Rewarding performance and administering benefits Flashcards
What is the definition of compensation?
Total amount of monetary and non-monetary pay provided to an employee in return for work performed as required
What is the meaning of pay-for-performance systems?
Also called incentive systems, reward employee performance on 3 assumptions:
- Individual employees and teams differ in how much they contribute to the firm
- Firm’s overall performance depends to a large degree on the performance of individuals
- To attract, retain and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance
What is the meaning of the “do only what you get paid for” syndrome?
In order to be objective, pay-for-performance systems rely on indicator of performance. However, the more closely pay is tied to specific performance indicators, the more people pay attention on those indicators and neglect other important job components that are difficult to be measured
What unethical behaviour occurs in pay-for-performance systems?
The evaluation and score keeping on employees may lead them to deceive, cut corners, take credit where it is not due and hide information
What is a psychological contract?
In the context of pay-for-performance systems, the psychological contract is between the employee and the firm and represents a set of expectations based on prior experience
What is a credibility gap?
It is when employees do not believe that pay-for-performance programs reward performance or are fair
Do pay-for-performance systems influence job satisfaction?
Yes, the more performance is tied to pay, the more job dissatisfaction is caused and employees become less happy
What are the types of pay-for-performance plans?
There are 4 types of pay-for-performance plans:
- Individual-based plans
- Team-based plans
- Plant-wide based plans
- Corporate-wide plans
In the context of individual-based plans, what kinds of compensation is there?
There is: merit pay (consists of an increase in base pay normally given once a year), individual bonus programs (similar to merit pay but only happen on a one-time basis) and awards (which are like bonuses but tend to be given in the form of a tangible prize)
What are the advantages and disadvantages of individual-based plans?
Advantages: performance that is rewarded is likely to be repeated, individuals are goal oriented and financial incentives can shape an those goals, assessing the performance of each employee helps the firm achieve individual equity
Disadvantages: tying pay to goals may promote single-mindedness, credibility gap, may work against achieving quality goals, may promote inflexibility in some cases
What are team-based pay-for-performance plans?
Team-based plans normally reward all team members equally based on group outcomes
What are the advantages and disadvantages of team-based plans?
Advantages: they foster group cohesiveness, they aid performance measurement
Disadvantages: possible lack of fit between individual’s values, free-riding effect (some individuals may put more effort in than others), social pressure to limit performance
What are plant-wide plans?
They reward all workers in a plant or unit based on the performance of the entire plant or unit
What are the advantages and disadvantages to plant-wide plans?
Advantages: they promote active employee input and improve the production process, they can also increase employee cooperation
Disadvantages: protection of low performers, management-labor conflict
What are corporation-wide plans?
Rewards employees based on the corporation’s performance
