Variable Compensation November 8, 2011. SEE READINGS!!!!! Bullets are examples!! Chpt 18 –Variable...
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Transcript of Variable Compensation November 8, 2011. SEE READINGS!!!!! Bullets are examples!! Chpt 18 –Variable...
![Page 1: Variable Compensation November 8, 2011. SEE READINGS!!!!! Bullets are examples!! Chpt 18 –Variable Pay Plan Elements Eligibility Payout timing and frequency.](https://reader035.fdocuments.net/reader035/viewer/2022062717/56649e455503460f94b3a398/html5/thumbnails/1.jpg)
Variable Compensation
November 8, 2011
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SEE READINGS!!!!!
• Bullets are examples!!• Chpt 18
–Variable Pay Plan Elements• Eligibility• Payout timing and frequency
–Types of Variable Pay Plans
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SEE READINGS!!!!!
• Chpt 19–Types of Variable Pay Plans–Effectiveness of Plans
• Chpt 21–Team-based Incentives
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SEE READINGS!!!!!
• Chpt 22–Profit-sharing and Gainsharing–The Farmer’s Tale–Line-of-sight Measurement
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SEE READINGS!!!!!
• Chpt 37–Balanced scorecard
• Chpt 38–Metrics
• Chpt 39–Variable compensation and productivity
• Tables 39.1 and 39.2
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SEE READINGS!!!!!
• Chpt 40–ROI
• Chpt 41–Challenges
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Types of Plans
• SEE READINGS!!!!!• Individual incentive plans
–Piece rate plans–Standard hour plan–Business incentives–Stock options
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Types of Plans
• Individual incentive plans–Standard hour plan–Piece rate plans–Business incentives
• Financial measures of org’l performance–Stock options
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Balanced Scorecard
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Types of plans
• Stock option plans– “strike price”– “underwater”–Back dating –Mess = longer
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Se-ries1
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
2005 2011
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Se-ries1
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
Strike Price
2005 2011
100,000 @ $30
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Se-ries1
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
Strike Price (1)
Strike Price (2)
2005 2010
“Back Dating”
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Types of Plans
• “special recognition” plans–Cheap– Immediacy–personalized
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Types of Plans
• Group incentive plans–Any individual plan based on group
performance–Expectancy Theory?–Recall performance appraisal
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Types of Plans
• Plantwide/unit wide group plans
–Typically gainsharing plans
–Profit sharing
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Types of Plans
• Employee Stock Ownership Plans (ESOPs)–Tax saving–Smaller companies–10,000 companies/ 9 million
employees
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And in closing……
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Netflix
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Type of incentive plans
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Executive Management
Professional(Sales and Non-sales)
Office/Clerical/
Technician
Trades/ Production/
Service
Highest-rated
64% 27% 20% 15% 13%
Middle-rated
44% 20% 14% 11% 11%
Lowest-rated
30% 10% 7% 6% 4%
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Porter-Lawler Expectancy Theory
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Porter and Lawler
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Motivation Effort
Ability
Resources
Satisfaction?Performance
Intrinsic
Extrinsic
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Objectives of merit pay
• Pay-for-performance culture– “at-risk” compensation–Tied to performance appraisal results
• Org’l success–High when good, low when bad
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Merit Pay• But the REALLY BIG problem…..
Time
$
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Darwin Awards
A Chronicle of Enterprising Demises Honoring those who improve the species by….....
accidentally removing themselves from it!
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We have a winner!
• Corp goal: 2%• Company goal: 2% (on top of 2%)• Company - $0.67• Employees - $0.33• $1,200 / quarter