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Click to Edit Master Title Style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,2007 Thomson/South-Western.All rights reserved.,10,*,Pay-for-Performance:Incentive Rewards,Human Resource Management,Snell Bohlander,Objectives,After studying this chapter,you should be able to:,Discuss the basic requirements for successful implementation of incentive programs.,Identify the types of,and reasons for implementing,individual incentive plans.,Explain why merit raises may fail to motivate employees adequately and discuss ways to increase their motivational value.,Indicate the advantage of each of the principal methods used to compensate salespeople.,2,Objectives,(contd),After studying this chapter,you should be able to:,Differentiate how gains may be shared with employees under the Scanlon,Rucker,and,Improshare,gainsharing,systems.,Differentiate between,profitsharing,plans and explain advantages and disadvantages of these programs.,Describe the main types of ESOP plans and discuss the advantages of ESOP to employers and employees.,3,Strategic Reasons for Incentive Plans,Variable Pay,Tying pay to some measure of individual,group,or organizational performance.,Incentive Pay Programs,Establish a performance“threshold to qualify for incentive payments.,Emphasize a shared focus on organizational objectives.,Create shared commitment in that every individual contributes to organizational performance and success.,4,Figure 10,1,Types of Incentive Plans,INDIVIDUAL,Piecework,Standard hour plan,Bonuses,Merit pay,Lump-sum merit pay,Incentive awards,Sales incentives,Incentives for professional employees,Executive compensation,GROUP,Team compensation,Scanlon Plan,Rucker Plan,Improshare,Earnings-at-risk plans,ENTERPRISE,Profit sharing,Stock options,Employee stock ownership plans(ESOPs),5,Incentive Plans as Links toOrganizational Objectives,Incentive Plan Purposes,Encourage employees to assume“ownership of their jobs,thereby improving effort and job performance.,Motivate employees to expend more effort than under hourly and/or seniority-based compensation systems.,Support a compensation strategy to attract and retain top-performing employees.,Incentive Plan Effectiveness,There is evidence of a relationship between incentive plans and improved organizational performance.,6,Figure 10,2,Advantages of Incentive Pay Programs,Incentives focus employee efforts on specific performance targets.They provide real motivation that produces important employee and organizational gains.,Incentive payouts are variable costs linked to the achievement of results.Base salaries are fixed costs largely unrelated to output.,Incentive compensation is directly related to operating performance.If performance objectives(quantity and/or quality)are met,incentives are paid.If objectives are not achieved,incentives are withheld.,Incentives foster teamwork and unit cohesiveness when payments to individuals are based on team results.,Incentives are a way to distribute success among those responsible for producing that success.,Incentives are a means to reward or attract top performers when salary budgets are low.,7,Employee Opposition to Incentive Plans,Production standards are set unfairly.,Incentive plans are really“work speedup.,Incentive plans create competition among workers.,Increased earnings result in tougher standards.,Payout formulas are complex and difficult to understand.,Incentive plans cause friction between employees and management.,8,Successful Incentive Plans,Employees have a desire for an incentive plan.,Employees are encouraged to participate.,Employees see a clear connection between the incentive payments they receive and their job performance.,Employees are committed to meeting the standards.,Standards are challenging but achievable.,Payout formulas are simple and understandable.,Payouts are a separate,distinct part of compensation.,9,Highlights in HRM 1,Assessing Incentive Program Effectiveness,Source:Christian M.Ellis and Cynthia L.Paluso,“Blazing a Trail to Broad-Based Incentives,WorldatWork Journal 9,no.4(Fourth Quarter 2000):3341.Used with permission,WorldatWork,Scottsdale,Arizona.,10,Highlights in HRM 2,Setting Performance MeasuresThe Keys,Performance measuresat all organizational levelsmust be consistent with the strategic goals of the organization,.,Define the intent of performance measures and champion the cause relentlessly,.,Involve employees,.,Consider the organizations culture and workforce demographics when designing performance measures,.,Widely communicate the importance of performance measures,.,11,Effective Incentive Plan Administration,Grant incentives based on individual performance differences.,Have the financial resources to reward performance.,Set clearly defined,accepted,and challenging yet achievable performance standards.,Use an easily understood payout formula,Keep administrative costs reasonable.,Do not“ratchet up performance standards.,12,Individual Incentive Plans,Straight Piecew
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