12 Pay for Performance
and Financial Incentives
Human Resource
Management
14th Edition, Global
Edition
4-
Gary Dessler
Copyright © 2015 Pearson
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Learning Objectives
1. Explain how you would apply four
motivation theories in formulating an
incentive plan.
2. Discuss the main incentives for
individual employees.
3. Discuss the pros and
4- cons of
commissions versus straight pay for
salespeople.
4. Describe the main incentives for
managers and executives.
5. Name and describe the most popular
organization-wide incentive plans.
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Explain how you would apply
four motivation theories in
4-
formulating an incentive plan.
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Money and Motivation
Strategy
4-
Performance
Incentive Pay
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Motivation and Incentives
Herzberg’s
Two-Factory Hygiene
4-
Theory
Deciand
demotivators Motivators
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Motivation and Incentives
• Expectancy
4-
Theory, Victor
Vroom
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Motivation and Incentives
o Behavior modification
o Incentive pay terminology
4-
o Employee incentives and the law
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Review
• Money and motivation
• Motivation theories
• Incentives 4-
• Terminology
• The law
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Discuss the main
incentives for individual
employees.
4-
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Individual Employee Incentive and
Recognition Programs
• Piecework plans • Merit pay as an
o Straight 4- incentive
piecework o Differential pay
o Standard hour increases
plans o Merit pay options
o Pros and cons
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Individual Employee Incentive and
Recognition Programs
• Incentives for professional employees
• Nonfinancial and recognition-based
4-
awards
o Incentives managers can use
• Online and apps supported awards
• Job design
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IMPROVING PERFORMANCE:HR Tools for
Line Managers and Entrepreneurs
For motivation:
1. Employees need a doable goal and agree
with it
4-
2. Recognition either alone or in combination
with financial rewards
3. Social recognition (such as compliments)
as positive reinforcement on a day-to-day
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IMPROVING PERFORMANCE:
HR as a Profit Center
Research:
• Performance was compared in stores using
and not using financial and nonfinancial
incentives
4-
• Measured gross profitability, drive-through
time, and employee turnover
• Financial and nonfinancial incentives
improved employee and store performance
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Review
• Piecework
• Merit pay
• Incentives for professionals
4-
• Nonfinancial rewards
• Online
• Job design
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Discuss the pros and
cons of commissions
versus straight
4-
pay for
salespeople.
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Incentives for Salespeople
• Salary plan
• Commission plan
• Combination plan 4-
• Maximizing sales force results
• How effective are your
incentives?
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Improving Performance Through HRIS:
How Effective Are Your Incentives?
• With the aid of VUE Compensation
Management® the sales manager can
4-
analyze compensation and performance
data, conduct “what-if” analyses and
reports, and conduct trend analyses.
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Review
• Types of sales
incentives
• Maximizing results
4-
• Effectiveness
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Describe the main
incentives for managers
4-
and executives.
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Incentives for Managers
and Executives
• Strategy and the executive’s long-term
and total rewards package
• Sarbanes-Oxley Act
4-
• Short-term incentives, annual bonus
o Eligibility
o Fund size
o Individual performance
o Formula
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Incentives for Managers
and Executives
• Strategic long-term incentives
o Stock options
4-
o Stock option problems
o Other stock plans
o Ethics and incentives
• Other executive incentives
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IMPROVING PERFORMANCE:
HR Practices Around the Globe
• Chinese companies studied to determine
if new incentive plans affected company
performance
• Researchers compared4-
performance of
those with management stock-option
plans and a control group without plans
• Differences found between private and
government controlled companies
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Review
• Strategy and long-term incentives
• Federal law
• Short-term incentives
4-
• Strategic long-term incentives
• Other incentives
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Name and describe the
most popular
organization-wide
4-
incentive plans.
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Team and Organization-Wide
Incentive Plans
• Designing team incentives
o Engineered standards
4-
o Pros and cons
• HR inequities that undercut team
incentives
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Team and Organization-Wide
Incentive Plans
• Profit-sharing plans
• Scanlon plans
4-
• Other gain-sharing plans
• At-risk pay plans
• Employee stock ownership plans
12-26
Incentive Plans in Practice:
Nucor
• The production incentive plan at
Nucor steel also has a:
o Department manager incentive plan
o Professional and4- clerical bonus
plan
o Senior officer incentive plan
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Review
• Team incentives
• Inequities
• Profit-sharing
4-
• Scanlon and gain-sharing
• At-risk
• ESOPs
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Improving Performance
at The Hotel Paris
• Do you agree with the measurable
criteria Lisa set for the new incentive
plan?
4-
• Given what you know about the Hotel
Paris’s strategic goals, list specific
behaviors you would incentivize for
front-desk clerks, hotel managers,
valets and housekeepers.
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Hotel Paris
Strategy
Chapter 12
4-
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