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York University (12,352)
HRM 2600 (78)
Chapter 10

Chapter 10

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York University
Human Resources Management
HRM 2600
Shelley Millman

Chapter 10PayforPerformance Incentive RewardsStrategic Reasons for Incentive PlansVariable paytying pay to some measure of individual group or organizational performanceIncentive rewards that based entirely upon a payforperformance philosophyIncentive plans emphasize a shared focus on organizational objectives by broadening the opportunities for incentives to employees throughout the organizationIncentive Plans as Links to Organizational ObjectivesSpecific company goals might be to lower labour costs improve customer satisfaction expand product markets or maintain high levels of productivity and qualityBy meshing compensation and organizational objectivesmanagers believe that employees will assume ownership of their jobs by improving their effort and overall job performanceStudies show a measurable relationship between incentive plans and improved organizational performance Requirements for a Successful Incentive PlanEmployees must have desire for the plan Employees must be able to see a clear connection between the incentive payments theyreceive and their job performanceThese characteristics of a successful incentive planoFinancial incentives are linked to valued behaviouroThe incentive program seems fair to employeesoProductivityquality standards are challenging but achievableoPayout formulas are simple and understandableSetting Performance MeasuresMeasurement is key to the success of incentive plans because it communicates the importance of established organizational goalsWhat gets measured and rewarded gets attentionFailure can often be traced to the choice of performance measuresOverly quantitative measures are to be avoidedWhen selecting performance measure its necessary to evaluate the extent to which the employees involved can actually influence the measurementAdministering Incentive PlansThorough planning combined with proceed with caution approachThree important points related to the effective administration of incentive plansoOnly effective when managers are willing to grant incentives based on differences in individual team or organizational performanceoAnnual salary budgets must be large enough to reward and reinforce exceptional performanceoOverhead costs associated with plan implementation and administration must be determined
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