Employee Rewards PDF

Financial incentives to improve employee performance The carrot and the stick theory To get the donkey to move faster and work harder you can either choose: To bait it with a juicy carrot To beat it with a hard stick The choice is yours – which will make the donkey work harder? W...

Financial incentives to improve employee performance The carrot and the stick theory To get the donkey to move faster and work harder you can either choose: To bait it with a juicy carrot To beat it with a hard stick The choice is yours – which will make the donkey work harder? What if I give you £5? Will you work harder in today’s lesson if I pay you £5? What if the hard workers ONLY get £5, is this a fair system? What could I give you that would make you work harder? What about if I shout at you will you work harder? In “stick” businesses the boss thinks that the best way to motivate their staff is through; shouting, punishment if they don’t work hard e.g. dock their pay What if I started to shout at you in today’s lesson? Would this motivate you? How should I decide who to shout at? How do you think you would react? Is this the best way to motivate staff in a business? Which theorist does this most sound like? Motivation methods Motivation methods can be divided into financial and non- financial Get ready to make some notes on these from the next few slides Non-financial Financial Financial motivation methods introduction There are lots of financial incentives to improve employee performance, but these are the five that the exam board would like you to know about. Get ready to make some notes on: 1. piecework 2. commission 3. bonus 4. profit share 5. performance-related pay Financial #1 Piece work Financial Employees are paid per finished item or unit Also called “output workers” Employers choose to pay either the Minimum Wage or a “fair piece rate” based on average times taken to complete the product An example might be knitted gloves or hats, the employee would be paid per item knitted #1 Piece work pros and cons Disadvantages As workers speed up they may cut corners Advantages Quality may suffer √ Experienced and efficient Slower workers may fall under workers can earn more the national minimum wage √ Incentive to complete the work √ Employees may work more hours to get the job done √ Home workers can start and finish when they want which means the work fits round a family #2 Commission Salespeople may be paid Financial commission only, or low basic salary and commission OTE is ‘on target earnings’ and in a job advertisement lets the candidate know the potential top earnings that can be made in the job The commission may be paid a percentage% of unit price or per unit sold Examples are: Estate agents, car sales people, financial advisors #2 Commission pros and cons Disadvantages Salespeople on commission only could earn no money at all Not a steady income Advantages Risky in a recession √ Skilled salespeople can make Employees are selling rather than meeting needs of customers very good money Temptation to pressure sell or oversell √ Employer is not paying for down time when the employee is not selling √ Motivates employees to sell more #3 Bonus An employee bonus is a lump Financial sum paid on top of a salary or wages this can be for: Sales, for meeting targets Performance, for meeting output or quality targets Christmas, as a yearly bonus Footballers win bonus, this could be a reward paid out related to the number of points gained every league match, but it may also be related to appearances. #3 Bonus pros and cons Disadvantages A cash bonus can be costly for any company, so a business may offer gift cards instead When an employee receives a bonus, it Advantages becomes part of his total income at the A bonus payment to an employee can end of the year, the employee will also be used as an incentive, especially in a be paying taxes on the bonus they field where employees must make receive sales or meet specific goals. A bonus payment can also be used as a means of appreciation for an employee’s hard work throughout the year or in a specified amount of time in the year. #4 Profit share Financial Employees may be paid an annual dividend based on the level of profits made by the firm Employees keep costs down (don’t overspend a budget) to keep profits high Employees become more loyal to the firm Example: John Lewis pays dividends to employees – in the photo the staff have just heard that they have had a 17% profit share on the top of their wages. #4 Profit share pros and cons Disadvantages The salaries of the individual employees go up equally, not on the basis of merit or promotion, this does not necessarily motivate individuals Advantages The focus of the employee may be on the profit share rather than on quality customer Brings employees together to work towards service a common goal. Their sole aim will be the success of the company Motivation levels will be high and it encourages teamwork The employee focus will be on profitability Increases commitment to the organisation among the employees Employee can identify with the company. He or she will feel part of it Bridges the gap between the employee and employer #5 Performance related pay Performance related pay is a system of Financial motivation introduced in the 1980s in banking and public sector A line manager sits with a worker in an appraisal and decides a set of criteria or objectives that the employee must fulfil. From this personal targets are set Further appraisals will then determine how well the employee has done. For example: Excellent employee gets 10% bonus on pay Good employee gets 5% bonus on pay Satisfactory no bonus is paid to employee #5 Performance related pay pros and cons Disadvantages Critics say it causes jealousy and unrest Those that don’t meet the targets Advantages blame the line manager and can become demotivated. Bonuses Advantage is there is a are often too low to act as an direct link between the incentive to work towards targets performance of an employee and how much they are paid Easy for the business to rank their staff when look at who to promote Ross McEwan boss of RBS Non-financial techniques to improve employee performance Non - financial motivation methods introduction There are lots of non-financial techniques that a business might use to improve employee performance, these are the 8 that your exam board would like you to know about. Get ready to make some notes on these 8 areas: 1. delegation 2. consultation Non-financial 3. empowerment 4. team working 5. flexible working 6. job enrichment 7. job rotation 8. job enlargement  Non-financial #1 Delegation This method of non-financial motivation involves allocating more complex tasks to employees The manager or supervisor delegating needs to have the authority to delegate The manager makes a list of everything they do then divide up some of the tasks amongst their subordinates in the organisational hierarchy #1 Delegation pros and cons Disadvantages Managers sometimes allocate tasks when overloaded with work and not when they want to Advantages motivate an employee Gives managers self Managers may not always choose the most suitable confidence, empowers employee to delegate to managers to make decisions and allocate tasks to the most appropriate member of staff Makes sure the team’s potential is maximised Builds trust between the manager and the employees Ross McEwan boss of RBS  Non-financial #2 Consultation This method of non-financial motivation involves giving employees a chance to be part of the decision making process This will involve employees in discussions with management on topics such as how to improve productivity, cut costs or problem solve By law a business has to consult with their employees on: health and safety issues changes to the contract of employment redundancies Jes Staley – Barclays Chief Executive Changes to pension schemes What would you like to be consulted about in school? #2 consultation pros and cons Disadvantages Employees may not know what it needs o run a successful business, keeping costs low Employees may come up with grudges Advantages against the company or amongst Effective consultation can help avoid themselves any minor issues in the business becoming larger e.g. lack of air conditioning Consultation can help avoid a union action Consultation can help the employees feel motivated as their views are asked for on certain matters Quality circles are a useful way to motivate workers in a production environment  Non-financial #3 empowerment This method of non-financial motivation involves allowing employees more authority to delegate tasks to others This means that the person most suitable to make the decision gets the responsibility of taking it and can be held accountable for it Jes Staley – Barclays Chief Executive #3 Empowerment pros and cons Disadvantages Sometimes regarded as a cost cutting, a way of delayering, making management redundancies, makes managers insecure and has an associated cost of training Advantages Some see this as giving employees more to do for the same pay, so that mangers can Staff that are recognised for their be made redundant ability, trusted and given control Lack of experience in the job can increase over decisions, therefore are less risk of mistakes being made frustrated with the business and have increased productivity levels Empowered employees are close to issues and problems, may be more effective at problems solving at that level Great involvement means greater loyalty to the business Ross McEwan boss of RBS  Non-financial #4 Team working This method of non-financial motivation involves grouping employees to work in teams Team work is becoming more common in a variety of work settings Through collaboration and discussion a team can often produce a better product or Jes Staley – Barclays Chief Executive solution than an individual working on their own #4 Team working pros and cons Disadvantages Tensions can occur, not everyone gets along, teams suffer from too many meetings, a team is not the solution to every problem Advantages sometimes an individual approach Team working means pooled talents, would be better Individuals can specialise, Life of Brian fun clip about meetings* shared responsibility, Fresh business ideas can be gained through brainstorming sessions, making the business more innovative Well managed work-place teams can produce better results Peer pressure in the group can help to keep motivation levels high Ross McEwan boss of RBS  Non-financial #5 Flexible working (flexitime) This method of non-financial motivation involves offering a variety of working patterns so that employees can achieve a work life balance These may include; part-time, homeworking, term time only, job share and flexible start and finish times with a core of worked times Have you ever been taught by Jes Staley – Barclays Chief Executive two teacher sharing a job, perhaps in primary school? #5 Flexible working Disadvantages It can be difficult to to fit shifts and schedules to suit everyone Some staff may take advantage of Advantages the flexible system and not work as hard or when they should e.g. Greater cost working from home the temptation effectiveness and efficiency, such may be to do something else as savings on overheads when employees work from home or less downtime for machinery when 24- hour shifts are worked The chance to have extended operating hours More job satisfaction and better staff motivation Reduced levels of sickness absence Ross McEwan boss of RBS  Non-financial #6 Job enrichment This method of non-financial motivation involves giving the employee a greater variety of tasks of a higher responsibility This means the job may be redesigned so that it is more challenging and less repetitive For example an employee may be responsible for; planning a Jes Staley – Barclays Chief Executive task, quality, ordering materials, scheduling activities #6 Job enrichment pros and cons Disadvantages Some employees may just feel that the job has become harder May mean the employee will need to be trained on new machinery, in ICT or Advantages other job skills to perform the new The employee benefits from having a tasks more interesting job role, which can be Not all jobs can be enriched e.g. bin very motivating and improve employee man productivity and lower absenteeism rates The employee will feel more loyal to the organisation and they get the sense of achievement (Maslow?) Prepares the employee for possible promotion in the future (succession planning) Ross McEwan boss of RBS  Non-financial #7 Job rotation This method of non-financial motivation involves moving employees from one task to another This means that staff can be trained in a variety of skills, so can be better utilised when there are shortages This is most common on a production line or in a factory #7 Job rotation pros and cons Disadvantages Convincing employees that job rotation is a good thing can be a time consuming process, they may be unwilling to leave a job they know well Advantages or work with a different team Advantage is the business gets multi- It also takes time for employees to skilled employees who can carry out learn the new skills and get up to speed more than one task The job can be less monotonous and boring for the employees, reducing labour turnover rates It is an easy and cost effective way to motivate employees and improve productivity  Non-financial #8 Job enlargement This method of non-financial Daniel Radcliffe tries his hand at motivation involves giving an being a receptionist’s job – look employee more tasks of the how large her job role is video* same level of responsibility This is designed to prevent the employee from getting bored and to expand the scope of their job at the same level (horizontal) This can improve motivation levels as it can give the employee more interesting and varied tasks #8 Job enlargement pros and cons Disadvantages May be seen as more of the same if the employee regards it as just more tasks to get done in a Advantages working day This method can make the job Needs to be linked to a clear less boring, less repetitive, and career progression to make sense to the employee can get the maximum use out of an employee e.g. administrator given some recruitment tasks such as shortlisting candidates Employee productivity may be improved Improves employee retention and absenteeism Ross McEwan boss of RBS