Recognizing And Rewarding Day 24 Flashcards Preview

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Flashcards in Recognizing And Rewarding Day 24 Deck (50):
1

Organizations have wide discretion in setting performance-related pay called

Incentive pay

2

This is pay specifically designed to energize, direct, or conte employees' behavior

Incentive pay

3

Organizations select incentives based on (3)

Costs
Expected influence on performance
Fit with the organization's broader HR policies and goals

4

Organizations can tie incentive pay to (4)

Individual performance
Profits
Seniority
Other measures of success

5

Three types of incentives

Individual incentives
Group incentives
Organizational incentives

6

Law of effect

What is rewarded gets done.

7

Two major rewards at work

Money
Praise

8

Individual incentives (5)

Piecework rate
Standard hour plan
Merit pay
Performance bonuses
Commission

9

Wage based on the amount workers produce

Piecework rate

10

Piecework rate is best for work that is

Stable, repetitive, worker paced, and easily measured

11

Piecework rate fits best with _______ between jobs

Low interdependence

12

Piecework rate is rarely used because (5)

Most jobs have no physical output
Individuals focus only on the incentive
Does not fit with team approach
Does not reward obtaining multiple skills
Rewards output at the expense of quality or service

13

An incentive plan that pays workers extra for work done in less than a preset "standard time"

Standard hour plan

14

Standard hour plan

An incentive plan that pays workers extra for work done in less than a preset "standard time"

15

Piecework rate

An incentive plan that pays wages based on the amount workers produce

16

Advantage of standard hour plans

They encourage employees to work as fast as they can and be efficient, can potentially bill more hours in a week than worked

17

Disadvantage of standard hour plans

Employees may not necessarily care about quality or service

18

System of linking pay increases to ratings on a performance scale
Requires quality performance appraisal
Supervisor provides most performance info

Merit pay

19

Most common individual incentive system

Merit pay

20

Merit pay

System of linking pay increases to ratings on a performance scale

21

Disadvantages of merit pay (5)

Discouraged teamwork
Too much reliance on supervisor for rating
Pay increase are not representative of performance and/or are too small to be motivating
An annuity based on the past rather than the present
Fail to account for short-term fluctuations in performance

22

Incentive not built into base pay so employees must re-earn it every year
Usually given in addition to or in place of merit "pay" incentives

Performance bonuses

23

Advantages of performance bonuses

Allows organizations to be flexible, year to year, in terms of what they want to reward

24

Incentive pay calculated as a percentage of sales, revenue, or profitability

Commissions

25

Commissions

Incentive pay calculated as a percentage of sales, revenue, or profitability

26

3 types of commissions

Straight commission
Salary-plus-commission
Commission-plus-draw

27

2 disadvantages of commissions

Contaminated - some things employees cannot control
Deficient - (make the sale regardless of the long term cost)

28

Group incentives (2)

Gainsharing
Bonuses and rewards

29

Measures increases in productivity or effectiveness and distributes part of the gain back to employees

Gainsharing

30

Gainsharing

Measures increases in productivity or effectiveness and distributed part of the gain back to employees

31

This frees employees to determine how to improve their own and group's performance
Distributed payouts frequently

Gainsharing

32

Conditions for success of gainsharing (5)

Management commitment
Commitment to continuous improvement and change
High level of cooperation and information sharing
Employment security
Requirements clearly communicated with employee input

33

These reward the members of a group for attaining a specific goal, usually measured in terms of physical output

Group bonuses and rewards

34

Advantages of group bonuses and rewards

They encourage group or team members to cooperate

35

Disadvantage of group bonuses and rewards

Competition among individuals may be replaced by competition among groups

36

4 issues with group rewards

Hurdle too high/too low
Value the payout
Line of sight
Free rider

37

Organization incentives (2)

Profit sharing
Stock options

38

Incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary

Profit sharing

39

3 disadvantages of profit sharing

Many plans defer actual payments
Few plans pay out during business downturns
Increases variability of compensation costs

40

Profit sharing

Incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary

41

Opportunity to buy stock at a later date but at a price established when the option is granted

Stock options

42

Stock options

Opportunity to buy stock at a later date but at a price established when the option is granted

43

Advantage of stock options

Puts employees in the role of (part) owner

44

Employee stock ownership plans (ESOPs)

Stock distributed to employees to keep in a trust fund
Employees can sell stock when they leave the company
Must invest 51% or more of fund's assets in the company's own stock

45

A combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay

Balance scorecard

46

Balance scorecard

A combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay

47

When are organization-focused incentives effective? (4)

Performance measures should be linked to organization's goals
Organization must give employees resources needed to meet goals
Plan should take into account that employees may ignore goals that are not rewarded
Establish concrete goals with sufficient feedback

48

When are employee-focused incentives effective? (5)

Employees believe they can meet performance standards
Employees value rewards
Employees perceive reward system as fair
Do not make employees feel coerced
Shield employees from unnecessary risk

49

Central tenet of this theory is that there is potential for mischief when the interests of owners and managers diverge

Agency theory

50

4 examples of agency theory

Used illegal accounting practices
Backdated stock options
Acted on internal knowledge and engaged in insider trading
Financially mismanage organization to attain bonuses