Chapter 6

Chapter 6 - Chapter 6 Linking Pay to Performance: on...

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Chapter 6 Linking Pay to Performance: on Production Jobs Piece-rate: A pay system in which an individual worker is paid a certain sum of money for each unit of production completed Wage Incentive Plans: Various systems that link pay to performance on production jobs. (intro of wage incentives usually leads to substantial increases in production Potential Problems with Wage Incentives: o Lowered Quality o Differential Opportunity-supply of raw materials or the quality of equipment varies from workplace to workplace, some workers are at an unfair disadvantage o Reduced Cooperation-might decrease cooperation among workers (hoarding raw materials, refusing to engage in peripheral tasks) o Incompatible Job Design-the design of a job can make it very hard to implement wage incentives, ie an assembly line o Restriction of Productivity-workers may come to an informal agreement about what constitutes a fair day's work and artificially limit their output accordingly Linking Pay to Performance: on White-Collar Jobs Trustworthy, objective indicators of individual performance for the majority of white-collar jobs are often difficult to find Merit Pay Plans: Systems that attempt to link pay to the performance on white-collar jobs (can provide a tangible signal that the org considers an employees performance ‘on track') 85% of orgs using this system said that is was only somewhat successful or not working at all. Potential Problems with Merit Pay Plans: o Low Discrimination-managers might be unable/unwilling to discriminate between good performers and poor performers o Small Increases-merit increases are simply too small to be performance motivators Lump Sum Bonus: Merit pay that is awarded in a single payment and not built into base pay o Pay Secrecy: Even if merit pay is distributed fairly, is contingent on performance, and is generous, employees might remain ignorant of these facts because they have no way of comparing their own merit treatment with that of others Using Pay to Motivate Teamwork Profit Sharing-the return of some company profit to employees in the form of a cash bonus or a
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This note was uploaded on 04/13/2011 for the course BMOS 2180 taught by Professor Annett during the Fall '11 term at UWO.

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Chapter 6 - Chapter 6 Linking Pay to Performance: on...

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