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Pay for Performance

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PAY-FOR-PERFORMANCE: INCENTIVE REWARDS
Compensation can be a significant source of motivation if at least part of it is tied directly to the employee's performance. Countless financial incentive systems have been developed over the years to motivate employees who occupy various levels within an organization and who perform different types of duties. Some of these systems have been successful, while others have not. The success of a particular system depends not so much on the formula for determining incentive payments, as on the existence of a favorable climate in which the system can operate.

Success also depends on the degree to which the system has been tailored to the needs of the organization where it is to be used. Contributing to this success, furthermore, are the ways in which the system allows for employees to participate, psychologically as well as financially, in the organization. Employee stock ownership plans, can be advantageous to employers and to employees.
Successful Incentive Plans:
The success of an incentive pay plan depends on the organizational climate in which it must operate, employee confidence in it, and its suitability to employee and organizational needs. Importantly, employees must view their incentive pay as being equitable and related to their performance. Performance measures should be quantifiable, easily understood, and bear a demonstrated relationship to organizational performance. | Individual Incentive Plans Piecework plans pay employees a given rate for each unit satisfactorily completed. Employers implement these plans when output is easily measured and when the production process is fairly standardized. Bonuses are incentive payments above base wages paid on either an individual or team basis. A bonus is offered to encourage employees to exert greater effort. Standard hour plans establish a standard time for job

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