2Chapter Topics What Behaviors Do Employers Care About? What Does It Take to Get These Behaviors? What Theory and Research SayWhat Does It Take to Get These Behaviors? What Compensation People SayTotal Reward System: Besides Money, Other Rewards Influence Behavior!
3Chapter Topics (cont.)Does Compensation Motivate Behavior? General CommentsDoes Compensation Motivate Behavior? Specific CommentsDesigning a Pay-for-Performance PlanYour Turn: Burger Boy
4What Behaviors Do Employers Care About? Employers want employees to perform in ways that lead to better organizational performanceOrganizational strategy is the guiding force that determines what kinds of employee behaviors are needed
5Exhibit 9.1: The Cascading Link between Organization Strategy and Employee Behavior
6Exhibit 9.2: The Big Picture, or Compensation Can't Do It Alone!
7What Behaviors Do Employers Care About? (cont.) Behaviors that compensation needs to reinforceCompensation should be sufficiently attractive to make recruiting and hiring good potential employees possible (attraction)Need to make sure the good employees stay with the company (retention)Need to find ways to motivate employees to perform well on their jobs—to take their knowledge and abilities and apply them in ways that contribute to organizational performance
8What Behaviors Do Employers Care About? (cont.) Performance measurementNeed to accurately measure performance to tell if compensation efforts are workingPerformance management
9Exhibit 9.3 Performance Measurement Relates to Compensation Strategy See Exhibit 9.2, pages 284 – 286 in the text
10What Behaviors Do Employers Care About? (cont.) How do we get good employment prospects to join our company?How do we retain these good employees once they join?How do we get employees to develop skills for current and future jobs?How do we get employees to perform well on their current job?
11What Motivates Employees? In the simplest sense, motivation involves three elements:1. What is important to a person?2. Offering it in exchange for some3. Desired behavior
12Exhibit 9.4: Motivation Theories See Exhibit 9.2, pages 284 – 286 in the text
15What Compensation People Say Employees learned what behaviors were important as part of the socialization processCompensation is designed to support this risk-taking behaviorTotal Reward SystemCompensation is but one of many rewards that influence employee behaviorSee Exhibit 9.2, pages 284 – 286 in the text
16Exhibit 9.5: Components of a Total Reward System See text, Exhibit 9.3 on page 289
19Does Compensation Motivate Behavior? General Comments Organizations with “high-performance work practices” had annual sales that averaged $27,000 more per employee.
20Does Compensation Motivate Behavior? Specific Comments Do people join a firm because of pay?Do people stay in a firm (or leave) because of pay?Do employees more readily agree to develop job skills because of pay?Do employees perform better on their jobs because of pay?
21Do People Join a Firm Because of Pay? Key factors affecting a person’s decision to join a firmLevel of payPay system characteristicsJob candidates look for organizations that “fit” their personalitiesReward systems should be designed to attract people with desiredPersonalitiesValues
22Do People Stay in a Firm (Or Leave) Because of Pay? Factors impacting turnoverPay based on individual performanceGroup incentive plansLevel of employee satisfaction with payType of pay system
23Do People Stay in a Firm (Or Leave) Because of Pay? (cont.) Other rewards affect the decision to stayWork variety and challengeDevelopment opportunitySocialStatus recognitionWork importanceBenefits
24Do Employees More Readily Agree to Develop Job Skills Because of Pay? Evidence is unclearRelevance of skill-based pay
25Do Employees Perform Better on Their Jobs Because of Pay? Not clear if performance of individuals can be increased by tying it to payIf the incentive depends on individual performance, applicants find the company more attractiveTeam-based incentives, in contrast, are less attractiveA number of recent studies provide strong evidence that pay for performance has a direct and, at times, substantial impact on firm performance
26Exhibit 9.7: Examples of Group Incentive Plans See Exhibit 9.5, page 299 in text
27Designing A Pay-For-Performance Plan EfficiencyStrategyStructureStandardsObjectivesMeasuresEligibilityFunding
28Designing A Pay-For-Performance Plan (cont.) Equity/FairnessDistributive justiceProcedural justiceComplianceComply with existing lawsEnhance and maintain firm’s reputation