Top Pay for Best Performance By Steve Bates

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Top Pay for Best PerformanceBy Steve Bates
Article 31

• Craig Fisher
• MGMT 610
• May 11, 2005

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(Non-Rhetorical) Question

• Should employees get salary increases in an
  economic downturn?
• Why or why not?

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(Non-Rhetorical) Question

• Should employees get salary increases in an
  economic downturn?
• Corning says Yes
• Reward good employees with what little money you
  have to position your company for future
  lucrative market
• Tracks with Financial Management Theory
• Leverage fixed costs during low business cycle

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• Its not an economic issue. You need performance
  whether its a good economy or a bad economy.
• -Ed Lawler, Professor
• Marshall School of Business, Los Angeles

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Traditional vs. Variable Pay

• Traditional Pay
• Annual Salary Adjustment
• Variable Pay
• One-time or recurring bonuses
• 2/3 of employers use
• 10 of all compensation is variable (i.e. sales)
• Companies providing variable pay
• 68 more likely to report outstanding financial
  performance

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Top Performers vs. Low Performers

• Should we compensate top and low performers the
  same?
• Why or why not?

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Top Performers vs. Low Performers

• Should employers compensate top and low
  performers the same?
• No!
• Employers should differentiate between top and
  low performers
• The era of entitlement systems disappeared with
  the manufacturing economy
• Performance Pay

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Top Performers vs. Low Performers

• Budget impact
• Structure compensation system to have neutral
  impact
• Give low performers less money over time
• Give top performers more money over time

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Performance Pay Comparison
5 Yr Budget
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Hard to Execute

• Ensure top performers know they are getting
  greater rewards
• lt40 of top performers believe they receive
  moderately or significantly better raises and/or
  bonuses than average performers
• Organization must be able to set goals
  effectively
• Build culture of high performance

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Communication, Communication

• Need to involve employees in compensation design
  process
• Educate employees on compensation system
• Goalsharing involves employees in establishing
  specific performance standards in each business
  unit.

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Measurement

• Performance pay easiest in quantifiable
  environments
• In other environments need to develop list of
  critical skills
• Compare employees with each other

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Role of HR

• Propose
• Design
• Implement
• Business units are usually left to interpret the
  compensation system based on their needs.

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Is Salary a Motivator?

• The article incorrectly states that performance
  pay attempts to motivate future behavior
• The following is from

MPA 8002 The Structure and Theory of Human
Organization Richard M. Jacobs, OSA,
Ph.D. Villanova University http//www83.homepage.v
illanova.edu/richard.jacobs/MPA208002/Powerpoint/
800220MPA/human.ppt
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Frederick Herzberg (1959)...

• formulated a two factor theory of the
  motivation to work

E
A
2F
M
motivation is a psychological complex of two
factors manifesting themselves in attitudes
evident in their effects
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hygiene factors

• 2 FACTORS

2F
motivators
these factors are the objective elements and
subjective feelings (i.e., needs or drives
activated by the events themselves) antecedent to
an attitude
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extrinsic
hygiene factors

• do not motivate but the absence of hygiene
  increases worker dissatisfaction

• when hygiene is not met, workers strike or give
  up motivation and become addicted to hygiene

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Good organizational hygiene provides the
foundation for higher motivation in the
workplace...
hygiene factors
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motivators
intrinsic

• experiences enabling personal growth and
  self-actualization in the work itself

doing complete jobs, experiencing success
achievement
engaging in work design and accountability
responsibility
doing the job
the work itself
engaging in new learnings, developing expertise
advancement
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...motivators build on hygiene factors...
motivators
hygiene factors
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• To inculcate higher motivation in workers,
  managers and leaders should focus on

• using the organizing and planning functions to
  encourage high morale

• attending to the workers attitudes not the work
  process

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• While attending to worker morale and attitudes,
  managers and leaders recognize

• that workplace hygiene is primary providing the
  foundation for motivation

• that motivation to work is a psychological
  process not a matter of a workers interest in
  the job

• that salary is a hygiene factor not a motivator

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• According to Herzbergs two-factor theory of
  motivation, the worst of all motivators is

an across-the-board salary increase
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Questions?