(c) 2007 by Prentice Hall 11-1
Rewarding PerformanceRewarding Performance
Chapter 11Chapter 11
(c) 2007 by Prentice Hall 11-2
• Recognize individual & group contributions to the firm by
rewarding high performers
• Dev...
(c) 2007 by Prentice Hall 11-3
Pay-for-performance:Pay-for-performance:
The ChallengesThe Challenges
• Pay-for-performance...
(c) 2007 by Prentice Hall 11-4
• Negative effects on the spirit ofNegative effects on the spirit of
cooperationcooperation...
(c) 2007 by Prentice Hall 11-5
• Link pay & performance appropriatelyLink pay & performance appropriately
– Piece-rate sys...
(c) 2007 by Prentice Hall 11-6
• Promote the belief that performancePromote the belief that performance
makes a difference...
(c) 2007 by Prentice Hall 11-7
Types of Pay-for-performanceTypes of Pay-for-performance
PlansPlans
• Individual-based plan...
(c) 2007 by Prentice Hall 11-8
Conditions under which individual-basedConditions under which individual-based
plans are mo...
(c) 2007 by Prentice Hall 11-9
Team-based PlansTeam-based Plans
• Advantages andAdvantages and
disadvantages to team-disad...
(c) 2007 by Prentice Hall 11-10
Conditions under which team-basedConditions under which team-based
plans are most likely t...
(c) 2007 by Prentice Hall 11-11
• GainsharingGainsharing
• Conditions favoring plantwideConditions favoring plantwide
plan...
(c) 2007 by Prentice Hall 11-12
Corporatewide PlansCorporatewide Plans
• Profit sharingProfit sharing
• Employee StockEmpl...
(c) 2007 by Prentice Hall 11-13
Conditions favoring corporatewideConditions favoring corporatewide
plansplans
• Firm sizeF...
(c) 2007 by Prentice Hall 11-14
For Executives & SalespeopleFor Executives & Salespeople
• Salary & short-term incentivesS...
(c) 2007 by Prentice Hall 11-15
• Do you think it is ethical for a company toDo you think it is ethical for a company to
g...
(c) 2007 by Prentice Hall 11-16
Rewarding Excellence inRewarding Excellence in
Customer ServiceCustomer Service
Customer s...
(c) 2007 by Prentice Hall 11-17
• Pay-for-performance: The Challenges
• Meeting the challenges of pay-for-
performance sys...
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Managing Human Resources, Luis Gomez Mejia, David Balkin,Ch1, Managing Human Resources 6e Luis Gomez Mejia David Balkin, Ch11, Vahdi Boydaş, Mensur Boydaş

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Managing Human Resources, Luis Gomez Mejia, David Balkin,Ch1, Managing Human Resources 6e Luis Gomez Mejia David Balkin, Ch8, Vahdi Boydaş, Mensur Boydaş

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Managing Human Resources, Luis Gomez Mejia, David Balkin,Ch1, Managing Human Resources 6e Luis Gomez Mejia David Balkin, Ch11, Vahdi Boydaş, Mensur Boydaş

  1. 1. (c) 2007 by Prentice Hall 11-1 Rewarding PerformanceRewarding Performance Chapter 11Chapter 11
  2. 2. (c) 2007 by Prentice Hall 11-2 • Recognize individual & group contributions to the firm by rewarding high performers • Develop pay-for-performance plans that are appropriate for different levels in an organization • Identify the potential benefits & drawbacks of different pay-for- performance systems & choose the plan that is most appropriate for a particular firm • Design an executive compensation package that motivates executives to make decisions that are in the firm’s best interests • Weigh the pros & cons of different compensation methods for sales personnel & create an incentive plan that is consistent with the firm’s marketing strategy • Design an incentive system to reward excellence in customer service Chapter 11 OverviewChapter 11 Overview
  3. 3. (c) 2007 by Prentice Hall 11-3 Pay-for-performance:Pay-for-performance: The ChallengesThe Challenges • Pay-for-performance orPay-for-performance or Incentive SystemsIncentive Systems • The “The “do only what you get paiddo only what you get paid forfor” syndrome” syndrome
  4. 4. (c) 2007 by Prentice Hall 11-4 • Negative effects on the spirit ofNegative effects on the spirit of cooperationcooperation • Lack of controlLack of control • Difficulties in measuring performanceDifficulties in measuring performance • Psychological contractsPsychological contracts • The credibility gapThe credibility gap • Job dissatisfaction & stressJob dissatisfaction & stress • Potential reduction of intrinsic drivesPotential reduction of intrinsic drives Pay-for-performance:Pay-for-performance: The ChallengesThe Challenges
  5. 5. (c) 2007 by Prentice Hall 11-5 • Link pay & performance appropriatelyLink pay & performance appropriately – Piece-rate systemPiece-rate system –– A compensation systemA compensation system in which employees are paid per unitin which employees are paid per unit produced.produced. • Use pay-for-performance as part of aUse pay-for-performance as part of a broader HRM systembroader HRM system • Build employee trustBuild employee trust Meeting the Challenges ofMeeting the Challenges of Pay-for-performance SystemsPay-for-performance Systems
  6. 6. (c) 2007 by Prentice Hall 11-6 • Promote the belief that performancePromote the belief that performance makes a differencemakes a difference • Use multiple layers of rewardsUse multiple layers of rewards • Increase employee involvementIncrease employee involvement • Use motivation & nonfinancial incentivesUse motivation & nonfinancial incentives Meeting the Challenges ofMeeting the Challenges of Pay-for-performance SystemsPay-for-performance Systems
  7. 7. (c) 2007 by Prentice Hall 11-7 Types of Pay-for-performanceTypes of Pay-for-performance PlansPlans • Individual-based plansIndividual-based plans –Merit payMerit pay –Bonus programsBonus programs –Lump-sum paymentsLump-sum payments • Advantages & disadvantages ofAdvantages & disadvantages of individual-based pay-for-individual-based pay-for- performance plansperformance plans
  8. 8. (c) 2007 by Prentice Hall 11-8 Conditions under which individual-basedConditions under which individual-based plans are most likely to succeed-plans are most likely to succeed- • When the contributions of individual employeesWhen the contributions of individual employees can be accurately isolatedcan be accurately isolated • When the job demands autonomyWhen the job demands autonomy • When cooperation is less critical to successfulWhen cooperation is less critical to successful performance or when competition is to beperformance or when competition is to be encouragedencouraged Types of Pay-for-performanceTypes of Pay-for-performance PlansPlans
  9. 9. (c) 2007 by Prentice Hall 11-9 Team-based PlansTeam-based Plans • Advantages andAdvantages and disadvantages to team-disadvantages to team- based pay-for-performancebased pay-for-performance plansplans
  10. 10. (c) 2007 by Prentice Hall 11-10 Conditions under which team-basedConditions under which team-based plans are most likely to succeed-plans are most likely to succeed- • When work tasks are so intertwined it isWhen work tasks are so intertwined it is difficult to single out who did whatdifficult to single out who did what • When the firm’s organization facilitates theWhen the firm’s organization facilitates the implementation of team-based incentivesimplementation of team-based incentives • When the objective is to fosterWhen the objective is to foster entrepreneurship in self-managed workentrepreneurship in self-managed work groupsgroups Team-based PlansTeam-based Plans
  11. 11. (c) 2007 by Prentice Hall 11-11 • GainsharingGainsharing • Conditions favoring plantwideConditions favoring plantwide plansplans – Firm sizeFirm size – TechnologyTechnology – Historical performanceHistorical performance – Corporate cultureCorporate culture – Stability of the product marketStability of the product market Plantwide PlansPlantwide Plans
  12. 12. (c) 2007 by Prentice Hall 11-12 Corporatewide PlansCorporatewide Plans • Profit sharingProfit sharing • Employee StockEmployee Stock Ownership PlanOwnership Plan (ESOP)(ESOP) • Advantages andAdvantages and disadvantages ofdisadvantages of corporatewide pay-corporatewide pay- for-performancefor-performance plansplans
  13. 13. (c) 2007 by Prentice Hall 11-13 Conditions favoring corporatewideConditions favoring corporatewide plansplans • Firm sizeFirm size • Interdependence of different parts ofInterdependence of different parts of the businessthe business • Market conditionsMarket conditions • The presence of other incentivesThe presence of other incentives Corporatewide PlansCorporatewide Plans
  14. 14. (c) 2007 by Prentice Hall 11-14 For Executives & SalespeopleFor Executives & Salespeople • Salary & short-term incentivesSalary & short-term incentives • Long-term incentivesLong-term incentives • PerksPerks • Directors & shareholders as equityDirectors & shareholders as equity partnerspartners • SalespeopleSalespeople Designing Pay-for-performanceDesigning Pay-for-performance PlansPlans
  15. 15. (c) 2007 by Prentice Hall 11-15 • Do you think it is ethical for a company toDo you think it is ethical for a company to give its CEO and its other top executivesgive its CEO and its other top executives multimillion-dollar pay packages that aremultimillion-dollar pay packages that are not closely tied to the company’snot closely tied to the company’s performance?performance? A Question of Ethics -A Question of Ethics -
  16. 16. (c) 2007 by Prentice Hall 11-16 Rewarding Excellence inRewarding Excellence in Customer ServiceCustomer Service Customer service rewards may beCustomer service rewards may be individual-, team-, or plant-basedindividual-, team-, or plant-based
  17. 17. (c) 2007 by Prentice Hall 11-17 • Pay-for-performance: The Challenges • Meeting the challenges of pay-for- performance systems • Types of pay-for-performance • Designing pay-for-performance plans for executives & salespeople Summary and ConclusionsSummary and Conclusions

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