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Compensation > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

Describe Pay-for-Performance Plans?

A
  • pay that varies with some measure of individual OR organizational performance
  • also called variable pay plans & at-risk pay plans
  • these plans have a positive impact on performance IF they are designed well
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2
Q

List the 4 types of Pay-for-Performance Plans?

A
  • Short term (S - TIP)
  • Long term (L - TIP)
  • Group
  • Individual
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3
Q

What are concerns about Pay-for-Performance Plans?

A
  • ALWAYS look for potential unintended consequences
  • Enron
  • Chandelier factory
  • Competition among employees, etc
  • Assume: People WILL game the system if possible
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4
Q

What are rewards from Short Term Individual: Pay-for-Performance Plans?

A
  • Merit Pay
  • Lump-Sum Bonuses
  • Individual Spot Awards (“on-the-spot”)
  • Individual Incentives
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5
Q

Discuss Piecework/ Halsey 50-50.

A 
Straight piecework – 1 rate
Taylor – 2 rates
Merrick – 3 rates
Halsey – 50-50 : Share savings
(time per unit of production)
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6
Q

What is Standard Hour Plan?

A

Non-repetitive
Multi-skill
Long cycle- time jobs

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7
Q

What are some Advantages of Individualized Incentive Plans?

A

Substantial contribution to:
- increased productivity
- lower production costs
- increased earnings of workers
- less direct supervision is required to maintain output than under pay for time
- payment for results: enable labour costs to be estimated more accurately than under pay for time
helps costing and budget control

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8
Q

What are Disadvantages of Individualized Incentive Plans?

A
  • Conflict: output volume vs quality
  • New technology: may be resisted by employees concerned about the impact on production standards
    reduced willingness of employees to suggest new production methods for fear of subsequent increases in production standards
  • increased complaints that equipment is poorly maintained, hindering employee efforts to earn larger incentives
  • increased turnover among new employees discouraged by the unwillingness of experienced workers to cooperate in on-the-job training
    elevated levels of mistrust between workers and management
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9
Q

What are types of Team / Group Incentive Plans?

A
  • Profit Sharing Plans
  • Gain-Sharing Plans
  • Earnings-at-Risk Plans (Note: 2 meanings for this term – text p.261 vs usual meaning here in Canada)
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10
Q

What are Customer-Focused Measures?

A 
Time to Market Measures
On time delivery
Cycle time
New product introductions
Customer Satisfaction Measures
Market share
Customer satisfaction
Customer growth and retention
Account penetration
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11
Q

What are Financially-Focused Measures?

A 
Value Creation
Revenue growth
Resource yields
Profit margins
Economic value added
Shareholder Return
Return on invested capital
Return on sales / earnings
Earnings per share
Growth in profitability
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12
Q

What are Capability-Focused Measures?

A 
HR Capabilities
Employee satisfaction
Turnover rates
Total recruitment costs
Rate of progress on developmental plans
Promotability index
Staffing mix/head-count ratio
Other Asset Capabilities
Patents and copyrights
Distribution systems
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13
Q

What are Internal Process-Focused Measures?

A 
Resource Utilization
Budget-to-actual expenses
Cost allocation ratios
Reliability / rework
Accuracy / error rates
Safety rates
Change Effectiveness
Program implementation
Teamwork effectiveness
Service / quality index
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14
Q

What are 4 Sample Group/Team Performance Measures?

A

Customer-Focused
Internal Process-Focused
Capability-Focused
Financially-Focused

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15
Q

What are Different Types of Variable Pay Plans?

A 
Cash Profit Sharing
Stock Ownership or Options
Balanced Scorecard
Productivity / Gain- Sharing
Team / Group Incentives
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16
Q

Discuss Balanced Score Card.

A

Four Perspectives (Kaplan & Norton 1992/ 1996):

  • Financial
  • Customer
  • Internal business processes
  • Learning and growth (Many versions of this in use)
17
Q

Discuss Gain-Sharing Plans.

A

Under gain-sharing plans, employees share in cost-savings or productivity gains as measured by a predetermined, gain-sharing formula
Helps isolate problem areas

18
Q

What are Key Elements in Designing a Gain-Sharing Plan and Formula?

A 
strength of reinforcement
productivity standards (historical std?)
scope of the formula
perceived fairness of the formula
ease of administration
production variability
19
Q

Describe Scanlon Plans.

A

SVOP: Sales Value of Production
SVOP = Sales Revenue + Value of goods in inventory
Use historical data to determine ratio:
Total Wage Bill/SVOP

20
Q

Describe Improshare.

A

Use historical production data or time and motion studies

Like a group Halsey plan – savings shared 50-50

21
Q

Define Profit-Sharing Plans.

A

variable pay plans requiring a corporate profit target to be met before any payouts occur

22
Q

What is Earnings-at-Risk Plans?

A

incentive plans sharing profits in successful years and reducing base pay in unsuccessful years

Example: Base pay reduced 15% across the board. Employees are then given .5% increase for every % of productivity above 70% of last year’s productivity.
At last year’s production level, ees break even.
Production above last yr’s level is rewarded with x % increase in pay.

23
Q

What are the Advantages of Group Incentive Plans?

A
  • positive impact on organization and individual performance
  • easier to develop performance measures than for individual plans
  • signals that cooperation, both within and across groups, is a desired behaviour
  • teamwork supported by most employees
    may increase participation of employees in decision making process
24
Q

What are the Disadvantages of Group Incentive Plans?

A

line of sight may be lessened
employees may find it more difficult to see how their individual performance affects their incentive payouts.
may lead to increased turnover among top individual performers because they must share with lesser contributors
increases compensation risk to employees because of lower income stability

25
Q

What are types of Long-Term Incentive Plans?

A

Employee Stock Ownership Plans (ESOPs)
Stock Options
Broad-Based Option Plans (BBOP)

26
Q

What are the Components of an Executive Compensation Package?

A

base salary
short-term (annual) incentives or bonuses (STIP)
long-term incentives and capital appreciation plans (LTIP)
executive benefits
executive perquisites (Perqs)

27
Q

What are Examples of Long-Term Incentives for Executives?

A 
1. Appreciation-Based Plans
stock options
stock appreciation rights
2. Full-Share Plans
restricted stock plans – date restriction
restricted stock units/phantom stock plans – “Notional”
Deferred share units
3. Performance-Based Plans
performance share / unit plans
28
Q

What are Pay Components for Professional Employees?

A 
dual career ladders
maturity curves
performance bonuses
attaining professional licenses
perks
flexible work schedules
Campus-like environment
29
Q

What are Key Factors in Designing a Sales Compensation Plan?

A

the nature of the people who enter the sales profession
organizational strategy
competitor practices
product/service being sold

30
Q

What are Key Issues in Contingent Workforce Compensation?

A

equity/fairness relative to permanent employees
Snip – dual career ladder / maturity curve
boundaryless careers

Compensation (1 decks)

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