Incentives Dessler Chapter 12

Agenda – 3/29/05  Reminder  Announcements  Questions and Comments  Incentives

Reminder 1 Turn in Your Performance Reports! The Reports Count for 15% of Your Final Grade. PR 4 Due This Friday (4/1/05) Before 3:00 Via .

Reminder 2 HRM Intervention 2 Due Next Friday (4/8/05) by 3:00 PM via Focus on Compensation and Benefits Rough Drafts Accepted Until 4/5/05

Reminder 3 No Class Thursday (3/31/05) for Caesar Chavez Day

Turn in Your Midterm Exam Make-Up I Will Return Your Make-Up Next Tuesday IN CLASS

Announcement 2 Guest Speaker Next Tuesday (4/5/05) Dale Carlsen – Sleep Train Mattresses

Questions and Comments? What is Salary Compression? What is the Purpose of Compensation? What Are the Negative Outcomes Associated with Perceived Inequity?

Incentives  What are Incentives?  Terminology  How Do Organizations Use Incentives  Types of Incentives  Why Incentives Influence Behavior  Motivation  Justice  Trends in Incentives  Merit Pay

What Are Incentives - Terminology  Incentive  A reward or Punishment Used to Induce Action (Behavior)  Motivation  EDS  Justice  Procedural and Distributive  Traditional Pay Incentive  Piecework, Hourly, Salary  Social Loafing  The Price of Group Incentives

How Organizations Use Incentives LLLLink Pay to Job to Performance SSSShort Term BBBBonuses - Annual or Immediate PPPPrevalent Use in Private Sector BBBBase + Commission PPPPrevalent Use in Sales LLLLong Term SStock Options LLong Term Performance PProfit Sharing EEmployee Stock Option/Ownership Plans (ESOPs) GGainsharing

The Relationship Between Motivation and Pay  Ambiguous At Best  Herzberg’s 2 Factor Theory  Pay Merely Satisfies, Mostly Dissatisfies  Intrinsic and Extrinsic  Social Perceptions  Relative Nature of Motivation  Better Motivator Than Pay  Goal Setting and Valence-Expectancy

Why Pay Really Matters- Pay and Justice  Justice = Fairness  Remember Individual Perceptions  Who Is Your “Comparison Other”  Procedural Justice Drives Distributive Justice  Practical Advice for Organizations

Trends in Pay - Merit Pay  Direct Pay For Performance  At Risk  Variable not Stable  Who Excels with Merit-Based Pay?  High Self-Esteem  High Need for Achievement  Paying for Organizational Citizenship Behaviors (OCBs)  Damaged Commitment

Practical Suggestions  Balance Pay for Job and Pay for Performance  Use Different Mixes of Incentives  Don’t Use Pay to Punish  The Power of Goals…  Challenging Yet Attainable  Communicate the Process  Procedural Justice  No “Standard” OCBs