incentive system and linkage to compensation

7/27/2019 Incentive System and Linkage to Compensation

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Incentive system and linkage to

compensation


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Types of Incentives

Positive versus Negative

Individual versus Organization wide

Financial versus non-financial


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Prerequisites for Effective

Incentive Adequate competitive floors in basic

commitment and fringe benefits

Significant individual or group effect onperformance

Measurable performance

Reasonable time span Commitment of the top management

A salubrious climate


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Advantages of Incentives

Increased expectancy of reward on

performance

Perception of equity due to input-output

balance

Behavior Modification

Objective ratings are more acceptable


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Limitations of Incentives

Perception of equity offset by perceived

inequity

Human problems

Administrative problems


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Individual Incentive Systems

Payment by time

Payment by output


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Measurement techniques

Past performance

Bargaining between union and employer

Time study

Standard data

Predetermined elemental times Work sampling


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Types of Individual Incentive

Systems The Measured Day-Work Incentive System

Piece-Work System

Standard hour or 100 Percent Bonus System

Gains Sharing System


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Prerequisites to the Individual

Incentive System Standardized work and uniform working

conditions

Clearly defined and precisely measurable

units of production

Independent production processes

Uniform supply of material and exclusive

control of the work


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Prerequisites to the Individual

Incentive System contd.. Normalized standards

Chance to earn substantially high incentives

Review and revision of standards and rates

Help from professionals

Alignment of managerial philosophy withhigh earnings of human resources

Easy to understand system


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Advantages of an individual

incentive system For employer Predetermination of production and labour cost

Minimisation of absenteeism and tardiness

Enhanced creativity in work

Removal of inefficient workers

Enhanced productivity and decreased per unit cost of production

For employee Possibility of increasing earnings in direct proportion to efforts

Direct and immediate financial rewards

Enhanced knowledge and efficiency


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Disadvantages of an individual

incentive system For employer Encouragement to sacrifice quality for quantity

Conflict with labour

Stress upon workers initiative at the cost of human relationships

Rigidity of rates

Impractibilty in new operations

For employee Adverse effects on health

Increased feeling of insecurity and emotional strains

Dangers of rate cutting


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Organizational Incentive Systems

Cooperation among employees,

management and union

Accomplish broader objectives


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Organizational Incentive Systems

Types:

The Scanlon Plan

The Kaiser-United Steel workers Plan

Profit Sharing


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Non-Financial Incentives

RABBLE HYPOTHESIS: The assumption

that employees only respond to money

(employees are treated as a group ofunrecognized rabble, insensitive to the

social motives of approval and self-respect)


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Non-Financial Incentives

Types

Improved Attitude

Supervisory Relationship Advancement and Security

Supervision

Job Satisfaction and Enrichment Praise and Blame

incentive system and linkage to compensation

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