Human Resource Management Study Set 17
Quiz 12 :
Pay-For-Performance and Financial Incentives
The compensation of any employee or board member cannot be said as overpaid or underpaid. It all varies with the performance, skills, knowledge, experience, availability of suitable person for the job. The company BB is operating since last five months without a CEO which has resulted in downfall of the organizations price. Thus they are seeking a sitting CEO for the organization. To fulfill this need they believed Mr. j to be an appropriate person and have offered his a pay package valued at $32 million for the next 3 years. He is also leaving his last job as COO with hospitality giant which makes him eligible for a better pay package to compensate for the opportunity cost he is leaving. Thus to state that the J is over paid is not correct.
Individual incentives include rewards or compensation given to individuals for their good performance. Some of the individual incentive plans which are practiced in organizations are as follows: • Piece-rate-systems: This incentive plan provides compensation for piece of work done by an employee. This plan was very successful as employees get motivated to produce defect free pieces in large numbers to gain incentive. • Bonuses: Bonus is given to employees who achieve the specified targets. This is also an effective plan as it motivated employees to meet their targets.
Executive compensation is provided to employees who hold an executive position in the organization. The compensation given to them is different from other employees as they hold more responsible position in the organization. The executive compensation plans are formulated based on following assumptions: • The executive compensation includes executive salaries, perks and benefits, annual incentives, bonus, long-term executive performance incentives, supplemental benefit s etc. • One of the major issues that affect executive compensation program is modern market economic conditions. The organization performance can also affect the executive compensation packages. • The profit directly influences the compensation packages of the executives.