Chapter 12 – Pay for performance and Financial

Chapter 12 – Pay For Performance And Financial Incentives :

Chapter 12 – Pay For Performance And Financial Incentives Presented By – Ashutosh Mishra Galgotias Busines School

Purpose of this chapter:

Purpose of this chapter How to use performance based incentives to motivate employees. Incentive for Individual employees Incentive for salespeople and professionals Organizationwide Incentive plan Incentive for Managers and executive

Money and Motivation : An Introduction:

Money and Motivation : An Introduction Financial Incentives by Frederick Taylor Systematic soldiering - The tendency of employees to work at the slowest pace possible and to produce at the minimum accepted level. Fair days work – Standards of output which employees should devise for each job based on careful scientific analysis. PUNEET

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Performance And Pay Emphasis is on competitiveness , productivity and delivering measurable bottom line results. Motivation And Incentives Performance linked pay (PRP) Frederick Herzberg Edward deci Victror vroom Behavior Modification Theory Incentive Pay Terminology Variable pay PUNEET

Individual Employee Incentive And Recognition Programs:

Individual Employee Incentive And Recognition Programs Piecework Plans Piece work Straight piecework – proportionality between result and rewards regardless of output Standard hours plans – premium equal to the percent… Pros and cons – promote rigidity and quality problems Merit Pay As An Incentive A salary increase Part of the employee’s base salary Merit Pay Options Incentives For Professional Employees Ayushi n Ankita

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Recognition based awards Recognition program Social Recognition program Performance feedback Combining both financial and non-financial incentives Employees recognition Gift certificate Special events Cash rewards Merchandise incentives E-mail /print communications Training programs Supporting incentives and recognition program with technology Ayushi n Ankita

Incentives For Salespeople:

Incentives For Salespeople Salary plans Commission plan Combination plan Sales awards Setting sales quotas Commission rate Lock in or not A checklist Strategic sales incentives Sunil

Organizationwide Incentive Plans:

Organizationwide Incentive Plans Profit sharing plans Cash plans Lincoln incentive system Differed profit sharing plans Employee stock ownership plans (ESOP) Scanlon plans – 1973 Philosophy of cooperation Identity Competence Involvement system Sharing of benefits formula Gainsharing plans At risk variable pay plans Rohit

Incentives of managers and executive:

Incentives of managers and executive Short term incentives: the annual bonus Eligibility – Job level, base salary, discretionary considerations Fund size – Nondeductible formula and deductable formula Individual awards – Outstanding managers should receive at least their target bonuses. And marginal one should receive at best below average award. Long term incentives Golden handcuffs Stock options Broad based stock options Other options - Stock appreciation rights ,Performance achievement plans ,Phantom stock plans MANISH

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Other executive incentives Golden parachutes Strategy and executive compensation Strategy-mapping-type process Decide what long term behavior executive must exhibit to achieve the firms strategic goals and put in place long term incentives to reward those behaviors - Define the strategic context for the executive compensation programs Based on your strategic aims shape each component of executive compensation packages All legal and regulatory requirements and tax effectiveness Process of reviewing and evaluating MANISH

Designing Effective Incentive Programs:

Designing Effective Incentive Programs Why incentive plan fails Performance pay can’t replace good management You get what you pay for Pay is not a motivator Rewards rapture relationship Rewards can have unintended consequences Rewards undermine intrinsic motivation Rewards succeed at securing one thing only: temporary compliance MANOJ

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How to implement effective incentive plans Ask: if performance levels inadequate due to motivation Link the incentives with your strategy Make sure that program is motivational Make the plan easy to understand Set effective standards View the standard as a contract with employees Get employees’ support for the plan Use good measurements system Use a complete set of standards Make the incentive plan part of comprehensive , commitment-oriented approach MANOJ

Considerations before Implementing a Plan:

Considerations before Implementing a Plan Review the current objectives and purpose of the equity plan Identify alternative rewards Develop a communication plan for how the effectiveness of the program will be measured Gather employees’ perspectives via surveys, focus groups, or internal research Gather external market information Determine the costs Develop recommendations for design change Create the communication plan

Features of Effective Plans :

Features of Effective Plans Top Management Support Communication Performance Management Appropriate Rewards