Psych of Work Unit 6
Explain the second reason why hourly wage systems do not result in well-motivated employees from a behavioral perspective
2) Consequences -In hourly wage systems, there are clear consequences for performing below a minimally acceptable performance level (criticism, threats of dismissal), but there are no clear consequences for performing above that level. -Thus, hourly wage systems tend to support minimally acceptable performance
What was the actual (not planned) lowest percentage of incentives examined by Frisch and Dickinson?
3%
How many team-based incentive studies were included in the meta-analysis?
30
Compensation experts have claimed that performance would not be affected by incentives that were less than ____________, nor would performance be affected by percentages that were greater than this
30% of base pay as incentive pay
Explain why Skinner believes that incentive systems may be "better contingencies" in the sense of not being as aversive as hourly pay
May evoke feelings of confidence, certainty of success, and enjoyment arising from a sense of mastery and effectiveness, and interest in the job as occurs when behaviors are frequently reinforced.
What consistent results were obtained by all five studies that examined the effects of the percentage of incentive pay on performance?
Results of all five studies were consistent: a) Different incentive percentages resulted in the same level of performance: that is, higher incentive percentages have not increased performance more b) Low percentages of incentive, as low as 3%, have significantly increased performance
In general, to date, what do all of the data suggest regarding the generalizability of laboratory findings to actual work settings?
Reviews of incentive studies, though few in number, have indicated that the results of field studies and laboratory studies are similar if care is taken to include the critical variables in laboratory simulations, also true for other IVs in IO (feedback, goal setting, training, etc.)
What were the results with respect to the effectiveness of individual incentives and team-based incentives in field vs laboratory studies?
Stronger effects for both individual and group incentives in field studies in comparison to lab studies.
Why are these results important
The amount of incentive pay did not affect performance differently (similar to the incentive percentage studies)The total amount of money earned did not influence performance
Why might individual incentives control performance more than small group monetary incentives?
When individuals are paid individual incentives, the amount of pay they earn is directly dependent of their own performance. Thus, they have complete control over what they earn.
Why might small group incentives control performance as well as individual incentives?
When the group is small, certainly when the group is only 2-3 members, the individual can still greatly influence the performance of the group, and hence his or her pay. There is still a pretty tight contingency between performance and pay
Important implication of the conclusions of Bucklin & Dickinson
You don't have to worry a lot about the details of how money/consequences are related to performance - as long as they ARE related in - some type of ratio schedule -delivered fairly frequently, and -supported by an on-going feedback system.
Be able to state why the following plans should not be called "pay for performance" -Special recognition bonuses
in most cases, employees do not know the distribution method in advance or what criteria will be used to determine whether or not they will receive a bonus. Bonus plans are administered at the discretion of management. Bonuses can be given "sporadically" (whenever management decides they are warranted) or annually butare usually given "sporadically"
Be able to state why the following plans should not be called "pay for performance" -Profit sharing
Bonuses are based on the annual profits of the organization and typically distributed annually
Historically, what have reviews indicated about the effectiveness of incentives in field vs laboratory studies?
Compared with laboratory studies, field studies have generally supported a positive relation between financial incentives and performance; the effect for field studies is stronger than for laboratory studies.
What relationship was found between the amount of pay earned and the percentage of incentives?
Inverse relationship between the amount earned and incentive percentage
not including 0%, what was the lowest percentage of incentive examined in LaMere et al.s field study with truck drivers? What was the highest percentage?
Lowest - 3% Highest - 9%
State the features, from a behavioral perspective, that a performance pay system must have to truly be a "pay for performance system"
(1) The incentives must be based on the actual on-the-job performance (or performance result) of the employees; (2) Performance must be objectively measured; (3) There must be a pre-existing formula/contingency for how pay is tied to performance; (4) Incentives/money must be distributed relatively frequently (weekly, biweekly, monthly, and in some cases if necessary given the performance being measured, quarterly; but certainly not annually).
What were the results of the Oah & Dickinson study with respect to the amount of money earned and the effects of linear vs accelerating piece rate pay?
- Participants in the two groups performed comparably - Participants in the accelerating group earned significantly more money
What were the results of the study? What do these data indicate?
- Three of the four participants performed an average of 14% lower when they were paid small group monetary incentives than when they were paid individual incentives - The data suggest that high performers are indeed likely to decrease their performance when paid small group monetary incentives (with N=10 members)
Summarize the results of studies with respect to the comparison of the effects of equally-divided group incentives and individual incentives. Provide the range of the number of subjects in the groups that were examined which you can get from Table 1
-Only five studies have compared performance when individuals were paid individual incentives and when they were paid small group incentives - Groups have ranged in size from 2-12 members - in 4/5 studies, equally-divided small group incentives sustained performance as well as individual monetary incentives - Participants reported that they were equally satisfied with the individual and small group incentives
State two reasons why these data are important
1) Participants who earned incentives made less money than those who were paid hourly, but performed significantly better; thus the total amount of money earned cannot account for the higher performance 2) Participants in the four incentive groups received different per piece incentives, yet they performed the same, thus the per piece incentive did not affect performance
What components should a compensation plan include and why should each be included?
1) Security -Base pay -Benefits 2) Adjustments -Location -Shift 3) Incentive: motivate and reward employees
Explain two reasons why hourly wage systems do not result in well-motivated employees from a behavioral perspective
1) You get what you pay for - If you pay for hours, you get hours, not performance -Economically it makes more sense for employees to take as much time as possible to complete their work. - And, if you can finagle overtime, all the better
What two factors appear to affect ratings of satisfaction with various types of incentive pay plans?
1. Exposure to all of the pay systems you are going to ask employees about (behavioral choice is the best method to obtain satisfaction data) 2. The amount of money employees earn under the different pay systems - not surprisingly, "The pay system I like best is the one where I earn the most money."
Learn the three main conclusions of Bucklin & Dickinson
1. Incentives increase performance 2. The critical determinant of performance is the ratio schedule contingency between performance and pay; that is, that-Individuals earn a specified amount of money for the number of work units they complete 3. Variations in the parameters of the incentive system do not appear to affect performance differently
State two idiosyncratic factors in a work setting that could account for differences that occur when employees are exposed to various ratio schedules of reinforcement. Give one example of each factor from the lecture
1. Rule statements 2. Social contingencies Example: Results were very different in two very similar studies that compared hourly pay with a VR schedules -In one, workers performed better when paid hourly than when they received the incentives due to rule statements that compromised the fidelity of the study (Yukl & Latham, 1975) -In the other workers performed better when they received the incentives than when they were paid hourly due to the social contingencies in place that made the VR4 schedule more rewarding (Latham & Dossett, 1978)
How many individual incentive studies were included in the meta-analysis?
115
State the three reasons why it is not surprising from a behavioral perspective that profit-sharing has not been shown to increase productivity REASON 3
Annual distribution of profit-sharing bonuses or distribution of money into retirement accounts, are simply too delayed to have much effect on performance
Historically, what has the empirical literature indicated about which type leads to higher increases in performance?
Equitably-distributed rewards
Which type of team-based incentives resulted in higher performance in the current study?
Equitably-distributed rewards
Describe what is meant by both "equitably-distributed" team awards and "equally-distributed" team awards
Equitably-distributed: individual pay incentives Equally-distributed: team-based pay contingencies
Why were the results of Frisch & Dickinson "particularly interesting?"
Higher percentages of incentives did not result in better performance - rather participants who earned different percentages of incentives performed the same (3% base pay incentives performed sig. better than hourly)
State why as the team size increases, we would expect any type of group-based reward/contingency to become less effective.
In small groups, any one individual has a lot of influence over the performance of the entire group; that influence decreases as the size of the group becomes larger.
Explain, according to Skinner, what maintains performance under hourly wage systems (Do not forget to include the role of the supervisor)
No one works on Monday morning because he is reinforced by a paycheck on Friday afternoon. The employee who is paid by the week works during the week to avoid losing a standard of living which depends upon a weekly wage. A supervisor who can discharge him is an essential part of the system. Rate of work is determined by the supervisor (with or without the pacing stimuli of a production line), and special aversive contingencies maintain quality. The pattern is therefore still aversive
Be able to state why the following plans should not be called "pay for performance" -Pay for skill or knowledge
Pay for skill/knowledge: it is only based on the number of tasks/skills the employee can do; not on how well he/she performs the tasks/skills when they perform them
Be able to state why the following plans should not be called "pay for performance" -Merit pay
Pay raises are annual and almost always based on annual, subjective performance ratings of supervisors. The raise is typically given as a percentage of base pay.
Which of the following three pay systems did all four high performers prefer: Hourly pay, individual incentive pay, group incentive pay?
Preferred the individual monetary incentive system
State the three reasons why it is not surprising from a behavioral perspective that profit-sharing has not been shown to increase productivity REASON 1
Profits are based on the aggregate performance of all members of the organization. Thus one person's performance contributes only a very small proportion to the total performance of the organization. Hence a person's performance is not strongly related to his/her pay.
State the three reasons why it is not surprising from a behavioral perspective that profit-sharing has not been shown to increase productivity REASON 2
Profits are often affected by factors that have little to do with the performance of individuals and are outside of their control such as mergers, acquisitions, building a new factory or plant, investment of funds in research, product recalls making bonuses uncertain and the amount unpredictable.
What were the results with respect to the effectiveness of team incentives and size of team?
The effect of team-based rewards on performance decreased with the amount of team members
Why might the effectiveness of incentives decrease as the complexity of the task increases?
The more complex the task, the more skills and resources are needed to complete it; thus the "gap" between the complexity and ability/skill increases
Which of the following three pay systems did the majority of participants find to be the most stressful?
The small group monetary incentive system
When would individual performers be likely to perform the same under individual and group monetary incentives and why?
When all members of the small group, including the individual, perform at approximately the same level. If all group members perform at approximately the same level, then their pay would not differ much when they were paid individual incentives and when they were paid small group incentives
When would performers be likely to decrease their performance under group monetary incentives and why?
When an individual was a high performer in comparison to the other members in the group A top performer would earn less money when he or she was paid small group incentives than when she or she was paid individual incentives because of the lower performance of the other members of the group Hence, over time, the high performer may decrease his or her performance because his or her earnings decrease