chapter 9 : pay for performance
When employee performance is easily measure and the organization's performance is fairly stable over time, the most effective type of compensation is to offer___
monetary rewards and large incentives
______ involves identifying what is important to a person and offering it to them in exchange for some desired behavior.
motivation
explain the expectancy theory of motivation
According to the expectancy theory, motivation is the product of three perceptions: Expectancy is employees' assessment of their ability to perform required job tasks. Instrumentality is employees' beliefs that requisite job performance will be rewarded by the organization. Valence is the value employees attach to the organization rewards offered for satisfactory job performance.
When an organizations performance has regular and large swings and individual performance is unclear and hard to measure, the most effective compensation mix is to offer___
Base pay with low incentives and a variety of rewards (incentives)
what predictions can be made about performance based pay based on Maslow's theory?
Based on Maslow's need hierarchy the following predictions can be made about performance-based pay:1. Base pay must be set high enough to provide individuals with the economic means to meet their basic living needs.2. An at-risk program will not be motivating since it restricts employees' ability to meet lower order needs.3. Success-sharing plans may be motivating to the extent they help employees pursue higher- order needs. Performance-based pay may be de-motivating if it impinges upon employees' capacity to meet daily living needs. Incentive pay is motivating to the extent it is attached to achievement, recognition, or approval.
The key ingredient in ______ is careful cost analysis to make sure the dollar cost of the package an employee selects meets employer budgetary limits.
Cafeteria style compensation
What is a cost of living increase?
Cost-of-living-increase is a wage increase granted to all employees, regardless of performance. The magnitude of increase is based on changes in the cost of living (e.g., as measured by CPI). This wage component poses some risk to the employee since the increase is at the discretion of the employer, but the risk is also lower as it is not tied to performance differences.
Which theories would support a higher minimum wage?
Maslow & Herzberg's 2 factor
In ___ theory incentive pay is motivating if it helps an employee gain a sense of achievement, recognition or approval.
Maslow's
When developing a flexible compensation system, which theory or theories would be most useful?
Maslows & Herzberg theory
What are stay bonuses?
Stay bonuses are generally lump-sum or installment bonuses designed specifically to retain key employees during and after a Chapter 11 restructuring. These bonuses can be as large as 50 to 75 percent of salary for CEOs, dropping down to 25 percent for middle-level managers and below.
what are the 4 standards managers need to focus on when designing a pay for performance system?
When designing a pay-for-performance system, managers need to be concerned about: 1. Objectives 2. Measures 3. Eligibility 4. Funding
Who best supports a culture of flexibility and innovation
a strong commitment to job security
A key factor in increasing trust in top management is
an acceptable appraisal system
a business has centralized structure and a compensation system that rewards sales volume. however, sales volumes are low compared to competitors who respond more quickly to changes in consumer demand. what is the most likely source of the low sales performance?
an inappropriate organization design
the motivation triangle includes
culture
desired employee behaviors are influences by
motivation
Compensation should reinforce which behaviors?
reinforce attracting and hiring good employees, encourage skill development, and motivate high job performance.
the ability triangle includes
selection
What are the behaviors that compensation ought to enforce?
First, compensation should be sufficiently attractive to make recruiting and hiring good potential employees possible (attraction). Second, compensation should be used to ensure that the good employees stay with the company (retention). It should also concentrate on further building employee knowledge and skills (develop skills). Compensation should motivate employees to perform well on their jobs—to take their knowledge and abilities and apply them in ways that contribute to organizational performance.
_______ theory contends that success- sharing plans will be motivating but at-risk plans will be de motivating
Herzberg's 2 factor
________ theory argues that performance-based pay is best for complex jobs where monitoring employee performance is difficult.
expectancy and goal setting
Research shows that team-based pay is in/not in the top 3 aspects of pay systems desired by workers.
is not
When an organization's performance has regular and large swings and individual performance is unclear and hard to measure,
?
When employee performance is easily measured and the organization's performance is fairly stable over time, the most effective type of compensation is to offer
?
Compare risk sharing and success-sharing plans. explain how personality characteristics can influence an employee's preference for rewards.
A success-sharing plan is a generic category of pay add-on (variable pay) which is tied to some measure of group performance, not individual performance. It is not a part of an employee's base pay. In these plans, employees share in any success—performance above standard—but are not penalized for performance below standard. A risk sharing plan is also a generic category of pay add-on (variable pay). It differs from success sharing in that an employee not only shares in successes but is also penalized during poor performance years. Penalty is in form of lower total compensation in poor corporate performance years. Rewards, though, are typically higher than that for success-sharing programs in high performance years. These plans pose greater risk than success-sharing plans. Recent research suggests job candidates look for organizations with reward systems that fit their personalities. For example, people who are more materialistic are likely to be relatively more concerned about the level of pay. Also, individuals with low self-esteem are likely to prefer large, decentralized organizations which offer little pay for performance. Risk takers are likely to want more pay based on performance while risk-averse individuals would prefer less performance-based pay. Individualists want pay plans based on individual performance, not group performance. Evidence suggests talented employees are attracted to companies that have strong links between pay and performance.
Briefly explain the concept of cafeteria-style or flexible compensation
Cafeteria-style or flexible compensation is based on the idea that only the individual employee knows what package of rewards would best suit personal needs. Employees choose their own "blend" of rewards which may be both more satisfying and less expensive. As such, employees who hate risk could opt for more base pay and less incentive pay. Tradeoffs between pay and benefits could also be selected. Cafeteria-style compensation is based on the notion of different rewards having different dollar costs associated with them. The key ingredient is careful cost analysis to make sure the dollar cost of the package an employee selects meets employer budgetary limits.
what are the implications for performance- based pay based on theory of reinforcement?
The implication for performance-based pay based on the theory of reinforcement is that the timing of payouts is very important. As per this theory, rewards must follow directly after behaviors to be reinforcing and behaviors that are not rewarded will be discontinued. As such, withholding payouts can be a way to discourage unwanted behaviors.
The primary guiding force that determines needed employee behaviors is
organization strategy
