pay for performance and financial incentives 12 copyright © 2013 pearson education, inc. publishing...
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Pay for Performance Pay for Performance and Financial Incentivesand Financial Incentives12
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12-1
Learning ObjectivesLearning Objectives
1. Explain how you would apply five motivation theories in formulating an incentive plan.
2. Discuss the main incentives for individual employees.
3. Discuss the pros and cons of commissions versus straight pay incentives for salespeople.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12-2
Learning ObjectivesLearning Objectives4. Describe the main incentives for
managers and executives.
5. Name and define the most popular organization-wide variable pay plans.
6. Outline the steps in designing effective incentive plans.
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Money and MotivationMoney and Motivation
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Five motivation theories in Five motivation theories in formulating an incentive formulating an incentive
plan.plan.
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Motivational TheoriesMotivational Theories1. Maslows Hierarchy of Needs
2. Herzbergs 2-factor theory
3. Reinforcement theory
4. Equity theory
5. Expectancy theory
6. Theory X & Y
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Motivation and IncentivesMotivation and Incentives
• Maslow’s Hierarchy of Needs
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Motivation and IncentivesMotivation and Incentives
• Herzberg’s Two-Factory Theory
• Deci and demotivators
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Reinforcement TheoryReinforcement TheoryBehaviorist theory – Skinner
They believe that all behaviour results from external stimuli and peoples goals are determined by the desire to achieve pleasure and avoid pain.
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Equity TheoryEquity Theory
•People are motivated by a desire for fairness.
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Expectancy TheoryExpectancy Theory
• Expectancy Theory (Victor Vroom)
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Theory X and YTheory X and Y1. Theory X – average workers has an
inherent dislike of work and will avoid.
2. Theory Y – expenditure of physical and mental effort in work is as natural as play or rest.
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Motivation and IncentivesMotivation and Incentives
• Behavior modification
• Incentive pay terminology
• Employee incentives and the law
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ReviewReview
• Money and motivation
• Motivation theories
• Incentives
• Terminology
• The law
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Incentives for individual Incentives for individual employees.employees.
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Individual Employee Incentive Individual Employee Incentive and Recognition Programsand Recognition Programs
• Merit pay as an incentiveoDifferential pay
increasesoMerit pay options
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• Piecework plansoStraight
pieceworkoStandard hour
plansoPros and cons
Individual Employee Incentive Individual Employee Incentive and Recognition Programsand Recognition Programs
• Incentives for professional employees• Nonfinancial and recognition-based
awardso Incentives managers can use
• Online and IT-supported awards• Job design – refer to Oldham &
Hackman.
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ReviewReview• Piecework
• Merit pay
• Incentives for professionals
• Nonfinancial rewards
• Online
• Job design
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The Pros and Cons of The Pros and Cons of Commissions vs. Straight Commissions vs. Straight
Pay Incentives for Pay Incentives for SalespeopleSalespeople
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Incentives for SalespeopleIncentives for Salespeople
• Salary plan
• Commission plan
• Combination plan
• Maximizing sales force results
• How effective are your incentives?
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ReviewReview
• Types of sales incentives
• Maximizing results
• Effectiveness
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The main incentives for The main incentives for managers and executives.managers and executives.
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Incentives for Managers Incentives for Managers and Executivesand Executives
• Strategy and the executive’s long-term and total rewards package
• Sarbanes-Oxley Act• Short-term incentives, annual bonus
oEligibilityoFund sizeo Individual performanceoFormula
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Incentives for Managers Incentives for Managers and Executivesand Executives
• Strategic long-term incentivesoStock optionsoStock option problemsoOther stock plansoEthics and incentives
• Other executive incentives
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ReviewReview
• Strategy and long-term incentives
• Federal law
• Short-term incentives
• Strategic long-term incentives
• Other incentives
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The Most Popular The Most Popular Organization-wide Variable Organization-wide Variable
Pay PlansPay Plans
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Team & Organization-wide Team & Organization-wide Incentive PlansIncentive Plans
• Designing team incentivesoEngineered standardsoPros and cons
• HR inequities that undercut team incentives
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Team & Organization-wide Team & Organization-wide Incentive PlansIncentive Plans
• Profit-sharing plans
• Scanlon plans
• Gainsharing plans
• At-risk pay plans
• Employee stock ownership plans
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ReviewReview• Team incentives
• Inequities
• Profit-sharing
• Scanlon and gainsharing
• At-risk
• ESOPs
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The Steps in Designing The Steps in Designing Effective Incentive PlansEffective Incentive Plans
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The Five Building Blocks of The Five Building Blocks of Effective Incentive PlansEffective Incentive Plans
• Common sense
• Linkages
• Effort Rewards (motivational)
• Standards
• Contract
• Measurement
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ReviewReview
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12-32