12 Pay for Performance

and Financial Incentives

4-

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 Learning Objectives

12-1 Explain how you would apply four

motivation theories in formulating an
incentive plan.

12-2. Discuss the main

4- incentives for
individual employees.

12-3. Discuss the pros and cons of

commissions versus straight pay for
salespeople.

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 Learning Objectives

12-4. Describe the main incentives for

managers and executives.

12-5 Name and describe the most popular

organization-wide incentive
4- plans.

12-6 Explain how to use incentives to

improve employee engagement.

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 I.
Explain how you would apply
four motivation
4-
theories in
formulating an incentive plan.

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 Psychologist Victor Vroom’s
expectancy motivation theory

• Effort is depending on three things:-

• E represents expectancy,
4- I
instrumentality, and V valence.
• If E or I or V is zero or inconsequential,
there will be no motivation
• Motivation = (E * I * V),
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 Incentive Pay Terminology

• Pay-for Performance
• Variable Pay 4-

• Profit Sharing

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Linking Strategy, Performance, and
Incentive Pay

4-

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 II.
Discuss the main
incentives for
4-
individual
employees.

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 Individual Employee Incentive and
Recognition Programs

• Piecework plans
o Straight
4-
piecework
o Standard hour
plans
o Pros and Cons

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 Merit Pay as an Incentive

• Merit pay as an
incentive
o Differential pay 4-

increases
o Merit pay
options

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Incentive for Professional
Employees

4-

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 Non-financial and
Recognition-Base Awards

• Social Recognition
4-
• Performance
Feedback

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List of Recognition

4-

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 III.
Discuss the pros and
cons of commissions
4-

versus straight pay for

salespeople.

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 Types of Sales Incentive Plans

1. Salary plan
2. Commission plan
3. Combination plan 4-

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Maximizing Sales Force Results

• Set Effective Quotas

• Distinguish Among Performers
4-

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 IV.
Describe the main
incentives for managers
4-
and executives.

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 Incentives for Managers and
Executives

• Short-term Incentives
• Long-term incentives
4-

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Strategy and the Executive’s Long-Term
and Total Rewards Package

• Short-term incentives and the Annual

bonus
o Eligibility
o Fund size 4-
o Individual awards
o Stock options
o Ethics

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 V.
Name and describe the
most popular organization-
wide incentive plans.
4-

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 Team and Organization-Wide
Incentive Plans

• How Designing Team Incentives

• Evidence-Based HR: Inequities That
Undercut Team Incentives
4-

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 Organizational – Wide Plans

• Profit-sharing plans
• Other Gainsharing Plans
4-
• At-Risk Pay Plans
• Employee Stock Ownership Plans

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 V.
Explain how to use
incentives to improve
employee engagement.
4-

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 Employee Engagement Guide for
Managers

• Incentives and Engagement

 Measure the extent to which supervisors are
encouraging their subordinates
4- to be engaged
 Use incentives to reward supervisors for
improving employee engagement

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 Chapter 12 Review

What you should now know….

4-

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