pay-for-performance - gimmenotesgimmenotes.co.za/wp-content/uploads/2016/12/hrm3705-chap009.pdf ·...
TRANSCRIPT
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Chapter Topics
• Major Decisions• Specify Competitive Pay Policy• The Purpose of a SurveyCOMPENSATION MANAGEMENT
p y• Select Relevant Market Competitors• Design the Survey• Interpret Survey Results and Construct a Market line• Interpret Survey Results and Construct a Market line• From Policy to Practice: The Pay-Policy LineCHAPTER 9 (Study unit 8)
Pay-for-Performance
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Chapter Topics
• What Behaviors Do Employers Care About?
• What Does It Take to Get These Behaviors? What Theory and Research
Say
• What Does It Take to Get These Behaviors? What Compensation People
Say
• Total Reward System: Besides Money, Other Rewards Influence Behavior!
• Does Compensation Motivate Behavior? General Comments
• Does Compensation Motivate Behavior? Specific Comments
• Designing a Pay-for-Performance Plang g y
• Your Turn: Burger Boy
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What Behaviors Do Employers Care About?
• Employers want employees to perform in ways that lead to better
organizational performanceorganizational performance
• Organizational strategy is the guiding force that determines what kinds of
employee behaviors are neededemployee behaviors are needed
• Behaviors that compensation needs to reinforce
C ti h ld b ffi i tl tt ti t k iti d– Compensation should be sufficiently attractive to make recruiting and
hiring good potential employees possible (attraction)
N d t k th d l t ith th ( t ti )– Need to make sure the good employees stay with the company (retention)
– Need to find ways to motivate employees to perform well on their jobs—to
take their knowledge and abilities and apply them in ways that contribute
to organizational performance
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Exhibit 9.1: The Cascading Link between Organization Strategy and Employee Behavior
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Exhibit 9.2: The Big Picture, or Compensation Can't Do It Alone!
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What Behaviors Do Employers Care About? (cont.)
• Performance measurement
– Need to accurately measure performance to tell if compensation efforts
are workingg
• Performance management
• How do we get good employment prospects to join our company?o do e get good e p oy e t p ospects to jo ou co pa y
• How do we retain these good employees once they join?
H d t l t d l kill f t d f t j b ?• How do we get employees to develop skills for current and future jobs?
• How do we get employees to perform well on their current job?
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Exhibit 9.3 Performance Measurement Relates to Compensation Strategy
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What Motivates Employees?
• In the simplest sense, motivation involves three elements:
1. What is important to a person?
2. Offering it in exchange for some
3. Desired behavior
• Refer to Exhibit 9.4 in the prescribed book regarding the different motivation
theories
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What Compensation People Say
• Employees learned what behaviors were important as part of the socialization
process
• Compensation is designed to support this risk-taking behaviorp g pp g
– Total Reward System– Total Reward System
• Compensation is but one of many rewards that influence employee
behaviorbehavior
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Exhibit 9.5: Components of aTotal Reward System
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Exhibit 9.6: Wage Components
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Exhibit 9.6: Wage Components (con’t)
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Does Compensation Motivate Behavior?Specific Comments
• Do people join a firm because of pay?
• Do people stay in a firm (or leave) because of pay?
• Do employees more readily agree to develop job skills because of pay?
• Do employees perform better on their jobs because of pay?
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Do People Join a Firm Because of Pay?
• Key factors affecting a person’s decision to join a firm
– Level of pay
– Pay system characteristics
J b did t l k f i ti th t “fit” th i liti• Job candidates look for organizations that “fit” their personalities
• Reward systems should be designed to attract people with desired
Personalities– Personalities
– Values
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Do People Stay in a Firm (Or Leave) Because ofPay?
• Factors impacting turnover
– Pay based on individual performancePay based on individual performance
– Group incentive plans
– Level of employee satisfaction with payLevel of employee satisfaction with pay
– Type of pay system
• Other rewards affect the decision to stay– Work variety and challenge
Development opportunity– Development opportunity– Social– Status recognition
Work importance– Work importance– Benefits
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Do Employees More Readily Agree to Develop Job Skills Because of Pay?
E id i l• Evidence is unclear
• Relevance of skill-based payp y
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Do Employees Perform Better on Their Jobs Because of Pay?
• Not clear if performance of individuals can be increased by tying it to pay
• If the incentive depends on individual performance, applicants find the
company more attractive
• Team-based incentives, in contrast, are less attractive
• A number of recent studies provide strong evidence that pay for performance
f fhas a direct and, at times, substantial impact on firm performance
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Exhibit 9.7: Examples of Group Incentive Plans
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Designing A Pay-For-Performance Plan
• Efficiency
– Strategy: does the pay-for-performance plan support corporate
objectives? Does it link well with HR strategy and objectives?
St t i th t t f th i ti ffi i tl d t li d t– Structure: is the structure of the organisation sufficiently decentralized to
allow different operating units to create flexible variations on a general
pay for performance plan?pay-for-performance plan?
– Standards
• Objectives• Objectives
• Measures
• EligibilityEligibility
• Funding
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Designing A Pay-For-Performance Plan (cont.)
• Equity/Fairness
– Distributive justice: amount that is distributed to employees, does theDistributive justice: amount that is distributed to employees, does the
employee view it as fair?
– Procedural justice: Was a fair procedure used to determine the amount ofj p
rewards employees receive?
– Communications is key in fairness
• Compliance
– Comply with existing laws
– Enhance and maintain firm’s reputation
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Your turn
Answer the end of chapter 9 review questions