Department of Business Management Strategic Human Resource Management Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Strategic Human Resource Management Introduction to Human Resource Management Strategic Human Resource Management Personnel Planning and Recruiting - Job Analysis, Descriptions and Specifications Employee / Employer Selection and Interviewing Process Training and Developing Employees Performance Management and Appraisal Coaching, Careers and Talent Management Compensation planning Financial Incentives and Employee Benefits Ethics, Culture, Organizational Change and Fair Treatment in HR Management Equal Opportunity and Diversity, Labor Relations, Employee Safety and Health Managing Human Resources in Global and SME companies Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Motivation, Performance, and Pay Incentives Financial rewards paid to workers whose production exceeds a predetermined standard. Frederick Taylor Popularized scientific management and the use of financial incentives in the late 1800s. Systematic soldiering Fair day’s work Linking Pay and Performance Understanding the motivational bases of incentive plans Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz The Hierarchy of Needs Maslow’s Hierarchy of Needs: Physiological (food, water, warmth) Security (a secure income, knowing one has a job) Social (friendships and camaraderie) Self-esteem (respect) Self-actualization (becoming a whole person) Maslow’s prepotency process principle: People are motivated first to satisfy each lower-order need and then, in sequence, each of the higher-level needs. [Abraham Maslow] Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Herzberg’s Hygiene–Motivator Theory Hygienes (extrinsic job factors) Satisfy lower-level needs Inadequate working conditions, salary, and incentive pay can cause dissatisfaction and prevent satisfaction. Motivators (intrinsic job factors) Satisfy higher-level needs Job enrichment (challenging job, feedback, and recognition) addresses higher-level (achievement, self-actualization) needs. Premise: The best way to motivate someone is to organize the job so that doing it provides feedback and challenge that helps satisfy the person’s higher-level needs. [Frederick Herzberg] Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Herzberg’s Hygiene–Motivator Theory Relying exclusively on financial incentives is risky. The employer should also provide the recognition and challenging work that most people desire. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Incentive Pay Terminology Pay-for-Performance Plan Ties employee’s pay to the employee’s performance Variable Pay Plan Is an incentive plan that ties a group or team’s pay to some measure of the firm’s (or the facility’s) overall profitability Example: profit-sharing plans May include incentive plans for individual employees Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Types of Employee Incentive Plans Individual Employee Incentive and Recognition Programs Sales Compensation Programs Organizationwide Incentive Programs Executive Incentive Compensation Programs Team/Group-based Variable Pay Programs Pay-for-Performance Plans Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Individual Incentive Plans Piecework Plans The worker is paid a sum (“piece rate”) for each unit he or she produces. Straight piecework Standard hour plan Merit Pay Is a permanent cumulative salary increase the firm awards to an individual employee based on his or her individual performance Becomes permanent ongoing reward for past performance Merit Pay Options Give annual lump-sum merit raises that do not make the raise part of an employee’s base salary. Tie merit awards to both individual and organizational performance. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Incentives for Professional Employees Are those whose work involves the application of learned knowledge to the solution of the employer’s problems. Lawyers, doctors, economists, and engineers Possible Incentives Bonuses, stock options and grants, profit sharing Better vacations, more flexible work hours Improved pension plans Equipment for home offices Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Non-financial and Recognition Awards Effects of Recognition-Based Awards Recognition has a positive impact on performance, either alone or in conjunction with financial rewards. Day-to-day recognition from supervisors, peers, and team members is important. Ways to Use Recognition Social recognition Performance-based recognition Performance feedback Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Incentives for Salespeople Salary Plan Straight salaries Best for: prospecting (finding new clients), account servicing, training customer’s sales force, or participating in national and local trade shows Commission Plan Pay is a percentage of sales results. Keeps sales costs proportionate to sales revenues May cause a neglect of nonselling duties Can create wide variation in salesperson’s income Likelihood of sales success may be linked to external factors rather than to salesperson’s performance Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Incentives for Salespeople Combination Plan Pay is a combination of salary and commissions, usually with a sizable salary component. Plan gives salespeople a floor (safety net) to their earnings. Salary component covers company-specified service activities. Plans tend to become complicated, and misunderstandings can result. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Incentives for Managers and Executives Executive Total Reward Package Base salary Short-term incentives Bonuses – annually, quarterly … Long-term incentives Stock options Performance shares Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Executive Compensation Plan Define the strategic context for the executive compensation program. Shape each component of the package to focus the manager on achieving the firm’s strategic goals. Check the executive compensation plan for compliance with all legal and regulatory requirements and for tax effectiveness. Install a process for reviewing and evaluating the executive compensation plan whenever a major business change occurs. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Team/Group Incentive Plans Team (or Group) Incentive Plans Incentives are based on team’s performance. How to Design Team Incentives Set individual work standards. Set work standards for each team member and then calculate each member’s output. Members are paid based on one of three formulas: All receive the same pay earned by the highest producer All receive the same pay earned by the lowest producer All receive the same pay equal to the average pay earned by the group. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Organization-wide Incentive Plans Profit-Sharing Plans Current profit-sharing (cash) plans Employees receive cash shares of the firm’s profits at regular intervals. Employee Stock Ownership Plan (ESOP) A firm annually contributes its own stock—or cash (with a limit of 15% of compensation) to be used to purchase the stock—to a trust established for the employees. The trust holds the stock in individual employee accounts and distributes it to employees upon separation from the firm if the employee has worked long enough to earn ownership of the stock. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz Advantages of ESOPs For the Company Can take a tax deduction equal to the fair market value of the shares transferred to the ESOP trustee Gets an income tax deduction for dividends paid on ESOP-owned stock Can borrow against ESOP in trust and then repay the loan in pretax rather than after-tax dollars For the Employees Develop a sense of ownership and commitment Do not pay taxes on ESOP earnings until they receive a distribution. For the Shareholders of Closely-Held Corporations Can place assets into an ESOP trust which will allow them to purchase other marketable securities to diversify their holdings Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Why Incentive Plans Fail Performance pay can’t replace good management. You get what you pay for. “Pay is not a motivator.” Rewards punish. Rewards rupture relationships. Rewards can have unintended consequences. Rewards may undermine responsiveness. Rewards undermine intrinsic motivation. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Types of Employee Benefits Emploee Benefits Supplemental pay Executive services Insurance benefits Retirement benefits Types of Employee Benefits Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Employer Benefits Costs by Category Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Policy Issues in Designing Benefit Packages Who will be covered Coverage during probation Degree of employee choice Which benefits to offer Whether to include retirees How to finance benefits Cost containment procedures Communicating benefits options Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Pay For Time Not Worked Supplemental Pay Benefits Vacations and holidays Parental leave Supplemental unemployment benefits Supplemental Pay Benefits Unemployment insurance Sick leave Severance pay Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Trends in Health Care Cost Controls Premiums and co-pays Communication and empowerment Health savings accounts Claim audits Wellness programs Cost-Control Trends Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz Other Benefits Issues Long-Term Care Insurance for older workers is a growing issue. Life Insurance Types Group life insurance Accidental death and dismemberment Personnel policy considerations Benefits-paid schedule Supplemental benefits Financing (employee contribution) Benefits for Part-Time and Contingent Workers Leave and health benefits available to part-time workers. Benefits for long-term independent contractors. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Defined contribution plans Retirement Benefits Defined benefit plans Defined contribution plans Qualified plans Types of Pension Plans Nonqualified plans Pension plans are financial programs that provide income to individuals in their retirement. We can classify pension plans in three ways: contributory versus noncontributory plans, qualified versus nonqualified plans, and defined contribution versus defined benefit plans. Plan details are based on each country law. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Family-Friendly (Work–Life) Benefits Subsidized child care Sick child benefits Elder care Time off Subsidized employee transportation Food services Educational subsidies Fitness and medical facilities Flexible work scheduling Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Flexible Benefits Programs Cafeteria (Flexible Benefits) Approach Each employee is given a limited benefits fund budget to spend on preferred benefits. Types of plans Flexible spending accounts Core plus option plans Employee Leasing Professional employer organizations or staff leasing firms Handle human resources functions for leased employees of small firms Can provide benefits by aggregating employees into larger insurable groups Can raise worker commitment, co-employment, and workers’ compensation issues Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Flexible Work Schedules Flextime Compressed workweek schedules Workplace flexibility Job sharing Work sharing Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz Key Terms financial incentives Expectancy variable pay standard hour plan annual bonus stock option golden parachutes team (or group) incentive plan profit-sharing plan employee stock ownership plan (ESOP) Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz Key Terms benefits supplemental pay benefits unemployment insurance sick leave supplemental unemployment benefits workers’ compensation group life insurance Social Security pension plans financial incentives Expectancy variable pay annual bonus profit-sharing plan employee stock ownership plan (ESOP) stock option golden parachutes team (or group) incentive plan early retirement family-friendly (or work–life) benefits flexible benefits plan/cafeteria benefits plan compressed workweek workplace flexibility job sharing work sharing Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz

Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz LEARNING OUTCOMES Explain how you would apply five motivation theories in formulating an incentive plan. Discuss the main incentives for individual employees. Discuss the pros and cons of commissions versus straight pay incentives for salespeople. Describe the main incentives for managers and executives. Name and define the most popular organization wide variable pay plans. Outline the steps in designing effective incentive plans. Ing. Miloš Krejčí milos.krejci@mail.vsfs.cz