Variable Compensation November 8, 2011. SEE READINGS!!!!! Bullets are examples!! Chpt 18 –Variable Pay Plan Elements Eligibility Payout timing and frequency.

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Presentation transcript:

Variable Compensation November 8, 2011

SEE READINGS!!!!! Bullets are examples!! Chpt 18 –Variable Pay Plan Elements Eligibility Payout timing and frequency –Types of Variable Pay Plans

SEE READINGS!!!!! Chpt 19 –Types of Variable Pay Plans –Effectiveness of Plans Chpt 21 –Team-based Incentives

SEE READINGS!!!!! Chpt 22 –Profit-sharing and Gainsharing –The Farmer’s Tale –Line-of-sight Measurement

SEE READINGS!!!!! Chpt 37 –Balanced scorecard Chpt 38 –Metrics Chpt 39 –Variable compensation and productivity Tables 39.1 and 39.2

SEE READINGS!!!!! Chpt 40 –ROI Chpt 41 –Challenges

Types of Plans SEE READINGS!!!!! Individual incentive plans –Piece rate plans –Standard hour plan –Business incentives –Stock options

Types of Plans Individual incentive plans –Standard hour plan –Piece rate plans –Business incentives Financial measures of org’l performance –Stock options

Balanced Scorecard

Types of plans Stock option plans –“strike price” –“underwater” –Back dating –Mess = longer

$30

“Back Dating”

Types of Plans “special recognition” plans –Cheap –Immediacy –personalized

Types of Plans Group incentive plans –Any individual plan based on group performance –Expectancy Theory? –Recall performance appraisal

Types of Plans Plantwide/unit wide group plans –Typically gainsharing plans –Profit sharing

Types of Plans Employee Stock Ownership Plans (ESOPs) –Tax saving –Smaller companies –10,000 companies/ 9 million employees

And in closing……

Netflix

Type of incentive plans

ExecutiveManagement Professional (Sales and Non-sales) Office/ Clerical/ Technician Trades/ Production/ Service Highest- rated 64%27%20%15%13% Middle- rated 44%20%14%11% Lowest- rated 30%10%7%6%4%

Porter-Lawler Expectancy Theory

Porter and Lawler

MotivationEffortAbility ResourcesSatisfaction? Performance Intrinsic Extrinsic

Objectives of merit pay Pay-for-performance culture –“at-risk” compensation –Tied to performance appraisal results Org’l success –High when good, low when bad

Merit Pay But the REALLY BIG problem…..

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