OS 352 4/1/08 I. Exam II is cancelled – April Fool’s!! II. Pay system design (Chapter 12) A. Review from last time. B. Pay Ranges C. Supplemental incentives III. Rewards and motivation A. Motivation theories B. Intrinsic vs. extrinsic perspectives IV. Exam Guidance. V. ****For Tues. : Read HBR article, “When Salaries Aren’t Secret “ – much of the class is devoted to discussion of this article, so you must read it ahead of time .
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OS 352 4/1/08 I. Exam II is cancelled – April Fool’s!! II. Pay system design (Chapter 12) A. Review from last time. B. Pay Ranges C. Supplemental incentives.
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OS 352 4/1/08
I. Exam II is cancelled – April Fool’s!!II. Pay system design (Chapter 12)
A. Review from last time.B. Pay RangesC. Supplemental incentives
III. Rewards and motivationA. Motivation theoriesB. Intrinsic vs. extrinsic perspectives
Secret “ – much of the class is devoted to discussion of this article, so you must read it ahead of time.
Creating the Pay Structure
y = 7649.1x + 16474
R2 = 0.9092
0
20000
40000
60000
80000
0 5 10
gradeswages
Market
Rank/grade wages
1. Admin. Assistant 28000
3. Accountant 37000
4. Flight Attendant 40000
6. Attorney 70000
7. Pilot 68000
Two Components of the Pay Structure
Pay Ranges Variation in pay that is
available in a job. Distinguish ees based
upon: performance seniority experience
Pay Grades Groups into which jobs of
the same or similar values are grouped.
Pay Ranges & Grades
$35/hr
$25/hr
Pay line
Establish pay ranges (minimum, maximum, midpoint) around the pay line created by regression
Establish pay grades by identifying which jobs should be considered together (e.g., accountant and flight attendant in a single grade same pay ranges)
Pay Range Issues
Issue: Some ees being paid above or below pay ranges. Green circle – increase pay Red circle – freeze or cut pay,
supplemental bonus
Issue: Equity issues within pay ranges Decision rule for when to
address Potential discrimination issues
$35/hr
$25/hr
Broadbanding
Use of fewer grades and wider pay ranges. Advantages
Increase flexibility in pay structure. Provide managers with more discretion in setting
employee pay. Encourage lateral career moves. Reward outstanding achievers.
Disadvantages Less control over compensation costs. Begins to resemble traditional structures over time. EEO issues.
Supplemental Incentives (not added in to ees’ base pay)
Gainsharing Plans: Group incentive program that measures improvements in productivity and effectivess, and distributes a portion of the gain to employees. Relies on team cooperation and meetings. Relies on suggestion systems.
Profit Sharing Plans: Company incentive pay in which payments are a percentage of the organization’s profits.
Earnings-at-risk plans: An incentive play in which ees’ base wages are set below a specified level (e.g., 80% of market wage) and incentive earnings are used to raise wages above market.
Line of Sight
An ee’s ability to see how individual performance affects their incentive payout.
Gainsharing
Clear line of sight
• Small teams
• Clear criteria
Profit-sharing
Fuzzy line of sight
• Whole company
• Clear criteria but individual ee can have little impact on criteria.
Motivation
That which energizes, directs, and sustains human behavior (p. 595, text).
Exchange Theories of Motivation
1. Organizational justice theory & Equity theory
2. Expectancy theory
Equity Theory (same process as distributive justice theory)
OUTCOMEINPUTS
OUTCOMEINPUTS
?
the same,more or less
A person evaluates fairness by comparing his/her ratio with others.