MGT 2030 Chapter Notes - Chapter 8: Merit Pay, Expectancy Theory, List Of Auto Parts
Organizational Behavior
Creating Effective Reward Systems
MONEY AS A MOTIVATOR
Money is the most commonly used reward in organizations.
Money certainly helps needs get met.
Pay can satisfy lower-level needs as well as social, self-esteem, and self-actualization needs so it
should be a good potential motivator
Therefore, pay has high valence and is a good motivator to the extent that it is clearly tied to
performance.
Financial incentives and pay-for-performance plans can increase performance and lower
turnover.
Pay can be an important and effective motivator of performance, WHEN pay structures are
designed carefully. This is not easy to do.
The ability to earn money for outstanding performance is a competitive advantage for
attracting, motivating, and retaining employees. Higher performers often want to be paid based
on their performance.
ESTABLISHING A FAIR PAY STRUCTURE
Setting pay levels requires a balance between external and internal equity
Internal equity ̶ the worth of the job to the organization (job evaluation)
External equity ̶ the competitiveness of an organization’s pay relative to
industry standards, what is being paid by other organizations (salary surveys)
Setting pay levels (above, at, or below market rates) is a key strategic decision with important
trade-offs
REWARDING INDIVIDUALS THROUGH VARIABLE PAY PROGRAMS
Many firms are moving towards variable-pay programs
A portio of a eployee’s pay is ased o soe idiidual ad/or orgaizatioal
measure of performance.
Individual-based programs
Piece-rate wages
Merit-based pay increases
Bonuses
Skill-based pay
Group-based programs
Gainsharing
Organizational-based programs
Profit sharing
Employee stock ownership plans (ESOPs) and stock options
VARIABLE PAY PROGRAMS
Individual-Based Incentives
Piece-rate pay plans
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Money is the most commonly used reward in organizations. Pay can satisfy lower-level needs as well as social, self-esteem, and self-actualization needs so it should be a good potential motivator. Therefore, pay has high valence and is a good motivator to the extent that it is clearly tied to performance. Financial incentives and pay-for-performance plans can increase performance and lower turnover. Pay can be an important and effective motivator of performance, when pay structures are designed carefully. The ability to earn money for outstanding performance is a competitive advantage for attracting, motivating, and retaining employees. Higher performers often want to be paid based on their performance. Setting pay levels requires a balance between external and internal equity. Internal equity the worth of the job to the organization (job evaluation) External equity the competitiveness of an organization"s pay relative to industry standards, what is being paid by other organizations (salary surveys)
