Performance Management Chapter 4

Skyler Milkovich
Flashcards by Skyler Milkovich, updated more than 1 year ago More Less
Skyler Milkovich
Created by Skyler Milkovich almost 4 years ago


Chapter 4

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Question Answer
4 Types of Rewards 1. Monetary and tangible 2. Social 3. Status enhancement 4, Intrinsic
Monetary/Tangible Rewards Rewards such as: Pay raises Profit sharing Bonuses Vacation Time
Social Rewards Rewards such as: Praise Informal recognition Positive feedback Company parties/events/games
Status Enhancement Rewards such as: Promotion Wall plaques Office size Rings/watches
Intrinsic Rewards Rewards such as: Job autonomy Job variety Authority to choose work location, work time
Reward System Objectives Attract and retain qualified employees Foster high performance and innovation Build employee competence Maintain equity Maintain high employee satisfaction Foster long term commitment
Considerations in Compensation Strategy Design Monetary vs. non-monetary rewards Owner vs. Employee needs Effort-reward relationship Equity Performance vs. Membership Job vs. Knowledge Open vs. Secret Centralized vs. Decentralized
Key attributes of a good pay system Control Objectives Meaningful Perceived contingency Equity and fairness Non-quantifiable performance dimensions Simplicity Achievable Timely Economical
Agency Theory A theory that postulates that a firm is a series of contractual relationships between owners and workers. Owners invest in firms to increase their own wealth and contract with employees to produce goods and services
Expectancy Theory A theory that suggests that employee motivation is affected by the performance outcome relationship, the attractiveness of the outcome to the person concerned, and the perceived effort-reward relationship
Internal Equity Is the perceived fairness of pay structure within a firm
External Equity Is the perceived fairness of pay relative to what other employers are paying for similar services and efforts
Equity Theory Theory that proposes employees examine the relationship between their outcomes from a job (such as pay) and their inputs (such as education), by computing a ratio of these and comparing it to the ratios of relevant others
Compa-ratio An index of how the salary of an employee relates to the mid-point of the relevant pay grade Comp-ratio for employee = Salary/Midpoint of pay grade Comp-ratio for groups = Average Salaries/Midpoint of pay grade
Performance Contingent Compensation Ties a substantial proportion of employee's pay to job outcomes
Membership-Contingent Compensation System Offers the same wage to every employee in a given job, as long as the employee achieves at least satisfactory performance
Knowledge-Based Pay Systems Rewards employees on the basis of the competencies they possess, the jobs they can do, or the knowledge they possess
*Key Attributes of Performance Maximizing Compensation Systems* C.O.M.P.E.N.S.A.T.E C = Control O= Objectives M = Meaningful P = Perceived Contingency E = Equity and Fairness N = Non-quantifiable performance S = Simplicity A = Achievable T = Timely E = Economical
Piece-Rate Pay System Compensates employees for each unit of output
Merit Pay Is a typical annual salary that reflects performance Typically, 3 to 4% increase
Profit Sharing Plans Pay employees their regular wages and a share of the company profits, usually on an annual basis Three types: Current distribution plans Deferred payout plans Combination plans
Employee Stock Ownership Plan Plans in which employees own actual company stock or representations of such stock Usually, longer term service is required Employees may expose themselves to financial uncertainty
Cost Reduction Plans Plans that reduce labor costs and the sharing of resultant savings among employees A portion (typically, 50%] of the labour costs saved is shared amongst employees Cost reduction plans may have a narrow perspective
Triple Goals of a Compensation System 1. Foster a culture of high performance 2. Develop employee competencies that help achieve organizational goals 3. Achieve cost-effectiveness
Steps to Develop a Compensation Plan 1. Define goals clearly 2. Focus on uniqueness 3. Identify competencies 4. Consult and compensate
Differentially Rewarding Competencies 286c6f7c-9eb1-4e6d-8664-e024f5f36707.png (image/png)
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