Pay for performance and financial incentive
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This document discusses pay for performance and financial incentive programs. It provides a brief history of such programs dating back to the 1800s and scientific management movement. It then outlines several major theories on motivation and incentives. The rest of the document describes different types of individual, professional, sales, and executive incentive programs, including piecework plans, standard hours plans, recognition awards, commission plans, annual bonuses, and stock options. It notes both the pros and potential cons of these various approaches.
Pay for performance and financial incentive
- 1. Pay for Performance and Financial Incentive BY: PAYAM NASEHI CGA120079
- 2. History Fredrick Taylor , 1800s , Midvale Steel Co. Used financial reward for workers who produce more than standard. Scientific Management Movement introduced by Taylor. Financial incentive to Boost Employee performance and enjoy Productivity gain Not successful , because worker reduce quality to achieve more quantity of goods / Managers did not satisfied in this way
- 3. Motivation and Incentives The Hierarchy of needs theory by Maslow Motivators theory by Herzberg Demotivators Theory by Edward Deci Expectancy theory by Victor Vroom
- 4. Individual employee incentive and recognition programs Piecework plans: employee will receive piece rate for each unit they produce. Straight piecework: strict proportionality between result and reward regardless of output. Standard Hours Plan: Worker will get a premium equal to the percent by which his performance exceed the standard. PRO: More goods will manufacture , Cons: Quality possibly decline
- 5. Incentive for Professional Employees Financial and recognition : Higher payment for expert who works on important projects for company Non Financial and Recognition based award: ( Recognition program) Employee recognition Gift certificates Special events Merchandise incentive Group/ Individual Travel
- 6. Incentive for salespeople Salary Plan : Hard to keep good salespeople Commission Plan : S.P. salary will fluctuate during recession and boom time. Combination Plan : Company give a floor for salespeople income , some managers believe that this method reduce salesperson's incentive for more activities.
- 7. Incentive for managers and executives Long term and total rewards package Short term incentive and annual bonus: Eligibility : annually received by employees with attention to their job/ title and position Fund size : There is not any rule for this part. Individual Performance: Mostly managers and executive will receive more than lower levels. ( Split- Award Plan: 2 kinds of bonus for managers , first: base on Individual effort , second: organization overall performance)
- 8. Incentive for managers and executives (cont.) Stock Option : The right to purchase specific number of shares of company at specific price and during specific period. Problems of Stock Option : 1- Manipulated by managers 2- Volatility of economic circumstances
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- 10. References Human Resource Management , Gary Dessler