1. Variable Compensation November 8, 2011

2. SEE READINGS!!!!! Bullets are examples!! Chpt 18 –Variable Pay Plan Elements Eligibility Payout timing and frequency –Types of Variable Pay Plans

3. SEE READINGS!!!!! Chpt 19 –Types of Variable Pay Plans –Effectiveness of Plans Chpt 21 –Team-based Incentives

4. SEE READINGS!!!!! Chpt 22 –Profit-sharing and Gainsharing –The Farmer’s Tale –Line-of-sight Measurement

5. SEE READINGS!!!!! Chpt 37 –Balanced scorecard Chpt 38 –Metrics Chpt 39 –Variable compensation and productivity Tables 39.1 and 39.2

6. SEE READINGS!!!!! Chpt 40 –ROI Chpt 41 –Challenges

9. Types of Plans SEE READINGS!!!!! Individual incentive plans –Piece rate plans –Standard hour plan –Business incentives –Stock options

11. Types of Plans Individual incentive plans –Standard hour plan –Piece rate plans –Business incentives Financial measures of org’l performance –Stock options

12. Balanced Scorecard

13. Types of plans Stock option plans –“strike price” –“underwater” –Back dating –Mess = longer

14. 20052011

15. 20052011 100,000 @ $30

17. 20052010 “Back Dating”

18. Types of Plans “special recognition” plans –Cheap –Immediacy –personalized

19. Types of Plans Group incentive plans –Any individual plan based on group performance –Expectancy Theory? –Recall performance appraisal

20. Types of Plans Plantwide/unit wide group plans –Typically gainsharing plans –Profit sharing

21. Types of Plans Employee Stock Ownership Plans (ESOPs) –Tax saving –Smaller companies –10,000 companies/ 9 million employees

22. And in closing……

25. Netflix

27. Type of incentive plans

28. ExecutiveManagement Professional (Sales and Non-sales) Office/ Clerical/ Technician Trades/ Production/ Service Highest- rated 64%27%20%15%13% Middle- rated 44%20%14%11% Lowest- rated 30%10%7%6%4%

29. Porter-Lawler Expectancy Theory

30. Porter and Lawler

31. MotivationEffortAbility ResourcesSatisfaction? Performance Intrinsic Extrinsic

32. Objectives of merit pay Pay-for-performance culture –“at-risk” compensation –Tied to performance appraisal results Org’l success –High when good, low when bad

33. Merit Pay But the REALLY BIG problem…..

34. Darwin Awards A Chronicle of Enterprising Demises Honoring those who improve the species by…..... accidentally removing themselves from it!

35. We have a winner! Corp goal: 2% Company goal: 2% (on top of 2%) Company - $0.67 Employees - $0.33 $1,200 / quarter