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Pay-for-Performance And Financial Incentives

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by

Bolette Wredstroem

on 19 November 2013

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Transcript of Pay-for-Performance And Financial Incentives


Pay-for-Performance And Financial Incentives
FONTS
Incentive for Senior and Executive Managers
Incentives for Sales People
INTRODUCTION
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)


Two basic forms:
Fixed pay
Variable pay

Type of Incentives
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)

Concern
: employees only work to meet minimum requirements
Short-Term Incentives
Annual bonus
Long-Term Incentives
Where is the Balance?
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

Ken Gibson
Senior Vice President of Vision Link Advisory Group
Incentives for Other Managers and Professionals
Summary
Employee Recognition Programs
Salary, Commissions, Combinations, Multi-tiered

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
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
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.

COMMISSION
PROS:
High performing salespeople through incentives
Costs proportionate to sales
Easy to understand

CONS:
Wide variance in pay
Highest turnover
Neglect other duties

Incentives for other Managers
Incentives for Professional Employees
EXAMPLE
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

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

Focus of professionals is on the highest quality performance they can achieve

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
Disadvantage
Managers may feel vulnerable
A Common Misconception:
Bonuses vs Merit Pay
Piecework
The number of items processed by each individual worker in a unit of time
.
Straight piecework
Payment for each piece produced or processed in a factory or shop.
Guaranteed piecework
The minimum hourly wage



The differential piece-rated
Extra percentage of his or her base rates for production exceeding the standard per hour or per day.
Advantages and Disadvantages
Different individual is motivated by different things
Tailor incentive program to different categories of employees
Emerging emphasis on employee recognition

1. Stock options
2. Plans using Share "Units"
*Performance share unit plan
*Restricted share unit plan
*Deferred share unit plan
(Capital Assumption Programs)
Incentive for Operations Employees
+Easy to calculate
+Easy understood by employees



-Unsavory reputation among many employees
-Stated monetary
-Resistance when the production standards are changed.

An hour incentive for each piece produced.
Basic hourly rate
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
Shout! Staff Recognition Programme
Example:
Anan Yin: 10121836
Bolette Wredstroem: 10119024
Dea Svanholm: 10119165
Hui Ping Tay: 10120973
Kathryn Hajjar: 10017537
Vladimir Bogdashkin: 06043650

Preconditions:
measurable and in line of sight
Full transcript