Incentive System.pptx

7/29/2019 Incentive System.pptx

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In enti e

Systems


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Reinforcement theory

Expectancy theory

Pay influences employees through

Wage incentives include all the plans that provide extra

pay for extra performance In addition to regular wages

for the job.

It implies monetary inducements offered toemployees to perform beyond acceptance standards.

MEANING :-


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Behavior that is rewarded will be repeated.

Reinforcement Theory


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Expectancy Theory

ExpectancyIf I attempt this level of

performance, am I likely to

succeed?

InstrumentalityIf I achieve this level of

performance, am I likely to be

rewarded?

ValenceWhat value do I place on the

rewards available to me?

Motivational Force =

E * I * V


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Differ by payment method

frequency of payout ways of measuring performance choice of which employees are covered

Fitting program to situation depends on organizational structure management style type of work

Incentive Programs


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Plan is clearly communicated.

Plan is understood by employees and management. Bonuses are easy to calculate.

Employees participate in administrating the plan.

Employees believe they are being treated fairly.

Employees believe they can trust the company and that theyhave security.

Bonuses are awarded as soon as possible after the desiredperformance.

Conditions for EffectiveIncentive Plans


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Merit Pay

Profit Sharing

Ownership

Gainsharing Group Incentives

Alternative Reward Systems

Piece Rate System

Gantt Task and Bonus Plan Emerson's Efficiency Scheme

Types of Incentive Systems


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Link performance appraisal ratings to annual pay increases

Focus: identifying individual differences in performance

better performance results in higher reward, contingent onposition in the range (compra-ratio)

Merit Pay Programs


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Payments are based on a measure of

organizational performance (profits) Payments do NOT become a part of base pay

Advantage: may encourage workers to think morelike owners

Drawbacks: workers may perceive their performance has little to do

with profit

deferred nature of payouts

Profit Sharing


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Encourages employees to focus on the success

of the organization as a whole but may notresult in motivation for high individualperformance

Gains not realized until stock sold (employeesleaving company?)

Methods:

stock options

ESOPs (employee stock ownership plans)

Ownership


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Sharing productivity gains with employees Differs from profit sharing in that instead of using

an organization-level performance measure(profits) plans measure group or plantperformance

Better for motivation Examples: Scanlon plan, Rucker plan, Improshare

Goes beyond money -- participation in problemsolving = key

Gainsharing


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Focus = smaller work groups

While gainsharing typically measures physicaloutput, group incentives tend to measureperformance in terms of a broader array such as cost savings successful completion of product design

meeting deadlines

Drawback: competition among teams

Group Incentives


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alternatives to cash --

travel

merchandise

earned time off

symbolic awards plaques, coffee cups, bananas

Alternative Reward Systems


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Piece Rate System

This system was devised by F.W. Taylor, the fatherof scientific management and was the firstsystematic attempt in rationalizing incentive.

It is based on the assumption that the degree ofefficiency varies from worker to worker and hencethe workers must be paid according to their

degree of efficiency.


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The main features of the system are:

(i) The system is based on piece rates.

(ii) The standard output for unit of time is pre-determined on thebasis of time and motion study.

(iii) There are two piece rates, one lower and another higher. Thosewho reach the standard or exceed it, get wages at higher piece rate

(e.g. 120% of piece rate) and those who fail to reach it, get wages ata lower piece rate (e.g. 80% of piece rate).

(iv) Minimum wages for the workers are not guaranteed.

Piece Rate System


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Disadvantages

(i) It does not guarantee a minimum wage for the workers.

ii) The system is very harsh to the inefficient workers becausethey gentle wages due to lower rate and lower output.

iii) It penalises a worker who just fails to attain the standard by anarrow margin

It is clear from the above illustration that the workers with lowerefficiency less wages and workers with higher efficiency get morewages under Table differential piece rate system as compared toordinary piece rate system.

Piece Rate System


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This plan was originated by Mr. Henry L. Gantt.

The plan is a combination of time rate, piece rate and bonus

plan.

The features of the plan are:

1) There is a guaranteed time wage for every workerirrespective of the efficiency.

2) Standards are set for various jobs.

Gantt Task and Bonus Plan


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3) Wages are paid at the following rates:

Output below standard - Guaranteed Time Rate (Below100% efficiency)

Output at standard - Wages for standard time and a bonus

of (100% efficiency) 20% of Time Rate

Output above standard - Wages for standard time and abonus of (Above 100% efficiency) 20% of wages of standardtime



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Advantages

(i) The plan is simple to understand and operate.

(ii) Minimum wages for the workers are guaranteed underthe plan.

(iii) It provides a reward to the efficient workers by way ofbonus.

(iv) It does not penalise the inefficient workers.



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Disadvantages

(i) The plan may result in frustration among the workersif the standards are high and a very few workers earnbonus.

(ii) It may not encourage efficiency since a guarantee isgiven for minimum wages.



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This plan was devised by Emerson.

The features of the scheme are:

(i) Day wages are guaranteed but efficiency also is rewarded.

(ii) A standard time is fixed for each job or operation or a

volume of output and then the level of efficiency of workers isdetermined on that basis.

(iii) The guaranteed time rate is given for below 66 efficiency.

Emerson's Efficiency Scheme


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(iv) Payments are made on the basis of step bonus ratefrom 66- % to 100% efficiency. This means bonusbecomes payable only when efficiency touches 66- %and it increases progressively with increase in efficiencyin such a manner that at 100% efficiency the bonus is 20%of the time wages. The scheme contains about 32

differentiating rates at different levels of efficiency.



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(v) Additional bonus of 1% is payable for each 1%

increase in efficiency beyond 100%. Thus bonuspayable is 40% (20% + 20%) at 120% efficiency.



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Rajiv Padte

Saurabh Betharia

Sumit Gandhi

Ankit Agrawal Anand Gundewar

Pratiksha Nikam

Thank You

Incentive System.pptx

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