BA 2204 and BAS 324 Human Resource Management Rewarding performance Instructor: Ça ğ rı Topal 1

Assumptions Individual employees and work teams differ in how much they contribute to the firm The firm’s overall performance depends on the performance of individuals and groups The firm needs to reward employees on the basis of their relative performance 2

Challenges “Do only what you get paid for” syndrome Unethical behaviors Negative effects on cooperation Lack of control Difficulties in measuring performance Psychological contracts Credibility gap Job dissatisfaction and stress Potential reduction of intrinsic drives 3

Meeting challenges Use pay for performance as part of a broader HRM system Link pay and performance appropriately Build employee trust Promote the belief that performance makes a difference Use multiple layers of rewards Increase employee involvement Stress the importance of acting ethically Use motivation and nonfinancial incentives 4

Types: individual-based Definition Rewarding individuals based on individual outcomes Merit pay Bonuses Awards 5

Types: individual-based Advantages Rewarded performance is likely to be repeated Financial incentives can shape an individual’s goals over time Assessing the performance of each employee helps the firm achieve individual equity Individual-based plans fit in with an individualistic culture 6

Types: individual-based Disadvantages Individual plans may create competition Individual plans may lead to sour relationships Many managers tend to equalize pay increase rates among employees Tying pay to goals may promote single- mindedness Many employees do not believe pay and performance link Individual plans may work against quality goals Individual programs may promote inflexibility 7

Types: individual-based Conditions Individual employee contributions can be accurately isolated Job demands autonomy Cooperation is less critical to successful performance 8

Types: team-based Definition and advantages Rewarding all team members equally based on group outcomes Team plans foster group cohesiveness Team plans aid performance measurement 9

Types: team-based Disadvantages Possible lack of fit with individualistic cultural values Free-riding effect Social pressures to limit performance Difficulties in identifying meaningful groups Intergroup competition and decline in overall performance 10

Types: team-based Conditions Work tasks are so intertwined that it is difficult to single out who did what The firm’s organization and technology facilitates team-based incentives Employees are committed to their work The firm needs to prevent employees from pursuing their personal projects The objective is to foster entrepreneurship in self-managed work groups 11

Types: plant-based Definition and advantages Rewarding all workers in a plant or unit based on the efficiency of the entire plant or unit Productivity gains resulting from employee involvement Improvements in the production process due to employee input Development of a cooperative work culture No need to measure individual contributions More acceptable for workers not singled out 12

Types: plant-based Disadvantages Protection of low performers Criteria problems Inflexibility Unprofitability Relative easiness Limited opportunity Management-labor conflict 13

Types: plant-based Conditions Firm size is small to medium Technology is not an alternative to workers Data on the historical performance of different units within the firm is on hand Corporate culture is not hierarchical There should be a relatively stable demand for the firm’s product 14

Types: corporate-based Definition and advantages Rewarding employees based on the entire corporation’s performance Profit sharing plans Employee stock ownership plans Financial flexibility for the firm Increased employee commitment Tax advantages 15

Types: corporate-based Disadvantages Employees’ savings at considerable risk High exposure to macroeconomic forces Limited effect on productivity Long-run financial difficulties 16

Types: corporate-based Conditions Firm size is large Plants or business units are interdependent within the firm The firm faces cyclical ups and downs in product demand There are complementary incentive plans 17