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Lecture 5

BUS 272 Lecture Notes - Lecture 5: Merit Pay, Barista, Selective Perception

Business Administration
Course Code
BUS 272
Christopher Zatzick

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Variable-Pay Programs
A portion of an employee’s pay is based on some individual and/or
organizational measure of performance.
Piece-rate wages (get paid for every thing done (ex.: one shoe,
5$, 2 shoes 10$)
Merit pay: raise is giving based on performance (ex.: 0-5%),
people don’t see it as such a important big pay because people
not motivate by it
Bonuses (linked to current performance)
Linked to past performance
High performer: 5% (50K+2500)
Avg performer: 2.5% (50K+1250)
Low performer: 0% (50K+0)
Based on performance evaluation made by supervisor
Gainsharing: companies share the gains with the teams
(suggestions that improve efficiency and effectiveness of the
Makes team members collaborate
Capitalise on employee idea
Profit sharing: when the organization meets a goal (no profit
no sharing)
Employee stock ownership plans (ESOPs): give you a stock
option (buy it for less than the market price)
Motivated to increase the price of the stock
Problem: unethical, your action won’t change the price
(ex.: Starbucks barista and stock price)
Make sure close link in performance and pay
Challenges to Payfor-Performance Programs
What constitutes performance and how is it measured?
oMeasured by supervisor, extremely biased (likes you or not, halo
affect, selective perception)
The challenges for pay-forperformance programs can be affected by how and
where they are implemented.
find more resources at
find more resources at

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Exhibit 5-2 Management Reward Follies
(you’re evaluate individually but look for teamwork)
We hope for:
Teamwork and collaboration
Innovative thinking and risk
Development of people skills
Employee involvement and
High achievement
Long-term growth
Commitment to total quality
But we reward:
The best team members
Proven methods and no
Technical achievements and
Tight control over operations,
Another year’s efforts
Quarterly earnings
Shipment on schedule, even
with defects
Reporting good news E
How do you measure performance?
 Ethical problems
Police? More tickets, more arrest, less arrest?
Doctor? Less referral to specialists
Electric company California, improve customer satisfaction, friends and family
called to get rate up
Employee Recognition (intrinsic rewards)
Employee recognition programs use multiple sources and recognize both
individual and group accomplishments.
It’s free!
Motivation by Job Redesign
Job Rotation (move people to different jobs in organization): get rid of the
boredom, get understand the whole picture of the company
oProblem: start-up cost all the time, training,
Job Enlargement: new tasks at the same level that you’re working at (ex.:
burger person can work at fries too)
Job Enrichment: enriching the job (burger person now is in charge of the
supply and demand, etc)
Job Characteristics Model Five core job dimensions:
Skill variety
Task identity: whole and identifiable piece of work
find more resources at
find more resources at
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