tock *wnership Plan :#5*P;#mployee 5tock *wnership Plan :#5*P; A firm ann$ally contrib$tes its own stockKor cash A firm ann$ally contrib$tes its own stockKor cash

:with a limit of "0 of compensation; to be $sed to:with a limit of "0 of compensation; to be $sed to

p$rchase the stockKto a tr$st established for thep$rchase the stockKto a tr$st established for the

employees&employees&

The tr$st holds the stock in individ$al employeeThe tr$st holds the stock in individ$al employee

acco$nts and distrib$tes it to employees $ponacco$nts and distrib$tes it to employees $pon

separation from the firm if the employee has workedseparation from the firm if the employee has worked

long eno$gh to earn ownership of the stock&long eno$gh to earn ownership of the stock&


36/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"%

.dvantages of E1/Ps.dvantages of E1/Ps

3 For the CompanyFor the Company

Can take a ta, ded$ction e>$al to the fair market val$eCan take a ta, ded$ction e>$al to the fair market val$eof the shares transferred to the #5*P tr$steeof the shares transferred to the #5*P tr$stee

ets an income ta, ded$ction for dividends paidets an income ta, ded$ction for dividends paid

on #5*P=owned stockon #5*P=owned stock

Can borrow against #5*P in tr$st and then repayCan borrow against #5*P in tr$st and then repay

the loan in preta, rather than after=ta, dollarsthe loan in preta, rather than after=ta, dollars

3 For the #mployeesFor the #mployees -evelop a sense of ownership in and commitment to the firm&-evelop a sense of ownership in and commitment to the firm&

-o not pay ta,es on #5*P earnings $ntil they receive-o not pay ta,es on #5*P earnings $ntil they receive

a distrib$tion&a distrib$tion&3 For the 5hareholders of Closely='eld CorporationsFor the 5hareholders of Closely='eld Corporations Can place assets into an #5*P tr$st which will allow them toCan place assets into an #5*P tr$st which will allow them to

p$rchase other marketable sec$rities to diversify their holdingsp$rchase other marketable sec$rities to diversify their holdings


37/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"&

&m!'ementing an E6ective&m!'ementing an E6ective

&ncentive P'an&ncentive P'an"&"& Ask9 -oes it make sense to $se an incentive hereH Ask9 -oes it make sense to $se an incentive hereH

&& 7ink the incentive with yo$r strategy&7ink the incentive with yo$r strategy&

.&.& 8ake s$re the program is motivational&8ake s$re the program is motivational&

/&/& 5et complete standards&5et complete standards&

0&0& Be scientific in analy1ing the effects of the plan&Be scientific in analy1ing the effects of the plan&


38/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"'

7hy &ncentive P'ans 2ai'7hy &ncentive P'ans 2ai'

3 Performance pay can6t replace good management&Performance pay can6t replace good management&

3 Lo$ get what yo$ pay for&Lo$ get what yo$ pay for&

3 Pay is not a motivator&DPay is not a motivator&D

3 (ewards p$nish&(ewards p$nish&

3 (ewards r$pt$re relationships&(ewards r$pt$re relationships&

3 (ewards can have $nintended conse>$ences&(ewards can have $nintended conse>$ences&

3 (ewards may $ndermine responsiveness&(ewards may $ndermine responsiveness&

3 (ewards $ndermine intrinsic motivation&(ewards $ndermine intrinsic motivation&


39/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!"+

-/E 12!" #,press A$to Compensation 5ystem

E(press -uto eam ?esponsibility o eam Current Compensation ethod

1. ales orce Pers$ade b$yer to

p$rchase a car&

ery small salary :minim$m wage; with

commissions& Commission rate increaseswith every ! cars sold per month&

2. Finance oice 'elp close the saleMpers$ade c$stomer to$se company financeplan&

5alary% pl$s bon$s for each N"!%!!!financed with the company

". Getailing Inspect cars deliveredfrom factory% clean% andmake minor ad


40/41

Copyright © 2011 Pearson Education, Inc. publishing as Prentice all 12!#0

' E ( T E R ) S

financial incentives

fair day6s work

scientific management movement

e,pectancy

instr$mentality

valence

behavior modification

variable pay

piecework

straight piecework

standard ho$r plan

merit pay :merit raise;

ann$al bon$s

stock option

golden parach$tes

team :or gro$p; incentive plan

organi1ationwide incentive plans

profit=sharing plan

5canlon plan

gainsharing plan

at=risk variable pay plans

employee stock ownership plan :#5*P;


41/41

-ll rights resered. o part o this publication may be reproduced,stored in a retrieal system, or transmitted, in any orm or by any

means, electronic, mechanical, photocopying, recording, orother3ise, 3ithout the prior 3ritten permission o the publisher.

Printed in the Dnited tates o -merica.

Documents

Dessler HRM12e PPT 12