HRM L.6 Reward and Compensation

1. High pay. 2. Individual Pay. 3. Fixed Pay. 4. Flexible benefits.

Each of these character traits can be identified by a time of payment scheme. Name each one. 1.Materialism. 2. Individualism. 3. Risk Aversion. 4. Internal locus of control.

Meaningful work

High skill variety, task identity and task importance all lead of what?

1. Attraction 2. Retention. 3. Moivation.

Rewards affect which 3 things (related to employees)?

1. Satisfaction. 2. Fairness

With which two aspects do people evaluate their pay?

Giving more responsibilities to employees.

These are the conditionals that must be present in order for what to be successful? - Management commitment. - Need for change or strong commitment to continuous improvement. - Management acceptance and encouragement of employee input. - High levels of cooperation and interaction. - Employment security. - Information sharing on productivity and costs. - Goal setting - Commitment of all involved parties to the process of change and improvement.

Job involvement

This commitment attributions can also lead to emotional exhaustion.

False (standard is not in control of the firm but perception of fairness is)

True or false: Employees' conclusions about equity depend on what they choose as a standard of comparison. This can be controlled by the firm.

True ('Gaming' the system and focusing only on what gets measured)

True or false: High incentives can encourage excessive risk taking or corruption.

True (although the final question means their performance is indirectly reflected)

True or false: Netflix´s pay structure is not explicitly performance-related.

True (65% for women, 58% for men)

True or false: One of the top reasons why people said to leave the company is because they found a higher paying job.

True

True or false: Pay is key to attracting employees to a firm.

False (lower limits are placed by labour markets, product markets place upper limit.)

True or false: Product markets place an lower limit on the pay an organization will offer

True (Due to the differences between intrinsic and extrinsic motivation)

True or false: Short-term incentives increased intensity did not encourage persistence

True

True or false: The sorting effect only works if a firm is able to actually give a substantial bonus and the bonus is well received.

True (but NOT for complex tasks)

True or false: Verbal rewards increased intrinsic motivation for simple tasks.

False (it is the way you get paid that makes the difference)

True or false: Whether students in the survey got the payment scheme they wanted impacted whether the likeliness of staying in a firm.

Procedural Fairness

Type fo fairness that describes whether the procedure has been applied... - Consistently - Free from bias - Accurately - Allowing for flawed decisions to be corrected - Conforming to ethical standards - Allowing for multiple perspectives to be taken into account.

1. Inflating the market. 2. Not financially stable.

What are the 2 risks or issues with Netflix´s performance scheme?

1. Intensity of effort. 2. Direction of Effort (motivation) 3. Persistence of Effort.

What are the 3 characteristics of motivation?

1. Job structure (relative pay for different jobs within the organization) 2. Pay level (average amount (including wages, salaries, and bonuses) 3. Pay structure (pay policy resulting from job structure and pay level decisions)

What are the 3 decisions about pay related to?

1. Intangible 2. Non-financial 3. Financial

What are the 3 types of rewards that a company can give an employee?

Types of Fairness

What are the following? 1. Distributive (WHAT) 2. Procedural (HOW) 3. Managerial (HOW)

Interpersonal comparison (over 50%, followed by discrepancy of expected vs actual at 25%)

What is the characteristic that most informs pay satisfaction?

Netflix

Which company has a pay strategy that consists of paying top of the market and making sure everyone knows it. - Compensation all on pay (plus stock options, which the employee chooses). - Positive working environment. - They set pay levels based on 3 questions: - What would that person get somewhere else? - What would we pay for a replacement? - What would we pay to keep that person (if they had a bigger offer elsewhere)?

Social support (Feeling making progress have a lot of impact on job satisfaction)

Which job characteristic is most related high job satisfaction?

Emotional exhaustion

Work Overload and intention to quit (control attributions) lead to...

Extrinsic, intrinsic

___________ motivation relates to quantity and leads to working harder. __________ motivation relates to quantity and quality and leads to working better.

Balanced Scorecard

A combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay. - Merges financial goals to satisfy its customers, efficiency goals to ensure better operations, and goals related to acquiring skills and knowledge for the future to fully tap into employees' potential.

Cash

In the example about a bonuses applied to technicians at a high-tech company, the removal of which incentive resulted in the highest production drip?

1. Pizza meal 2. Verbal reward.

In the example about a bonuses applied to technicians at a high-tech company, which 2 incentive strategies resulted in the highest productivity increase?

1. Attraction (people who want their pay differentiated by performance, will be more attracted to organisations offering PRP (person-organisation fit)) 2. Retention (low performers receive lower pay...so are more likely to leave the organisation (and higher performers to stay))

Sorting effects are based on two things.

Financial (better to focus on intrinsic or extrinsic benefits)

The following are all more important than what type of incentive? 1. Meaningful work. 2. Job design. 3. Power of small wins. 4. Everyday incentives.

Netflix pay structure

The following are benefits for what? - Setting high pay levels to attract only 'A players' from the market. - Because everyone knows they get paid the most...so pay is never a reason that people leave. - So Netflix never 'pay' people to stay. - They do not use pay as a motivator to increase performance..

Payment decisions

The following are the factors that influence what decisions? 1. Legal Requirements. 2. Market forces. 3. Organization´s Goals.

Legal Requirements for Pay

The following are what? 1. Equal employment opportunities. 2. Minimum wage. 3. Overtime pay. 4. Child labour. 5. Prevailing wages.

Economic

The following factors represent what type of influence on pay? 1. Product markets 2. Labour markets. 3. Pay level 4. Benchmarking

Expectancy Theory (An individual will behave or act in a certain way because they are motivated to select a specific behavior over others due to what they expect the result of that selected behavior will be)

The incentive effect is related to which theory

Low performers are more likely to quit.

The sorting effect states that when there is high extent of PRP and high pay dispersion then what occurs (based on sorting effect graph)?

Equity theory

Theory which states that employees evaluate their pay relative to the pay of other employees. To decide whether a level of pay is fair, the person compares her ratio of outcomes and inputs with other people's outcome/input ratios

HR attribution theory (based on attribution theory)

Theory which states that employees seek out explanations for why HR practices are in place (i.e. their intention). This informs their reactions.

other people in the organization

There 3 components are considered when an employees compares how a company pay people relative to... 1. Internal structure (comparison of responsibilities) 2. Value (of position to organization) 3. Fairness/equity (similar job pay)

people doing similar jobs outside

There 3 components are considered when an employees compares how a company pay people relative to... 1. Job market (available candidates) 2. Pay comparison 3. Attractiveness 4. Fit

1. Wellbeing. (Commitment) 2. Performance (Commitment) 3. Cost-saving (Control) 4. Exploitation (Control).

There are 4 HR attributions. Which are they?

1. Participation in decisions (employee empowerment (risk of selfishness)) 2. Communication (increases perceived fairness)

Generally, the processes that make incentives in a Balance ScoreCard method work are which (2)?

Incentive Effect

Effect which states that individual effort increases individual performance when that individual has an expectancy of performance success. If a reward has an instrumental relationship with this performance and has valence, then pay for performance will work.

Incentive Pay

Forms of pay linked to an employee's performance as an individual, group member, or organization member. The amount paid is linked to certain predefined behaviours or outcome. Effective plans meet the following requirements: - Performance measures are linked to the organization's goals - Employees believe they can meet performance standards - The organization gives employees the resources they need to meet their goals - Employees value the rewards given - Employees believe the reward system is fair - The pay plan takes it into account that employees might ignore any goals that are not rewarded

commitment, control

Organisational commitment, citizen behaviour and job involvement are ___________ attributions. Work overload, intention to quit are ___________ attributions.

Customer satisfaction with staff

Organizational commitment, citizen behaviour and job involvement (commitment attributes) lead to what?

Group bonuses and team awards

Pay for group performance: Bonuses for group performance tend to be for smaller work groups. Reward the members of a group for attaining a specific goal, usually measured in terms of physical output.

Scanlon plan

Pay for group performance: Gainsharing program in which employees receive a bonus if the ratio of labour costs to the sales value of production is below a set standard

Gainsharing

Pay for group performance: Group incentive program that measures improvements in productivity and effectiveness objectives and distributes a portion of each gain to employees. Used for complex jobs.

Standard hour plans

Pay for individual performance: An incentive plan that pays workers extra for work done in less than a pre-set "standard time." - Completes the work in less than the standard time, the mechanic receives an amount of pay equal to the wage for the full standard time. - No focus on quality and comfortable work place.

Sales commissions

Pay for individual performance: Incentive pay calculated as a percentage of sales One example is a straight commission plan where employees earn only commissions, no salary.

Straight piecework plan

Pay for individual performance: Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces.

Performance bonuses

Pay for individual performance: Reward individual performance, but bonuses are not rolled into base pay, must re-earn them each time. - Can be extremely effective (if tied to organization's goals) and give the organization great flexibility.

Merit pay

Pay for individual performance: System of linking pay increases to ratings on performance appraisals. decisions about pay are based on two factors: the individual's performance rating and the individual's compa-ration (ratio of average pay to the midpoint of the pay range). - Makes the reward more valuable by relating it to economic conditions. BUT Conditions can shrink the available range of increases. - Rewarding performance in all of the dimensions measured in the organization's performance management system. BUT Can become expensive.

Differential piece rates

Pay for individual performance: incentive pay in which the piece rate is higher when a greater amount is produced - Direct link between how much work the employee does and the amount the employee earns à Most suited for standard, routine jobs.

Employee stock ownership plans (ESOP)

Pay for organizational performance: An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust. - Risky for employees - Builds pride and commitment to the organization.

Profit sharing

Pay for organizational performance: Incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary. - Encourage employees to think more like owners, taking a broad view of what they need to do in order to make the organization more effective leading to cooperation, cost-effectiveness. - BUT Unclear effectiveness and doubted equity.

Stock Options

Pay for organizational performance: Rights to buy a certain number of shares of stock at a specified price - Effective for managers. - BUT lose sight of other goals, including ethical behavior.

Skill-Based Pay Systems

Pay systems that set pay according to the employees' levels of skill or knowledge and what they are capable of doing - Empower employees and enrich jobs à encourages employees to add to their knowledge - Rewards employees for acquiring skills but does not provide a way to ensure that employees can use their new skills

1. Sorting Effect. 2. Incentive Effective.

Performance-related pay words because of which two effects?