Recognising Employee Contributions with Pay

Question 1

Commission

Answer 1

Pay calculated as a percentage of a sale

Paid to a salesperson for closing a sale

Question 2

Bonus

Answer 2

Paid for meeting a monthly quota

Question 3

Requirements of effective incentive pay plans

Answer 3

1. Performance measures are linked to the org goals
2. Employees believe they can meet the performance standards
3. The org gives employees the resources they need to reach goals
4. Employees value the rewards given
5. Employees believe the system is fair
6. The pay plan takes into account that employees might ignore any goals that are not rewarded

Question 4

Categories of incentive pay

Answer 4

1. Incentives linked to individual
2. Incentives linked to a group
3. Incentives linked to org performance
   time

Question 5

Individual incentives

Answer 5

Do not add to base pay. They have the be re-earned.

Does not encourage teamwork

Question 6

Piecework rate

Answer 6

Pay employees per unit produced

Question 7

Straight piecework plan

Answer 7

Pay the same rate per piece no matter how much the worker produces

Question 8

DIfferential piece rate

Answer 8

Piece rate depends on the amount produced.

Question 9

Advantage: Piece rates

Answer 9

Pay is directly linked to the amount of work

Seems fair and easy

Question 10

Disadvantages; piece rates

Answer 10

Jobs without physical output are hard to measure
Fail to focus on quality or customer satisfaction
Not suitable for:
- complex jobs
- employee empowerment
- team-based problem solving

Question 11

Standard hour plan

Answer 11

Quantity oriented incentive. Pays extra for work done in less than a preset standard time

Question 12

Merit pay/Merit bonuses

Answer 12

Linking pay or bonus increase to ratings on performance appraisal

Question 13

Merit increase grid

Answer 13

Lists which performance rating is linked to which compa-ratio. Establishes the size and frequency of pay increase

Question 14

Performance bonuses

Answer 14

Reward individual performance, but bonuses are not rolled into base pay
Can be really effective and give org flexibility in deciding what kinds of behaviour to reward

Question 15

Retention bonuses

Answer 15

Paid when an acquisition is happening, companies tend to pay in order to keep valuable employees

Question 16

Straight commission plan

Answer 16

Employee earns only commission

Question 17

Group incentives

Answer 17

Encourage employees to cooperate

To share knowledge

Question 18

Gain sharing

Answer 18

Measure increases in productivity and effectiveness, and distribute a portion of each gain to employees

Question 19

Conditions for gain sharing success

Answer 19

1. Management commitment
2. Need for change or strong commitment to continuous improvement
3. Management acceptance and encouragement of employee input
4. High levels of cooperation and interaction
5. Employment security
6. Information sharing on productivity and costs
7. Goal setting
8. The commitment of all involved parties of the process of change and improvement
9. Performance standard and calculation that employees understand, consider to be fair, and that is closely related to managerial objectives
10. Employees who value working in groups

Question 20

Scanlon plan

Answer 20

Gain sharing plan in which employees receive a bonus if the ratio of labour costs to the sales value of production is below a set standard

Question 21

Bonuses for group performance

Answer 21

Reward members of a group attaining a specific goal, usually measured in terms of physical output

Question 22

Team awards

Answer 22

Use a broad range of performance measures

Question 23

Profit sharing

Answer 23

compensation plan in which payments are a percentage of the org profit and do not become part of base salary

Question 24

Pros; profit sharing

Answer 24

• encourage broader view on the org
• encourage acting in the best interest of the org
• makes more cooperative
• reduces labour costs in difficult eco times

Question 25

Cons: Profit sharing

Answer 25

Only top managers see strong connection between what they do and profits
Negatively influence motivation if org makes losses

Question 26

Stock ownership programs

Answer 26

Stock options

EMployee stock ownership plans

Question 27

Stock option

Answer 27

Give employees the right to buy a certain number of shares of stock at a previously fixed price
- encourage employees to act in ways that will benefit the company
- underwater (no value) demotivates
Focus too much on stock prices lose focus on values

Question 28

Exercising the option

Answer 28

Purchasing the stock

Question 29

Employee stock ownership plans

Answer 29

Give employees certain tax and financial advantages when stock is granted to employees

Question 30

Balanced Scorecards

Answer 30

Combination of performance measures directed toward the company’s long and short term goals and is used as basis for awarding incentive pay

Question 31

A process that makes incentives work

Answer 31

Participate in decisions

Communication

Question 32

Short term incentives

Answer 32

Bonuses based on yearly profits, return on investment, or other measures related to org. goals

Question 33

Long-term incentives

Answer 33

Stck options and stock purchase plans

Question 34

Securities and Exchange Commission

Answer 34

Requires companies to more clearly report executive compensation levels and the company’s performance relative to that of competitors

Question 35

Dodd-Frank Wall Street Reform and Consumer Protection Act

Answer 35

Requires that public companies report the ratio of average compensation of all their employees to the CEO’s compensation