Chapter 09 - Recognizing Employee Contributions with Pay.docx

Chapter 09 - Recognizing Employee Contributions with Pay.docx

This preview shows page 1 - 2 out of 13 pages.

INTRODUCTION In this chapter we focus on pay for performance (sometimes called incentive pay, variable pay, or performance-based pay ), or variable forms of pay designed to recognize and reward employees’ performance that are based on individual or group contributions to the organization’s success. Employees’ pay does not depend solely on the jobs they hold. Instead, differences in performance (individual, group, or organization), seniority, skills, and so forth are used as a basis for differentiating pay among employees. First , what are the costs of the program? Second , what is the expected return (in terms of influences on attitudes and behaviours) from such investments? Third , does the program fit with the organization’s human resource strategy and its overall business strategy? Fourth , what might go wrong with the plan in terms of unintended consequences? HOW DOES PAY INFLUENCE INDIVIDUAL EMPLOYEES? Pay plans are typically used to energize, direct, or control the behaviour of current employees. Reinforcement Theory E. L. Thorndike’s law of effect states that a response followed by a reward is more likely to recur in the future. The implication for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely. By the same token, high performance not followed by a reward will make it less likely in the future. Expectancy Theory Although expectancy theory also focuses on the link between rewards and behaviours, it emphasizes expected (rather than experienced) rewards (hence the name expectancy theory ). In other words, it focuses on the effects of incentives. Behaviours (job performance) can be described as a function of ability and motivation. In turn, motivation is hypothesized to be a function of expectancy (the perceived link between effort and performance), instrumentality (perceived link between behaviours and pay), and valence perceptions (perceived value of rewards being offered versus behaviours expected by the organization).
Image of page 1

Subscribe to view the full document.

Generally speaking, the main factor is instrumentality : the perceived link between behaviours and pay, or the beliefs employees hold that rewards will be received from the organization in return for behaviours requested. Valence of pay outcomes should remain the same under different pay systems. Expectancy perceptions (the perceived link between effort and performance) often have more to do with job design and training than pay systems. Although expectancy theory implies that linking an increased amount of rewards to performance will increase motivation and performance, some authors have used cognitive evaluation theory to question this assumption, arguing that monetary rewards may increase extrinsic motivation but decrease intrinsic motivation.
Image of page 2
You've reached the end of this preview.
  • Winter '14
  • Dr.Schat

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern