Encourages employees to move cross functionally to

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encourages employees to move cross-functionally to increase cross-fertilisation of ideas career moves within bands are more common than between bands Disadvantages of broad-banding: may lead to judging of individuals, which should be avoided can lead to chaos and favouritism presumes that managers will manage employee pay to accomplish organisation’s objectives; not their own presumes employees will be treated fairly 4.3 Differentiate between gain sharing and profit sharing as incentive systems. Explain what Denis Spry should do to ensure that the results sharing programme will continue to motivate both managers and non-management employees. (18)
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58 Use study unit 8 as point of departure for answering this question. To focus your mind, give a brief description of the results sharing programme – remember that it consists of a profit sharing and a gain sharing component. Discuss the differences between these two incentive schemes. Discuss the key elements in the design of a gain sharing programme. Gain-sharing plans are incentive plans that are based on some measure of group performance oppose to individual performance. Taking data on a past year as a base, group incentive plans may focus on cost savings or on profit increases as the standard for distributing a portion of the accrued funds among relevant employees. The goal with gain sharing plans is to achieve a cost index, and not financial performance. There is less risk to the employee because the performance measure is more measureable. Profit-sharing plans are plans that focus on profitability as the standard for group incentives. These plans typically involve one of three distributions, namely: (1) cash or current distribution plans provide full payment to participants soon after profits have been determined (quarterly or annually); (2) deferred plans have a portion of current profits credited to employee accounts, with cash payments made at time of retirement, disability, severance, or death; and (3) combination plans that incorporate aspects of both current and deferred options. This method continues to be popular due to the fact that the focus is based on the measure that is most important to people, namely a predetermined index of profitability. When payoffs are linked to such measures, employees spend more time learning about financial measures and the business factors that influence them. However, with profit-sharing plans, most employees don’t feel that their jobs have a direct impact on profits. The following are key elements in designing a gain-sharing plan: (1) Strength of reinforcement Incentive pay encourages only the behaviours that are rewarded. Tasks carrying no rewards are performed reluctantly or not at all.
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