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(1)

Pay for Performance

and Financial Incentives

(2)

Learning Objectives

1. Explain how you would apply five

motivation theories in formulating an

incentive plan.

2. Discuss the main incentives for

individual employees.

(3)

Learning Objectives

4. Describe the main incentives for

managers and executives.

5. Name and define the most popular

organization-wide variable pay

plans.

(4)
(5)

Explain how you would apply

five motivation theories in

(6)

Motivation and Incentives

• Maslow’s

(7)

Motivation and Incentives

• Herzberg’s

Two-Factory

Theory

• Deci and

(8)

Motivation and Incentives

• Expectancy

(9)

Motivation and Incentives

• Behavior modification

• Incentive pay terminology

(10)

Review

• Money and motivation

• Motivation theories

• Incentives

(11)
(12)

Individual Employee Incentive

and Recognition Programs

• Merit pay as an

incentive

o

Differential pay

increases

o

Merit pay options

• Piecework plans

o

Straight

piecework

(13)

Individual Employee Incentive

and Recognition Programs

• Incentives for professional employees

• Nonfinancial and recognition-based

awards

o

Incentives managers can use

(14)

Review

• Piecework

• Merit pay

• Incentives for professionals

• Nonfinancial rewards

(15)

The Pros and Cons of

Commissions vs. Straight

Pay Incentives for

(16)

Incentives for Salespeople

• Salary plan

• Commission plan

• Combination plan

• Maximizing sales force results

(17)

Review

• Types of sales

incentives

(18)
(19)

Incentives for Managers

and Executives

• Strategy and the executive’s long-term and

total rewards package

• Sarbanes-Oxley Act

• Short-term incentives, annual bonus

o

Eligibility

o

Fund size

(20)

Incentives for Managers

and Executives

• Strategic long-term incentives

o

Stock options

o

Stock option problems

o

Other stock plans

(21)

Review

• Strategy and long-term incentives

• Federal law

• Short-term incentives

(22)

The Most Popular

(23)

Team & Organization-wide

Incentive Plans

• Designing team incentives

o

Engineered standards

o

Pros and cons

(24)

Team & Organization-wide

Incentive Plans

• Profit-sharing plans

• Scanlon plans

• Other gainsharing plans

• At-risk pay plans

(25)

Review

• Team incentives

• Inequities

• Profit-sharing

• Scanlon and gainsharing

• At-risk

(26)
(27)

The Five Building Blocks of

Effective Incentive Plans

• Common sense

• Linkages

• Effort Rewards

• Standards

• Contract

(28)
(29)

References

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