Concept and Brief Description
Chapter 12 continued the discussion on pay more in regards to incentive and bonus pay. Setting pay is often very complicated for HRM and owners but setting incentives and bonuses is often much harder. They must always weigh the pros and cons of using this type of pay as motivation while managing cost as well as ensuring the motivation is in the best interest of the company. Often incentive pay can encourage workers to get work done quickly and efficiently but the focus on customer service and quality may suffer. Along with bonus and incentive pay there are options for group bonuses, profit sharing, and stock options. Again with these options there are many pros and cons. The biggest thing is to consider how to get this type of pay to motivate employees to perform better in a way that will improve the profitability of the company as a whole. There are also concerns with ethics with executive bonus pay since they have the ability to manipulate the earnings and accounting documents to tell a story that could be better than it really was.
Every level of employee can be motivated by incentive pay but the same type pay will not work for every level of employee. Bonus pay that employees feel they have no control of is often viewed as not motivating and can actually be a waste of a company’s money since it does not lead to more productivity or efficiency.
Key Points to Elicit in Discussion
Stock options can be good since it ties the employee to the performance of the company. However the profit is not realized for the employee until the stock it sold and that is often after they leave the company not while they are their contributing to the performance of it.
Pay for group performance can be good for rewarding a group for working together but it can also frustrate members of the group that feel that they did more or that a member of the group that did not participate gets the same bonus.
Although the balance scorecard often the most effective, it can also be the most work.
What are some potential ethical issues with performance pay or stock options?
Who does a sales commissions pay structure work best for?