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This chapter explores the theoretical background on money as a reward, the effectiveness of pay, traditional methods of administering pay, and the value of new pay in attracting and retaining talented employees. It also discusses the role of recognition as an organizational reward and the importance of benefits.
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Chapter Five Organizational Context: Reward Systems
Learning Objectives • Discuss the theoretical background on money as a reward • Present the latest research on the effectiveness of pay • Describe some of the traditional methods of administering pay • Relate some of the latest forms of “new” pay and their value in helping attract and retain talented employees • Explain how recognition is used as an organizational reward • Discuss the role of benefits as organizational rewards
Pay for Output Individual Incentives Profit Sharing Gainsharing Bonuses Group Incentives Stock Options Employee Stock Ownership Plan Pay For Performance
Executive/Company Timothy Koogle Yahoo Stephen Case America Online Barry Diller USA Networks Glen Meakem Freemarkets Millard Drexler Gap Henry Silverman Cendant Value* $2,251,451 1,263,767 1,033,984 751,140 685,003 684,683 Executive/Company John Chambers Cisco Systems Louis Gerstner IBM Joseph Nacchio Qwest Communications William Esrel Spring Fon Group Jack Welch General Electric Gerald Levin Time Warner Value* $482,453 481,350 467,546 452,837 436,357 377,728 Unexercised Stock Options At Select Firms
Rewarding new goals Rewarding leadership effectiveness Pay for know- ledge workers in teams Commissions beyond sales to customers Skill pay Broadbanding Competency pay “New” Pay Approaches “New Pay” Approaches
Solicit recognition new ideas Review recognition process Inform everyone about recognition process Publicize best practices On-site recognition ceremonies Use recognition Educate the managers Use all communications tools Steps To Improve Recognition System
Traditionally Offered Benefits Insurance Life Health Disability Federally Mandated Benefits Social Security Medicare Workers’ Compensation Family and Medical Leave Employee Retirement Income Security Act Pregnancy Discrimina- tion Act Life Cycle Benefits Child care Elder care Flexible, Cafeteria-Style Benefits