Term
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Definition
- Forms of pay linked to an employee's performance as an individual, group member, or organization member.
- Very influential
- To motivate employees to contribute to the contribute to the organizations success, the pay plans must be well designed. |
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Term
| What are the 6 principles of effective incentive plan? |
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Definition
1.) performance measures are linked to the organizations goals.
2.) Employees believe they can meet performance standards.
3.) The organization gives employees the resources they need to meet their goals.
4.) Employees value the rewards given
5.) Employees believe the reward system is fair.
6.) The pay plan takes into account that employees may ignore any goals that are not rewarded. |
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Term
| What are the three categories of pay incentive plans? |
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Definition
Pay for individual performance
Pay for group performance
Pay for organizational performance |
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Term
| What are types of pay for individual performance? |
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Definition
1.) Piecework rates
2.) Standard hour plans
3.) Merit Pay
4.) Individual bonuses
5.) Sales commission |
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Term
| What is a peicework rate? |
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Definition
| A wage based on the amount workers produce. |
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Term
| What is a straight peicework plan? |
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Definition
| Incentive pay in which the employer pays the same rate per peice, no matter how much the worker produces. |
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Term
| What is a standard hours plan? |
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Definition
| An incentive plan that pays workers extra for work done in less than a preset standard time. |
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Term
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Definition
| A system of linking pay increases to ratings on performance appraisals. Underrewards top performers. |
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Term
| What are performance bonuses? |
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Definition
- rewards for individual performance, but bonuses are not rolled into base pay.
- the employee must re-earn them during each performance period. |
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Term
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Definition
| Incentive pay calculated as a percentage of sales. |
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Term
| What are the two rewards for group performance? |
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Definition
| Gainsharing, and group bonuses and team awards. |
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Term
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Definition
| group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees. |
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Term
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Definition
| type of gainsharing program in which employees recieve a bonus if the ratio of labor costs to the sales value of production is below a set standard. |
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Term
| What are group bonuses and team awards? |
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Definition
- tend to be for smaller groups than gainsharing programs.
- More likely to use a broad range of measures to measure performance. |
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Term
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Definition
| Rucker plan: This plan also uses committees, but although the committee structure is simpler the cost-saving calculations are more complex. A ratio is calculated that expresses the value of production required for each dollar of total wage bill. |
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Term
| What is an impropshare plan? |
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Definition
| An improshare plan is a type of gainsharing plan which is based on a mathematical formula that compares a baseline of performance with actual productivity during a given period. |
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Term
| What are the types of pay for organizational performance? |
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Definition
| Profit sharing,Stock ownership |
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Term
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Definition
Incentive pay in which payments are a percentage of the organizations profits and do not become part of the employees' base salary.
- encourages employees to think more like owners.
- evidence is not clear if it helps performances work better |
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Term
| What are the two types of stock ownership? |
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Definition
| Stock options and employee stock ownership plans? |
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Term
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Definition
| rights to buy a certain number of shares of stock a specified price. |
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Term
| what are employee stock ownership plans? |
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Definition
An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.
- has tax and financing advantages |
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Term
| What is a balanced score card? |
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Definition
| A combination of performance measures directed toward the company's long and short term goals and used as the basis for awarding incentive pay? |
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Term
| What are the four categories of a balanced score card? |
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Definition
1.) financial
2.) customer
3.) internal
4.) Learning and growth |
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Term
| What are the benefits of a balanced score card? |
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Definition
- combines the advantages of different incentive pay plans
- helps employees understand organizations goals
- shows employees information about what its goals are and what it expects employees to accomplish. |
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Term
| What are the processes that make incentives work? |
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Definition
1.) Participation in decisions.
2.) Communication |
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Term
| When it comes to participation in decisions, whats important? |
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Definition
- it can lead to employee empowerment
- can contribute to the success of an incentive plan. |
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Term
| What are some important things about communication? |
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Definition
- demonstrates to employees that the pay plan is fair.
- when employees understand the requirements, the plan is more likely to influence their behavior as desired. |
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Term
| What are the two incentive payment plans for executives? |
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Definition
1.) short term incentives
2.) Long term incentives. |
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Term
| What are some examples of short term incentive plans? |
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Definition
- bonuses based on the year's profits, return on investment, or other measures related to the organizations goals
- payment might be delayed to gain tax advantages |
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Term
| What are some examples of long term incentives |
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Definition
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Term
| What are the pros and cons of incentive plan for executives? |
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Definition
- pros: executives will want to do what is best for the organization because that will cause the value of their stock to grow.
- Ethical issues include the potential for managers to be dishonest in hopes for larger earnings. |
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