PA 215 ( STRATEGIC AND OPERATIONAL PLANNING)

Linking the Reward system to Performance Outcome

 Tying rewards to the achievement of strategic and financial performance targets is

management’s single most powerful tool to win the commitment of company personnel
to effective strategy execution.
 Objectives in designing the reward:
 Generously reward those achieving objectives
 Deny rewards to those who don’t
 Make the desired strategic financial outcomes the dominant basis for designing incentives,
evaluating efforts, and handing out rewards.

Key Considerations in designing Reward System

 Create a results-oriented system

 Reward people for results, not for activity
 Define jobs in terms of what to achieve
 Incorporate several performance measures
 Tie incentive compensation to relevant outcomes
 Top Executives- Incentives tied to overall firm performance.
 Department heads, teams, and individuals- Incentives tied achieving
performance targets in their areas of responsibility.

Guidelines for designing an effective Compensation System

1. Payoff must be a major, not minor, piece of total compensation package.

2. Incentive plan should extend to all employees.
3. Administer system with scrupulous objectivity and fairness.
4. Tie incentives to performance outcomes directly linked to good strategy execution and
financial performance.
5. Keep the time between performance review and payment as short as possible.
6. Make sure that the performance targets set for each individual or team involve outcomes
that the individual or team can personally affect.
7. Make liberal use of non-monetary rewards.
8. Avoid ways or rewarding non-performers.
INFORMATION SYSTEM- an integrated set of components for collecting, storing, and
processing data and providing information, knowledge, and digital products.

Components of Information System: Computer Hardware and Software, Telecommunications,

Databases and Data warehouses, Human resources, and procedures.

The Hardware, Software, and Telecommunications constitute Information Technology, which is

now ingrained in the operations and management of organizations.

Effects of Information System:

 Leaner Organization
 More Flexible Operations
 Increased Collaboration
 More Flexible work sites
 Changed employee behaviors