HR Chapter 11: Rewarding Performance
48 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is an advantage of using plantwide plans?

  • Cost savings earned by treating employees better (correct)
  • Increased management control over employees
  • Enhanced job security for all employees
  • Reduction in turnover rates

Which of the following is a disadvantage of plantwide plans?

  • Increased employee participation in decision-making
  • Enhanced competitiveness in the market
  • Improvement in employee morale
  • Protection of low performers (correct)

What condition does NOT favor the implementation of plantwide plans?

  • Firm size
  • High employee turnover (correct)
  • Stability of the product market
  • Corporate culture

Which advantage is associated with corporatewide plans?

<p>Financial flexibility for the firm (B)</p> Signup and view all the answers

What is a significant disadvantage of corporatewide plans?

<p>Limited effect on productivity (B)</p> Signup and view all the answers

Which condition is least likely to favor corporatewide plans?

<p>Small firm size (C)</p> Signup and view all the answers

Which feature is typically included in executive pay-for-performance plans?

<p>Golden parachutes (B)</p> Signup and view all the answers

What is a common goal of implementing pay-for-performance plans for salespeople?

<p>Increase in sales productivity (A)</p> Signup and view all the answers

What is a primary goal of pay-for-performance systems?

<p>To build employee trust and boost performance (D)</p> Signup and view all the answers

Which of the following is NOT considered an individual-based pay-for-performance plan?

<p>Profit sharing (D)</p> Signup and view all the answers

What is one advantage of individual-based pay-for-performance plans?

<p>They align employee goals with organizational goals (D)</p> Signup and view all the answers

Using motivation and nonfinancial incentives is crucial for

<p>Increasing employee involvement (D)</p> Signup and view all the answers

Which of the following layers of rewards can enhance a pay-for-performance system?

<p>Implementing multiple types of rewards (A)</p> Signup and view all the answers

What is an example of a macro-level pay-for-performance plan?

<p>Gainsharing (D)</p> Signup and view all the answers

In the context of pay-for-performance plans, which culture would benefit the most from individual-based rewards?

<p>Individualistic culture (B)</p> Signup and view all the answers

What is a potential disadvantage of individual-based pay-for-performance plans?

<p>They may create inflexibility within organizations. (D)</p> Signup and view all the answers

Which statement describes a potential misconception about pay-for-performance systems?

<p>They solely rely on financial incentives. (C)</p> Signup and view all the answers

Under what condition is an individual-based pay-for-performance plan most likely to succeed?

<p>When the contributions of individual employees can be accurately isolated. (C)</p> Signup and view all the answers

What is one advantage of implementing team-based pay plans?

<p>They foster group cohesiveness. (A)</p> Signup and view all the answers

Which disadvantage is commonly associated with team-based pay plans?

<p>Difficulty in identifying meaningful groups. (A)</p> Signup and view all the answers

For team-based plans to be successful, which factor is essential?

<p>Intertwined work tasks. (C)</p> Signup and view all the answers

What type of reward system is exemplified by plantwide plans?

<p>Rewards based on the performance of the entire plant. (A)</p> Signup and view all the answers

Which factor contributes to the success of team-based pay plans?

<p>When employees are intrinsically motivated. (C)</p> Signup and view all the answers

What challenge may arise from team-based plans in terms of performance?

<p>Creation of social pressures to limit performance. (D)</p> Signup and view all the answers

What is a potential disadvantage of a straight-commission sales compensation plan?

<p>It may lead to aggressive behavior from sales representatives. (B)</p> Signup and view all the answers

Which group is primarily responsible for setting executive pay?

<p>The board of directors (B)</p> Signup and view all the answers

What is one major challenge of pay-for-performance systems?

<p>Difficulties in measuring performance (A)</p> Signup and view all the answers

Which psychological impact can a pay-for-performance system have on employees?

<p>Job dissatisfaction and stress (D)</p> Signup and view all the answers

What advantage is associated with a straight-salary compensation plan for salespeople?

<p>It helps reduce stress levels among sales force. (D)</p> Signup and view all the answers

What approach can help address the challenges of pay-for-performance systems?

<p>Developing a complementary relationship between extrinsic and intrinsic rewards (D)</p> Signup and view all the answers

Incentive systems used for customer service are designed to encourage what?

<p>Better customer service. (C)</p> Signup and view all the answers

What is a characteristic difference between compensation programs for salespeople and other employees?

<p>Sales compensation plans typically focus on individual performance. (C)</p> Signup and view all the answers

What negative behavior could be encouraged by certain pay-for-performance incentives?

<p>Unethical behavior (C)</p> Signup and view all the answers

Which issue is associated with the credibility gap in pay-for-performance systems?

<p>Misalignment between perception and reality of rewards (D)</p> Signup and view all the answers

Which of the following is an implication of using a straight-salary plan?

<p>It may require more managerial oversight. (D)</p> Signup and view all the answers

Which strategy can be used to enhance the effectiveness of pay-for-performance plans for executives?

<p>Designing plans that align with company goals (B)</p> Signup and view all the answers

Which of the following is NOT a potential benefit of a straight-commission sales compensation plan?

<p>It may lead to more robust customer relationships. (D)</p> Signup and view all the answers

What could be a downside of high fixed compensation costs in a sales team?

<p>It may lead to reduced motivation in sales performance. (B)</p> Signup and view all the answers

What is a potential disadvantage of using pay-for-performance systems?

<p>Reduction of intrinsic motivation (C)</p> Signup and view all the answers

What is a potential disadvantage of combining salary with straight commission sales?

<p>Sales force may not understand the most important objectives (A)</p> Signup and view all the answers

How should organizations structure performance incentives to avoid hindering teamwork?

<p>By utilizing group-based performance metrics (C)</p> Signup and view all the answers

Why can pay-for-performance contribute to greater commitment among employees in small firms?

<p>It provides clear feedback regarding contributions (C)</p> Signup and view all the answers

Which of the following is a benefit of implementing a pay-for-performance plan?

<p>It attracts and retains talent effectively (B)</p> Signup and view all the answers

Which of the following represents a challenge in designing pay-for-performance systems?

<p>Establishing consistent company-wide performance metrics (B)</p> Signup and view all the answers

What is a potential problem for top salespeople in a combined salary and commission structure?

<p>They may find the current job less attractive than alternatives (A)</p> Signup and view all the answers

How can feedback improve the efficacy of pay-for-performance in small firms?

<p>By helping employees understand their individual contributions (C)</p> Signup and view all the answers

What might be a consequence of poorly designed pay-for-performance systems?

<p>Confusion regarding performance expectations among employees (B)</p> Signup and view all the answers

What is one way to effectively implement pay-for-performance in small firms?

<p>Encouraging employee input in setting performance goals (B)</p> Signup and view all the answers

Flashcards

Pay-for-Performance System

A system that rewards employees based on their performance. This can be at the individual, team, or organizational level.

Building Employee Trust

Creating an environment where employees believe that their efforts and performance truly matter, making them more likely to work hard and strive for excellence.

Use Multiple Layers of Rewards

Providing a variety of reward options, such as bonuses, promotions, and recognition programs, to cater to different employee motivations and values.

Increase Employee Involvement

Engaging employees in setting goals, evaluating performance, and designing reward systems. This leads to better ownership and commitment.

Signup and view all the flashcards

Individual-Based Pay Plans

Pay-for-performance programs that reward individual employees based on their individual performance. This includes merit pay, bonuses, and awards.

Signup and view all the flashcards

Merit Pay

A system where employees receive a raise based on their performance evaluation. This is a common form of individual-based pay.

Signup and view all the flashcards

Bonus Programs

These offer one-time lump-sum payments to employees who exceed their performance targets.

Signup and view all the flashcards

Awards

Recognition programs that acknowledge and reward employee achievements with non-monetary incentives, such as plaques, trips, or public praise.

Signup and view all the flashcards

Individual-Based Plans

Pay-for-performance plans that reward individual employees based on their individual performance.

Signup and view all the flashcards

Disadvantages of Individual-Based Plans

These plans can lead to employees focusing only on their own goals, difficulty in linking performance to pay, potential conflict with quality goals, and inflexibility in organizations.

Signup and view all the flashcards

When are Individual-Based Plans Best?

These plans work well when individual contributions are easily measured, the job requires autonomy, and cooperation is less crucial to success.

Signup and view all the flashcards

Team-Based Plans

Pay-for-performance plans that reward teams based on their collective performance.

Signup and view all the flashcards

Advantages of Team-Based Plans

These plans promote group cohesion and make it easier to measure team performance.

Signup and view all the flashcards

Disadvantages of Team-Based Plans

These plans can lead to free-riders, social pressure to limit performance, difficulty in identifying meaningful teams, and increased competition between teams.

Signup and view all the flashcards

When are Team-Based Plans Best?

These plans work well when work tasks are interconnected, tied to team incentives, and employees are intrinsically motivated.

Signup and view all the flashcards

Plantwide Plans

Pay-for-performance plans that reward all workers in a plant or business based on the entire plant's performance.

Signup and view all the flashcards

Executive Pay

Compensation for top-level managers set by the board of directors.

Signup and view all the flashcards

Sales Compensation Programs

Plans designed to motivate salespeople to achieve revenue goals.

Signup and view all the flashcards

Customer Service Incentives

Reward systems used to encourage employees to provide exceptional customer service.

Signup and view all the flashcards

Plantwide Plans: Advantages

Plantwide plans offer benefits such as motivating employees through intrinsic rewards, cost savings from improved employee treatment, and active employee involvement leading to better production processes.

Signup and view all the flashcards

Straight-Commission Sales Plan

Compensation based solely on sales volume, with higher earnings for more sales.

Signup and view all the flashcards

Straight-Salary Sales Plan

Compensation based on a fixed salary, regardless of sales performance.

Signup and view all the flashcards

Plantwide Plans: Disadvantages

Plantwide plans can have downsides like protecting low performers, problems with reward criteria, and potential conflicts between management and labor.

Signup and view all the flashcards

Straight-Commission Plan: Goods

May boost sales, encourage entrepreneurial spirit, and lower fixed costs.

Signup and view all the flashcards

Plantwide Plans: Favoring Conditions

Plantwide plans are more likely to succeed in firms with a suitable size, technology, historical performance, corporate culture, and stability in the product market.

Signup and view all the flashcards

Corporatewide Plans: Types

Corporatewide plans include profit sharing, where employees receive a portion of the company's profit, and Employee Stock Ownership Plans (ESOPs), where employees own company stock.

Signup and view all the flashcards

Straight-Commission Plan: Bads

Quality of service may suffer, sales reps might oversell, and aggressive tactics can alienate customers.

Signup and view all the flashcards

Straight-Salary Plan: Goods

Sales reps spend more time with customers, reduce stress, and may improve cooperation.

Signup and view all the flashcards

Corporatewide Plans: Advantages

Corporatewide plans offer benefits such as financial flexibility for the company, increased employee commitment, and tax advantages.

Signup and view all the flashcards

Corporatewide Plans: Disadvantages

Corporatewide plans can have downsides like exposing employees to financial risks, vulnerability to economic factors, limited impact on productivity, and long-term financial difficulties.

Signup and view all the flashcards

Straight-Salary Plan: Bads

May reduce motivation, increase fixed costs, and lose top performers who seek incentives.

Signup and view all the flashcards

Corporatewide Plans: Favoring Conditions

Corporatewide plans are more effective when the company is large, departments are interconnected, market conditions are favorable, and other incentives are available.

Signup and view all the flashcards

Executive Plans: Components

Executive compensation plans typically include salary, short-term incentives, long-term incentives, golden parachutes, rewards for social responsibility, and perks.

Signup and view all the flashcards

Pay for Performance

A system where employee compensation is directly linked to their individual or team performance, rewarding higher contribution with greater rewards.

Signup and view all the flashcards

Challenges of Pay for Performance

These systems can face difficulties ensuring fairness, preventing unethical behavior, and maintaining team spirit while also addressing concerns like measuring performance accurately and ensuring the system's credibility.

Signup and view all the flashcards

‘Do only what you get paid for’ syndrome

When employees focus solely on tasks directly tied to their pay, neglecting other important responsibilities or activities that contribute to the overall success of the organization.

Signup and view all the flashcards

Negative effects on cooperation

Pay-for-performance systems can unintentionally create competition among individuals or teams, hindering collaboration and teamwork.

Signup and view all the flashcards

Lack of control

Pay-for-performance systems can be difficult to implement effectively due to factors outside of employee control, such as market fluctuations or changes in company strategy, which may affect performance and rewards.

Signup and view all the flashcards

Psychological Contracts

The unspoken expectations and understandings employees hold about the relationship they have with their employer, which can be influenced by pay-for-performance systems.

Signup and view all the flashcards

Credibility Gap

A lack of trust or confidence in the fairness and effectiveness of the pay-for-performance system, which can lead to negative employee perceptions and decreased motivation.

Signup and view all the flashcards

Job dissatisfaction and stress

Pay-for-performance systems can create pressure and anxiety for employees, leading to dissatisfaction and burnout if they feel like their efforts are not sufficiently recognized or rewarded.

Signup and view all the flashcards

Combining Salary with Straight Commission Sales

A pay structure that combines a fixed salary with a commission based on sales performance, aiming to balance employee security with sales incentives.

Signup and view all the flashcards

Goods of Combining Salary with Straight Commission

This pay structure encourages good customer service and sales drive, offering a good middle ground between customer focus and sales targets.

Signup and view all the flashcards

Bads of Combining Salary with Straight Commission

Complexity in plan design, unclear priorities for salespeople, and potential loss of top talent due to higher earning opportunities elsewhere are drawbacks of this pay structure.

Signup and view all the flashcards

Pay-for-Performance in Small Firms

In smaller companies, pay-for-performance programs can foster employee commitment, clarity in contributions, and attract/retain talent. Frequent feedback is crucial for success.

Signup and view all the flashcards

Benefits of Pay-for-Performance in Small Firms

This system encourages active employee participation, allows for clearer understanding of individual contributions, and facilitates attracting and retaining talent.

Signup and view all the flashcards

Designing Pay-for-Performance for Executives

Tailoring pay-for-performance plans for executives typically involves long-term goals, company-wide performance metrics, and a strong emphasis on leadership and strategic decision-making.

Signup and view all the flashcards

Designing Pay-for-Performance for Salespeople

Effective sales pay-for-performance plans often focus on individual sales quotas, customer satisfaction ratings, and incentivizing specific sales behaviors like cross-selling or upselling.

Signup and view all the flashcards

Study Notes

Chapter 11: Rewarding Performance

  • Learning Objectives:
    • Grasp major challenges in pay-for-performance systems
    • Develop competence in dealing with potential problems in pay-for-performance systems
    • Understand advantages and disadvantages of various pay for performance plans
    • Develop competence in designing pay for performance for executives and sales people

Pay-for-Performance: Challenges

  • Challenges (1 of 3):

    • Individual employees and work teams contribute differently to the firm
    • Firm performance depends on individual and group performance
    • High performers are rewarded based on relative performance

  • Challenges (2 of 3):

    • "Do only what you get paid for" syndrome
    • Unethical behavior
    • Negative impact on cooperation
    • Lack of control
    • Measurement difficulties in performance

  • Challenges (3 of 3):

    • Psychological contracts
    • Credibility gap
    • Job dissatisfaction and stress
    • Potential reduction in intrinsic drives

  • Incentives may cause unethical behaviors:

    • Rewarding hospitals for quality care
    • Gainsharing for doctors
    • Doctors paid to prescribe generic pills
    • Surgeons report cards
    • Undisclosed doctor practices
    • Use of orthopedic devices

Meeting the Challenges of Pay-For-Performance Systems

  • Meeting the Challenges (1 of 3):

    • Develop a complementary relationship between extrinsic and intrinsic rewards
    • Appropriately link pay and performance
    • Integrate pay for performance into a broader HRM system

  • Meeting the Challenges (2 of 3):

    • Build employee trust
    • Promote belief that performance makes a difference
    • Use multiple layers of rewards

  • Meeting the Challenges (3 of 3):

    • Increase employee involvement
    • Stress the importance of acting ethically
    • Use motivation and non-financial incentives

Pay-for-Performance Programs

  • Unit of Analysis:
    • Micro Level (Individual): Merit pay, Bonuses, Awards, Piece rate
    • Micro Level (Team): Bonuses, Awards
    • Macro Level (Business Unit/Plant): Gainsharing, Bonuses, Awards
    • Macro Level (Organization): Profit sharing, Stock plans

Types of Pay-For-Performance Plans

  • Pay-for-performance plans are designed to reward:
    • Individual performance
    • Team performance
    • Business unit or plant performance
    • Organization performance
    • Any combination of the above

Individual-Based Plans

  • (1 of 4): Individual-based pay plans are the most widely used plans in industry

    • Merit pay
    • Bonus programs (lump-sum payments)
    • Awards

  • (2 of 4): Advantages of individual-based plans:

    • Repeated performance
    • Goal orientation and shaping goals through systems
    • Reward-individual equity fit with an individualistic culture

  • (3 of 4): Disadvantages of individual-based plans:

    • Tying pay to goals might promote single-mindedness
    • Difficulty linking performance and pay
    • Individual pay plans might hinder quality goals
    • Individual-based programs may be inflexible in some organizations

  • (4 of 4): Individual-based plans are more likely to succeed when:

    • Individual contributions are easily isolated
    • The job demands autonomy
    • Cooperation is not critical to performance

Team-Based Plans

  • (1 of 4): Increasing number of firms redesigning work for teams. Cash or non-cash rewards. Provide integral team support. Equal rewards for members. Members decide on distribution.

  • (2 of 4): Advantages of team-based plans are:

    • Fostering group cohesiveness
    • Aid in performance measurements

  • (3 of 4): Disadvantages of team-based plans:

    • Free riders
    • Social pressures to limit performance
    • Identifying meaningful groups
    • Intergroup competition

  • (4 of 4): Team-based plans are more likely to succeed when:

    • Work tasks are intertwined
    • Implemented with team-based incentives
    • Employee intrinsic motivation
    • Group goals exist
    • Blend diverse backgrounds

Plantwide Plans

  • (1 of 4): Reward all workers in a plant or business unit based on the plant's performance

    • Gainsharing

  • (2 of 4): Advantages:

    • Capitalizes on intrinsically motivated employees
    • Cost savings from better treatment of employees
    • Employee input and improved production process

  • (3 of 4): Disadvantages:

    • Protection of low performers
    • Problems stemming from criteria used to trigger rewards
    • Management-labor conflict

  • (4 of 4): Conditions favoring plantwide plans:

    • Firm size
    • Technology
    • Historical performance
    • Corporate culture
    • Product market stability

Corporatewide Plans

  • (1 of 4): Profit sharing and employee stock ownership plans (ESOPs)

  • (2 of 4): Advantages:

    • Financial flexibility for the firm
    • Increased employee commitment
    • Tax advantages

  • (3 of 4): Disadvantages:

    • Employees may be at risk due to macroeconomics
    • High exposure to macroeconomic forces
    • Limited impact on productivity
    • Long-term financial difficulties

  • (4 of 4): Situations favorable for corporatewide plans:

    • Firm size
    • Interdependence of different business parts
    • Market conditions
    • Presence of other incentives

Executive and Salespeople Plans

  • Executives (1 of 2): Salary, short-term incentives, long-term incentives, golden parachutes, rewards for social responsibility, perks

  • Executives and Salespeople (2 of 2):

    • Boards set executive pay
    • Salespeople bring revenue to the company
    • Compensation for salespeople has unique program needs

Rewarding Excellence in Customer Service

  • Many companies use incentive systems to encourage better customer service
  • Customer service rewards can be individual, team- or plant-based.

How Should Employees in Sales Be Compensated?

  • Direct Commission Plan:

    • Goods: Generates more accounts, motivates sales force, entrepreneurial orientation, reduces expenses
    • Bads: Quality of service may suffer, representatives may exaggerate the product features

  • Straight Salary Plan:

    • Goods: Employees spend more time with customers, reduces stress, and cooperation increases.
    • Bads: Reduced motivation to sell, increases fixed costs might increase costs and may reduce incentives for superior sales people.

  • Combined Plan:

    • Goods: Reinforces good citizenship behavior while motivating sales, middle-ground solution, and supports multiple marketing goals
    • Bads: Designing and managing the plan can be complicated, representatives may not understand the most important objectives, might encourage higher earnings in other companies

Pay for Performance in Small Firms

  • Active participation builds commitment
  • Easy for employees to see their contributions
  • Frequent feedback helps employees see contributions
  • Offers opportunity to attract and retain talent
  • Increases employee identification with the company

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Managing Human Resources Chapter 11 PDF

Description

Explore the complexities of pay-for-performance systems in this quiz focused on Chapter 11 of Human Resource Management. Learn about the challenges, advantages, and disadvantages of various pay-for-performance plans, and develop skills in designing effective compensation strategies for executives and salespeople. Test your knowledge on key issues that impact firm performance and employee motivation.

More Like This

Pay for Performance Quiz
0 questions

Pay for Performance Quiz

PromptGarnet avatar
PromptGarnet
CHAPTER 8 Pay for Performance
108 questions

CHAPTER 8 Pay for Performance

GentleCosecant avatar
GentleCosecant
Performance-Based Pay
10 questions

Performance-Based Pay

GuiltlessEcstasy1426 avatar
GuiltlessEcstasy1426
Performance and Competency-Based Pay Overview
40 questions

Performance and Competency-Based Pay Overview

HighQualityFlugelhorn avatar
HighQualityFlugelhorn
Use Quizgecko on...
Browser
Open
Browser
Browser