HR Management

What is agency theory? How is it related to executive compensation?

Agency theory.- Addresses potential conflicts of interests among different groups of stakeholders in an organization. Based almost entirely in economics. The name of the theory and some of its basic principles is derived from the fact that, in most modern organizations, the individuals who own a firm do not actually run it on a daily basis. Problems arise when the interest of the owners (the principals) are in conflict with the interest of the managers (the agents). Executive compensation and executive compensation plans are the areas in which agency theory is most often applied. Agency theory can provide guidance on how to change some parameters of any such situation so that we can align the interest of the groups involved. Stock options.- when the pay is related to the success of the company managers interests are more likely to be aligned with principals interests

What is novel about Nucor´s compensation system?

All employees are correlated to bonuses and how the company performs. If a successful year, they can make much more than market average. If bad year they could make less than average

Equity theory

By J. Stacey Adams. Is concerned with a person´s perceived inputs to a (work) setting and the outcomes received from that setting. The theory suggests that everyone calculates the ratio of inputs to outcomes, similar to considering a return on investment.

What are some potential rating errors?

Contrast error: occurs when we compare people against one another instead of against ab objective standard Distributional error: Occurs when the rater tends to use only one part of the rating scale Halo Error: occurs when one positive performance characteristic causes manager to rate all other aspects of performance positively. Horn Error

How do you motivate someone to be creative? Do rewards work?

Creative behavior.- involves doing things at work that are innovative and provide some value to the organization. HR management can do things to enhance the creativity of an employee. Informative and constructive feedback has been found to be related to high levels of creativity at work. Another study found that structuring jobs in ways that are consistent with the creativity requirements of those jobs (e.g. Allowing more autonomy for jobs requiring more creativity) led to increased satisfaction in the job. React to all attempts of creative ideas positively; employees must feel safe to share their ideas.

Talk about developmental networks and mentors:

Definition of developmental network: Consist of mentors, sponsors, coaches, peers, and anyone else helpful for your learning and development (Higgins & Kram, 2001) *Transfer valuable knowledge and resources *Help you develop professional identity *Help you learn Advice: •Take responsibility for your own satisfaction and career development •Don't expect to have only one mentor -Cultivate multiple developmental relationships -Learn from many people- a "collage approach" •Be a good protégé! -Consider what you offer in exchange -People are very busy -Connect with them!

What is 360 degree feedback? Why should organizations use this system?

Definition: Performance information is gathered from people on all sides of the manager: above, beside, below, and so forth Why should they use it: Allows for match of strengths and weaknesses, the benfits and shortcomings, from each perspective and gain a more realistic, overall view of a persons true performance.

Fair Labor Standards Act (FLSA) describe and explain resulting practices

Established a minimum hourly wage for jobs and further stipulated that wages for hourly workers must be paid at a rate of one and a half times the normal rate for work in the excess of 40 hrs. a week. • Exempt employees do not receive overtime pay (usually employees compensated with salary). • Non-exempt employees receive overtime pay for work over 40 hours per week. According to FLSA (1938) overtime is compensated at 1.5 X normal pay rate (OR compensatory time off at a rate of 1.5 hours) for every hour worked over 40 hours per week.

Know some of the current topics in compensation - executive compensation trends and debate, pay compression /pay inversion, pay secrecy vs transparency.

Executive Comp: Do they deserve it vs. is it too much. Pay secrecy: keeping employees compensation to themselves Pay Compression: When individuals with different levels of experience earn similar salaries Pay Inversion: The external market changes so new employees are paid more than experienced

What does it mean if a position is exempt? What does it mean if a position is not exempt?

Exempt employees do not receive overtime pay. Non-Exempt employees do

What role does feedback play in employee motivation and development?

Feedback is really important in employee motivation development as it gives a consise idea of what it is that you are doing vs. what you need to be doing. It also suggests what you are doing right and improve what you are doing wrong

Discuss ways to make jobs more flexible- flextime, compressed work weeks, job-sharing, telecommuting

Flexible work hour plans.- plans in which employees usually must still work 40 hours a week and typically 5 day a week but in which they have control over the starting and ending times for work on each day. *Compressed work weeks.- are arrangements in which the employee works the required number of hours (typically 40) but does so in fewer than 5 days. For example a 4 day 10 hr schedule is fairly common *Job sharing.- employment arrangement where typically two people are retained on a part-time or reduced-time basis to perform a job normally fulfilled by one person working full-time. Compensation is apportioned between the workers, thus leading to a net reduction in per-employee income. (?) *Telecommuting.- Logical extension of the electronic cottage. Under this arrangement employees may do almost all of their work at home and may even receive assignments electronically. Provides employees with flexibility because they can choose hours and even location

Goal setting theory

Goal Setting.- The process of establishing desired results that guide and direct behavior Goals help crystallize the sense of purpose and mission essential to success at work. This theory suggests that people with goals work harder than people without goals. Not all goals are created equal, and goals that are difficult yet specific and concrete will motivate employees best.

Know how to classify a position as exempt and non-exempt

If they lead people and serve as management aka can hire and fire or are a knowledge worker then they will classify as exempt If they do manual work or do not serve in supervisor or knowledge worker role then they are non exempt

Why do firms offer benefit plans?

Improve employee work satisfaction Meet employee health and security requirements Attract and motivate employees Reduce turnover

What are incentive pay plans? What are profit sharing plans? ESOP´s? Stock options?

Incentive pay plans usually try to enhance performance by explicitly tying rewards, especially pay, to performance *Profit sharing plans.- is an incentive system in which, at the end of the year, some portion of the company´s profits is paid into a profit sharing pool, which is then distributed to all of employees *ESOP´s.- Employee Stock Ownership Plans.- are group-level reward systems in which employees are gradually given a major stake in the ownership of the corporation *Stock options.- incentive plan established to give senior managements the option to buy company stock in the future at a predetermined fixed price. *Stock purchase plan.- typically offered to all employees of a firm rather to only the executives to serve more as a retention tool. Under these plans, employees are entitled o the stock only if they remain with the company for a specified period of time. If they leave before that time, they have no rights to the shares of stock.

Suggest ways to increase the motivating potential of jobs. Be able to explain and apply this! How can you design jobs to enhance their potential motivation

Job characteristics model. - Any job can be described in terms of five core job dimensions: Skill variety Task identity Task significance Autonomy Feedback Implications for managers: Design jobs to enhance motivation - Autonomy and flexibility are key - Feedback helps as well - Minor tweaks can make a big difference! Rating Performance • Trait Methods (can be vague & subjective) - Assesses extent to which employee has certain traits (e.g. Dependability, reliability, creativity, leadership etc.) • Behavioral Measures- - Specifically describes which actions should (or should not) be exhibited on the job - "Suggests to peers ways to build sales; Follows up on customer leads", etc. • Productivity Measures- Results Oriented - Appraisals based on quantitative measures (e.g., sales volume) that directly link what employees accomplish to results beneficial to the organization. • e.g.- sales volume, $ sales, # of new clients, % of clients retained

Know what job crafting, de jobbing and engagement means.

Job crafting.- The physical and cognitive changes individuals can make within the constraints of a task to make the work their own. De jobbing.- broadening the responsibilities of individuals & departments in a company, and encouraging employees not to limit themselves to their job descriptions. It represents the gradual reverse of the process that created an employment driven economy now becoming obsolete. Engagement.- An "engaged employee" is one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organization's reputation and interests. An organization with 'high' employee engagement might therefore be expected to outperform those with 'low' employee engagement, all else being equal • 30% of the U.S. workforce "feels strongly committed and engaged with their work"- (Gallup, 2013) • 70% are not engaged or "actively disengaged" - Checked out - Lack energy and passion - Less productive - More costly- negatively influence co-workers, drive customers away, miss work, steal from the organization - Unhappy - Less satisfied Active disengagement costs U.S. companies between $450B- $550B per year

Extrinsic vs Intrinsic Motivation

Motivation. - The processes that account for an individual's intensity and persistence of effort toward attaining a goal. Intensity - how hard a person tries Persistence - how long the person exerts effort Extrinsic motivation.- Based on external factors that motivate us to do something. (money, raise, recognition) Intrinsic motivation.- the motivation to do work because it is interesting, engaging, or possibly challenging rather than because someone is rewarding us to do the job Although there are individual differences, most people respond well to intrinsic motivators especially for non-routine tasks - Autonomy - Purpose/ Significance - Mastery **studies suggests that the introduction of extrinsic rewards for doing something that had been intrinsically motivating, actually destroys the intrinsic motivation.

What is the minimum wage nationally? What is the minimum wage in TX? Why are there differences in minimum wage rates across states? What are the current debates about minimum wage?

Nationally the minimum wage is 7.25, In texas the minimum wage is also 7.25. Different states have different views on how minimum wage issues should be handled. Debates about minimum wage: If price of people increase, then choice of automation could become a better one. Also, by raising minimum wage it will bring the lowest class above the poverty line. If you raise minimum wage it will cost more, it could make technology a better option cause it would be cheaper.

Needs theory (Maslow)

Need based theories are theories of motivation that focus on what motivates a person rather than how that motivation occurs. Hierarchy of needs (Abraham Maslow.- Specifies 5 levels of need that are capable of motivating behavior; Physiological, Security, Social, Esteem, and Self-actualization

*Herzberg´s 2 factor theory

Need based theory proposed by Frederick Herzberg. Identifies motivators and hygiene factors as two sets of conditions that can satisfy needs. Research on this theory has provided little empirical support.

Be able to describe how career contract has evolved.

Old Career: New Career Mutual Loyalty Market based exchange of rewards for performance One employer Focus Occupational excellence Top-Down Firm Organizational empowerment Corporate Allegiance Project-based organizing Organization Driven Person Driven

Why do organizations perform performance appraisals? What are the goals of performance appraisal?

Performance Appraisals.- A process, typically performed annually by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success. Often is part of a 360 degree feedback program 1. Can provide a benchmark for assessing the extent of recruiting and and selection. Can lead to improvements in performance of individual and entire organization 2. Legal reasons, can demonstrate that promotions, transfers, and terminations are based on merit opposed to discriminatory factors 3. Appraisals can form as a method of feedback to employees on how they are doing which will allow employees to improve 4. Performance appraisal information should be the basis of incentive pay systems and other performance management interventions

What are cafeteria plans?

Plans that allow employees to pick and choose their benefits from a list. AKA they have a set budget of compensation and they get to choose where they apply it too

*Reinforcement theory

Process theories.- are motivation theories that focus on how people become motivated and what they are motivated to do rather than on what motivates them. Reinforcement theory: process theory by BF Skinner. Proposes that all behavior is a function of its consequences. • If you want more of a behavior, reinforce it with a reward • If you want less of a behavior, punish or ignore it

*Expectancy theory or (VIE theory)

Process theory of motivation that casts the employee in the role of decision maker. Basically an employee decides whether or not to exert effort, depending on the outcomes he/she anticipates receiving for those efforts as based on calculations concerning expectancies, instrumentalities, valences, and links among these three components.

What are forms of positive reinforcement?

Refers to the situation in which a behavior is followed by positive consequences and thus is likely to be repeated. Recognizing and employee, praising him, giving a bonus or raise are forms of positive reinforcement.

Discuss ways to empower employees (Share information, encourage them to act and take risks, hold people accountable)

Share information to make employees feel part of a bigger picture and that their opinion is important Encouraging taking risks. Listen to the t ideas; do not criticize to encourage creative ideas. Hold people accountable, as they should own their work and understand their responsibilities that ought to be completed.

What are the legally required benefits that firms must offer? What are other common benefits?

Social Security Insurance Unemployment insurance Workers Comp Insurance COBRA Insurance Benefits provided by PPACA

Know the traditional career stages. What is the current/contemporary version?

Traditional Step 1: Exploration: Involves identifying interests and opportunities. This is typically from late teens to late twenties Step 2: Establishment: individual creates a meaningful and relevant role for themselves in the organization Step 3: Maintenance: individual begins to realize a level that optimizes talents and capabilities. Some would call a mid career plateau if it is not high enough Step 4: Disengagement : Involves individual gradually beginning to pull away from work in the organization. Priorities change and work may become less important Current Version: The current version is that this process can repeat itself over and over again. And starts over with every new job.

Difference between wages and salaries

Wages - Generally refer to hourly compensation - Time is often the basis for wages (or # of units produced) - Most jobs paid on an hourly basis are eligible for OT based on FLSA Salary - Typically describes compensation on a monthly or annual basis - Paid for overall contributions to organization's performance, not for the hours spent on the job - Most salaried jobs are exempt from OT

Recognize and discuss current career issues

Work-Family Balance: Stress over how to handle issues happening at home can cause employee problems at work. Relieving these issues allows worker to focus in more on work and become more productive. Dual Career Issues: Increasingly the wife's career is becoming just as important as the husbands, thus an organization must begin to consider complexities associated with another career. The challenge of balancing mid-career stages with family balance can pose issues for the worker. Both of these can induce stress, which is bad for long term health for employee Firms investing less in training and development: As the psychological contract or work employment shortens, people are leaving companies more frequently. It is very expensive for companies to train and develop employees and they lose a lot of money when this happens. As a response more and more companies are investing less in training and development and instead on recruiting people that are already trained.

Managing by objectives

• A philosophy of management that rates performance on the basis of employee achievement of goals. • Converts overall organizational objectives into specific goals for divisions, departments, and individuals • Works best when employees participate in setting goals and get feedback on their performance

Suggests ways we can make jobs and careers more meaningful

• Allow employees to develop multiple skills • Provide flexibility and autonomy- expect results - Offer compressed schedules - Allow flexible work hours - Offer telecommuting if appropriate - Give constructive feedback and sincere praise • Remind employees about the significance of their work • Form work teams- increases feedback and purpose • Create opportunities for job sharing How can you make YOUR JOB more meaningful? • See your career holistically - See the significance of your job to your career more generally • Connect with others who have similar goals/ do similar work • Identify areas where you feel "called" to work • Identify skills that you enjoy developing and using • Try to operate from your strengths- craft your job to make use of these skills • Develop high quality relationships with mentors and peers - "High quality connections are like taking a vitamin"

Bases for Compensation

• Hourly Work - Work paid on an hourly basis. • Piecework - Work paid according to the number of units produced. • Salaried Workers - Employees whose compensation is computed on the basis of weekly, biweekly, or monthly pay periods. - Exempt vs Non-Exempt employees (FLSA

Daniel Pink´s Video - Autonomy, Mastery, and Purpose TAKE AWAYS FROM CHAPTER

• Performance management develops careers • Motivation matters- know what drives your employees - Create opportunities for intrinsic motivation - Use praise and recognition - Pay people enough and fairly - Set challenging goals and reward employees for accomplishing them - Link incentives to achieving goals- balance intrinsic and extrinsic • Create opportunities for employees to develop, grow, and direct their work