For example, consider the employee who works hard all year, earns a 6% increase as
the above guidelines indicate, and compares himself with the average performer who
coasts to a 4% increase.
First we take out taxes on that extra 2%.
Then we spread t
The above exhibit illustrates three different formulas that can be used as a basis for
The numerator, or input factor, is always some labor cost variable, expressed in either
dollars or actual hours worked. The denominator is som
A major disadvantage of using historical standards is that changing environmental
conditions can render a standard ineffective.
Care must be taken to ensure that the link between performance and rewards is
This means that environmental in
If teams are defined too narrowly, they may tend to gravitate to behaviors that are
unhealthy for overall corporate success disallowing transfers of star performers,
refusing to take on new members for fear of time lost to training, etc. Also, becau
Comparing Group and Individual Incentive Plans
The first issue focuses on whether incentive plans actually enhance performance. The
preponderance of evidence indicates the answer is yes.
The second issue focuses on which is better group or individua
Team Incentive Plans: Types
A. Group incentive plans focus on an established standard against which group
performance is compared to determine the magnitude of incentive pay.
1. The group might be a work team, department, division, or the whole
Cell 3: includes two plans that vary incentives as a function of units of production
per time period. Both are intended to reward efficient workers and penalize inefficient
ones. Both plans provide different piece rates, depending on the level of pr
The specified relationship between production level and wages , i.e. the way wages are
tied to output.
The first alternative is to tie wages to output on a one-to-one basis,
so that wages are some constant function of production.
In contrast, some p
Individual Spot Awards
According to a recent survey, 74 percent of companies reported these awards
were either highly or moderately effective.
Larger companies may have a formal mechanism for recognition, and perhaps
some guidelines on the size of t
Acceptance of these figures, assuming they are accurate, requires that the organization
choose a base year that is neither a boom nor a bust year. The base year chosen
also should be fairly recent, allaying worker fears that changes in technology or