...infrastructure development. 2010. Nr. 5 (24). Research papers. CRITICAL ISSUES FOR COMPENSATION AND INCENTIVES MANAGEMENT: THEORETICAL APPROACH Ramunė Čiarnienė, Milita Vienažindienė Kaunas University of Technology, Vilnius Co-operative College For most people, pay is a primary reason for working. Indeed, compensation is at the core of any employment exchange, and it serves as a defining characteristic of any employment relationship. The study focuses on critical points of compensation and incentives management. The fundamentals of a good incentive program include the elements of vision, potential, communication and motivation and can be realized if incentive promises are fulfilled – by both employer and employee. The aim of the paper is to identify the most important attributes of compensation and incentives management. Research method is the analysis and synthesis of scientific literature, logical, comparative and graphic representation. On the base of analysis, authors of this paper present the model of incentive system for positive employee attitudes and behaviors. Keywords: compensation, employees, incentives, management. Introduction Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. Pay may be received directly in the form of cash (e.g., wages, merit increases, incentives, cost of living adjustments) or indirectly through benefits and services (e. g., pensions, health insurance...
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............................................... 4 3 References .................................................................................................................... 9 PQHRM/KDY/12 Page ii Module -4 Compensation Management 1 Question 1 WHAT ARE THE MANAGEMENT ISSUES FACED BY THIS COMPANY? Inability to achieve the 40% of production rate. The company’s initial target was to achieve 40% or above increase in production. At the first 3 months they gradually reached up to 32%. There after it was dropped up to 20% during the latter three months. Increase of the lower quality products during the 6 months. The lower quality and rejects rate was increased by 10 -15% during the 1st 6 months of implementation of the new incentive scheme. As Blue Flowers (Pvt.) Ltd is engaged in manufacturing of high quality artificial flowers to both local & international market quality of the product is a very critical factor. Therefore this considerable rate of quality drop has a large effect on its profit. Demotivation among employees. Due to the...
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...of Bangor Family Physicians in 1986, the practice has used an equal pay compensation model as the reimbursement scheme of choice. Profits that are above overhead costs at the end of the year are portioned out equally to each partner, thus determining the overall amount the physician receives for the year. While this type of compensation model discourages overutilization and allocates risk among all physicians, it negatively affects productivity and does not reward efforts to improve quality. Such a system can only work on the basis that all physicians have the same skill and productivity levels and are equally motivated to contribute to the practice. In Bangor Physician’s situation, each physician believes they are working more than the other and thus should receive greater compensation. Bangor Family Physicians Goals The goal of the case study is to elect the most suitable compensation model that meets all five criteria set by Bangor family Physicians and creates an incentive for all physicians to be as...
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...commentators had the following perspectives about this pay plan: Maggie Coil, vice president of compensation of Motorola, thinks that the employees of Top Chemical should have some input on if and how to change the pay plan since they are the majority that will be affected and by allowing them to be part of the process of designing and implementing the pay plan, it will make it more accepted. Donald Berwick, associate professor at the Harvard Medical School and Harvard School of Public Health in Boston, thought the new pay plan is moving in the right direction, but still needs improvement; there is no focus on customer satisfaction, the numerical goals may be inaccurate and discouraging, and there is no incentive for employees learning new skills. Tom Nyberg, senior business systems specialist for Monsanto, thinks the employees of Top Chemical need to be more involved in creating and designing the new pay plan including...
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...store management systems and procedures for all the stores of Gintong Hiyas and the management of the company's two branches. The focus of the case are two the stores managed by Elizabeth so taking her point of view is the most appropriate since she has the knowledge and authority to these stores. The staff incentive system was also implemented under her supervision. II. Analysis of the Case Situation The original store opened in Quezon City in 1968 and sold a line of handmade gold and other jewelry. It expanded in the 1980s by opening four new outlets in different parts of Metro Manila. New lines of jewelry were added as sales expanded. Managing five stores became too difficult for the Santos Family; the original store in Quezon City was closed in 1989. Elizabeth Santos joined the management of Gintong Hiyas after completing her Bachelor's Degree in Commerce in 1992. She designed the store management systems and procedures for all stores while managing one of the Gintong Hiyas stores herself. In 1995, she was asked to manage a store previously ran by her father. In October 1995, Elizabeth introduced an incentive system to increase sales. Thirty percent of the daily wage of the salesgirl will be paid as bonus if the daily quota is exceeded. This resulted in increased sales and morale in the first few months. Employees in other stores were asking for the same incentive scheme. However, the Santos Family decided to wait before implementing the system in the other stores...
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...pay-for-performance approaches to enhancing employee performance, though, that suggest there is more involved than simply throwing money at top performers. Despite these constraints, many authorities suggest that pay-for-performance programs have a lot to offer organizations seeking to identify better ways to improve employee performance. Pay for performance is not a new idea. Organizations all over the world use this type of system when offering bonuses based on predetermined results or commission. Pay-for-performance programs, also known as incentive pay or merit pay, are a solid approach to rewarding top-quality performance by employees in many types of organizations including healthcare settings. Pay for performance is a motivation concept in human resources, in which employees receive compensation for their work based on the level of reaching certain targets individually or with their team, department or company. The term is often referred to when one is addressing the topic of variable pay based on performances. Unfortunately, the perception of such incentive pay approaches is...
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...to Christopher Columbus when he discovered the Americas. There is not one common theme in Freakonomics, instead the book is structured around four essential ideas: incentives are the basis of modern life, conventional wisdom is often wrong, dramatic effects often have distant (even subtle) causes, and experts use their information advantage to serve their own interests. Each consequent chapter is titled with an intriguing question, such as, “what do school teachers and sumo wrestlers have in common” and then answers are provided based on Levitt’s economic research and analysis. One of the primary points emphasized in Freakonomics is that economics is essentially the study of incentives; why people behave in certain ways and how they benefit from the things that they do. The authors explain that there are mainly three varieties of incentives that motivate human decision-making: moral, financial, and social. When people make decisions based on moral incentives they are doing what they feel is “the right thing to do”. Financial incentives exist when decisions are made based on money, economic gain, and/or some other sort of material reward. Lastly, people make decisions based on social incentives, which exist because of societal or group norms and expectations. The authors claim that when incentives are high enough, even naturally ethical people will behave unethically to get what they want....
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...Nicole L. King Baker College HRM315: Evaluating Human Resources Tae Dawson June 13, 2012 Abstract This purpose of this research project was to find out how well BWI HR is meeting the needs of its employees. Fifty surveys were collected and reviewed. One each survey were eight HR services. The HR services are Performance Appraisal, Wage & Salary Administration, Incentive Pay Program, Internal Job Posting, Healthcare Insurance, Technical Training, Career Counseling/Development and Flexible Work Schedule. Each of the HR services had a rating scale to see how important and satisfied the Target employees would rate them. There were three HR services that showed the largest gap between importance and satisfaction. The incentive pay program, performance appraisal system and career counseling and development all showed large negative gaps. The incentive pay program should be changed from an individual-based program to a team/group-based program. The performance appraisal system should evolve into a “social network” type of performance management system. This type of social performance management system will bring many advantages, including empowerment. Finally, the career counseling/development programs should see a small expansion and reviews of the eligible degrees, adding certificates, increasing the tuition reimbursement amount and adding mentoring programs. These improvements should be implemented to improve the HR services, our people and our overall company performance...
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...Moneragala District, with a total workforce of 350.Its products are very well established in local and International outlets. The vision of the company is “To be a leading manufacturer of world class quality artificial flowers in South Asia by year 2015”. The company operates through functional departments, namely Purchasing Department, Production Department, Sales/Marketing Department, Accounts Department and HR Department. From last year onwards, they have been flowing with steady import orders. This trend can be anticipated in the coming years as well. In this background, in order to increase the production at least by 40%, the company engaged in implementing an incentive program, where they gave 10%-15% as an additional incentive when they produced more than the original targets given. After this incentive program was introduced, they ran this for 6 months and evaluated the pros and cons of the...
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...Tournaments and Piece Rates Revisited: A Theoretical and Experimental Study of Premium Incentives Werner Guth Rene Levnsky Kerstin Pully Ori Weiselz June 22, 2010 Abstract Tournaments represent an increasingly important component of organizational compensation systems. While prior research focused on xed-prize tournaments, i.e., on tournaments where the prize or prize sum to be awarded is set in advance, we introduce a new type of tournament into the literature: premium incentives. While premium incentives, just like xed-prize tournaments, are based on relative performance, the prize to be awarded is not set in advance but is a function of the rm's success: the prize is high if the rm is successful and low if it is not successful. Relying on a simple model of cost minimization, we are able to show that premium incentives outperform xed-prize tournaments as well as piece rates. Our theoretical result is qualitatively conrmed by a controlled laboratory experiment and has important practical implications for the design of organizational incentive systems. JEL Classication: C72, C91, J33 Keywords: Tournaments, Incentives, Economic experiments Max Planck Institute for Economics, Kahlaische Strasse 10, 07745 Jena, Germany. yEberhard Karls Universitat Tubingen, Faculty of Economics and Business Administration, Nauklerstrasse 47, 72074 Tubingen, Germany. zThe Hebrew University, Center for the Study of Rationality, Giv'at Ram, Jerusalem 91904, Israel...
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...Importance of alignment [300 words]: The role of incentives in securing execution Employees are the agents of the firm’s owners since they take actions or make decisions that impact the payoff to the owners. The difficulties in the agent-principal relationships arise when the objectives of principal and agent are different and the actions taken by the agent or the information possessed by the agent are hard to observe. Employees care about the job in terms of the value the job generates for themselves. Thus providing the right incentives to employees would secure execution of the firm’s plans to meet the firm’s objectives. There are financial and non-financial incentives. Non- financial incentives are social and moral incentives. Which incentives are appropriate depends on the objective of the company. Since motivation comes from within the employees, the personality, needs and interest of each employee determine the right incentives that will influence employees to self motivate and produce the best work possible that will contribute to the firm meeting its objectives. Reward and recognition is concerned with the range of practices an organisation undertakes (financial and non-financial) to compensate employees, maximise employee engagement and encourage behaviours that lead to organisational success. A good reward and recognition system should motivate employees while aligning their goals with those of the organisation. Such a system involves balancing employee remuneration and...
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...focused on how best to compensate employees for their performance in recent years. Moreover, because employee performance and productivity is inextricably related to organizational profitability, these issues have assumed new relevance and importance in the current economic environment. There have been some mixed reviews concerning pay-for-performance approaches to enhancing employee performance, though, that suggest there is more involved than simply throwing money at top performers. Despite these constraints, many authorities suggest that pay-for-performance programs have a lot to offer organizations seeking to identify better ways to improve employee performance. In this regard, Miller, Hildreth and Rabin (2012) note that, “Individual incentives have a central role to play in the success of most conceptual schemes related to performance. Such plans, while very difficult, have large possibilities; seemingly insurmountable obstacles can be overcome if the emphasis moves to the employee's relative needs for power, affiliation, and achievement” (p. 230). These are tall orders for any human resource manager and an organization’s leadership, though, and the fact remains that measuring individual performance is a complicated affair in many types of organizational settings, particularly the nation’s schools where the controversy over pay-for-performance has been especially pronounced. When the need to take into account individual employee’s relative needs for “power, affiliation, and...
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...eCleary Student Guide Support eCleary FAQ Welcome Contacts Resources HW 4 Review of attempt 1 ------------------------------------------------- Top of Form Bottom of Form Started on | Sunday, 5 February 2012, 09:19 PM | Completed on | Sunday, 5 February 2012, 09:58 PM | Time taken | 38 mins 15 secs | Marks | 13/20 | Grade | 6.5 out of a maximum of 10 (65%) | Question 1 Marks: 1 A compensation program that includes all performance indicators that influence an employee's output is called the: Choose one answer. | a. informativeness principle. | | | b. incentive coefficient. | | | c. risk-sharing premium. | | | d. efficient bargaining solution. | | Correct Marks for this submission: 1/1. Question 2 Marks: 1 An efficient allocation of risk among employees and owners must: Choose one answer. | a. take into account that performance-based incentives are the sole important component of an employee's salary. | | | b. take into account that...
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...will find the new compensation proposal that will be used for all current employees and new hires. After the merger between InterClean and Enviro Tech the management team requested that a new compensation proposal be created. The new compensation proposal will be effective January 1, 2011 upon approval from the executive management team. The new compensation plan for employees will consist of the employee’s base salary that will be determined by experience and education of each employee, the sales team will also receive commissions on his or her sales per month. The employees on the sales team will also be part of a sales incentive bonus program; this program will be a quarterly and is determined by the sales for each member on the sales team. If the employee meets or exceeds his or her sales goals for the quarter he or she will be eligible for the sales incentive bonus. The compensation plan also includes vacation time, company paid holidays, and personal time. The company gives two weeks vacation to all full-time employees, at five years the employee will have three weeks vacation and at 15 years the employee will have four weeks vacation. The company has seven paid holidays (New Years Day, Memorial Day, 4th of July, Labor Day, Thanksgiving Day and the Day after, and Christmas Day). The company also will give each employee eight personal/sick days. The vacation time will accrue per pay-period and no more than 80 hours can be carried into the next year. The eight personal/sick...
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...stakeholders requires that companies comply with all employment legislation? Son Answer | | Employees | | | Line managers | | | Executives | | | U. S. Government | Question 3 COLA (Cost of Living adjustments): Ha Answer | | are tied to changes in the price of consumer goods. | | | are part of seniority pay systems. | | | reward employees based upon the achievement of individual goals. | | | are offered as a type of merit pay. | Question 4 __________ is the term used to describe both the monetary and nonmonetary rewards an employee receives. Ha Answer | | Extrinsic compensation | | | Salary | | | Discretionary benefits | | | Strategic compensation | | | | Question 5 __________ focuses on gaining competitive advantage by being the lowest-cost producer of a good or service within the market place. MA Answer | | Differentiation strategy | | | Cost leadership strategy | | | Competitive strategy | | | Core compensation | Question 6 List and explain the five different stakeholders of a company’s compensation system. Son There are five different stakeholders of a company compensation system and the human resource department provides them within and outside the companies. They are as follow: Employees, line managers, executives, unions, and US government. Stakeholders is performance-based compensation that focuses everyone in an organization on long-term while providing unlimited compensation opportunities for...
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