Ch. 9 Pay for Performance

Standards

- employers should be concerned with objectives, measures, eligibility, and funding

•Data suggests employees prefer pay systems influenced by:

-Individual performance -Changes in the cost of living -Seniority -Market rate

Behaviors to reinforce short:

1. attraction 2. retention 3. development 4. performance

Components of a total rewards system

1. compensation 2. benefits 3. social interaction 4. security 5. status/recognition 6. work variety 7. workload 8. work importance 9. authority / control / autonomy 10. advancement 11. feedback 12. work conditions 13. development opportunity

equity includes two types of concern to employees:

1. distributive justice 2. procedural justice

theories that focus on rewards in exchange for behaviors:

1. expectancy theory 2. equity theory 3. agency theory

Efficiency involves three general areas of concern:

1. strategy 2. structure 3. standards

Components of a total reward system long

Compensation in the form of Wages, commissions, and bonuses. Benefits, such as Vacations and health insurance. Social interaction in a Friendly workplace. Security in a Stable, consistent position with rewards. Status, or recognition with Respect and prominence due to work. Work variety, such as Opportunity to experience different things. Workload as in the Right amount of work, not too much, not too little. Work importance as in the Work is valued by society. Authority, control, and, or autonomy, such as the Ability to influence others and control their own destiny. Advancement or the Chance to get ahead. Feedback, because Receiving information helps improve performance. Work conditions should be Hazard free. Development opportunity, such as Formal and informal training to learn new knowledge, skills and, or abilities.

Behaviors to reinforce

Compensation should reinforce the following behaviors: •Attraction - It should make recruiting and hiring easier •Retention - It needs to make sure good employees stay •Development - After attracting and retaining good employees, concentrate on building further knowledge and skills •Performance - Compensation should motivate employees to apply their abilities in ways that contribute to organizational performance

The Cascading Link Between Organization Strategy and Employee Behavior

Organizational strategy is the guiding force that determines what kinds of employee behaviors are needed. Organizational strategy is behind corporate goals. Corporate goals lead to strategic business unit goals which lead to department or team goals. These department or team goals lead to both individual goals and employee team results. Individual goals lead to employee task behaviors.

Companies offering an array of rewards as part of the compensation package are better able to get employees to ____ , _____ , and _____

adjust, be flexible, and show commitment

Flexible compensation

allows employees to choose rewards which best suit their personal needs

Equity theory

believes people are highly concerned with equity of the exchange process

fairness key element:

communication

•Agency theory

depicts employees as agents who enter an exchange with principals

Procedural justive

fairness in determining rewards

Goal-setting theory

focuses on desired behavior

Companies have moved toward compensation programs

higher on the risk continuum •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

Expectancy theory

holds that employers choose behaviors that yield the most satisfactory exchange

Content theories:

identifying what is important to people - maslow and herzberg

Incentives work....

in some situations and not in others •A low-incentive component is appropriate in organizations with highly variable annual performance •Larger-incentive components are appropriate in companies with stable annual performance

Self Determination Theory

integrates motivation theories under a broad umbrella

Risk

is defined in terms of stability of income, or the ability to accurately predict income level from year to year

•Employee behavior is a function of

motivation, ability, and environment -Success depends on finding people with ability -Pay and other rewards should reinforce desired behaviors -The culture should point in the same direction

Distributive justive

perceived fairness of the amount and allocation of rewards among individuals

Talented employees are attracted to

strong links between pay and performance - •There is a positive impact of reward choice as long as employees view the choices available as attractive

Behaviors Employers Care About

•Employers want employees to perform in ways that lead to better organizational performance

Job candidates look for organizations with reward systems that fit their personalities

•Materialistic - more concerned about pay level •Low self-esteem - wants large, decentralized organization with little pay for performance •Risk takers - want more pay based on performance •Risk-averse - want less performance-based pay •Individualists - want pay plans based on individual performance, not group performance

strategy

•the plan must support corporate objectives and link well with HR strategy

structure

•will it allow flexible variations on a general plan?