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Chapter 5

BUS 272 Chapter Notes - Chapter 5: Work Council, Ob River, Absenteeism


Department
Business Administration
Course Code
BUS 272
Professor
Lieketen Brummelhuis
Chapter
5

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Bus 272 Chapter 5
MOTIVATION IN ACTION
WHAT TO PAY: ESTABLISHING PAY STRUCTURE
the process of initially setting pay levels entails balancing internal equity
the worth of the job to the organization usually established through job
evaluation. External equity the external competitiveness of an
organizations pay relative to pay elsewhere in its industry usually
established through surveys.
Pay more and you will get better qualified people who stay longer
HOW TO PAY:
Variable-pay programs bases a portions of an employees pay on
some individual and/or organizational measure of performance
Organizations like this because it reduces expenses when
company performance declines
Encourages people to be high performers
INDIVIDUAL-BASED INCENTIVES:
There are four types of individual-based variable-pay programs
1. Piece-rate wages
a. No salary only pays employee for what they produce
employee is paid a fixed sum per unit of production
completed
i. Not feasible for many jobs
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2. Merit-based pay
a. Based on performance appraisal ratings people who are
high performer should be given bigger raises
i. This only works if employees perceive a strong
relationship between their performance and rewards
they receive but research shows that is not the case.
ii. Can result in gender and racial discrimination
3. Bonuses
a. Annual rewards employees for recent performance rather
than historical performance. One time rewards rather than
ongoing.
i. When times are bad firms can cut bonuses to reduce
expenses.
ii. Bonuses can results in employees engaging in negative
behavior to ensure they get bonuses
iii. Taking rewards and splitting it into categories
manipulates increased motivation among employees
4. Skill-based pay
a. Also called
compentency-based or knowledge-based pay
sets pay levels on the basis of how many skills employees have
or how many jobs they can do
GROUP-BASED INCENTIVES
Gainsharing formula based group incentive plan that uses
improvements in group activity from one period to another to determine
the total amount of money to be shared
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ORGANIZATIONAL-BASED INCENTIVE
Profit-sharing plans - distributes compensation based on some
established formula designed around a company’s profitability
Employee Stock Ownership Plans (ESOP) when the company gives
stocks of organization to employees as part of their bonus
Makes employees think about their behavior when they own a part
of company
FLEXIBLE BENEFITS
Flexible benefits a plan that allows each employee to put together a
benefit package tailored it their own needs
3 most popular types of benefits plan are:
1. Modular plans
a. Predesigned packages of benefits with each module put
together to meet the need of a specific group of employees
i. Ex: Single parent, employee with no dependent
2. Core-plus plans
a. Consit of a core of essential benefits and menu-like section of
other benefits options from which employees can select (like
add on in a phone plan)
3. Flexible spending accounts
a. Allow employees to set aside pretax dollars up to the dollar
amount offered in the plan to pay for particular benefits such
as eye care.
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