REWARDS AND MOTIVATION

Individuals will act in way which maximize rewards

Pay is one reward, which is the most common used in organizations

Other rewards do exist, and can enhance motivation

TYPES OF ORGANIZATIONAL INCENTIVES

Dichotomy Number 1

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Intrinsic 
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from the job itself 
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Extrinsic 
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from outside the job 
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Dichotomy Number 2

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Financial (direct) 
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Nonfinancial (indirect) 
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Dichotomy Number 3

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Performance-based 
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Membership-based 
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COMPENSATION ADMINISTRATION

Process of managing a compensation program, which can:

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Attract 
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Motivate 
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Retain 
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Job Evaluation is the starting point

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Determines the relative value of jobs 
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Is based on job analysis information 
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Establishes INTERNAL EQUITY 
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GOVERNMENT REGULATIONS

Davis-Bacon Act of 1931

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Federal construction contracts 
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Prevailing wages of locality 
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Walsh-Healey Act of 1936

All federal contracts exceeding $10,000

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Prevailing wages of the industry 
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Established overtime as 1.5 times pay rate for work beyond 8 hours in a day

FLSA of 1938

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Established a minimum wage 
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Established overtime beyond 40 hours per week

Equal Pay Act of 1963

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Fair pay based on job, not sex 
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Four exceptions

Seniority system, merit system, earnings based on production, and any factor other than gender

Civil Rights Act

Title VII of the CRA addresses all conditions of employment

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This includes pay and benefits 
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Also looks at comparable worth 
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JOB EVALUATION

Use of Job Analysis information to determine the relative worth of a job in an organization

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INTERNAL EQUITY
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This is only one of the considerations, others include:

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Labor market 
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Collective bargaining 
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Differences in performance 
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DETERMINING JOB EVALUATION CRITERIA

Judgment used to determine which factors to compare jobs

Typical criteria are:

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Mental requirements 
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Level of supervision 
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Complexity 
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Physical demands 
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JOB EVALUATION METHODS

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Ranking 
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Classification 
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Factor comparison 
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Point system 
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ESTABLISHING THE PAY STRUCTURE

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Wage surveys 
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EXTERNAL EQUITY 
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Wage curves 
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Wage structure

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Pay ranges for jobs 
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Jobs of similar job evaluation values should have similar pay ranges

SPECIAL AREAS OF COMPENSATION

Incentive compensation plans

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rewarding performance 
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Individual incentives

INDIVIDUAL EQUITY

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Merit Pay; Piecework; Commissions 
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Group incentives

Encourages cooperation

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Profit sharing 
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Gain sharing 
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Competency-based compensation

Rewards for skills, knowledge, and behaviors

Broad-banding - increasing an employee’s pay based on growth in competencies

Team-based compensation

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Encourages cooperation and teamwork 
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Effectiveness depends on clarity of purpose or goals, communication, resources, and trust

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Still not used much 
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EXECUTIVE COMPENSATION

Salaries

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Very high 
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Competition for talent drives up the price

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High salaries may motivate 
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Supplemental financial compensation

Deferred bonuses

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encourage staying with firm 
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Stock options 
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ties to firm performance 
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Hiring bonuses 
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Perquisites

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Life insurance 
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Expense accounts 
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Club memberships 
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Golden parachutes

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Protect from takeover, etc. 
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INTERNATIONAL COMPENSATION

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Base pay 
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based on home country 
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Differentials

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Offset higher costs 
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Attract employees 
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Incentives

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Such as housing, transportation 
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Assistance programs, such as schooling 
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5 - 9 times the cost of employing at home

REWARDS AND MOTIVATION

TYPES OF ORGANIZATIONAL INCENTIVES

COMPENSATION ADMINISTRATION

GOVERNMENT REGULATIONS

JOB EVALUATION

DETERMINING JOB EVALUATION CRITERIA

JOB EVALUATION METHODS

ESTABLISHING THE PAY STRUCTURE

SPECIAL AREAS OF COMPENSATION

EXECUTIVE COMPENSATION

INTERNATIONAL COMPENSATION

QUESTIONS?