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Dessler, Cole, and Sutherland Human Resources Management in Canada Canadian Eighth Edition

Dessler, Cole, and Sutherland Human Resources Management in Canada Canadian Eighth Edition. 13. Chapter Thirteen Pay-for-Performance and Financial Incentives. © 2002 Pearson Education Canada Inc., Toronto, Ontario 13- 1. Money and Motivation: Background and Trends. Variable Pay

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Dessler, Cole, and Sutherland Human Resources Management in Canada Canadian Eighth Edition

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  1. Dessler, Cole, and Sutherland Human Resources Management in Canada Canadian Eighth Edition 13 Chapter Thirteen Pay-for-Performance and Financial Incentives © 2002 Pearson Education Canada Inc., Toronto, Ontario 13-1

  2. Money and Motivation:Background and Trends Variable Pay -plan that links pay to productivity or profitability

  3. Money and Motivation:Background and Trends Types of Incentive Plans -individual incentive programs -group incentive programs -profit sharing plans -gainsharing plans

  4. Incentives for Operations Employees • Piecework plans – straight; guaranteed • Standard hour plan • Team or group incentive plan

  5. Incentives for Managers and Executives Short-term Incentives annual bonus • Long-term Incentives • capital accumulation plans

  6. Incentives for Managers and Executives Annual Bonus - Decisions • Eligibility • Fund size • Determining individual awards

  7. Incentives for Managers and Executives Long-Term Incentives • Stock options • Book value plan • Stock appreciation rights • Performance achievement plan • Restricted stock plans • Phantom stock plans • Performance plans

  8. Incentives for Salespeople Salary Plan (fixed salary) Commission Plan (pay in direct proportion to sales) Combination Plan (salary plus commission)

  9. Incentives for Other Professionals Merit Pay Traditional Merit Pay Characteristics -merit pay granted as higher base salary (a raise) -usually based on individual performance only New Merit Pay Characteristics -merit pay awarded as lump sum once per year (NOT a raise) -merit pay tied to both individual and organizational performance

  10. Incentives for Other Professionals Incentives for Professional Employees -bonus represents small portion of total pay -incentives based on results longer than one year -up-to-date equipment and facilities -supportive management style -support for research publications

  11. Organization-Wide Incentive Plans -profit sharing plans -employee share purchase/stock ownership plans -Scanlon plans -gainsharing plans -at-risk variable pay plans

  12. Organization-Wide Incentive Plans Basic Feature of Scanlon Plans (1 of 2) Philosophy of Cooperation -eliminate ‘us versus them’ attitudes Identity -company’s mission or purpose clearly articulated Competence -requires competence from all employees

  13. Organization-Wide Incentive Plans Basic Feature of Scanlon Plans (2 of 2) Involvement System -departmental and executive-level committees Sharing of Benefits Formula -employees share directly in any extra profits resulting from their cost-cutting suggestions

  14. Organization-Wide Incentive Plans Gainsharing Plans – Success Factors Cooperation between management and labour Joint development of the plan Effective communication Clear guidelines regarding plan changes Setting achievable goals

  15. Developing Effective Incentive Plans When to Use Incentives -units of output can be measured -clear relationship between employee effort and quantity of output -standardized job, regular workflow with few/consistent delays -quality less important than quantity

  16. Developing Effective Incentive Plans Principles for Effective Implementation (1 of 2) -pay for performance -link incentives to career development and challenging opportunities -link incentives to measurable competencies

  17. Developing Effective Incentive Plans Principles for Effective Implementation (2 of 2) -match incentives to the culture of the organization -keep group incentives clear and simple -overcommunicate -remember greatest incentive is the work itself

  18. Developing Effective Incentive Plans Why Incentive Plans Don’t Work • Performance pay cannot replace good managers • Firms get what they pay for • Pay is not a motivator • Rewards can rupture relationships • Rewards may undermine responsiveness • Rewards can undermine interest and motivation

  19. Developing Effective Incentive Plans Employee Recognition Programs Lack of recognition and praise is the #1 cause of employee turnover

  20. Developing Effective Incentive Plans Employee Recognition Programs Objectives -show support for employees -enhance employees’ attitudes to the company -enhance customer service -increase loyalty -increase productivity

  21. Developing Effective Incentive Plans Employee Recognition Programs Cost-effective -> praise and modest gifts Important communication tool

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