Compensation REVIEW

Piece work- disadvantage

- Health and safety issues having employees produce too rapidly
- They won't be concerned about company needs

Merit pay vs lump sum individual incentives

- Merit pay; evaluating individual performance problems- based on performance
appraisal
- The likelihood of getting a pay increase is low bc you’re already high on the pay ranking
- Employees “top up”
- Merit pay is supposed to increase performance however if you are above midpoint you
need a promotion (higher grade)
- Merit pay may not motivate when employees are high on range block and are expensive
to the company
- Merit pay refers to a compensation approach that rewards employees for achieving
their performance goals through bonuses or pay increases.
- A lump sum is a single payment of money, as opposed to a series of payments made
over time.
- Lump sum doesn’t become repentantly engraved In ranks-if you stop performing you
don’t get it

Profit sharing:
- What formula will be used to determine which employees get how much?
- In some cases you get profit sharing in retirement
- The biggest good thing; they want employees to feel they have a stake in how the
company does (might motivate employees)
- Do employees believe what they do in the company affect the company's progress
- Game sharing-group based incentive; line of sight is better than profit sharing
- line of sight means that employees can see the connection between their goals and the
organization's goals
- more likely to see what they do and creation in gains
- Gainsharing is best described as a system of management in which an organization
seeks higher levels of performance through the involvement and participation of its
people
- Company stock price-a bunch of stuff affects it; plague, economy
- Stock options- when an employee joins the company has the option to join stocks
- Buy company stock at a future point in time at the original price

Two big problems with executive compensation

- Increased gap between how much more money executives make than normal employee
- Why did it get so high?
o Competitive factors increase pay to keep executives in the company
o Executives get big payouts when the company does poorly.
- Cheatsheet
- Same format
- 15 min early in class

- Chapters starting after mid-term.

Syllabus Ch- 7, 8, 9, 10, 11,