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CCP 7 - Variable Pay: Improving Performance With Variable Pay (Questions And Answers)
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CCP 7 - Variable Pay: Improving Performance With Variable Pay (Questions And Answers)
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CCP 7 - Variable Pay: Improving Performance WithVariable Pay (Questions And Answers)
Variable Pay Right Ans - based on an individual, group or organizational
results
flexible, adaptable
Performance based compensation
Goal: improve organizational performance
Purpose: differentiate the pay of individuals who achieve results vs those who
do not
Compensation that is discretionary or contingent on performance or results
achieved, and can be designed for any individual or combination of
individuals. The amount actually paid will vary based on whatever criteria the
organization chooses.
Elements of Compensation Right Ans - Fixed Pay - nondiscretionary
Variable Pay - discretionary
Fixed Pay Right Ans - Non Discretionary compensation that does not
regularly vary according to performance of results achieved.
Designing a Variable Pay Plan Right Ans - Start with business strategy
-Operational excellence
-Product service leadership
-Customer intimacy
operational excellence Right Ans - Combination of price, quality,
dependability and ease of purchase other competitors cannot match
Primarily a price / cost based strategy
Minimize waste and reward efficiency
Strategy: product quality, operational efficiency improvement, process
improvement, cost reduction
product service leadership Right Ans - Time to market shorter than 90
days (time from innovation to market)
Primarily an innovation based strategy
Focuses on innovation, product development and market exploitation
,Strategy: market share, market penetration, product development, tie from
innovation to market
customer intimacy Right Ans - Measure guest satisfaction scores
Guest retention score
Primarily a solutions based strategy
Deep and lasting relationships with customers - build customer loyalty
Strategy: customer opinion of products, product quality, customer retention,
customer satisfaction
start-up Right Ans - new with little or no formal policies or procedures.
Focus is obtaining capital, marketing products or services, initial sales growth
and cash conservation.
growth Right Ans - focused on growing sales, increasing distribution
capability and determining how to efficiently produce products or services to
meet growing demand. Need to begin standardizing procedures through
policy creation
maturity Right Ans - focus on maintaining / increasing market share,
improving productivity and reducing cost of sales. Improvements to products
are more evolutionary than revolutionary. Higher levels of bureaucracy and
greater amounts of cash on hand than at other stages.
decline Right Ans - revenues are declining. Must decide to reinvest in
current products, create new products or maximize profits with current
products as long as possible.
Variable Pay helps achieve business objectives in 4 ways Right Ans - focus
your employees
aligns them with tasks
provides motivation
reinforce the behavior
focus, alignment, motivation, reinforcement
high variable low base Right Ans - Sales people
, Keep base low to conserve fixed cash expenses while providing the
opportunity to receive high levels of variable pay based on company growth
objectives
High variable high base Right Ans - High potential employees, hard to hire,
want them aligned with company success, CEOs, Research and Development,
& technological types
Attract the very best talent
Low variable high base Right Ans - Precision effort - doctors
Promote retention
3 Types of Variable Pay Right Ans - Incentives
Bonus
Recognition
incentives Right Ans - Criteria determined in advance
Amount of payment can vary
Monetary or nonmonetary
Self-funded or budgeted
Nondiscretionary
Formulaic
If you do X,Y,Z then you get A,B,C
Bonuses Right Ans - Completion of specific task
Amount determined in advance
Monetary
Budgeted
Nondiscretionary
One amount
recognition plan Right Ans - Criteria broadly defined and subjective
Awarded spontaneously
Decision made after the fact
Focused on behaviors
Monetary or nonmonetary
Budgeted
Discretionary
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