Chapter 6: Motivation in Practice Flashcards
Pay to Performance on Production Jobs
- Variable pay
- Wage incentive plans
Variable pay
a portion of employee’s pay that is baked on a measure of performance
Wage incentive plans
various system that link pay to performance on production jobs
Piece rate
worker are paid for each unit produced
Potential Problems with Wage Incentives
1) Lowered quality
2) Differential opportunity
3) Reduced cooperation
4) Incompatible job design
5) Restriction of productivity
Lowered quality
to gain more pay, employee emphasize on quantity rather than quality
Differential opportunity
supply of raw materials / equipment technology varies from workplace to workplace → unequal opportunity
Reduced cooperation
unwilling to do group tasks, etc
Incompatible to job design
ex → on assembly line, it’s hard to identify & reward individual contribution to productivity
Restriction of productivity
a. Increased productivity might lead to reduction in workforce
b. Fear employer might cut labour cost
Pay to Performance on White-Collar Jobs
Merit pay plans
Merit pay plans
System that attempt to link pay to performance on white-collar jobs
Potential problems with Merit Pay Plans
1) Low discrimination
2) Small increases
3) Pay secrecy
Problems with Merit Pay Plans - Low Discrimination
managers might not differentiate between good & bad performing employee (might be because perceptual errors, etc)
Problems with Merit Pay Plans - Small increases
when merit pay is too small to be a motivator
Lump sum bonus : merit pay awarded in a single payment and not built into base pay
Problems with Merit Pay Plans - Pay Secrecy
employee can’t compare their merit with others
Types of Pay Plans
1) Profit Sharing
2) Employee stock ownership plans (ESOPs)
3) Gainsharing
4) Skill based pay
Types of Pay Plans - Profit Sharing
the return of some company profit to employees in the form of a cash bonus or retirement supplement
Advantages of profit sharing
i. Sense of ownership
ii. Pays only when org. makes profit
iii. Align employee goals w/ org. goals
Disadvantage of profit sharing
i. Difficult for employees to see their impact on org. profits
ii. Many factors affect org. profits that’s beyond employee control
Types of Pay Plans - Employee stock ownership plans (ESOPs)
allow employee to own a set amount of company’s shares that they’re allowed to purchase at fixed price
Advantages of Employee Stock Ownership plans (ESOPs)
i. Sense of legal & psychological ownership for employees
ii. Align employee goals w/ org. goals
Disadvantages of Employee Stock Ownership Plans (ESOPs)
i. They lose motivational potential in a weak economy when value of org. stock declines
ii. Many factors can influence value of org shares, regardless of employee effort & performance
iii. Difficult for employee to see connection between their effort & value of org stocks
Types of Pay Plans - Gainsharing
group pay incentive plan based on productivity / performance improvements over which workforce has some control (ex : reduction in labour cost, material, supplies)
Advantages of Gainsharing
i. Align employee goals w/ org goals
ii. Encourage teamwork & cooperative behaviour
Disadvantages of Gainsharing
i. Bonuses might be paid even when org doesn’t make a profit
ii. Employees might neglect objectives that not included in the formula
Types of Pay Plans - Skill based pay
the more skill employee acquired, the higher the pay
Advantages of Skill based pay
i. Encourage employee learn & new skills
ii. Provide greater flexibility in task assignments
iii. Provide employee w/ broader picture of work process