1. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-1 Chapter Five Organizational Context: Reward Systems

2. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-2 Learning Objectives Discuss the theoretical background on money as a reward Present the latest research on the effectiveness of pay Describe some of the traditional methods of administering pay Relate some of the latest forms of “new” pay and their value in helping attract and retain talented employees Explain how recognition is used as an organizational reward Discuss the role of benefits as organizational rewards

3. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-3 Pay For Performance IndividualIncentives GroupIncentives Pay for Output Bonuses Stock Options Gainsharing Profit Sharing Employee Stock Ownership Plan

4. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-4 Executive/Company Timothy Koogle Yahoo Stephen Case America Online Barry Diller USA Networks Glen Meakem Freemarkets Millard Drexler Gap Henry Silverman Cendant Value* $2,251,451 1,263,767 1,033,984 751,140 685,003 684,683 Executive/Company John Chambers Cisco Systems Louis Gerstner IBM Joseph Nacchio Qwest Communications William Esrel Spring Fon Group Jack Welch General Electric Gerald Levin Time Warner Value* $482,453 481,350 467,546 452,837 436,357 377,728 Unexercised Stock Options At Select Firms

5. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-5 Commissions beyond sales to customers Rewarding leadership effectiveness Rewarding new goals Pay for know- ledge workers in teams Skill pay Broadbanding Competency pay “New Pay” Approaches “New” Pay Approaches

6. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-6 Use all communications tools Educate the managers Use recognition On-site recognition ceremonies Publicize best practices Inform everyone about recognition process Review recognition process Solicit recognition new ideas Steps To Improve Recognition System

7. McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-7 Traditionally Offered Benefits Federally Mandated Benefits Social Security Medicare Workers’ Compensation Family and Medical Leave Employee Retirement Income Security Act Pregnancy Discrimina- tion Act Insurance Life Health Disability Life Cycle Benefits Child care Elder care Flexible, Cafeteria-Style Benefits