Incentives May 2013
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Transcript of Incentives May 2013
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WII FM-the employee incentive radio station
by Toronto Training and HR
May 2013
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CONTENTS 5-6 Definitions7-9 Purpose of incentive programs10-11 Types of incentives12-13 Dimensions of incentives14-15 Factors of incentive pay16-18 Principles of incentive pay19-20 Best practices for using incentives21-23 Executive incentives24-26 Conditions for effective use of incentive
programs27-28 Caveats for administration of incentive programs
29-30 Reasons for implementation31-32 Motives for profit sharing33-34 Possible conditions affecting the link between
profit sharing and earnings 35-36 Things to consider when designing incentive
programs37-38 Concerns around incentive programs39-40 How and why incentive programs work
41-42 Attendance incentives
43-44 Types of incentive companies 45-46 Measures to evaluate success47-48 The situation in Nigeria
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Introduction
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Introduction to Toronto Training and HR
Toronto Training and HR is a specialist training and human resources consultancy headed by Timothy Holden 10 years in banking10 years in training and human resourcesFreelance practitioner since 2006The core services provided by Toronto Training and HR are:
Training event designTraining event deliveryReducing costs, saving time plus improving employee engagement and moraleServices for job seekers
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Definitions
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Definitions• Bonuses• Incentives
• Incentive schemes• Motivation• Productivity
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Purpose of incentive programs
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Purpose of incentive programs 1 of 2
• Improve motivation• Tie pay to performance • Recognize differences in
employee performance• Increase competition
among employees• Attract and retain
productive employees• Reduce absenteeism• Reduce idle time• Reduce or control costs
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Purpose of incentive programs2 of 2
• Utilize equipment more effectively
• Relate increases in compensation to increases in productivity
• Avoid additions to employees
• Create uniform processing costs
• Direct efforts toward achieving organizational objectives
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Types of incentives
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Types of incentives• Natural• Artificial
• Extrinsic• Intrinsic
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Dimensions of incentives
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Dimensions of incentives• What is being measured,
inputs or outputs?• What period of
performance does the payment reward?
• Does the payment reward an individual’s performance a or does it relate to team/organizational success?
• Is measurement based on a single factor or a multiple factor?
• What form does the payment take?
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Factors of incentive pay
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Factors of incentive pay
• Moral hazard• Adverse selection• Need to induce profitable
cooperation in organizations
• Need to counteract costly or unproductive institutional and/or regulatory constraints
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Principles of incentive pay
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Principles of incentive pay 1 of 2
• Insurance• Rationality• Certainty equivalence• Dual performance
measures• Risk premium• Intensity of incentives• Optimized performance• Efficiency in the evaluation
budget• Informativeness
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Principles of incentive pay 2 of 2
• Equal compensation intensity
• Deferred compensation• Group compensation
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Best practices for using incentives
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Best practices for using incentives
• Achievable goals set by the employee
• Programming elements that address those goals
• Programming that is directed to an incentive type
• Utilizes both extrinsic and intrinsic reward structures
• Rewarding behaviours, not outcomes
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Executive incentives
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Executive incentives 1 of 2• Executives are risk-averse• Complexity and ambiguity
destroy value• The longer you have to wait
the less it is worth• It’s all relative-fairness is
fundamental• People don’t just work for the
money• The key motivation of a long-
term incentive plan is recognition
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Executive incentives 2 of 2• Performance pay has a cost-be
sure you are getting value• Keep it short, sweet and
simple• One size does not fit all-know
your people and pay them accordingly
• Money is only part of the deal-and recognition matters as much as financial incentives
• Be realistic about how variable pay can be from year to year
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Conditions for effective use of incentive
programs
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Conditions for effective use of incentive programs 1 of 2
• Direct relationship between effort and output
• Readily identified units of output
• Even and continuous work flow
• Standards of performance• Quality standards• Measurement systems• Opportunity for cost
reduction• A good unit cost systemPage 25
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Conditions for effective use of incentive programs 2 of 2
• Sufficient financial inducement
• Reasonable time spans for payment
• Reliable stable technology• Selective application• Top management
commitment
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Caveats for administration of
incentive programs
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Caveats for administration of incentive programs
• Incentive punishes• Incentive schemes rupture
relationships• Incentive programs ignore
reasons• Incentive schemes
discourage risk taking• Incentive schemes
undermine intrinsic motivation
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Reasons for implementation
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Reasons for implementation
• Motivate employees• Increase sales• Increase brand exposure
and awareness• Support product launch or
promotion• Increase customer loyalty• Attract new customers
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Motives for profit sharing
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Motives for profit sharing• The substitution argument• The human capital
argument• The worker behaviour
argument
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Possible conditions affecting the link
between profit sharing and earnings
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Possible conditions affecting the link between profit sharing
and earnings• Employee participation in
decision-making• Establishment size• Pre-existing compensation
levels
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Things to consider when designing
incentive programs
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Things to consider when designing incentive programs
• Program cost• Return on investment• Ability to measure results• Program flexibility• Ease of use/time to
administer• Recipient experience• Redemption rate• Brand exposure
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Concerns around incentive programs
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Concerns around incentive programs
• Unethical actions• Pay inequality• Lower intrinsic motivation
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How and why incentive programs work
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How and why incentive programs work
• Incentive programs improve performance
• Incentive programs engage participants
• Incentive programs attract quality employees
• Long-term programs outperform short-term programs
• Executives and employees value being rewarded
• Quota-based rewards programs work best
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Attendance incentives
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Attendance incentives
• Attendance bonuses• Lotteries• Adjustments to profit-
sharing• Well-pay plans• Group-based approaches
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Types of incentive companies
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Types of incentive companies
• Full-service performance improvement companies
• Full-service incentive companies
• Incentive fulfillment companies
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Measures to evaluate success
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Measures to evaluate success
• Employee retention• Performance improvement• ROI• Sales increase• Media coverage• Brand exposure
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The situation in Nigeria
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The situation in Nigeria• Financial and non-financial
components of compensation
• Relevant incentive programs
• Type of incentives that do exist
• What should managers do
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Conclusion and questions
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Conclusion and questions
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