Pay for Performance and Financial Incentive BY: PAYAM NASEHI CGA120079

History  Fredrick Taylor, 1800s, Midvale Steel Co.  Used financial reward for workers who produce more than standard.  Scientific Management Movement introduced by Taylor.  Financial incentive to Boost Employee performance and enjoy Productivity gain  Not successful, because worker reduce quality to achieve more quantity of goods / Managers did not satisfied in this way

Motivation and Incentives  The Hierarchy of needs theory by Maslow  Motivators theory by Herzberg  Demotivators Theory by Edward Deci  Expectancy theory by Victor Vroom

Individual employee incentive and recognition programs  Piecework plans : employee will receive piece rate for each unit they produce.  Straight piecework : strict proportionality between result and reward regardless of output.  Standard Hours Plan : Worker will get a premium equal to the percent by which his performance exceed the standard. PRO: More goods will manufacture, Cons: Quality possibly decline

Incentive for Professional Employees  Financial and recognition : Higher payment for expert who works on important projects for company Non Financial and Recognition based award: ( Recognition program)  Employee recognition  Gift certificates  Special events  Merchandise incentive  Group/ Individual Travel

Incentive for salespeople  Salary Plan : Hard to keep good salespeople  Commission Plan : S.P. salary will fluctuate during recession and boom time.  Combination Plan : Company give a floor for salespeople income, some managers believe that this method reduce salesperson's incentive for more activities.

Incentive for managers and executives  Long term and total rewards package  Short term incentive and annual bonus:  Eligibility : annually received by employees with attention to their job/ title and position  Fund size : There is not any rule for this part.  Individual Performance: Mostly managers and executive will receive more than lower levels. ( Split- Award Plan: 2 kinds of bonus for managers, first: base on Individual effort, second: organization overall performance)

Incentive for managers and executives (cont.)  Stock Option : The right to purchase specific number of shares of company at specific price and during specific period.  Problems of Stock Option : 1- Manipulated by managers 2- Volatility of economic circumstances

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References  Human Resource Management, Gary Dessler