Bài giảng Human resource managemen - Chapter 8: Ecognizing employee contributions with pay - Ngô Quý Nhâm

ed by permission of United Feature Syndicate, Inc.
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Pay for Individual Performance:
Standard Hour Plans and Merit Pay
Standard Hour Plan Merit Pay   
• An incentive plan that pays 
workers extra for work done 
• A system of linking pay 
increases to ratings on a 
in less than a preset 
“standard time.”
• These plans are much like
performance scale.
• They make use of a merit 
increase grid         
piecework plans.
• They encourage employees 
  .
• The system gives the lowest 
paid best performers the 
to work as fast as they can, 
but not necessarily to care 
about quality or service
biggest pay increases.
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      .
Table 12.1: Sample Merit Increase Grid
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Figure 12.2: Ratings and Raises –
Underrewarding the Best
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Pay for Individual Performance:
Performance Bonuses
• Performance bonuses are not rolled into base             
pay.
• The employee must re earn them during each      ‐        
performance period.
S i h b i i d• omet mes t e  onus  s a one‐t me rewar .
• Bonuses may also be linked to objective 
performance measures, rather than subjective 
ratings.
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Pay for Individual Performance:
Sales Commissions
• Commissions – incentive pay calculated as a           
percentage of sales.
• Some salespeople earn a commission in           
addition to a base salary.
S i h i i l l l• tra g t comm ss on p an – some sa espeop e 
earn only commissions.
• Some salespeople earn no commissions at all, 
but a straight salary.
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Test Your Knowledge 
• John works twisting pretzels in a pretzel             
factory.  Pablo works on IT systems integration 
at a credit card company The best pay plans        .         
for these individuals would be ________ and 
respectively_______,  .
a) Merit pay, individual bonus
b) Sales commissions; merit pay     
c) Piecework, Merit pay
d) Individual bonus sales commissions
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  ,   
Pay for Group Performance
Gainsharing
Bonuses
Team Awards
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Pay for Group Performance:
Gainsharing
• Gainsharing – group • Gainsharing addresses    
incentive program that 
measures improvements 
the challenge of 
identifying appropriate 
performance measures
in productivity and 
effectiveness and 
distributes a portion of
for complex jobs.
• Gainsharing frees 
l t d t i       
each to employees.
emp oyees  o  e erm ne 
how to improve their 
own and their group’s 
performance.
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Organization Conditions Necessary for 
Gainsharing to Succeed
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.
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Organization Conditions Necessary for 
Gainsharing to Succeed (continued)
8. Commitment of all involved parties to the process               
of change and improvement.
9. Performance standard and calculation that 
employees understand and consider fair and that is 
closely related to managerial objectives.
10. Employees who value working in groups.
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Figure 12 3:  .  
Finding the Gain in 
a Scanlon Plan
Scanlon Plan – a 
gainsharing program 
in which employees 
receive a bonus if 
the ratio of labor       
costs to the sales 
value of production 
is below a set 
standard.
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Pay for Group Performance:
Group Bonuses and Team Awards
Group Bonuses Team Awards 
• Bonuses for group 
performance tend to be for 
• Similar to group bonuses, 
but are more likely to use a 
smaller work groups.
• These bonuses reward the 
members of a group for
broad range of performance 
measures:
– Cost savings         
attaining a specific goal, 
usually measured in terms 
– Successful completion of a 
project
M ti d dliof physical output. – ee ng  ea nes
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Figure 12.4: Types of Pay for 
Organizational Performance
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Pay for Organizational Performance:
Profit Sharing
• Profit sharing – incentive pay in which           
payments are a percentage of the 
organization’s profits and do not become part             
of the employees’ base salary.
• Profit sharing may encourage employees to           
think like owners.
E id i l h h fi h i• v ence  s not c ear w et er pro t s ar ng 
helps organizations perform better.
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Considerations for Setting Up a
Profit‐Sharing Plan
1. Get supervisors on board with the plan.           
2. Make sure employees understand how the plan 
works.
3. Identify the behaviors and results that contribute to 
greater profits.
4. Make sure managers understand that they 
contribute to the profit‐sharing goals by 
encouraging their employees and keeping them 
focused on their goals.
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Considerations for Setting Up a
Profit‐Sharing Plan (continued)
5. Consider linking rewards to the department’s or             
division’s performance, if profits can be assigned to 
the group.
6. Make the rewards big enough to matter.
7. Time the profit‐sharing payments for maximum 
effect.
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Pay for Organizational Performance:
Stock Ownership
Stock Options ESOPs 
• Rights to buy a certain 
number of shares of stock 
• Employee Stock Ownership 
Plan (ESOP) – an 
at a specified price.
• Traditionally, stock options 
have been granted to
arrangement in which the 
organization distributes 
shares of stock to all its       
executives.
• Some companies are trying 
employees by placing it in a 
trust.
to push eligibility for 
options further down the 
organization’s structure
• This is the most common 
form of employee 
ownership.
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  .
Figure 12.5: Number of ESOPs
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Test Your Knowledge
• For each of the following jobs, identify the best type 
of incentive (e.g., individual, group, organizational).  
Be prepared to explain your answer.
f k1. Director o  Mar eting, Pepsi
2. Recruiter, Verizon
3 C hi CVS (d t ). as er,    rugs ore
4. Salesperson, Macy’s
a) Individual
b) Group
c) Organizational
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Balanced Scorecard
• Balanced scorecard – a • The four categories of a     
combination of 
performance measures 
balanced scorecard 
include:
directed toward the 
company’s long‐ and 
h t t l d
– financial
– customer
s or ‐ erm goa s an  
used as the basis for 
awarding incentive pay
– internal
– learning and growth
    .
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Table 12.2: Sample Balanced Scorecard for 
a Production Manager
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Processes That Make Incentives Work
CommunicationParticipation in Decisions
• Employee participation in 
pay‐related decisions can be
• Communication 
demonstrates to employees 
th t th l i f i       
part of a general move 
toward employee 
t
a   e pay p an  s  a r.
• When employees 
understand the 
i f hempowermen .
• Employee participation can 
contribute to the success of 
requ rements o  t e 
incentive pay plan, the plan 
is more likely to influence 
their behavior as desired
an incentive plan.
      .
• Important when the pay 
plan is being changed.
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Incentive Pay for Executives
Short‐Term Incentives Long‐Term Incentives 
• Bonuses based on the year’s 
profits, return on 
• Include stock options and 
stock purchase plans.
investment, or other 
measures related to the 
organization’s goals
• Rationale for these long‐
term incentives is that 
executives will want to do  .
• Actual payment of the 
bonus may be delayed to 
what is best for the 
organization because that 
gain tax advantages. will cause the value of their 
stock to grow.
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Table 12.3: Balanced Scorecard for 
Whirlpool Executives
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Incentive Pay for Executives:
Ethical Issues
• Incentive pay for executives lays the           
groundwork for significant ethical issues.
• When an organization links pay to its stock               
performance, executives need the courage to 
be honest about their company’s performance           
even when dishonesty or clever shading of the 
truth offers the tempting potential for large             
earnings.
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Summary
• Incentive pay is pay tied to individual performance, 
profits, or other measures of success. Organizations 
select forms of incentive pay to energize, direct, or 
control employees’ behavior    .
• To be effective, incentive pay should encourage the 
kinds of behaviors most needed, and employees             
must believe they have the ability to meet the 
performance standards.
• Employees must value the rewards, have the 
resources they need to meet the standards, and 
believe the pay plan is fair
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          .
Summary (continued)
• Organizations may recognize individual performance         
through such incentives as piecework rates, standard 
hour plans, merit pay, sales commissions, and 
bonuses for meeting individual performance 
objectives.
• Common group incentives include gainsharing, 
bonuses, and team awards.
f l b• Incentives  or meeting organizationa  o jectives 
include profit sharing and stock ownership.
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Summary (continued)
• A balanced scorecard can be used as the basis for                   
awarding incentive pay. It also helps employees to 
understand and care about the organization’s goals.
• The mix of pay programs is intended to balance the 
disadvantages of one type of incentive with the 
advantages of another type.
• Communication and participation in decisions can 
b l ’ f l h hcontri ute to emp oyees   ee ings t at t e 
organization’s incentive pay plans are fair.
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Summary (continued)
• Communication is especially important when the           
organization is changing its pay plan.
• Because executives have such a strong influence over 
the organization’s performance, incentive pay for 
them receives special attention. Performance 
measures should encourage behavior that is in the 
organization’s best interests, including ethical 
behavior.
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