Chapter 10

Gantt Plan

individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production. Under this plan, a standard time for a task is purposely set at a level requiring high effort to complete.

Incentive

inducement offered in advance to influence future performance (e.g., sales commissions).

Straight piecework system

Individual incentive plan in which rate determination is based on units of production per time period; wages vary directly as a constant function of production level.

Standard hour plans

individual incentive plan in which rate determination is based on time period per unit of production and wages vary directly as a constant function of product level. In this context, the incentive rate in standard hour plans is set based on completion of a task in some expected time period.

Rowan plan

individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production. It is similar to the Halsey plan, but in this plan a worker's bonus increases as the time required to complete the task decreases.

long-term incentives

inducements offered in advance to influence longer-rate (multiyear) results. Usually offered to top managers and professionals to get them to focus on long-term organization objectives. Such as stock options

Halsey 50-50 method

Individual incentive method that provides for variable incentives as a function of a standard expressed as time period per unit of production. This plan derives its name from the shared split between worker and employer of any savings in direct costs

Variable pay plans

Pay tied to productivity or some measure that can vary with the firm's profitability

Improshare

a gain-sharing plan in which a standard is developed to identify the expected hours required to produce an acceptable level of output. Any savings arising from production of agreed-upon output in fewer-than-expected hours are shared by the firm and the worker.

Scanlon Plan

a group cost-savings plan designed to lower labor costs without lowering the level of a firm's activity. Incentives are derived as the ratio between labor costs and sales value of production (SVOP).

Employee Stock Ownership Plan (ESOP)

a retirement plan in which the company contributes its stock to the retirement benefit.

sales value of production (SVOP)

an incentive metric that calculates the dollar value of goods produced and in inventory.

Merit Bonus

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

Spot award

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

Pay for performance plans

pay that varies with some measure of individual or organizational performance, such as merit pay, lump-sum bonus plans, skill-based pay, incentive plans, variable play plans risk sharing, and success sharing.

Self-funding plans

these plans specify that payouts only occur after the company reaches a certain profit target. Then variable payouts for individual, team, and company performance are triggered.

profit-sharing plan

variable pay plan where payout depends on company profitability. Can also be used at lower levels such as the division. Size of payouts to individuals can be modified based on other measures such as individual performance.

Bedeaux Plan

- individual incentive plan that provides a variation on straight piecework and standard hour plans. Instead of timing an entire task, a Bedeaux plan requires determination of the time required to complete each simple action of a task. Workers receive a wage incentive for completing a task in less than the standard time.

Gain sharing plan

(aka group incentive plans) variable pay plan where payout depends not on company level performance such as profitability, but rather on performance at some sub-unit such as a plant/facility. Also, performance is often defined more broadly than just financial terms. Performance examples include labor cost/revenue, safety, cost of scrap, cost of utilities, customer (including patient) satisfaction.

Rucker plan

A group cost-savings plan in which cost reductions due to employee efforts are shared with the employees. It involves a somewhat more complex formula than a Scanlon plan for determining employee incentive bonuses.