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FONTS

Pay-for-Performance And Financial Incentives

Anan Yin: 10121836

Bolette Wredstroem: 10119024

Dea Svanholm: 10119165

Hui Ping Tay: 10120973

Kathryn Hajjar: 10017537

Vladimir Bogdashkin: 06043650

Incentive for Senior and Executive Managers

Short-Term Incentives

Annual bonus

Eligibility

*Key position - measuring impact on profit

*Salary-level - specific cut-off

*Salary grade - grade cut- off

How much to pay out (fund size)

*Non-Deductible formula

*Deductible formula

Determining Individual rewards

Long-Term Incentives

(Capital Assumption Programs)

1. Stock options

2. Plans using Share "Units"

*Performance share unit plan

*Restricted share unit plan

*Deferred share unit plan

Where is the Balance?

Ken Gibson

Senior Vice President of Vision Link Advisory Group

Incentives for Sales People

Incentive for Operations Employees

Guaranteed piecework

Straight piecework

Payment for each piece produced or processed in a factory or shop.

The minimum hourly wage

The differential piece-rated

An hour incentive for each piece produced.

Piecework

Basic hourly rate

The number of items processed by each individual worker in a unit of time.

Extra percentage of his or her base rates for production exceeding the standard per hour or per day.

Salary

PROS:

  • Prospecting or servicing Accounts
  • Loyalty
  • Predictable sales expense
  • Income known
  • Switches and reassigns are easier

CONS:

  • Not dependent on results
  • Tied to seniority

Advantages and Disadvantages

+Easy to calculate

+Easy understood by employees

-Unsavory reputation among many employees

-Stated monetary

-Resistance when the production standards are changed.

COMMISSION

CONS:

  • Wide variance in pay
  • Highest turnover
  • Neglect other duties

Workforce diversity

Traditionalists (1982-1945):

  • Flexible schedules
  • Health and fitness reward
  • Entertainment reward: computer and cell phones

Boomers (1946-1964):

  • Recognition and being appreciated
  • Travel reward
  • Luxury and health-related award

Generation X (1965-1980):

  • Gadgets and high-tech reward that are state-of-the-art technology.
  • Work-life balance: extra vacation
  • Flexibility

Generation Y (1981-2000)=millennium generation:

  • Relation enhancers

PROS:

  • High performing salespeople through incentives
  • Costs proportionate to sales
  • Easy to understand

COMBINATIONS

PROS:

  • Earnings floor
  • Companies activities are dictated
  • Commission provides for superior performance

CONS:

  • Can be complicated
  • Trading away incentive value

Harvard Business Review

EXAMPLE

Salary, Commissions, Combinations, Multi-tiered

AGENDA

1. Introduction (Dea)

2. Incentives for operation employees (Anan)

3. Incentives for senior managers and executives (Bolette)

4. Incentives for sales people (Vladimir)

5. Incentives for other managers and professionals (Kathryn)

6. Employee recognition programs (Hui Ping)

7. Summary (Hui Ping)

8. Quiz (Kathryn)

INTRODUCTION

Incentives for Other Managers and Professionals

Type of Incentives

Concern: employees only work to meet minimum requirements

Two basic forms:

Fixed pay

Variable pay

  • Individual or group incentive programs
  • Informal incentives
  • Organization-wide incentive plans
  • Most or all employees receive a share of the profit (ESOP or gain-sharing plan)

Incentives for other Managers

Preconditions: measurable and in line of sight

Merit pay: salary increase awarded to an employee based on his or her individual performance

  • must be tied to performance in order to keep employees motivated
  • merit derived from employees’ performance appraisals
  • typically awarded as a higher base salary at a designated time of the year

EXAMPLE

A Common Misconception:

Bonuses vs Merit Pay

NHL players rewarded financially for achieving certain statistics (# of goals, assists, +/- rating, etc)

These achievements can lead to merit pay in the players’ next contract, in the form of a raise

Incentives for Professional Employees

  • Personal achievement and recognition from colleagues are more valued than monetary incentives
  • Longer time cycle of these incentives reflect the time spent on the nature of their work
  • Focus of professionals is on the highest quality performance they can achieve

Summary

Employee Recognition Programs

Advantages

*Praise employee for their achievement and effort

throughout one’s career

*Emerging as a critical component of incentive plans

Cost effective

-Certificate, personalized gift packs, logo merchandises such as t-shirt or coffee mug

Improves attitudes, workload and productivity

Communication tool

- sends clear message to employees.

Example:

Shout! Staff Recognition Programme

Different individual is motivated by different things

Tailor incentive program to different categories of employees

Emerging emphasis on employee recognition

Disadvantage

Managers may feel vulnerable

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