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There are many ways to reward a company's employees. Since there are so many different kinds of rewards and different reasons to reward, management crafts different incentive plans for different results. In order to make these plans, though, management needs to know the company goals. Once they have pinpointed these goals, they can use an incentive plan to contribute to meeting these goals. A manager can set up incentives for individuals, groups, or use both types. The type of incentive plan is not important – it is important that the plan works and achieves its goals. Ketter (2002) says, of an effective reward and incentive system: “For an organization to have an effective reward system its managers must understand how effectiveness is to be achieved and what its employees consider to be the important factors in determining quality of work life” (Designing Effective Reward Systems ¶, 1). This paper lists three different kinds of incentive plans, and the positive and negative points of each one. The first example is Team Compensation. “Team incentive plans reward team members with an incentive bonus when agreed-on performance standards are met or exceeded. Furthermore, the incentive will seek to establish a psychological climate that fosters team cooperation” (Bohlander & Snell, S. A., 2007, p.453). One problem with team compensation is that all teams are different from each other. “For example, cross-functional teams, self-directed teams, and task force teams make it impossible to develop one consistent type of team incentive plan” (Bohlander & Snell, S. A., 2007, p.453). Bohlander & Snell, S. A., 2007, p.454 list the following pros and cons of team incentive plans.
• Team incentives create a “team culture” based around the group working together to plan and solve problems. • An individual's recognition depends on their cooperation with the group. • Team incentives reward a large variety of positive behaviors, motivating employees to many positive contributions, unlike rewards that only recognize output.
like merit pay. Employees who perform better like being rewarded for their effort.. employees understand their own goals more clearly 5. and invested in. 2. The best point of merit pay is that it allows manager to reward employees who perform well. 7. individual employees are less jealous and less likely to complain about someone else's performance • Incentives for a team encourage people to “cross-train” and learn more than just their job. Money is a very good way to motivate employees to perform. Can spur a company “cultural change” by decreasing employee apathy and increasing morale. and how to achieve them. Rollins (1988) lists these pros of merit pay: 1. CONS • Particular team members might not see how “their” personal work helped the team succeed or earned the team the incentive bonus. If the same amount of money is available. p.444). a company's total success. and keeps employees more satisfied with their payment. A. This can pressure poor employees to improve their performance or look for another job. When used correctly. The performance evaluations become more important when pay is linked to performance 4. 6. but still receives the same reward) • Formulas to change the payout might be too complicated for employees to understand Our next option is an incentive plan that rewards the individual. A merit raise is predicated on that employee meeting some goal or objective performance standard. Makes company money use more efficient.• If a team is rewarded together. “Although a superior’s subjective evaluation of subordinate performance may play a large role in the increase given” (Bohlander & Snell. 2007. unlike automatic raises for everyone. it makes sense to give more to good performers and less to weaker employees. . 3. Employees become more concerned about. They make the communicate more about both their individual and company goals. S. • People can be pressured to lower their own performance (as in when a team is concerned that one member is “making everyone else look bad”) or people can become freeloaders (when one person contributes less than the rest. Merit pay (or a merit raise) changes an employees base pay based on how well they do their job.
a compensation rate under which employees whose production exceeds the standard amount of output receive a higher rate for all of their work than the rate paid to those who do not exceed the standard amount” (Bohlander & Snell. p. ambition. According to research. Employees will start to monitor their own performance against objective. A. and ingenuity). perseverance. 10. S. and descibes them specifically and objectively to every involved party. “Overall” merit raise plans do not actually motivate employees to better individual performance. the performance appraisal becomes less subjective and move objective. they might be using vague or undefined standards to define merit and who is rewarded. “Differential piece rate. Help reinforce performance appraisals based around a “no surprise” policy.. Employees and management will talk about future performance expectations. “Old fashioned” measures are proven outdated. 6. and the plan permits an organization to predict its labor costs with . 5. Merit raises might require more money than is available in order to give all employees the raise. cooperation. while employers might want to cut merit pay costs and not recognize the employee. Sometimes employees want a positive evaluation. also say on p. Traits like these are linked far more to personality differences and the relationship between the manager and the employee. Employers and employees might not be communicating or cooperating honestly with each other. merit pay might just look like any other type of raise to them. Employees might not understand the system or believe that it is unrelated to results. S.442). If employers have no guidance as to how to name and measure performance. 2007. It challenges them to make their work for efficient. An employee already knows their performance targets and how accountable they are to them. tracking ones performance makes a person improve. their attitude. 444 that compensation specialists list some problems with merit raise plans: 1. and thus do not necessarily link to employee performance. creativity. 2. A well-designed merit program rewards target behaviors and results.. A. like rating an employee's overall appearance. Some advantages of piecework are “wage payment for each employee is simple to compute. 9. 2007. 4. 3. The last and perhaps oldest of incentive plans uses piecework. pre-established targets for performance. Bohlander & Snell.8.
when the job is fairly standardized. W.. because many PCTs work the floor at once. T.considerable accuracy. I would have said that merit pay would gain the best results. (2002). as when an individual employee's contributions are hard to distinguish or count. A. In my field. also say. other plans would be unsuitable. Boston: Allyn and Bacon. making merit pay the better choice. & Snell. S. S. Florence. p... 2007. though. In the job that I worked for five years. Many jobs cannot use piecework. and when a constant flow of work can be maintained” (Bohlander & Snell. Pay for performance: Is it worth the trouble? Personnel Administrator. Achieving excellence in the management of human service organizations. KY: Thomson Learning Higher Education. (1988). as these costs are the same for each unit of output. they will probably not produce to their to level. Team compensation might be appropriate for Patient Care Technicians. p. Kettner. A. G. P. S. that piecework has a downside – it might not always motivate employees very well. A. when the quality of the product is less critical. For head nurses. Bohlander & Snell. team compensation would not work. Rollins.442). though. (2007).. or when the job is so mechanical that the employee cannot exercise much control over the total output (2007. since only one head nurse works at once. because it is more important to them to “fit in” with their peers. . The piecework system is more likely to succeed when units of output can be measured readily. References Bohlander.442).). If an employee thinks that their coworkers might not approve of increased production. Managing human resources (14th ed.