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Chapter 12

ADM 2337 - Chapter 12 (Money and Motivation).doc

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University of Ottawa

ADM 2337 Chapter 12Money and MotivationMoney And MotivationoVariable pay Variable pay is any pay plan that ties productive or productivity to compensationExamples financial incentives pay for performance variable compensationoThe idea behind variable pay is making sure that our top performers are being paid top pay to secure their commitment to the organization and their continued successoVariable pay plans are really useful for tying compensation to line of sight Line of sight is the extent to which and employee can relate his or her daily work to the achievement of overall corporate goalsoThe entire thrust of such programs is to treat workers like partners and get them to think of the business and its goals as their ownType of Incentive PlansoIndividual incentive programs give income over and above base salary to individual employees who meet a specific individual performance standardoInformal incentives may be awarded generally to individual employees for accomplishments that are not readily measured by a standardoThis includes simple recognitionoGroup incentive programs are like individual incentive plans but they provide payments over and above base salary to all team members when the group or team collectively meets a specified standard for performance productivity or otheroOrganizationwide incentive plans provide monetary incentives to all employees of the organizationoThis include profitsharing plans and sharing our organizations profits with employees oNonmonetary recognition programs motivate employees through praise and expressions of appreciation for their workIncentives for Operations EmployeesPiecework PlansoPiecework a system of pay based on the number of items processed by each individual worker in a unit of time such as items per hour or items per dayoDeveloping a workable piecerate plan requires both job evaluation and industrial engineeringoJob evaluation allows our firm to assign an hourly wage rate to the job in questionoThe piecerate is the production standard which is usually developed by industrial engineerso Production standards are stated in terms of a standard number of minutes per unit or a standard number of units per houroStraight piecework plan a set payment for each piece produced or processed in a factory or shopoGuaranteed piecework plan the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per houroAdvantageThey are simple to calculate and easily understood by employeesPiecerate plans appear equitable in principle and their incentive value can be powerful since rewards are directly tied to performanceoDisadvantagesUnsavoury reputation among many employees based on some employers habits of arbitrarily raising production standards whenever they found their workers earning excessive wages Piece rates are stated in monetary terms thus when a new job evaluations results in a new hourly wage rate the piece rate must also be revisedSince the piece rate is quoted on a per piece basis in workers minds production standards become tied inseparably to the amount of money earned When an attempt is made to revise production standards it meets considerable worker resistance even if the revision is fully justifiedPiecework plans tend to be tailormade for relatively specialized jobs in which employees do basically the same narrow set of tasks over and over again many times a day
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