Deck 12: Recognizing Employee Contributions With Pay

Question 1

Does money motivate Use the theories and examples discussed in this chapter to address this question.

Answer 1

Facts
There are both potential unintended and intended consequences of various kinds of pay for performance plans. The main aim of pay for performance plans is to reduce unintended consequences and strike a balance between various plans. These plans are formulated keeping in view the goals and strategies of organization.
For example M decided to revise its strategy and lay more focus on the stock grants than stock options. The method was adopted keeping in view the strategy of business and slow growth of its stocks. Following the cue from M many organizations are now linking up pay for performance and minimize labor cost.
Money is one of the strong motivator, but not the sole motivator. Employees with higher amount of salary tend to be satisfied more with their job rather than those having less salary.
In the case of EU announcing a cap on bonuses, one observed that employees were dissatisfied. Employers find it hard to reward the performance of employees, as a result affecting performance of employees.
An employee used to work hard in order to earn extra money because money is one of the strong motivators to derive performance.
While in case of GM paid $9,000 of bonus in comparison to $6,600.GM management recognized the need of human desire for money. So in order to keep the moral and satisfaction of employees up to mark it decided to distribute $9,000 as bonus.
Since, workers were satisfied and they delivered best of their performances. It was the key to the success of GM.
Thus, it can be concluded that money is one of the strong forces to derive best performance from employees.

Question 2

To compete more effectively, your organization is considering a profit sharing plan to increase employee effort and to encourage employees to think like owners. What are the potential advantages and disadvantages of such a plan Would the profit sharing plan have the same impact on all types of employees Is the size of your organization an important consideration Why What alternative pay programs should be considered

Answer 2

Profit sharing plan refers to type of incentive plan in which company provides direct or indirect monetary incentives to the employees based on the organization's profitability along with the employees' compensation. Profit sharing plan can include allocating company shares, annual bonuses, and retirement benefits.
Following are the advantages of profit-sharing plan:
• As profit-sharing plan contributes to employees' incentives, the employees are motivated towards working a common organizational goal and contribute to the success of the company.
• The profit-sharing plan helps the employees to feel as the equal contributor to the success of the organization and hence, make them feel like the owner of the company.
• The profit-sharing plan helps increase the commitment of employees towards the company.
• Profit-sharing plan helps the employees to earn additional financial gains which help them to live a comfortable lifestyle and contributes to reduce personal stress. It ultimately leads to increased performance at the workplace.
Following are the disadvantages of profit-sharing plan:
• Profit-sharing plan depends upon the increased company's profitability. The incentives don't depend on the merit or talent of the employees making it unfair to high-performing employees.
• The profit-sharing plan may change the focus on increasing the profit by increasing the production volume without focusing on the quality of the work.
• The percentage of incentives differs on the level of the employee's position in the organization's structure. This results in top management being more motivated towards high performance compared to lower level employees because of their lower percentage of earnings in the plan.
No, the profit-sharing plan wouldn't have same impact on all types of employees. Although, initially money is the prime motivator for the employees, but as they gain experience, the employees want different things from their job like more challenging work, career growth, work-life balance etc. Profit-sharing plan gives only monetary benefits which might not be a great motivator in the long-term.
Yes, the size of an organization is an important consideration when implementing a profit-sharing plan. In bigger organization, the profitability of the company remains almost average year-on year which makes it easier to implement for the organization. In smaller organizations, the profitability isn't stable and have drastic fluctuations in the profitability of the company. They also need to invest in resources to expand and strengthen the company which makes it harder to establish profit-sharing plans in smaller organizations.
Following can be the alternatives to profit-sharing plan:
• Employee bonuses : The company may provide bonuses which can be given at any point of time in a financial year. Bonuses can include holiday bonus, annual bonus, performance bonus etc.
• ESOPs : Employee Stock Ownership Plans or ESOPs refer to the type of benefit given to employees which gives them an ownership stake in the organizational share. ESOPs can be provided in the form of stocks or even bonuses.

Question 3

Should companies worry about employee attitudes Why or why not

Answer 3

Employee attitude refers to the characteristics of an employee relating to their interest in their jobs, their willingness to contribute to organizational goals, requirement of supervision, attitude towards the problems and obstacles, etc. Employees with positive attitude are more committed to the organization and more involved in their jobs.
The case describes that various organizations have linked employee incentives to the employee satisfaction. There is various criticisms to the linking of incentives to employee satisfaction as it can result in unintended and undesirable consequences.
Yes, companies should worry about employee attitudes because it impacts the organizations in different ways. Employees with negative attitude are less engaged in their work resulting in lesser productivity of those employees. The employees who are less satisfied and have negative attitude can leave the organization increasing the turnover rate of the organization. Employees with negative are less interested in completing their work with good quality resulting in overall poor performance for the organization.

Question 4

What role did the executive bonuses described in the chapter opening play in the executive pay restrictions announced by President Obama

Question 5

Think of a job that you have held. Design an incentive plan. What would be the potential advantages and disadvantages of your plan If your money was invested in the company, would you adopt the plan

Question 6

Gainsharing plans have often been used in manufacturing settings but can also be applied in service organizations. How could performance standards be developed for gainsharing plans in hospitals, banks, insurance companies, and so forth

Question 7

If positive employee attitudes are an objective, should organizations directly link pay incentives with attitudes

Question 8

Are these restrictions a good idea Explain the potential pros and cons.

Question 9

Your organization has two business units. One unit is a long-established manufacturer of a product that competes on price and has not been subject to many technological innovations. The other business unit is just being started. It has no products yet, but it is working on developing a new technology for testing the effects of drugs on people via simulation instead of through lengthy clinical trials. Would you recommend that the two business units have the same pay programs for recognizing individual contributions Why

Question 10

Should the federal government regulate executive pay Will these restrictions actually contain executive pay in affected companies Which companies will be affected

Question 11

Throughout the chapter, we have seen many examples of companies making changes to how they pay for performance. Do you believe the changes at these companies make sense What are the potential payoffs and pitfalls of their new pay strategies