Pay for Performance and Financial IncentiveBY: PAYAM NASEHI

CGA120079

History

Fredrick Taylor , 1800s , Midvale Steel Co.

Used financial reward for workers who produce more than standard.

Scientific Management Movement introduced by Taylor.

Financial incentive to Boost Employee performance and enjoy Productivity gain

Not successful , because worker reduce quality to achieve more quantity of goods / Managers did not satisfied in this way

Motivation and Incentives

The Hierarchy of needs theory by Maslow

Motivators theory by Herzberg

Demotivators Theory by Edward Deci

Expectancy theory by Victor Vroom

Individual employee incentive and recognition programs

Piecework plans: employee will receive piece rate for each unit they produce.

Straight piecework: strict proportionality between result and reward regardless of output.

Standard Hours Plan: Worker will get a premium equal to the percent by which his performance exceed the standard.

PRO: More goods will manufacture , Cons: Quality possibly decline

Incentive for Professional Employees

Financial and recognition :

Higher payment for expert who works on important projects for company

Non Financial and Recognition based award: ( Recognition program)

Employee recognition

Gift certificates

Special events

Merchandise incentive

Group/ Individual Travel

Incentive for salespeople

Salary Plan : Hard to keep good salespeople

Commission Plan : S.P. salary will fluctuate during recession and boom time.

Combination Plan : Company give a floor for salespeople income , some managers believe that this method reduce salesperson's incentive for more activities.

Incentive for managers and executives

Long term and total rewards package

Short term incentive and annual bonus:

Eligibility : annually received by employees with attention to their job/ title and position

Fund size : There is not any rule for this part.

Individual Performance: Mostly managers and executive will receive more than lower levels.

( Split- Award Plan: 2 kinds of bonus for managers , first: base on Individual effort , second: organization overall performance)

Incentive for managers and executives (cont.)

Stock Option : The right to purchase specific number of shares of company at specific price and during specific period.

Problems of Stock Option :

1- Manipulated by managers

2- Volatility of economic circumstances

References

Human Resource Management , Gary Dessler