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Chapter 12 - Variable Pay & Exec Comp Exam Questions and Answers
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Chapter 12 - Variable Pay & Exec Comp Exam Questions and Answers
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Chapter 12 - Variable Pay & ExecComp Exam Questions and
Answers
Variable Pay - -1) Compensation that is tied to performance - either
individual, team, or organizational
2) AKA pay-for-performance
- Advantages of Variable Pay
1) Employers
2) Employees - -1) Better productivity; Lower fixed costs; Shifting some risk
to employees
2) More pay!
- Incentives - -Tangible rewards that encourage or motivate action
- Assumptions of variable pay - -1) Some people or groups contribute more
to organizational success
2) Some people perform better and are more productive than others
3) Employees who perform better or contribute more should receive more
compensation
- Elements of a successful variable pay plan - -1) Fit organizational culture /
structure
2) Reward the right things
3) Clear, concise, communicated (3C's)
- Combatting Variable Pay Complexity - -1) Develop clear plans that are
constantly communicated
2) Use realistic performance measures
3) Keep the plans current and linked to organizational objectives
4) Clearly link performance results to payouts and recognize performance
differences
5) Identify variable pay incentives separately from base pay.
- Categories of Variable Pay - -1) Individual
2) Group / Team
3) Organization
- Individual Variable Pay
1) Def
2) Common incentives
3) Possible disadvantages - -1) Reward efforts + performance of individuals
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