Variable Pay & Executive Compensation MN 301 – Human Resource Management Craig W. Fontaine, Ph.D. Pine Manor College Fall 2014.

Slides:



Advertisements
Similar presentations
Chapter 21 Rewarding Performance Cost Accounting Traditions and Innovations Barfield, Raiborn, Kinney.
Advertisements

1.
Pay for Performance and Financial Incentives
Reward - Prize, Recompense, Return, Incentive.,. Process.
Variable Pay and Executive Compensation
Human Resource Management Gaining a Competitive Advantage
Managing Human Resources Bohlander  Snell  Sherman
Introduction Organizations have a relatively large degree of discretion in deciding how to pay. Each employee’s pay is based upon individual performance,
Managing Human Resources, 12e, by Bohlander/Snell/Sherman © 2001 South-Western/Thomson Learning 10-1 Presentation Slide 10-1 Advantages of Incentive Pay.
Recognizing Employee Contributions with Pay
Incentive Rewards 19 Matakuliah: J0124 – Manajemen Sumber Daya Manusia Tahun : 2010.
1-1 McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Human Resource Management Gaining a Competitive Advantage Chapter 12 Recognizing.
INCENTIVES & FRINGE BENEFITS. Variable Pay Or Pay For Performance Systems Here the pay is linked to individual, group or organisational performance. Employees.
Designing Compensation and Benefit Packages
PowerPoint Presentation by Charlie Cook The University of West Alabama SECTION 4 Compensation © 2011 Cengage Learning. All rights reserved. May not be.
MBAO 6030 Human Resource Management Strategic Reward Systems II HR Management MBAO 6030.
Chapter 12 compensating salespeople. Compensation objective _ compensation is one of the most important motivating and retaining field salesperson _ sales.
Chapter 8 Compensation Practices, Planning, and Challenges
Variable Pay: Incentives for Performance
Copyright © 2002 by Harcourt, Inc. All rights reserved. Topic 17 : HR management: Financial Rewards Lecturer: Zhu Wenzhong.
Human Resource Management TENTH EDITON © 2003 Southwestern College Publishing. All rights reserved. PowerPoint Presentation by Charlie Cook Variable Pay.
R OBERT L. M ATHIS J OHN H. J ACKSON PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2005 Thomson Business & Professional.
12-1 McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. fundamentals of Human Resource Management 3 rd edition by.
Compensation Pay for Performance. Key Topics – Pay for Performance Merit pay and motivation Merit pay and motivation Types of incentive plans Types of.
Copyright © 2005 Thomson Business & Professional Publishing. All rights reserved.13–1 Effective Incentive Plans Figure 13–1.
Human Resource Management TENTH EDITON © 2003 Southwestern College Publishing. All rights reserved. Variable Pay and Executive Compensation Variable Pay.
CHAPTER 12 Incentive Plans and Executive Compensation
Copyright © 2008 by Nelson, a division of Thomson Canada Limited. 11–1 Part 4: Compensating Human Resources Chapter 11: Variable Pay and Executive Compensation.
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.12–1.
Recognizing Employee Contributions with Pay
Chapter 12 recognizing employee contributions with pay
Pay for Performance and Financial Incentives
Advances in Human Resource Development and Management
Incentives Session-13. What Is Incentive Pay? Incentive pay links pay (as a reward) to performance – The idea of incentive pay is to create incentives.
CHAPTER 14 VARIABLE PAY AND EXECUTIVE COMPENSATION.
VARIABLE PAY AND EXECUTIVE COMPENSATION. Objectives Define variable pay and give examples of three types of variable pay Identify four guidelines for.
Advances in Human Resource Development and Management Course code: MGT 712 Lecture 14.
Motivation: From Concept to Applications Pertemuan 7 Matakuliah: G0292/Organizational Behavior Tahun: 2007 Adapted from: ORGANIZATIONAL BEHAVIOR S T E.
Human Resource Management Lecture 17 MGT 350. Last Lecture Pay Types of Reward Plans Intrinsic versus Extrinsic Rewards Intrinsic Financial versus Nonfinancial.
Strategy for Human Resource Management Lecture 23 HRM 765.
Part V SALES FORCE LEADERSHIP
HUMAN RESOURCE MANAGEMENT Chapter 9 HUMAN RESOURCE MANAGEMENT Mathis R., Jackson J. 13 TH EDITION.
Lim Sei cK. Variable Pay: Incentives for Performance.
Compensation Pay for Performance. Key Topics – Pay for Performance Types of incentive plans Types of incentive plans Merit pay and motivation Merit pay.
Copyright © 2011 Pearson Canada Inc. Pay-for-Performance and Financial Incentives Dessler & Cole Human Resources Management in Canada Canadian Eleventh.
Incentives & Gain sharing
12-1 McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. fundamentals of Human Resource Management 3 rd edition by.
Incentive Plans.
Incentive Pay Chapter # 8 Resource person: Furqan-ul-haq Siddiqui Reference Books:  Strategic Compensation: A Human Resource Management Approach (6 th.
CREATING MOTIVATION AND INCENTIVES STRUCTURES PURVI SHETH CEO, SHILPUTSI CONSULTANTS 20 TH JANUARY, 2012.
A Human Resource Management Approach
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or.
ORGANIZATIONAL BEHAVIOR S T E P H E N P. R O B B I N S E L E V E N T H E D I T I O N W W W. P R E N H A L L. C O M / R O B B I N S © 2005 Prentice Hall.
PART FOUR Compensation Chapters Chapter 11 Pay and Incentive Systems McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
LEPAK / GOWAN MGT 430 – Spring 2016 Class 14 - Chapter 11 Pay Incentives and Rewards.
© 2017 Cengage Learning ®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 12 Variable.
Human Resource Management: Gaining a Competitive Advantage Chapter 12 Recognizing Employee Contributions with Pay Copyright © 2013 by The McGraw-Hill Companies,
Human Resource Management Paying Our Employees. Major HRM Activities Determining the Need Hiring, Firing, & Promoting Employees Performance Improvement.
12-1 McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. fundamentals of Human Resource Management 4 th edition by.
Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin FUNDAMENTALS OF HUMAN RESOURCE MANAGEMENT 5 TH EDITION BY R.A.
Incentives – Performance linked Pay Part 2. Types of incentive plans.
Incentive Pay Systems Chapter 14.
Variable Pay and Executive Compensation
Compensation Pay for Performance
Human Resource Management By Dr. Debashish Sengupta
Chapter Fifteen Incentive Plans.
© 2010 South-Western, a part of Cengage Learning All rights reserved.
Motivation: From Concept to Applications
Pay for Performance and Financial Incentives
Presentation transcript:

Variable Pay & Executive Compensation MN 301 – Human Resource Management Craig W. Fontaine, Ph.D. Pine Manor College Fall 2014

Variable: Incentives for Performance Variable pay - Compensation tied to performance Individual Group/ team Organizational Beneficial for both employees and employer Employers - More output per employee Employee - More pay

Why Use Variable Pay? Variable Pay Assumptions Some people perform better and are more productive than others Better performing employees should receive more compensation Some jobs contribute more to organizational success than others Total compensation should be tied directly to performance and results

A Variety of Possible Incentives

Pay-for-Performance Plans Reasons for Pay-for-Performance Plans Enhance results and reward employees financially Link strategic goals and employee performance Reward and recognize employee performance Promote achievement of HR objectives

Factors for Successful Variable Pay Plans

Categories of Variable Pay

Individual Incentives

Piece-rate systems Straight piece-rate system Wages are determined by multiplying the number of units produced by the piece rate for one unit Differential piece-rate system Pays employees one piece-rate wage for units produced up to a standard output and a higher piece-rate wage for units produced over the standard

Individual Incentives Bonus One-time payment that does not become part of the employee’s base pay Massive kinked bonuses Very large all or nothing bonus (example: golfer) Spot bonuses Can be awarded at any time

Individual Incentives Nonmonetary incentives Performance awards Incentive rewards for performance Recognition awards Recognizes individual employees for their work Service awards Recognize service

Individual Incentives Commissions Percentage of the money taken in on sales Often given on top of salary

Design of Group/Team Incentive Plans

Group/Team Incentives Distributing rewards issue: Same-size reward for each member Different-size reward for each member

Group/Team Incentives Challenges with group/team incentives Rewards distributed in equal amounts to all members may be perceived as unfair Free riders - Member of the group who contributes little Team size - Individual efforts of employees have little effect on the total performance of the group in large groups

Conditions for Successful Group/Team Incentives

Types of Group/Team Incentives Group/team results Group production Cost savings Quality improvement Gainsharing: Sharing with employees of greater-than- expected gains in productivity through increased discretionary efforts

Organizational Incentives Primary Objectives Increase productivity and organizational performance Attract or retain employees Improve product/service quality Enhance employee morale Drawbacks Disclosure of financial information Variability of profits from year to year Profit results not strongly tied to employee efforts Profit Sharing

Framework Choices for a Profit-Sharing Plan

Employee Stock Plans Stock option plan Employees can buy fixed number of shares of company stock At a specified price for a limited period of time Employee stock ownership plan (ESOP) Gives employees significant stock ownership in the organization they work

Advantages and Disadvantages of ESOP Advantages Favorable tax treatment for ESOP earnings Employees motivated by their ownership stake in the firm Disadvantages Retirement benefit tied to the firm’s future performance

Metric Options for Variable Pay Plans

Types of Sales Compensation Plans Salary-only All compensation is paid as a base wage with no incentives Straight commission Compensation is computed as a percentage of sales in units or dollars Draw system makes advance payments against future commissions to the salesperson Salary-plus-commission or bonuses Compensation is part salary for income stability and part commission for incentive

Sales Metric Possibilities

Executive Compensation Handled differently than other employees’ pay, why:

Legal Aspects of Executive Compensation Say on Pay Publically listed companies must allow share holders to vote on executive compensation Clawbacks Allows a company to recover any incentive based pay that was paid out during the prior 3 years if it would not have been paid under restated financial statements

Executive Compensation Packages

Executive Compensation Considerations and Concerns Would another company hire this person as an executive? How does the executive’s compensation compare with that for executives in similar companies? What would an investor pay for the level of performance of the executive? Is the executive’s pay consistent with pay for other employees within the company? Reasonableness of Executive Compensation

Common Executive Compensation Criticisms

Executive Compensation and Boards of Directors In most organizations the board of directors is the major policy-setting entity Must approve executive compensation packages Compensation committee : Subgroup of the board of directors that is composed of directors who are not officers of the firm