7. performance-linked pay Flashcards
what will maslow’s hierarchy of needs and herberg’s hygiene factors and motivators show about pay for performance?
base pay must be higher enough before talking about performance-linked (variable) pay and base pay alone will not motivate extra performance
how does expectancy affect performance-linked pay?
performance-linked pay must be large enough to be effective in motivating performance and line of sight (controlled by employees) is most important. employee must be able to influence results
what should equity be for performance-linked pay?
perceived eward must be equal to perceived effort and fairness, consistency and relatively are important
what is reinforcement in performance-linked pay?
payment must be timely
what is “fairness” and “return” for performance-linked pay?
there is a risk attached to performance-linked pay and to be fair to employees for accepting the risk, there should be a corresponding upside if the employee delivers on performance.
higher the risk, higher the upside
what is important for a materialistic person?
care most or maybe even only about the company’s pay policy, not about work culture, content and other non-monetary intangibles
what do low self-esteem person want as pay?
fixed with little or no variable pay
what is a risk-taker’s pay?
more variable pay with higher upside
what is the go-getter’s type of pay?
wants variable pay, but based on individual performance, not group performance
what is the critical success factors?
simplicity, linage strength, fairness and justice, and communication
what is simplicity?
criteria must be easily understood
what is the linkage strength?
effort-to-result linkage must be strong enough
what does fairness and justice refers to?
plan structure must be fair
communication is?
explain & review
what is the step design performance metric system?
- determine the number and type KPIs and it weightage
- determine the number of ratings for each KPIs
- define the level of performance for each rating
- suggest corresponding performance-linked pay
what are the types of key performance index (KPIs)?
- Production Cycle Time
- Sales Revenue
- Market Share
- Customer Satisfaction score
- Customer Retention rate
what are the type of performance-linked pay?
merit increment, merit bonus, spot award, commission, piece rate pay, time rate pay, gain sharing plans and stock plans
what is merit increment?
a variable/performance increment that will increase in monthly base salary that is linked to performance
what is merit bonus?
a variable/performance bonus receive by employees in a lump sum payment linked to performance and doesnt go into monthly base salary
what is spot award?
a special one-off award given for some special effort
what is commission?
pay is linked to the completion of a task or delivery of an outcome
what is piece rate pay?
a straight piece rate is single rate for each piece of work delivered, regardless of what productivity is achieved
what is merrick piece-rate plan?
rates based on whether performance exceeds/equals/below a set of productivity standards
what is time rate pay?
a straight time-rate is single rate for each piece of work delivered, regardless of what productivity is achieved
what is the rowan time-rate pay?
bonus is included when the performance exceeds a set productivity standard
what do gain sharing plan focuses on?
the input factors
what are the components in stock plans?
stock purchase, grant and option plan
what is stock purchase?
company offers the employees the chance to purchase company shares
what is stock grant?
company makes a grant of stock to the employee
what is stock option?
company makes an offer of stock option to employees
