presentation shanza

8/8/2019 Presentation Shanza

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Pay for PerformancePay for Performanceandand

Financial IncentivesFinancial Incentives


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IncentivesIncentives

Financial rewards paid to workersFinancial rewards paid to workers

whose production exceeds awhose production exceeds a

predetermined standard.predetermined standard.

Popularized scientific managementPopularized scientific management

and the use of financial incentivesand the use of financial incentives

in the late 1800s.in the late 1800s.Systematic soldiering: theSystematic soldiering: the

tendency of employees to worktendency of employees to work

at the slowest pace possible andat the slowest pace possible and

to produce at the minimumto produce at the minimum

acceptable level.acceptable level.

Frederick TaylorFrederick Taylor


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HIERACHY

OF NEEDS


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EDWARD DECIEDWARD DECI

Intrinsically motivatedIntrinsically motivated

behaviors are motivatedbehaviors are motivated

by the underlying needby the underlying need

for competence and selffor competence and self--determination.determination.

Offering an extrinsicOffering an extrinsic

reward for an intrinsicallyreward for an intrinsically--

motivated act can conflictmotivated act can conflict

with the actingwith the acting

individuals internal senseindividuals internal sense

of responsibility.of responsibility.


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PAY

FORPERFORMANCE

PLANS

INDIVIDAUL

INCENTIVES

SALES

COMPENSATIONPROGRAMS

TEAM/GROUP BASED

VARIABLE PAYPROGRAM

ORGANIZATION

WIDEINCENTIVE

PROGRAM

EXECUTIVE

INCENTIVE

COMPENSTATION

PROGRAM

VARIABLE

PAY

TYPES OF INCENTIVE PLANS


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INDIVIDUAL INCENTIVEINDIVIDUAL INCENTIVE

PLANSPLANS Piecework PlansPiecework Plans

Pro and cons of pieceworkPro and cons of piecework

Easily understandable, equitable, and powerful incentivesEasily understandable, equitable, and powerful incentives

Employee resistance to changes in standards or workEmployee resistance to changes in standards or work

processes affecting outputprocesses affecting output

Employee dissatisfaction when incentives either cannot beEmployee dissatisfaction when incentives either cannot be

earned due to external factors or are withdrawn due to a lackearned due to external factors or are withdrawn due to a lack

of need for outputof need for output

STRAIGHT PIECE WORK

STANDARD HOUR PLAN


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PLANSPLANS Merit payMerit pay

Merit pay optionsMerit pay options

Incentives for professional employeesIncentives for professional employees

Possible incentivesPossible incentives

Bonuses, stock options and grants, profit sharingBonuses, stock options and grants, profit sharing

Better vacations, more flexible work hoursBetter vacations, more flexible work hours

improved pension plansimproved pension plans

Equipment for home officesEquipment for home offices

ANNUAL LUMP SUM

MERIT AWARDS


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PLANSPLANS RecognitionRecognition--based awardsbased awards

Online award programsOnline award programs

Information technology andInformation technology andincentivesincentives Enterprise incentiveEnterprise incentive

management (EIMmanagement (EIM

Software thatSoftware that automatesautomates thetheplanning, calculation, modelingplanning, calculation, modelingand management of incentiveand management of incentive

compensation plans, enablingcompensation plans, enablingcompanies to align theircompanies to align theiremployees with corporateemployees with corporatestrategy and goals.strategy and goals.


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INCENTIVES FOR SALESINCENTIVES FOR SALES

PEOPLEPEOPLESALARY

PLAN

COMMISSION

PLAN

COMBINATION

PLAN

COMMISSION

PLUS DRAWING

ACCOUNT PLAN

COMMISSION

PLUS BONUSPLAN STRAIGHT

SALARIES

DRAW ON FUTUREEARNINGS

SMALL BONUSES PAID

FOR DIRECTED

ACTIVITIES


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Team/Group Variable Pay IncentiveTeam/Group Variable Pay Incentive

PlansPlans HOW TO DESIGNHOW TO DESIGN

TEAM INCENTIVETEAM INCENTIVE

PLANS?????PLANS?????

SET INDIVIDUALSET INDIVIDUALWORK STANDARDSWORK STANDARDS

USE ENGINEEREDUSE ENGINEERED

PRODUCTIONPRODUCTION

STANDARDSTANDARD

TIE REWARDS TOTIE REWARDS TO

GOALS OF GROUPGOALS OF GROUP

PERFORMANCEPERFORMANCE


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Organization wide Variable PayOrganization wide Variable Pay

PlansPlans PROFIT SHARING PLANSPROFIT SHARING PLANS

CASH PLANSCASH PLANS

LINCOLN INCENTIVE SYSTEMLINCOLN INCENTIVE SYSTEM

DEFFERED PROFIT SHARINGDEFFERED PROFIT SHARINGPLANSPLANS

EMPLOYEE STOCKEMPLOYEE STOCK

OWNERSHIP PLANOWNERSHIP PLAN

SCANLON PLANSCANLON PLAN GAINSHARINGGAINSHARING

AT RISK VARIABLE PAY PLANAT RISK VARIABLE PAY PLAN


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Organizationwide Variable PayOrganizationwide Variable Pay

PlansPlans Employee stock ownership plan (ESOP)Employee stock ownership plan (ESOP)

A corporation annually contributes its ownA corporation annually contributes its ownstockstockor cash (with a limit of 15% ofor cash (with a limit of 15% of

compensation) to be used to purchase thecompensation) to be used to purchase the

stockstockto a trust established for the employees.to a trust established for the employees.

The trust holds the stock in individual employeeThe trust holds the stock in individual employee

accounts and distributes it to employees uponaccounts and distributes it to employees upon

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

long enough to earn ownership of the stock.long enough to earn ownership of the stock.


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SCANLON PLANSCANLON PLAN

PH

ILOSOPHY

OFCO OPERATION

IDENTITY

COMPETENCE SHARING

BENEFITSFORMULA

AN INCENTIVE PLAN DESIGNED TO ENCOURAGE

COOPERATION, INVOLVEMENT AND SHARING OF

BENEFIT


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ShortShort--Term IncentivesTerm Incentives

for Managers Andfor Managers AndExecutivesExecutivesANNAUL BONUSESANNAUL BONUSES

STOCK OPTIONSSTOCK OPTIONS

Long-Term Incentivesfor Managers

And Executives

Performance plansPerformance plans

Golden parachutesGolden parachutes

Guaranteed loans toGuaranteed loans todirectorsdirectors


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Creating an ExecutiveCreating an Executive

Compensation PlanCompensation Plan Define the strategic context for the executiveDefine the strategic context for the executive

compensation program.compensation program.

Shape each component of the package to focus theShape each component of the package to focus the

manager on achieve the firms strategic goals.manager on achieve the firms strategic goals.

Create a stock option plan to meet the needs of theCreate a stock option plan to meet the needs of the

executives and the company and its strategy.executives and the company and its strategy.

Check the executive compensation plan for complianceCheck the executive compensation plan for compliancewith all legal and regulatory requirements and for taxwith all legal and regulatory requirements and for tax

effectiveness.effectiveness.


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Why Incentive Plans FailWhy Incentive Plans Fail

Performance pay cant replace goodPerformance pay cant replace good

management.management.

Pay is not a motivator.Pay is not a motivator.

Rewards punish.Rewards punish.

Rewards rupture relationships.Rewards rupture relationships. Rewards can have unintendedRewards can have unintended

consequencesconsequences..


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Implementing Effective IncentiveImplementing Effective Incentive

PlansPlans Ask: Is effort clearly instrumental in obtaining theAsk: Is effort clearly instrumental in obtaining the

reward?reward?

Link the incentive with your strategy.Link the incentive with your strategy.

Make sure effort and rewards are directly related.Make sure effort and rewards are directly related.

Make the plan easy for employees to understand.Make the plan easy for employees to understand.

Set effective standards.Set effective standards.

View the standard as a contract with your employees.View the standard as a contract with your employees.

Get employees support for the plan.Get employees support for the plan.

Use good measurement systems.Use good measurement systems.

Emphasize longEmphasize long--term as well as shortterm as well as short--term success.term success.


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HR Activities that Build CommitmentHR Activities that Build Commitment

Clarifying and communicating the goals and mission of theClarifying and communicating the goals and mission of the

organization.organization.

Guaranteeing organizational justice.Guaranteeing organizational justice. Creating a sense of community by emphasizing teamwork andCreating a sense of community by emphasizing teamwork and

encouraging employees to interact.encouraging employees to interact.

Supporting employee development by emphasizing promotion fromSupporting employee development by emphasizing promotion fromwithin, developmental activities, and careerwithin, developmental activities, and career--enhancing activities.enhancing activities.

Generally committing to peopleGenerally committing to people--first values.first values.

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