MGT 336 Final Exam

Employee Stock Ownership Plan (ESOP)

a company makes a tax-deductible contribution of stock shared or cash to a trust. •The trust then allocates company stock to participating employee accounts. The amount allocated is based on employee earnings. •Disadvantage: limits their utility for pension accumulations

Merit Pay

a pay-for-performance plan used to for than three-quarters of all exempt, clerical, and administrative employees. • Downfall: expensive, many argue it doesn't achieve the desired goal; improving employee and corporate performance.

Halo Error

an appraiser giving favorable ratings to all job duties based on impressive performance in jut one job function.

Defined Benefits Plans

an employer agrees to provide a specific level of retirement pension, which is expressed as either a fixed dollar or percentage-of-earnings amount that may vary (increase) with years of seniority in the company. In terms of a specific benefit and options included. • Firm finances this obligation by following an actuarially determined benefit formula and making current payments that will yield the future pension benefit for a retiring employee.

Employee Benefits

are that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (ex. life insurance, pension, workers comp, vacation)

Central Tendency Error

avoiding extremes in ratings across employees

Management by Objectives (MBO)

both a planning and an appraisal tool that has many different variations across firms. An employee planning, development, and appraisal procedure in which a supervisor and a subordinate, or group of subordinates, jointly identify and establish common performance goals. Employee performance on the absolute standards if evaluated at the end of the specified period.

Straight Ranking

employees are ranked relative to each other.

Equal Pay Act of 1963

forbids wage discrimination on the basis of gender if employees perform equal work in the same establishment.

Scanlon Plans

o Designed to lower labor costs without lowering the level of a firm's activity. Incentives are derived as a function of the ratio between labor costs and sales value of product (SVOP)

Rucker Plan

o Involved a somewhat more complex formula than a Scanlon plan for determining worker incentives bonuses. • A ratio is calculated that expresses the value of production required for each dollar of total wage bill.

Portability

of pension benefits becomes an issue when employees move to new organizations.

Deductible

An employee claim for insurance coverage is preceded by the requirement that the first $x be paid by the claimant.

Individual Retirement Accounts (IRA)

a tax-favored retirement savings plan that individual can establish themselves. •Doesn't require an employer to set them up unlike other pension options. Used mostly to store wealth accumulated in other retirement vehicles, rather than as a way to build new wealth.

Straight piecework system

rate discrimination is based on units of production per time period, and wages vary directly as a function of production level. •Adv: easily understood by workers, more readily accepted than some of the other incentive systems.

Alternation Ranking

recognizes that raters are better at ranking people at extreme ends of the distribution. Raters are asked to indicate the best employee and then the worst employee.

Vesting

refers to the length of time an employee must work for an employer before he or she is entitled to employer payments made into the pension plan.

ADA

required that "essential elements" of a job be called out. If a person with a disability can perform these essential elements, reasonable accommodation must be provided. 1990

401(k) plan

savings plan in which employees are allowed to defer pretax income. •Employers typically match employee savings at a rate of 50 cents on the dollar.

Behaviorally Anchored Rating Scales (BARS)

seem to be the most common format behaviors as descriptors. By anchoring scales with concrete behaviors, firms adopting BARS format hope to make evaluations less subjective.

Prevailing wage laws

set pay for work done to produce goods and services contracted by the federal government.

Paired-comparison ranking

simplified the ranking process by forcing raters to make ranking judgments about discrete pair of people. Each individual is compared separately with all others in the work group

Essay Format

supervisors answer open-ended questions, in essay form, describing employee performance.

Severity Error

the opposite of leniency error. Rating individuals consistently lower than is deserved.

Merit Bonuses

thought to be a substitute for merit pay. •Based on employee or company performance, employees receive an end-of-year bonus that does not build into base pay. Employees must earn this each year. •By giving merit for several year, a company is essentially freezing base pay. •Payment of entire increase at one time. Because amount is not factored into base pay, any benefits tied to base pay do not increase.

360-degree feedback

to less the impact of one reviewer, and to increase participation in the process. Assess employee performance from five points: • supervisor, peer, self, customer, and subordinate. • This is appealing to employees at all levels within an organization. • Frustration with the number of evaluation surveys each rater has to complete and the time necessary to complete the entire process. Extra costs as well.

Variable Pay

traced by two trends: 1. The increasing competition from foreign producers forces American firms to cut costs and/or increase productivity. 2. Today's fast-paced business environment means that workers must be willing to adjust what they do and how they do it.

Standard rating scale

when adjectives are used as anchors

Spillover Error

Continuing to downgrade an employee for performance errors in prior ratings periods.

•1. Method of rate discrimination o plans set up a rate based either on units of production per time period or on time period per unit of production. • 2. The specified relationship between production level and wages.

Incentive systems vary on:

Title VII of the Civil Rights Act of 1964

Prohibits discrimination in all employment practice on basis of race, sex, color, religion or national origin.

Family and Medical Leave Act (FMLA)

Required employers to provide up to 12 weeks' unpaid leave for family and medical emergencies.

Profit-sharing plans

A plan that focuses on profitability as the standard for group incentive. These plans typically involve one of three distributions: 1. Cash or current distribution plans provide full payment to participants soon after profits have been determined. 2. Deferred plans have a portion of current profits credited to employee accounts, with cash payments made at time of retirement, disability, severance, or death. 3. Combination plans that incorporate aspects of both current and deferred options.

Coinsurance

A proportion of insurance premiums are paid by the employee.

Cost Of Living Adjustments (COLA)

Across the board wage and salary increases or supplemental payments based on changes in some index of prices, usually the consumer price index (CPI). If included in a union contract, COLA's are designed to increase wages automatically during the life of contract as a function of changes in the CPI.

First Impression Error

Developing a negative or positive opinion of an employee early in the review period and allowing that to negatively or positively influence all later perceptions of performance.

Copay

Requiring that employees pay a fixed or percentage amount for coverage at time of app.t

FLSA (Fair Labor Standards act)

Sets minimum wage, hours of work, overtime premiums; prohibits child labor. 1938

Defined Contribution Plans

The employer makes provisions of contributions to an account set up for each participating employee. In terms of a DOLLAR contribution max. Years later then employees retire, the pension is based on their contributions, employer contributions, and any gains (or losses) in stock investments. More popular than other kind

Horn Error

The opposite of a halo error. Downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension.

Recency Error

The opposite of first impression error. Allowing performance, either good or bad, at the end of the review period to play too large a role in determining an employee's rating for the entire period.

Workers Compensation Unemployment Insurance Social Security

What benefits must be given to employees?

Leniency Error

consistently rating someone higher than is deserved

Halsey 50-50 method

derives its name from the shared split between worker and employer of any savings in direct cost. An allowed time for a task is determined via time study .The savings from completion of a task in less than the standard time are allocated 50-50 between the worker and the company.

HIPAA (o Health Insurance Portability and Accountability Act of 1963 )

designed to 1. Lessen an employers ability to deny coverage for a preexisting condition and 2. Prohibit discrimination on the basis of health-related status. 1996 Pg. 480

Gantt Plan

differs from both the Halsey and the Rowan plans in that the standard time for a task is purposely set at a level requiring high effort to complete.

Employee Retirement Income Security Act (ERISA)

does not require that employers offer a pension plan. Provisions designed to achieve two goals: 1. To protect the interest of approximately 100 million active participants and 2. To stimulate the growth of such plans. •Required that employees be eligible for pension plans beginning at age 21.

Taylor Plan

establishes two piece work rates. One rate goes into effect when a worker exceeds the published standard for a given time period. This is set higher than the regular wage incentive level. • The second rate is established for production below standard, and this rate is lower than the regular wage.

Standard hour plans

generic term for plans setting the incentive rate based on completion of a task in some expected time period.

Clone Error

giving better ratings to individuals who are like the rater in behavior and/or personality

Rowan Plan

is when the employer and employee both share in savings resulting from work completed in less than standard time. o Workers bonus increases as the time required to complete the task decreases.

COBRA (consolidated omnibus budget reconciliation act )

legislation that provides that employees who resign or are laid off through no fault of their own are eligible to continue receiving health coverage under the employers plan at a cost borne by the employee. 1985. Pg. 480

Disadvantages of individual incentive plans

o Lead to unexpected, and undesired behaviors o Employees and managers end up in conflict because incentive system often focuses only on one small part of what it takes for comp. to be successful. o Elevated level of mistrust between workers and MGT. o Increased complaints that equipment is poorly maintained, hindering employee efforts to earn larger incentives.

Group Incentive Plan Disadvantages

o Line-of-sight may be lessened, that is employees may find it more difficult to see how their individual performance affects their incentive payouts. o May lead to increased turnover among top individual performers o Increases compensation risk to employees because of lower income stability.

Group Incentive Plan Advantages

o Positive impact on organization and individual performance of about 5 to 10 percent per year o Easier to develop performance measures than it is for individual plans o Signals that cooperation, both within and across groups, is a desired behavior o Teamwork meets with enthusiastic support from most employees.

Problems with Team Compensation:

o Teams come in many varieties • Hard to argue for one consistent type of compensation plan o The "level problem" • Bickering arises when awards are given. o The three 3 C's • Complexity - some plans are too complex • Control • Communications - team-based plans simply are not well communicated.

Advantages of individual incentive plans:

oSubstantial impact that raises productivity, lowers production costs, and increases earnings of workers. o Less direct supervision is required to maintain reasonable levels of output than under payment by time. o In most cases, systems of payment by results, is accompanies by improved organizational and work measurement, enable labor costs to be estimated more accurately than under payment by time.

Spot Awards

one time award for exceptional performance; also called a spot bonus •Awarded for exceptional performance.

Merrick System

operates in the same way, except that three piecework rates are set • 1. High for production excessing 100 percent of standard. • 2. Medium for production between 83 and 100 percent of standard • 3. Low for production less than 83 percent of standard.

Bedeaux plans

provides a variation on straight piecework and standard hour plans. Instead of timing an entire task, this plan required division of a task into simple actions and determination of the time required by an average skilled worker to complete each action.