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Paying for Performance

How much and how employees are compensated for their performance obviously has some influence on their motivation and effort, but the issue of how much pay motivates may cause problems for managers seeking ways to enhance motivation. Maslow and Herzberg show that pay (money) enables an employee to satisfy his or her basic needs. While Herzberg sees money as maintenance factor that does not necessarily motivate an employee to perform at higher levels, his theory indicates that low or inadequate pay may result in dissatisfied, unmotivated employees. Equity theory suggests that employees must be paid at least fairly, that they need to perceive that they are earning what their efforts are worth.

With this in mind, managers can create pay plans that motivate if they (1) show employees that good performance leads to high levels of pay, (2) minimize any negative consequences of good performance, and (3) create conditions that provide desired rewards other than pay for good performance. So-called merit pay, which rewards employees according to their performance contributions, is a natural product of expectancy and reinforcement theories because it links pay increases to work performance. IBM has developed a program whereby 60 percent of employees' compensation relates to the profitability of an order and 40 percent is based on customer satisfaction determined by customer surveys. IBM is tying pay to performance and customer satisfaction - two of its goals.

Companies today are increasingly striving to relate pay to performance. For example, a Quaker Oats plant in Lawrence, Kansas, has developed a compensation plan that ties employees' pay rises to the plant's performance. The company determines the extent to which the plant has achieved its objectives and it groups company performance goals such as financial, safety, quality, sanitation, and division performance so employees can see the impact of their efforts. The plan promotes greater communication and participation among employees as well as the perception of equity between pay and organizational performance.

"Competition cannot continue to rely on traditional job-based pay, job evaluation systems, and individual performance criteria," says Dick Dauphinais, founder of Strategic Compensation Partners. Non-cash incentives include merchandise, travel, recognition, and status. Such incentives endure longer for employees through the creation of a memory or ongoing benefit (a Hawaiian vacation or wide-screen TV, for example). Non-cash rewards can be related to the goal; for example, if an employee is the top salesperson in a region, a new luxury car would reinforce the sales contribution to the organization.

 

 

1. Which of these statements expresses the main idea of the text?

 

a) How much and how employees are compensated for their performance has some influence on their motivation and effort.

b) So-called merit pay, which rewards employees according to their performance contributions, is a natural product of expectancy and reinforcement theories.



c) Companies today are increasingly striving to relate pay to performance.

d) In addition to traditional job-based pay and job evaluation systems, competition also depends on non-cash rewards related to the organizational goal.

 

3. Are these statements true or false? Correct the false ones.

 

a) Herzberg’s theory shows that insufficient pay may lead to employees’ disappointment and apathy.

b) According to equity theory, employees need to perceive that their efforts are paid adequately.

c) Managers should ignore any negative effects of good performance.

d) Customer satisfaction cannot be a factor that influences employees' compensation.

e) Employees' pay rises are by no means connected with organizational performance.

f) As a rule, non-cash motivation has a short effect on employees.

 

 

4. Answer the questions.

 

a) What pay-related issue may cause problems for managers seeking ways to enhance employees’ motivation?

b) How does money influence an employee’s motivation according to Maslow and Herzberg?

c) Does Herzberg’s theory suggest that money unquestionably motivates an employee to perform at higher levels?

d) In what way did IBM tie employees’ compensation to its goals?

e) In what ways does the Quaker Oats plant in Lawrence, Kansas, accomplish its compensation plan?

f) Can you give any examples of non-cash incentives?

5. Write a summary of the text.

 

 


Date: 2015-01-02; view: 792


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