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Intro+to+HRM-Ch-3.+11

Human Resource Management

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INCENTIVES AND  REWARDS Dr. Hazel-Anne M. Johnson Rutgers University
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Learning Objectives 1. Explain the theories behind how incentive plans  motivate employees. 2. Compare and contrast the different types of individual  incentives. 3. Discuss the major team- and group-based incentive  plans. 4. Compare and contrast the relative merits of the different  types of group-level incentive plans. 5. Explain how to design an effective incentive plan. 6. Describe how organizational demands affect a firm’s  incentive plans. 7. Explain how environmental factors affect a firm’s  incentive plans.
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Motivation Theories Reinforcement theory : people are likely to repeat actions  that resulted in positive consequences  Goal setting theory : employees are likely to achieve  challenging and specific goals   that they have set for  themselves  Expectancy theory : employees will make decisions about  work actions based on which behaviors will lead to rewards Expectancy : the degree to which employees believe they will be able  to achieve the objective Instrumentality : employees believe that achieving the objective will  be rewarded Valence : the degree of value employees place on different rewards Agency theory : managers motivate their employees to act  in certain ways by aligning their interest with the firm’s  other stakeholders (e.g. the owners)
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Types of Individual Incentive Plans  Merit Pay Programs  employees receive a  compensation adjustment based on results of their  performance evaluation Lump-Sum Merit Bonuses : one-time payment for  performance not rolled into employees’ salaries Piecework Incentive Plans : reward employees for  future performance Straight piecework plan : receive a certain rate of pay  for each unit produced Differential piecework plan :   the pay received per  unit produced changes at certain levels of output
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Sample Standard Hour Plan for a Salesperson Pay rate set based on expected amount of time an 
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