MERIT PAY SYSTEM

1.
2.
3.
4.

The incentive value of the reward offered is too low

The link between performance and rewards is weak
Supervisors often resist performance appraisal
Union contracts influence pay for performance
decisions within and between organizations
5. The annuity problem

GUIDLINES FOR EFFECTIVE MERIT

PAY SYSTEM

1. Establish high standars of performance

2. Develop and implement sound performance management
systems
3. Train supervisors in the mechanics of performance
appraisal and in the art of giving feedback to subordinates
4. The rewards closely to performance
5. Use a wide range of increase

 INCENTIVES FOR EXECUTIVE :

* long-term restricted stocks
restricted stocks units
* short-term
INCENTIVES FOR LOWER-LEVEL
EMPLOYEES
lump-sum bonus
spot bonus

TEAM INCENTIVES
Advantages :
1. They make it possible to reward workers
2. They encourage cooperation, not
competition, among workers
Disadvantages :
3. Competition between teams
4. Inability of workers to see their individual
contributions to the output of the team
5. Top performers grow disenchanted with
having to carry free riders

ORGANIZATIONWIDE
INCENTIVES
Profit Sharing, reasons ;
1. To provide a group incentive for increased
productivity
2. To provide retirement income for their employees
3. To institute a flexible reward stucture that reflects a
companys actual economic position
4. To enhance employees security and identification
with the company
5. To attract and retain workers more easily
6. To educate individuals about the factors that
underlie business succes and the capitalistic system

ORGANIZATIONWIDE INCENTIVES
(Cont...)
Gain Sharing, reasons ;
1. Generally, it does not work well in piecework operations
2. The returns from gain-sharing programs appear to dwindle
with increasing plan size
3. Some firms are uncomfortable with bringing unions into
business planning
4. Some managers may feel they giving up their
prerogratives
DIFFERS

N
O

GAIN SHARING

PROFIT SHARING

1.

Based on measure of
productivity

Based on a global profitability

measure

2.

Bonus payment, monthly

Rewards, annual

3.

Current distribution plans

Deffered payments

EMPLOYEE STOCK OWNERSHIP

PLANS (ESOPs)
As a means of tax-favored, companyfinanced transfer of ownership from a
departing owner to firms employees
As a way of borrowing money
relatively inexpensively
To fulfill a philosophical belief in
employee ownership
As an additional employee benefit

SUGGESTIONS
1. Start with the obvious
2. Consider insituting profit sharing, gain
sharing, or some other program
3. Rethink perquisites
4. Make sure the Boards pay consultant dont
work for management
5. Make sure your door is really open
6. If you dont survey employee attitudes now,
start
7. Explain things personally

TERIMA KASIH