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Ch9 - Pay-for-Performance & Financial Incentives

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Shawn Komar

Chapter 9 PayforPerformanceFinancial IncentivesMoneyMotivation Financial incentives payforperformance and variable compensation plans are used to motivate employees to achieve the strategic objectives of an organizationVariable pay any plan that ties pay to productivity or profitability It is important to ensure that whatever incentive is being provided is appealing to the individual receiving itTypes of Incentive PlansIndividual incentivegives income over and above base salary to individual employees who meet a specific individual performance standardInformal incentivegenerally awarded to individual employees for accomplishments that are not readily measured by a standard such as to recognize exemplary customer service this weekGroup incentiveprovide payments over and above base salary to all team members when the group or team collectively meets a specified standard for performance productivity or other workrelated behaviourOrganizationwide incentiveprovide monetary incentives to all employees of the organization eg profitsharing plans Nonmonetary recognition programsmotivate employees through praise and expressions of appreciation for their workIncentives for operations employees senior managers and executives salespeople other managers and professional employeesIncentives for Operations EmployeesPiecework 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 day o Advantages simple to calculate easily understood equitable powerful incentive system o Disadvantages employers raising production standards difficult and tedious to change the rate less fixated on quality and more on quantity dont have to recalculate piece rate when hourly wages are reevaluatedStraight Piecework Plan a set payment for each piece produced or processed in a factory or shopGuaranteed Piecework Plan the minim
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