Dessler Human Resource Management Chapter 12 Pay for Performance and Financial Incentives Lindenwood University

Financial Incentives
Financial rewards paid to workers whose production exceeds some predetermined standard
Productivity
The ratio of outputs(goods and services) divided by the inputs (resources such as labor and capital)
Fair day’s work
Output standards devised based on careful, scientific analysis
Scientific management
Management approach based on improving work methods through observation and analysis
Intrinsic Motivation
Motivation that derives from the pleasure someone gets from doing the job or task
Expectancy
A person’s expectation that his or her effort will lead to performance
Instrumentality
The perceived relationship between successful performance and obtaining the reward
Valence
The perceived value a person attaches to the reward
Behavior Modification
Using contingent rewards or punishment to change behavior
Variable Pay
Any plan that ties pay to productivity or profitability, usually as one-time lump payments
Piecework
A system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or items per day
Straight Piecework
An incentive plan in which a person is paid a sum for each item he or she makes or sells, with a strict proportionality between results and rewards
Standard Hour Plan
A plan by which a worker is paid a basic hourly rate but is paid an extra percentage of his or her rate for production exceeding the standard per hour or per day. Similar to piecework payment but based on a percent premium
Merit pay (merit raise)
Any salary increase awarded to an employee based on his or her individual performance
Annual Bonus
Plans that are designed to motivate short-term performance of managers and which are tied to company profitability
Stock Option
The right to purchase a stated number of shares of a company stock at today’s price at some time in the future
Golden Parachute
A payment companies make in connection with a change in ownership or control of a company
Team (or group) incentive plan
A plan in which a production standard is set for a specific work group, and its members are paid incentives if the group exceeds the production standard
Organization-wide incentive plan
Incentive plan in which all or most employees can participate
Profit-sharing plan
A plan whereby employees share in the company’s profits
Scanlon plan
An incentive plan developed in 1937 by Joseph Scanlon and designed to encourage cooperation, involvement, and sharing of benefits
Gainsharing Plan
An incentive plan that engages employees in a common effort to achieve productivity objectives and share the gains
Earnings-at-risk pay plan
Plan that puts some portion of employees’ normal pay at risk if they don’t meet their goals, in return for possibly obtaining a much larger bonus if they exceed their goals
Employee stock ownership plan (ESOP)
A corporation contributes shares of its own stock to a trust in which additional contributions are made annually. The trust distributes the stock to employees on retirement or separation from service.