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ACCY 302 Performance Evaluation - Motivation...

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Performance Evaluation and  Motivation:  Compensation & Incentives
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Three dimensions of a firm’s compensation  policy The ______ : the expected total cost (value) of the pay  package to the employer (employee) The ______________ : defines the relation between pay  and performance and the definition of performance The __________ : defines the relative amounts of the  components of the package (e.g., cash compensation, fringe  benefits, etc.)
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Objective Performance measurements Pay-for-performance systems that are based on objectives  measures such as sales, divisional profits, production levels,  etc.  Problems include: Many of such measures are achieved by joint efforts and, thus, ________  for the  observance of individual contributions Many of such measures result in resourceful employees “gaming the system” – i.e.,  ____________ Determining the correct objective measure of employee performance is often  impossible Research suggests that the compensation system that results from this set of  forces appears to be one with little or no pay for performance
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More on objective performance measures Responsibility Centers Cost centers- unit performance evaluated based on ability to 
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