Using Reward Systems to Motivate Performance
Reward System
formal and informal mechanism by which employee performance is defined, evaluated, and rewarded
Employee Stock Ownership Programs (ESOPs)
gradually grant stock ownership of the firm to the employees as a reward
Gain Sharing
group based; all members get a bonus when predetermined levels are exceeded; this aligns employee and corporate interests
Merit
the relative value of an individual's contributions to the organization
Standard Executive Compensation
- base salary - incentive pay (bonuses)
Executive Compensation Criticism
- excessively large compensation amounts - compensation not tied to overall/long-term performance of the organization - earning gap between executive pay and employee pay
Special Executive Compensation
- stock option plans - executive perks
Incentive System
attempt to reward employees in proportion to what they do ex: piece-rate plan
Merit Pay Plan
compensation plan that formally bases at least some meaningful portion of compensation on merit
Incentive Reward System
employee pay is based on employee output - performance is under control of an individual worker - employee works at a single task continuously - pay is tightly tied to performance (pay varies with output)
Profit Sharing
provides a varying annual bonus to employees based on corporate profits
Merit System
reward system in which people get different pay raises at the end of the years; depending on their overall job performance