V476 Exam 1

Implications of reinforcement theory

Rewards reinforce (motivate and sustain) performance. Rewards are most effective when they follow directly after behaviors to be reinforced. Behaviors that are not rewarded will be discontinued (extinction). Performance-based payments work best when they closely follow performance. Rewards tightly coupled to desired performance objectives generate higher effort. Withholding payouts discourages unwanted behaviors.

Intrinsic rewards

Self-granted, psychic rewards

When might pay differences for equal work may be justified?

Seniority Merit or quality of performance Quality or quantity of production Some factor other than sex

Objectives of the overtime provision of the FLSA

Requires time and a half for over 40 hours per week Meant to share available work Skilled workforce means higher training costs per employee Higher benefits costs, the bulk of which are fixed per employee Exempt Must make at least $455 a week

Components of rewards systems

Types of rewards Extrinsic Intrinsic Distribution criteria Results Behavior Other factors Desired outcomes Attract Motivate Develop Satisfy Retain

merit increases

given as performance-based increments to the base pay They are also based on performance rating but are paid in one lump sum rather than a permanent change to base pay

Azjen's theory of planned behavior

Individuals make logical, reasoned decisions to engage in specific behaviors by evaluating the information available to them Attitude toward the behavior, subjective norm, perceived behavioral control → intention → behavior

Extrinsic rewards

Financial, material, or social rewards from the environment

What do we mean by external competitiveness with regard to compensation?

How should total compensation be positioned against competitors?

difference between how incentives and merit increased impact based pay

Incentives try to influence future behavior and merit rewards past behavior- a matter of timing

Example of the sorting effect

Less productive workers (who did worse under the new incentive system) left and were replaced by more productive workers who would earn more money under the new incentive system

How does an organization define its strategy?

Matching business and pay strategy Focus on compensation choices that help the organization gain and sustain competitive advantage

Mental health act of 1997

Mental illness must be covered to same extent that other medical conditions are covered.

What has the greatest instrumental value in raising job performance?

Money

Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select what benefit?

More flexible work schedule

What can an employer do to make its pay mix less risky?

New forms of pay are less entitlement-oriented and more linked to the uncertainties of individual, group, and corporate performance Employees are increasingly expected to share the risks of the company Some research suggests employees may need a risk premium to stay and perform in a company with pay at risk

In mapping a total compensation strategy, the question of how important compensation as in the overall HR strategy is part of what part of the pay model?

Objectives

What guides the design of systems and provides the standards for evaluating their effectiveness

Objectives

How would an increase to minimum wage impact wages already above the minimum wage?

Pay rates above the minimum often increase in order to maintain differentials

In the context of pay relationships, what is an illegal practice in the U.S.?

Paying on the basis of race, gender, age, or national origin

Maslow's theory regarding performance based pay

People are motivated by needs. Needs form a hierarchy from most lower/basic (food and shelter) to higher-order (e.g., self-esteem, love, self-actualization). Unmet needs motivate. Met needs do not. Unmet higher-order needs become motivating after lower-order needs have been met.

Available evidence indicates managers believe what is the most important factor for pay increases?

Performance

Merit pay as a pay-for-performance plan

Permanent wage/salary increase granted to employee as function of some (typically primarily subjective) assessment of individual employee performance.

When pay is based on individual performance, turnover tends to be highest among what population?

Poor performers

Disparate impact

Practices that have a differential effect on members of protected groups are illegal, unless the differences are work-related.

internal alignment

Refers to comparisons among jobs or skill levels inside a single organization.

Executive order 11246

Requires government contractors to file affirmative action plans Utilizing analysis comparing their workers to available external workers Goals and timetables for achieving affirmative action Action steps for achieving goals and timetables

OFCCP

the Office of Federal Contracts Compliance Programs (OFCCP)

incentive pay

ties pay increases to performance, tied to objective performance measures

What is the most obvious sorting factor?

Ability

Three components of attitude

Affective Feelings or emotions about an object Behavioral How one intends to act toward someone or something Cognitive Beliefs or ideas one has about an object

What are the steps (in order) in formulating a total compensation strategy?

Assess total compensation implications Map a total compensation strategy Implement strategy Reassess

What is a merit bonus?

Bonus Nonpermanent (variable) payment (bonus or lump sum) form of variable pay granted to employee as function of some (typically primarily subjective) assessment of individual employee performance.

Which policy decision directly affects employees' attitudes and work behaviors?

Employee contributions

What is the incentive effect?

The degree to which pay influences individual and aggregate motivation among the employees we have at any point in time.

What is the sorting effect?

The effect that pay can have on the composition of the workforce How an organization pays can result in this

What is meant by strategy?

The fundamental directions an organization chooses

What is prevailing wage?

The set pay for work done to produce goods and services contracted by the federal government Prevents contractors from using their size to drive down wages

Regarding pay differences for different jobs, what do courts uphold to justify pay differences?

The use of market data Finding a standard to compare the value of jobs

Expectancy theory

Theory argues that people behave as if they cognitively evaluate what behaviors are possible (e.g., the probability that they can complete the task) in relation to the value of rewards offered in exchange.

What is the union preference as the basis for pay increases?

They oppose it

With regard to pay rises, when are employees likely to regard the system as unfair?

This is particularly true under incentive conditions. Turnover is much higher for poor performers when pay is based on individual performance (a good outcome!). Conversely, group incentive plans may lead to more turnover of better performers—clearly an undesirable sorting effect.

Refers to openness and communication about pay-

Transparency

Incentive plans

Variable pay tied directly to objective measure of individual performance such as sales, production volume, or production quality.

Use of variable pay

A payment based on performance objective achievement that does not become part of base pay in future years. May leave employees less satisfied both with their pay level and with the process used to determine pay

Herzberg's two-factor theory as it pertains to success-sharing plans and at risk plans

As with need hierarchy theory, performance based pay is motivating to the extent it is connected with meeting employees' needs for recognition, attainment, achievement, and the like.

When unemployment increases, the proportion of the population covered by health insurance is impacted how?

Health care coverage declines further

Components of a total reward system

Compensation Wages, commissions, and bonuses Benefits Vacations, health insurance Social interaction Friendly workplace Security Stable, consistent position and rewards Status/recognition Respect, prominence due to work Work variety Opportunity to experience different things Workload Right amount of work (not too much, not too little) Work importance Work is valued by society Authority/control/autonomy Ability to influence others; control own destiny Advancement Chance to get ahead Feedback Receive information helping to improve performance Work conditions Hazard free Development opportunity Formal and informal training to learn new knowledge skills/abilities

Flexible compensation in the scheme of package rewards

Flexible compensation, with employees choosing from a menu of pay and benefit choices, clearly is driven by the issue of needs. Who best knows what satisfies an employee's needs? The employee! So let employees choose, within limits, what they want in their reward package.

Job evaqluation and the determination of pay discrimination

If an employer's own job evaluation study shows that jobs of similar content are of equal value, isn't unequal pay proof of discrimination? Comparable worth proponents lobby for new laws or voluntary compliance of comparable worth standards