Professional Documents
Culture Documents
Management
SECTION 4
Compensating
Human
Resources
TENTH EDITON
Robert L. Mathis
John H. Jackson
Chapter 13
Variable
VariablePay
Payand
and
Executive
ExecutiveCompensation
Compensation
PowerPoint
Presentation
by Charlie Cook
Learning
Learning Objectives
Objectives
After you have read this chapter, you
should be able to:
Define variable pay and give examples of
three types of variable pay.
Identify four guidelines for successful
incentive programs.
Discuss three types of individual incentives.
Explain three different way that sales
employees typically are compensated.
Identify key factors that must be addressed
when using team variable pay plans.
2002 Southwestern College
132
Learning
Learning Objectives
Objectives (contd)
(contd)
Discuss why gainsharing, profitsharing, and
employee stock options have grown as
organizational incentive plans.
Identify the components of executive
compensation and discuss criticisms of
executive compensation levels.
133
Variable
Variable Pay:
Pay: Incentives
Incentives for
for Performance
Performance
Variable Pay Systems
134
Types
Typesof
of Variable
VariablePay
PayPlans
Plans
Figure 131
135
Factors
Factors Affecting
Affecting Variable
Variable Pay
Pay Plans
Plans
Does
Doesthe
theplan
planfit
fit
the
theorganization?
organization?
Variable
VariablePay
Pay
Plan
PlanSuccess
Success
Are
Arethe
theright
rightbehaviors
behaviors
encouraged
encouragedby
bythe
theplan?
plan?
Is
Isthe
theplan
planbeing
being
administered
administeredproperly?
properly?
136
Factors
Factorsfor
for
Successful
Successful
Variable
VariablePay
Pay
Plans
Plans
Figure 132
137
Individual
Individual Incentives
Incentives
Identification
Identificationof
of
Individual
Individual
Performance
Performance
Independent
Independent
Work
Work
Individual
Individual
Incentive
Incentive Pay
Pay
Plans
Plans
Individualism
Individualism
Stressed
Stressedin
in
Organizational
Organizational
Culture
Culture
Individual
Individual
Competitiveness
Competitiveness
Desired
Desired
138
Piece-Rate
Piece-Rate Systems
Systems
139
Bonuses
Bonuses and
and Special
Special Incentive
Incentive Programs
Programs
Bonus
A one-time payment that does not become part of
the employees base pay.
Awards
Cash or merchandise used as an incentive reward.
Recognition Awards
Recognition of individuals for their performance or
service to customers in areas targeted by the
firm.
Service Awards
Rewards to employees for lengthy service with an
organization.
1310
Sources
Sourcesof
ofBonuses
Bonuses
Source: Kathryn F. Clark, Incentives Increase But Competitive Base Salary Key in
Talent Race, Human Resource Executive, June 2, 2000, 30. Used with permission.
Figure 133
1311
Different
DifferentBases
Basesfor
forSales
SalesIncentives,
Incentives,In
InOrder
Orderof
ofUse
Use
Figure 134
1312
Sales
Sales Compensation
Compensation Plans
Plans
Salary Only
All compensation is paid as a base wage with
no incentives.
Commission
Straight Commission
Compensation is computed as a percentage of sales in
units or dollars.
Draw system make advance payments against future
commissions to salesperson.
1313
Why
WhyOrganizations
OrganizationsEstablish
EstablishTeam
TeamPay
PayPlans
Plans
Figure 135
1314
Group/Team-Based
Group/Team-Based Variable
Variable Pay
Pay
Determining
Determining
Individual
Individual
Rewards
Rewards
Timing
Timingof
of
Team
TeamIncentives
Incentives
Distributing
Distributing
Team
Team
Incentives
Incentives
Deciding
Decidingthe
the
Allocation
Allocationof
of
Rewards
Rewards
1315
Conditions
Conditionsfor
forSuccessful
Successful Team
Team Incentives
Incentives
Figure 136
1316
Gainsharing
Gainsharing
Gainsharing
The sharing with employees of greater-thanexpected gains in productivity.
Alternatives for rewards distribution:
1317
Profit
Profit Sharing
Sharing
Profit Sharing
A system to distribute a portion of the profits
of the organization to employees.
Primary objectives:
Improve productivity
Recruit or retain employees
Improve product/service quality
Improve employee morale
Drawbacks
Disclosure of financial information
Variability of profits from year to year
Profit results not strongly tied to employee efforts
1318
Profit-Sharing
Profit-SharingPlan
Plan Framework
FrameworkChoices
Choices
Figure 137
1319
Employee
Employee Stock
Stock Ownership
Ownership Plans
Plans (ESOPs)
(ESOPs)
ESOP Advantages
Favorable tax treatment for ESOP earnings
Employees motivated by ownership in the firm
ESOP Disadvantages
Retirement benefit is tied to the firms
performance
Management tool to fend off hostile takeover
attempts.
1320
U.S.
U.S.CEO
CEO Remuneration
Remuneration
Figure 138
1321
Executive
ExecutiveCompensation
Compensation Components
Components
Figure 139
1322
Common
CommonExecutive
ExecutivePerks
Perks
Figure 1310
1323
Arguments
Arguments
in
inthe
the
Executive
Executive
Pay
PayDebate
Debate
Figure 1311
1324