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BUSMHR 3100_ Final Exam.
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BUSMHR 3100_ Final Exam.
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BUSMHR 3100: Final ExamIncentive Pay - ANS-- forms of pay linked to an employee's performance as an
individual, group member, or organization member
- influential because the amount paid is linked to certain predefined behaviors or
outcomes
- may be in the form of a commission or a bonus
Effective Incentive Pay Requirements - ANS-- Performance measures are linked to the
organization's goals
- employees believe they can meet performance standards
- organization gives employees the resources they need to meet their goals
- employees value the rewards given
- employees believe the reward system is fair
- pay plan takes into account that employees may ignore any goals that are not
rewarded
Motivating Employees with Incentives - ANS-- employees must feel like the incentive
plan is fair
- give employees a say in allocating incentives
- employees want interesting work, appreciation for their efforts, flexibility and a sense
of belonging to the work group and the inner satisfaction of work well done
Examples of Incentives - ANS-- piecework rates, standard hour plans, merit pay,
individual bonuses, sales commissions
Piecework rate - ANS-a wage based on the amount an employee produces
Straight piecework plan - ANS-the employer pays the same rate per piece no matter
how much the worker produces
Differential piece rates - ANS-the piece rate depends on the amount produced
Standard Hour Plan - ANS-- an incentive plan that pays workers extra for work done in
less time than a preset "standard time"
- similar to piecework plans
Merit Pay - ANS-- a system of linking pay increases to ratings on performance
appraisals
,- use a merit increase grid (individual's performance rating, individual's compa-ratio)
Performance Bonuses - ANS-- not rolled into base pay
- employee must re-earn them during each performance period
- may be a one-time reward
- may be linked to objective performance measures, rather than subjective ratings
Sales Commissions - ANS-- commissions: incentive pay calculated as a percentage of
sales (some earn a commission in addition to a base salary)
- straight commission plan: some earn only commissions
- some earn no commissions at all, but a straight salary
Commission - ANS-- performance bonuses for production workers are not rolled into
base pay
- the bonuses could be tied to various measures including the quantity of products
shipped in a specific time period
Gainsharing - ANS-- group incentive program that measures improvements in
productivity and effectiveness and distributes a portion of each to employees
- addresses challenge of identifying appropriate performance measures for complex
jobs
- frees employees to determine how to improve their own and their group's performance
10 Conditions for Effective Gainsharing - ANS-- management commitment
- need for change or commitment to continuous improvement
- management acceptance and encouragement of employee input
- high levels of cooperation and interaction
- employment security
- information sharing on productivity and costs
- goal setting
- commitment of all involved parties to the process of change and improvement
- performance standard and calculation that employees understand and consider fair
and that is closely related to managerial objectives
- employees who value working in groups
Group Bonuses - ANS-- tends to be for smaller work groups
- reward the members of a group for attaining a specific goal, usually measured in terms
of physical output
, Team Awards - ANS-- similar to group bonuses but more likely to use a broad range of
performance measures (cost savings, successful completion of a project, meeting
deadlines)
Types of Pay for Organizational Performance - ANS-- profit sharing, stock options,
employee stock ownership plans
Profit Sharing - ANS-- incentive pay in which payments are a percentage of the
organization's profits and do not become part of the employees' base salary
- may encourage employees to think like owners
- evidence is not clear whether profit sharing helps organizations perform better
Stock Options - ANS-- rights to buy a certain number of shares of stock at a specified
price
- traditionally stock options have been granted to executives
ESOPs - ANS-- an arrangement in which the organization distributes shares of stock to
all its employees by placing it in a trust
- most common form of employee ownership
Balanced Scorecard - ANS-- a combination of performance measures directed toward
the company's long- and short-term goals and used as the basis for awarding incentive
pay
- Four categories of a balanced scorecard include: financial, customer, internal and
learning and growth
Processes that make incentives work - ANS-Participation in Decisions
- employee participation in pay-related decisions can be part of a general move toward
employee empowerment
- employee participation can contribute to the incentive plan's success
Communication
- communication demonstrates that the pay plan is fair
- when employees understand the incentive pay plan's requirements, the plan is more
likely to influence their behavior as desired
- important when changing the pay plan
Short-Term Incentives - ANS-- bonuses based on ROI, year's profits or other measures
related to the organization's goals
- actual payment of bonus may be delayed to gain tax advantages
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