...aspect that they did not focus on specific performance objectives. The incentive program which Alliston have set for their employees did not have any objectives for their production and performance tasks. The purpose of their incentive plan was to focus and align the organization by communicating and rewarding the achievement of company goals. In my view, Alliston Instruments should have implemented a compensation mix strategy. It would have allowed them substantial portion of compensation to be allocated to short-term incentives and long-term equity incentive, i.e., percentage of pay allocated between base pay and short-term incentive and long-term equity incentive pay. The base salary of the employees should have based on external market data, internal equity value, and performance of the company and in the end an individual performance. In terms of short term incentive Plans Company should have criteria in which the overall performance of an employee should be measured on different tasks and should set up minimum performance targets. This way employee would work hard and will not compromise with the quality of the products. In return, the short term incentive plans varies company to company, however the minimum incentive plans generally comprises 10-20% of the base of total direct compensation. Based on my study I recommend that Alliston should also introduce the annual incentive plans, the results of which should be measured in respective of total quality...
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...absolute proportion in total capital” (Michael Armstong&Helen Murlis2000). 4.Some staff's work enthusiasm is not high. Some employees lack the sense of belonging to a company, resulting in the loss of passion. So companies attach great importance to this problem. To establish a good working relationship, provide the appropriate level of compensation is an important aspect(Kenan S．Abosch and Janice S．Hand，1 998). .“Satisfied or not is one of people’s mood and emotional reactions, from the point of equity in compensation, when determining whether satisfied or not for people, people tend to compared with reference, if people feel input and output ratio is the same as with reference object, people will feel satisfied” (E Jane Amault，Louis Gordon，Douglas HJones，G Michael Phillips． 2001). Compensation knowledge: 5. So to energized, direct, control employees’ behavior, organizations select forms of incentive pay, such us profit sharing, stock ownership incentives. Incentive pay also raises fairness problems. Communication and...
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...reward will follow better performance (instrumentality)* * * Many employees are not sure that additional performance will lead to additional pay (the performance-reward connection) Desirable and Undesirable Instrumentality Conditions Situation | Level of Performance | Level of Economic Reward | Instrumentality Condition | 1 | High | High | Desirable | 2 | High | Low | Undesirable | 3 | Low | High | Undesirable | 4 | Low | Low | Desirable | ECONOMIC INCENTIVE SYSTEMS Incentives linking pay with performance ADV. & DISADV. OF INCENTIVES LINKING PAY WITH PERFORMANCE ADVANTAGES * Strengthen instrumentality beliefs * Create perceptions of equity * Reinforce desirable behaviors * Provide objective basis for rewards DISADVANTAGES * Cost (to both employer and employee) * System complexity * Declining or variable pay * Union resistance * Delay in receipt * Rigidity of system * Narrowness of performance Incentive Measure | Example | Description | Amount of output | Piece rate; sales commission | Merit pay or more pay for more production. | Quality of output | Piece rate only for pieces meeting the standard; commission only for sales that are without bad debts | Pay determined by combination of quantity-quality. | Success in reaching goals | Bonus for selling and established number of items during a predetermined...
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...innovative products. It's success is attributed to dynamic and innovative products coupled with leadership based on shared-knowledge and adaptable incentive plans for it's employees. These incentive plans included company stock offerings, stock bonuses, good salaries, paid vacation, and guaranteed jobs. The incentives were believed to have contributed to the incredible success of the organization, and could be utilized as a model to their international operations.. Though Lincoln had a string of international success in their Canadian, Australian, and French operation,they were failing to realize profits internationally despite having rapid sales growth. Their balance sheet took a major hit as their debt began to climb, and were beginning to run low on cash. There were a number of causes to this failed policy. Just to name a few, acquisitions, management, and a poor business environment. As a result of their acquisitions, they were entering new markets that had poor labor management, unions, and low productivity. The management was dislocated abroad, and local management was highly inadequate. Secondly, the business environment was also poor. They were in the middle of a global recession, and the market was overpriced for companies. They would eventually learn from their mistakes, raise cash through a sizable 123 mm equity offering and bring in a new CEO. In the 1990's, Tony Massacor was brought in as the new steward to built on past success and usher in a new...
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...infrastructure development. 2010. Nr. 5 (24). Research papers. CRITICAL ISSUES FOR COMPENSATION AND INCENTIVES MANAGEMENT: THEORETICAL APPROACH Ramunė Čiarnienė, Milita Vienažindienė Kaunas University of Technology, Vilnius Co-operative College For most people, pay is a primary reason for working. Indeed, compensation is at the core of any employment exchange, and it serves as a defining characteristic of any employment relationship. The study focuses on critical points of compensation and incentives management. The fundamentals of a good incentive program include the elements of vision, potential, communication and motivation and can be realized if incentive promises are fulfilled – by both employer and employee. The aim of the paper is to identify the most important attributes of compensation and incentives management. Research method is the analysis and synthesis of scientific literature, logical, comparative and graphic representation. On the base of analysis, authors of this paper present the model of incentive system for positive employee attitudes and behaviors. Keywords: compensation, employees, incentives, management. Introduction Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. Pay may be received directly in the form of cash (e.g., wages, merit increases, incentives, cost of living adjustments) or indirectly through benefits and services (e. g., pensions, health insurance...
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...Accel Partners VII Analysis The Private Equity Partnerships (PEPs) agreement contains mechanisms to align the interest of general partners (GPs) with those of the limited partners (LPs): performance incentives and direct means of control. In the case of Accel VII, we are interested in how the performance incentives align both the interest of the general and limited partners. They include the terms of the general partners’ compensation structure and calculations of management fees and carried interest. These details can significantly affect the general partners’ incentive to engage in behavior that does not maximize value for investors. In a typical incentive structure, Private Equity Partnerships often use an 80/20 profit-sharing rule based on the return on the partnership’s entire portfolio. This is different from the incentive structure of a mutual fund, which is based on the returns on individual investments. Thus, mutual fund managers are more interested in maximizing the returns of the most successful individual investments while neglecting those of average or below average performance. In PEPs, the incentive structure implies that GPs have a call option on 20% of the partnership’s total future payoff. Because it is a call option, carried interest gives the GPs incentives to take risks and to work hard to establish a positive investment track record. Carried interest also gives the GPs a great amount of upside. In other words, the GPs get a share in the fund’s net profits...
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...Running head: Compensation Planning 1 Compensation Planning Jonathan Phifer BUS 434 Compensation & Benefits Management Instructor Justin Furlong July 8, 2013 Compensation Planning 2 Compensation Planning When HR is designing a strategic compensation plan for and organization there are several key factor to consider which should include criteria for strengthening performance, containing cost, limiting liability, and promoting fair pay for employees. To ensure long term success and organizations need a compensation package that links organization strategy to good performance and ties it to the labor market. It also must be within legal compliance of the law and provides a sound salary structure pay for the employees. With the collaborative between these components they must be designed in such a way that it will support the organization business strategy which will stand the test of time and allow the organization to be successful. In this paper I am going to identify these key components and while designing a compensation plan for Holland Enterprises to allow the organization to be successful in the market place. The global market over the last two decades has placed greater stress on organizations regarding their ability to be competitive and profitable...
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...Is there a direct relationship between morale and productivity? According to Robert H. Garin, professor of secondary and higher education at East Texas State University and John F. Cooper, dean of instruction at Patrick Henry Community College, the traditional view that the individual whose morale is high will be highly productive, or vice versa, is not a necessarily valid one. The authors analyzed the historical development of the major representative research studies and concepts concerning the morale-productivity relationship and found that the relationship evolved from one of simple direct correlation to the present viewpoint that a variety of factors--such as the environment, motivation, job levels, and so on--must be taken into consideration before any positive conclusion can be drawn. Because of the national concern over the decline in American productivity standards, Garin and Cooper believe that the morale-productivity relationship is an area ripe for further experimental research Downsizing, the planned elimination of positions or jobs, is a phenomenon that has affected hundreds of companies and millions of workers since the late 1980s. While there is no shortage of articles on "How To" or "How Not To" downsize, the current article attempts to synthesize what is known in terms of the economic and organizational consequences of downsizing. We argue that in many firms anticipated economic benefits fail to materialize, for example, lower expense ratios, higher profits...
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...To what extent does executive pay influence company performance? There has been widespread controversy in recent years about the amount of compensation CEO’s receive. CEO’s financial compensation packages were largely structured to incentivize risk taking in order to increase shareholder wealth (“Restraints on Executive Pay”, 2009). Yet, the 2008 financial crisis was mostly characterized by declining levels of company performance largely due to the increase of risk afforded to CEO’s by the attractiveness of lucrative executive incentives to perform. This essay argues that executive pay and its influence on company performance is both controversial and complex and concludes that executive pay has minimal influence on company performance and, when it does have influence, it tends to be negative. It is widely believed that companies and their shareholders suffer from poor performance unless the importance of incentives for executives – most notably through monetary and stock compensation – is realized (Jensen and Murphy 1990). The notion that the level and performance sensitivity of pay affects the quality of managers an organization can attract in a competitive labor market for executives seems, on the surface, uncontroversial. However, whether compensation policy is truly “one of the most important factors in an organization’s success” (p.139), as Jensen and Murphy (1990) assert needs further examination A series of empirical studies from a variety of industry, national...
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...if these assets have to be developed and made productive, incentives should be offered. Though there are many kinds of incentives that can be offered ,it was found that profit sharing resulted in the greatest yield to the human assets .Employees knew that if they became productive they would earn a bonus and this would help hem recognize their productive levels . Building of human assets through profit sharing: Retirement savings plans and profit sharing were considered to be the most important human asset building activity and though revolutionary in nature with a little foresight and great planning can be converted into a productive tool which could never be refused by any employee. Profit sharing as has been empirically proved, it the best ways to retain employees in an organization .when employees settle themselves into an organization for long periods of time they get associated with the firm and become the most productive asset and are very simple incentives to attract the right kind of people, invest in them and protect their retirement benefits. These are considered to be most common method of building human assets . organizations have to recognize that employees needed to build their assts while at work and it was in their interest to see that these needs were met .Employees also realized that the longer they stayed with the company better would be their retirement benefits. This was an economic incentive given by employers to build the strong human asset base...
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...Compensation – The sum total of all forms of payments or rewards provided to employees for performing tasks to achieve organizational objectives Rs Compensation- Nature and scope • The complex process includes decisions regarding variable pay and benefits • It suggests an exchange relationship between the employee and the organization • It involves design, development, implementation, communication and the evaluation of reward strategy and process of the organization Compensation Objectives 1. 2. 3. 4. To reward employees’ past performance fairly, in line with efforts, skills and competencies To attract and retain competitive high performing employees To motivate the high performing employees and reinforce desirable employee behaviour To remain competitive in the labor market 5. 6. 7. To align employees’ future performance with organizational goals To communicate the employees their worth to the organization To provide employee social status • Strategic compensation – Using the compensation plan to support the company’s strategic aims. – Focuses employees’ attention on the values of winning, execution, and speed, and on being better, faster, and more competitive.. • IBM Strategic Compensation Planning • Strategic Compensation Planning – Links the compensation of employees to the mission, objectives, philosophies, and culture of the organization. – Serves to identify the net monetary payments made to employees with specific functions of...
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............................................... 4 3 References .................................................................................................................... 9 PQHRM/KDY/12 Page ii Module -4 Compensation Management 1 Question 1 WHAT ARE THE MANAGEMENT ISSUES FACED BY THIS COMPANY? Inability to achieve the 40% of production rate. The company’s initial target was to achieve 40% or above increase in production. At the first 3 months they gradually reached up to 32%. There after it was dropped up to 20% during the latter three months. Increase of the lower quality products during the 6 months. The lower quality and rejects rate was increased by 10 -15% during the 1st 6 months of implementation of the new incentive scheme. As Blue Flowers (Pvt.) Ltd is engaged in manufacturing of high quality artificial flowers to both local & international market quality of the product is a very critical factor. Therefore this considerable rate of quality drop has a large effect on its profit. Demotivation among employees. Due to the...
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...though, that suggest there is more involved than simply throwing money at top performers. Despite these constraints, many authorities suggest that pay-for-performance programs have a lot to offer organizations seeking to identify better ways to improve employee performance. Pay for performance is not a new idea. Organizations all over the world use this type of system when offering bonuses based on predetermined results or commission. Pay-for-performance programs, also known as incentive pay or merit pay, are a solid approach to rewarding top-quality performance by employees in many types of organizations including healthcare settings. Pay for performance is a motivation concept in human resources, in which employees receive compensation for their work based on the level of reaching certain targets individually or with their team, department or company. The term is often referred to when one is addressing the topic of variable pay based on performances. Unfortunately, the perception of such incentive pay approaches is...
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...previous and his bonus was about 25% less. When the company cannot meet there goals Mike Duke doesn’t get the full bonus at the end of the year. His total compensation for the year was totaling around 18.1 Million dollars which would put him as the 82nd highest paid CEO in the United States, according to Forbes magazine. Mike Duke compensation was measured for setting his incentive pay. Wal-Mart always used the metric common which would be same store sales, meaning that the volume of the store and has it been open for a year or more. By looking closer to the sales of each store and determining if the activities were making the store greater. However, Mike Duke incentive pay was total sales for the entire company. However, this changed came when Mike Duke had been seen that the store sales had only been decreasing instead of increasing. Same – store sales which totaled all sales in the basis for incentive pay changed with in the performance at which were set to reach. Once the company switched the performance measures, Wal-Mart executives had to meet goals from three year prior just to receive the incentive bonus. (McGraw-Hill, 2014)...
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...Using Ownership Incentives in China Case Overview PeriRaden is a California-based company, launched by Roy Weber - CEO, that specializes in mobile technology. They are focused on expanding their business into foreign countries, specifically China, and are faced with the challenge of introducing the employee ownership culture of the Silicon Valley to their target workforce in China. Although, ownership incentives have proven to be very Successful in the US, there are several reasons why it may not be as effective in China. The core objective of this study is to address all discussion questions and to intelligently propose an effective solution that will meet the demands of the Chinese workforce and fit within the scope of PeriRaden's business culture and overall compensation philosophy. The Chinese Workforce Besides being the world's oldest continuous civilization, with records dating back to 3500 BC, China has experienced substantial economic success since initiating its economic reform in the late 1970s. It is now the world's fastest growing economy and has the second largest GDP in the world. It is also home to the world's largest population, which equates to the world's largest labor pool. Naturally, this is appealing to many corporations looking to expand. China represents a seemingly limitless source of labor. What's more is that their individual buying power and levels of consumption are also increasing along side their growing economy. Although, it may seem...
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