CHAPTERS 11Chapter ObjectivesMotivation, Performance, and PayIndividual DifferencesNeeds and MotivationSlide 6Instrumentality and RewardsPay-for-performance: The ChallengesMeeting the Challenges of Pay-for-performance SystemsSlide 10Employee Preferences for Non-cash IncentivesTypes of Pay-for-performance PlansTypes of Incentive PlansTypes of Pay-for-performance Plans Individual-based plansTypes of Pay-for-performance Plans Individual-Based PlansTypes of Pay-for-performance Plans Sales Compensation ProgramsSlide 17Types of Pay-for-performance Plans Team-based PlansSlide 19Advantages and DisadvantagesTypes of Pay-for-performance Plans Plant-wide PlansSlide 22Types of Pay-for-performance Plans Corporate-wide PlansTypes of Pay-for-performance Plans Corporate-wide PlansTypes of Pay-for-performance Plans Corporate-wide PlansDesigning Pay-for-performance Plans Managers and ExecutivesDesigning Pay-for-performance Plans Managers and ExecutivesSlide 28Slide 29Key Strategic Pay QuestionsWhy Incentive Plans FailImplementing Effective Incentive PlansHR Activities that Build Commitment1-1CHAPTERS 11CHAPTERS 11Rewarding Performance1-2Chapter ObjectivesChapter ObjectivesDevelop pay-for-performance plans Develop pay-for-performance plans that are appropriate for different that are appropriate for different levels in an organizationlevels in an organizationIdentify the potential benefits and Identify the potential benefits and drawbacks of different pay-for-drawbacks of different pay-for-performance systems and choose the performance systems and choose the plan that is most appropriate for a plan that is most appropriate for a particular firmparticular firmDesign an executive compensation Design an executive compensation package that motivates executives to package that motivates executives to make decisions that are in the firm’s make decisions that are in the firm’s best interestsbest interestsWeigh the pros and cons of different Weigh the pros and cons of different compensation methods for sales compensation methods for sales personnel and create an incentive personnel and create an incentive plan that is consistent with the firm’s plan that is consistent with the firm’s marketing strategymarketing strategyReview Key TermsEmployee stock ownership plans (ESOPs)GainsharingIncentivesPay-for-performanceProfit-sharing1-3Motivation, Performance, and PayMotivation, Performance, and PayIncentivesFinancial rewards paid to workers whose production exceeds a predetermined standard1-4Individual DifferencesIndividual DifferencesLaw of Individual DifferencesThe fact that people differ in personality, abilities, values, and needs.Different people react to different incentives in different ways.Managers should be aware of employee needs and fine-tune the incentives offered to meets their needs.Money is not the only motivator.1-5Needs and MotivationNeeds and MotivationAbraham Maslow’s Hierarchy of NeedsFive increasingly higher-level needs:physiological (food, water, sex)security (a safe environment)social (relationships with others)self-esteem (a sense of personal worth)self-actualization (becoming the desired self)Lower level needs must be satisfied before higher level needs can be addressed or become of interest to the individual.1-6Needs and MotivationNeeds and MotivationHerzberg’s Hygiene–Motivator theory Hygienes (extrinsic job factors)Inadequate working conditions, salary, and incentive pay can cause dissatisfaction and prevent satisfaction.Motivators (intrinsic job factors)Job enrichment (challenging job, feedback and recognition) addresses higher-level (achievement, self-actualization) needs.The best way to motivate someone is to organize the job so that doing it helps satisfy the person’s higher-level needs.1-7Instrumentality and RewardsInstrumentality and RewardsVroom’s Expectancy TheoryA person’s motivation to exert some level of effort is a function of three things: Expectancy: that effort will lead to performance.Instrumentality: the connection between performance and the appropriate reward.Valence: the value the person places on the reward.Motivation = E x I x VIf any factor (E, I, or V) is zero, then there is no motivation to work toward the reward.Employee confidence building and training, accurate appraisals, and knowledge of workers’ desired rewards can increase employee motivation.1-8Pay-for-performance: The ChallengesPay-for-performance: The ChallengesThe “The “do only what you get paid fordo only what you get paid for” syndrome” syndromeUnethical BehaviorsUnethical BehaviorsNegative effects on the spirit of cooperationNegative effects on the spirit of cooperationLack of controlLack of controlDifficulties in measuring performanceDifficulties in measuring performancePsychological contractsPsychological contractsThe credibility gapThe credibility gapJob dissatisfaction and stressJob dissatisfaction and stressPotential reduction of intrinsic drivesPotential reduction of intrinsic drives1-9Meeting the Challenges of Pay-for-performance Meeting the Challenges of Pay-for-performance SystemsSystemsLink pay and performance appropriatelyLink pay and performance appropriatelyStraight piecework: A fixed sum is paid for each unit the worker produces under an established piece rate standard. An incentive may be paid for exceeding the piece rate standard.Standard hour plan: The worker gets a premium equal to the percent by which his or her work performance exceeds the established standard.Use pay-for-performance as part of a broader Use pay-for-performance as part of a broader HRM systemHRM systemBuild employee trustBuild employee trust1-10Meeting the Challenges of Pay-for-performance Meeting the Challenges of Pay-for-performance SystemsSystemsPromote the belief that performance makes a Promote the belief that performance makes a differencedifferenceUse multiple layers of rewardsUse multiple layers of rewardsIncrease employee involvementIncrease employee involvementStress the Importance of Acting EthicallyStress the Importance of Acting EthicallyUse motivation and non-financial incentivesUse motivation and non-financial incentives1-11Employee Preferences for Non-cash Employee Preferences for Non-cash IncentivesIncentives1-12Types of Pay-for-performance PlansTypes of Pay-for-performance Plans1-13Types