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Compensation Management: 9: Pay - For - Performance: The Evidence

The document discusses the relationship between motivation theories and compensation, emphasizing the importance of pay-for-performance programs. It outlines factors influencing employee performance and the significance of measuring performance in relation to compensation strategies. Additionally, it highlights various motivation theories and components of a total reward system that organizations should consider to effectively motivate employees.

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poscablolester
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© © All Rights Reserved
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Available Formats
Download as PDF, TXT or read online on Scribd

Topics covered

  • Merit Pay,
  • Profit Sharing,
  • Reinforcement Theories,
  • Expectancy Theory,
  • Lump Sum Bonuses,
  • Skill Development,
  • Job Importance,
  • Compensation Design Issues,
  • Incentive Plans,
  • Herzberg's Theory
74 views30 pages

Compensation Management: 9: Pay - For - Performance: The Evidence

The document discusses the relationship between motivation theories and compensation, emphasizing the importance of pay-for-performance programs. It outlines factors influencing employee performance and the significance of measuring performance in relation to compensation strategies. Additionally, it highlights various motivation theories and components of a total reward system that organizations should consider to effectively motivate employees.

Uploaded by

poscablolester
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Topics covered

  • Merit Pay,
  • Profit Sharing,
  • Reinforcement Theories,
  • Expectancy Theory,
  • Lump Sum Bonuses,
  • Skill Development,
  • Job Importance,
  • Compensation Design Issues,
  • Incentive Plans,
  • Herzberg's Theory

COMPENSATION

MANAGEMENT
Brief Notes for Students
HRSB 353

Chapter 9: Pay-for-
Performance:
The Evidence
LEARNING OBJECTIVES

1. Discuss the relation of the content,


process, and reinforcement theories
of motivation to compensation.
2. Discuss the important design issues
in creating a pay for performance
program.
3. Discuss why a pay for performance
program might not work in an
organization.
Employee performance depends on
three general factors:

Employee performance = f (S,K,M)


where:
S = Skill and ability to perform task
K = Knowledge of facts, rules,
principles, and procedures
M = Motivation to perform
Performance Measurement Relates to
Compensation Strategy
Variability in Organizational Performance

Low Variability: few High Variability: regular


swings in overall and large swings in overall
corporate performance corporate performance.

Variability and Unstable, Cell A – provide wide Cell B – provide wide


ease of unclear, and range of rewards range of rewards
measurement changing beyond just money. beyond just money.
in individual objectives Include significant Emphasize base pay
performance incentive component. with low incentive
portion.

Stable and Cell C – emphasize Cell D – emphasize


easily monetary rewards with monetary rewards. Large
measured large incentive base pay with low
component. incentive portion.
What Behaviors Do Employers
Care About?
How do we get good employment
prospects to join our company?
How do we retain these good
employees once they join?
How do we get employees to develop
s kills for current and future jobs?
How do we get employees to perform
well on their current job?
What Motivates Employees?
In the simplest sense, motivation involves
three elements:
1. what is important to a person, and
2. offering it in exchange for some
3. desired behavior
What Motivation Theories Say
 Content Theories (what is important to a
person)
 Maslow’s Need Hierarchy
 Herzberg’s 2-Factor Theory
 Process Theories (the nature of the exchange)
 Expectancy Theory
 Equity Theory
 Agency Theory
 Reinforcement Theories (desired behavior)
 Goal Setting
 Reinforcement
Motivation Theories (Content
Theories)
Motivation Theories (Content
Theories)
Motivation Theories (Process
Theories)
Motivation Theories (Process
Theories)
Motivation Theories (Process
Theories)
Motivation Theories (Reinforcement
Theories)
Motivation Theories (Reinforcement
Theories)
Components of a Total Reward System
1. Compensation Wages, Commissions and Bonuses
2.. Benefits Vacations, Health Insurance
3. Social Interaction Friendly Workplace
4. Security Stable, Consistent Position and Rewards
5. Status / Recognition Respect, Prominence Due to Work
6. Work Variety Opportunity to Experience Different Things
7. Workload Right Amount of Work (not too much, not too little)
8. Work Importance Is Work Valued by Society
9. Authority / Control / Autonomy Ability to Influence Others; Control Own Destiny
10. Advancement Chance to Get Ahead
11. Feedback Receive Information Helping to Improve
Performance
12. Work Conditions Hazard Free
13. Development Opportunity Training to Learn New Knowledge / Skills / Abilities
Across the Board
Cost of Living
Base Pay
Increase

Lump Sum
Merit Pay
Bonus
Wage
Components
Individual Success
Incentive Sharing Plans

Risk
Gain Sharing Profit Sharing Sharing Plans
Wage Components
Wage Components (continued)
Wage Components (continued)
Wage Components (continued)

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