..."What pay for performance looks like: the case of Michael Eisner" By Stephen F. O’Byrne, Stern Stewart & Co. Journal of Applied Corporate Finance 5 (summer 1992), pp. 135-136 It’s easy to think of Disney CEO Michael Eisner as a classic case of executive pay run amok. His total compensation in his first six years on the job exceeded $250 million. In reality, he is a classic example of what “pay for performance” looks like. When Eisner was hired in late 1984, he took over a troubled company. Disney had just been through a bitter takeover battle, theme park attendance was declining, and return on equity had fallen below 8%. When he joined Disney, Eisner agreed to a six-year employment contract with three main compensation provisions: a base salary fixed at $750,000, an annual bonus equal to 2% of Disney’s net income in excess of 9% of stockholders’ equity, and a tenyear option on two million shares exercisable at Disney’s current market price of $14. While Eisner’s contract provided for guaranteed payments with a present value of only $3.9 million, its expected value was, of course, much greater. The expected value of his options, based on the Black-Scholes option pricing model, was $16 million. I also estimate that the expected value of his total contract, including bonus and pension rights, was $22 million. The Disney directors were presumably willing to enter into a contract worth $22 million because it provided a tremendous performance incentive that could provide great benefits...
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...guideline to be based on selecting, retaining, and motivating your employees. However before these guidelines are made, they are all determined and influenced by the company’s particular structure, culture, and strategy, which is different for all businesses and an example of this can be found virtually in any business operation. Therefore if I were the manager of a business the matters of selecting, retaining, and motivating employees would depend on the type of business I was working for, their specific culture, structure, and strategy. For example Hoover (2009) Disney is the world’s second largest conglomerate and only second to Time Warner’s (p.1-2), which easily affirms and attests to the success of their business, when you look at a business like Disney the means by which that make them this successful pop in to your head quickly: hard work, knowledgeable, dedicated, attention is directed all towards the customers and really believe in customer satisfaction and that can only be guaranteed through their employees who make the ‘magic’ happen. Examining Disney’s structure, culture and strategy, you would find they are all related and...
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...The Impact of Compensation Practices February 20, 2011 “The ultimate goal of a pay system is to align the goals and interests of employees with the goals and interests of the organization” – Robert L. Heneman The Impact of Compensation Practices The business arena is ever changing. Where people work, how they work, the relationships in the workplace and compensation for their work continues to change. Hence, “It will be the challenge of compensation professionals to devise ways to reward and motivate employees who work under increasingly flexible arrangements” (Bennett, 1995). Most people interchange and have the perspective that pay and compensation are the same when in reality, compensation is more than just monetary rewards. Compensation is often misunderstood, and can also be misapplied. More often than not, it is out of synch with the values and processes of an organization. This is because despite continued organizational changes, the actual strategies for administering and implementing compensation is misaligned with the rapid changes in the company. “Pay can no longer be seen as a mere expense and cost of doing business, but instead must be viewed as an investment that is closely linked to the long-term success of the organization” (Flannery, et. al., 1996). As Cable and Judge (1994) note, “compensation systems are capable of attracting (or repelling) the right kinds of people because they communicate so much about an organization’s philosophy,...
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...Management and Personal Management | 4 | 1.2 Functions of Human Resource Management | 5 | 1.3 Role of Line Managers in HRM | 6 | 1.4 Impact of Legal and Regulatory Framework | 7 | 2.1 Human Resource Planning | 8 | 2.2 Stages in Human Resource Planning | 8 | 2.3 Recruitment and Selection process change | 9 | 2.4 Effectiveness of Recruitment and selection techniques | 12 | 3.1 Link between Motivational Theory and reward | 13 | 3.2 Job Evaluation | 13 | 3.3 Reward Systems | 13 | 3.4 Monitoring Employee Performance | 14 | 4.1 Reasons for Cessation of Employees | 15 | 4.2 Exit Procedures | 16 | 4.3 Legal and Regulatory Framework | 18 | Conclusion | 18 | References | 19 | Introduction People are the important resource of organization. Managing them well can improve the performance and efficiency of organization. In this report human resource management is discussed. It also includes the recruitment and selection method and performance management. Task 1 1.1 Human Resource Management and Personal Management It is true that human resource management has been developed form personnel management. According to Storey (1995) cited by Pinnington A. et. al.(2007), HRM in more specific sense...
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..."What pay for performance looks like: the case of Michael Eisner" By Stephen F. O’Byrne, Stern Stewart & Co. Journal of Applied Corporate Finance 5 (summer 1992), pp. 135-136 It’s easy to think of Disney CEO Michael Eisner as a classic case of executive pay run amok. His total compensation in his first six years on the job exceeded $250 million. In reality, he is a classic example of what “pay for performance” looks like. When Eisner was hired in late 1984, he took over a troubled company. Disney had just been through a bitter takeover battle, theme park attendance was declining, and return on equity had fallen below 8%. When he joined Disney, Eisner agreed to a six-year employment contract with three main compensation provisions: a base salary fixed at $750,000, an annual bonus equal to 2% of Disney’s net income in excess of 9% of stockholders’ equity, and a tenyear option on two million shares exercisable at Disney’s current market price of $14. While Eisner’s contract provided for guaranteed payments with a present value of only $3.9 million, its expected value was, of course, much greater. The expected value of his options, based on the Black-Scholes option pricing model, was $16 million. I also estimate that the expected value of his total contract, including bonus and pension rights, was $22 million. The Disney directors were presumably willing to enter into a contract worth $22 million because it provided a tremendous performance incentive that could provide great benefits...
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...“I Met My Goal, Now Where is My I-Pad” The effects rewards have on motivation and job performance T. Burt GM 591:Leadership and Organizational Behavior 06/19/2011 Literature Review Schermerhorn, Hunt, Osborn & Uhl-Bien (1997) defined motivation as the forces within an individual that account for the level, direction, and persistence of effort expended at work. They examined both the content theories, and process theories of motivation. They gave a detailed description of each theory which explains how the needs of individuals lead to motivation. There was an examination of intrinsic and extrinsic rewards and the pros and cons of each were discussed. Rollins (1987) examined the pros and cons of pay for performance. He concluded that the many pay for performance programs fall short of the model standards. Many organizations have a budgeted amount for merit increases and therefore they do not always fully compensate an employee for their performance. For those organizations that do not agree with pay for performance they must come up with other ways to motivate employees Kurland (1995) challenged organizations to look at how rewards could lead to unethical behavior. In some instances employees may try to beat the system in order to receive a reward. As was the case with Sears Roebuck and Company whose employees were charging employees so they could receive a higher commission. Leonard...
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...All business managers with employees at some point in the business life cycle select, retain, and motivate employees. Where many managers go wrong is that they don’t look at the unique personalities and behaviours of certain employees, they must understand that different employees will be best suited into different positions and that these employees will all be best retained and motivated in different ways. The dictionary defines management as “the act or art of managing: the conducting or supervising of something (as a business)” (dictionary.com). Although this helps define a manager it is far from helping to define a good manager. Good managers have strong qualities in different aspects of the management system and they do great jobs selecting, retaining, and motivating different employees of different personalities. An organization consists of one or more employees who perform various different tasks within the organization. The relationships between the employees working and the tasks performed must be structured so that the organization can achieve its strategic goals in an efficient and effective manner with a motivated and engaged workforce. There are many different ways for a manager to ensure and promote a motivated and engaged workforce, this starts with the selection process and ensuring that the proper employees are selected for the positions in which they best belong. There are many ways to distribute work among employees and ensuring that work is distributed effectively...
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...and approximately 15 percent of the exempt employees unionized. Between the union and management is where pay raises for union employees are across the board. Nonunion employees generally receive across the board increases. The poor seems to feel unjustified by always being the ones with poor ratings. To justify the dissatisfaction, they receive a larger than average raise. (“Utley Food Markets”, n.d.) In this paper we will discuss whether the new Utley management would like to establish a pay-for-performance system, what does this mean to the Utley management? In this paper we will see what changes will have to be made in the way the system operates now. We will discuss how might these changes be implemented? Finally, we will discuss which of the nonmonetary changes will help motivate better performance. Utley management wants to establish a pay-for-performance system, what does this mean for Utley management? A pay-for-performance program requires a compatible organizational situation if it is to succeed. Paying for performance is not ordinarily as complete a wage structure as paying basically for the job or possibly competencies can be. Paying for performance is integrated within or added to wage structures primarily based upon performance criteria. A pay performance-based system to meet its objectives, a well-designed and properly administered performance management system...
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...Chapter 1- The Pay Model Compensation: Does it matter? Compensation is one of the most powerful tools organizations have to influence their employees. General Motors (GM), like Chrysler, has, for decades, paid its workers well—too well perhaps for what it received in return. Having labor costs higher than the competition, without corresponding advantages in efficiency, quality, and customer service, does not seem to have served GM or its stakeholders well. On the other hand, Nucor Steel pays its workers very well relative to what other companies inside and outside of the steel industry pay. But Nucor also has much higher productivity than is typical in the steel industry. Wall Street financial services firms and banks used incentive plans that rewarded people for developing “innovative” new financial investment vehicles and for taking risks to earn themselves and their firms a lot of money. Troubled Asset Relief Program (TARP), which included restrictions on executive pay designed to discourage executives from taking “unnecessary and exces-sive risks.” In an opinion piece in The Wall Street Journal, entitled “How Business Schools Have Failed Business,” the former director of corporate finance policy at the United States Treasury wrote that “misaligned incentive programs are at the core of what brought our financial system to its knees.” 7 He says that we “should ask how many of the business schools attended by America’s CEOs and directors educate their students about the...
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...Lincoln Electric Pay Scale Curtis Pelston Personnel Management When a person graduates from high school or college either one they seem to look for what company or which job they can work in order to make the most money. What most people fail to look for is which job is going to offer the overall best atmosphere to work in. This includes bonuses they will be paid, vacation time received, health care benefits, how they will progress in the company, and the conditions they will be working in. There are a lot of different aspects of a job that people tend to overlook when looking for their first or next job. The truth is most people jump to conclusions and take the job that offers the biggest paycheck. One company that is an older company that has been offering some of the best pay systems possible for their employees is a company called Lincoln Electric. In this paper I am going to discuss the different ways in which the employees are paid and what puts Lincoln Electric heads and tails above the competition when it comes to employees. First, you have to look at what the company does to understand the jobs that are to be offered by the company and what the employees are to be qualified in or what they are to do at their job. Lincoln Electric is a company that started out in 1895 by John Lincoln creating small motors for different tools and other items. They later moved into creating the first portable welder in 1909 which came to be what Lincoln Electric is most known for...
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...Task 1 Pay, for many employees, is the reason that they go to work. Employees need money to pay the bills and other expenses of everyday life- work is a means of getting this. Most organisations such as The City of Wolverhampton College use pay to reward their employees; this may be by giving additional pay in the form of a one-off bonus or by giving employees a pay rise each year to reward them for their loyalty and good service to the business. Some people do not go to work mainly for the pay as job satisfaction is more important to them- it is important that employers realise this. Employees must be paid at least the minimum wage, so by paying above this, employers may be able to suggest they are rewarding the employee. Pay is also linked to qualifications and experience, and may be used to attract and reward employees who want to take on additional responsibility. Performance related pay is a way of giving employees extra money dependant on their performance in the previous three, six or twelve month period. Wolverhampton College do not offer performance related pay, if they were to introduce this reward method it would be very difficult for lecturers. Usually lecturers are given performance related pay on the basis of keeping their students in classes and passing their courses. If their performance is above what is expected at a national level they are likely to be rewarded with a performance related element to their pay. However, some students may not finish or pass...
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...level definition of expectancy is what managers expect from their employees. But as we look around in the world we live in today, expectancy goes even deeper than that. One definition of the expectancy theory that is used is, “That the strength of our tendency to act a certain way depends on the strength of our expectation of a given outcome and its attractiveness. (Victor Vroom)” (Robbins & Judge, 2013) When I read that at first, I really didn’t grasp what the definition really meant. But, as we consider how employees are motivated, we can define the expectancy theory as not only what managers expect from the employees, it is also why employees are not motivated to do the jobs that they are assigned. When we take a deep look at the workplace today we can see some employees just do what it takes to get by in their given job. As we explore how the expectancy theory pertains to relationships on the job, we can learn some techniques to improve employee performance by using different types of motivation. There are three ideas that pertain to relationships in the expectancy theory of motivation. They are effort-performance relationship (Expectancy), performance-reward relationship (Instrumentality), and reward-personal goal relationship (Valence). The effort-performance relationship asks the question that if the employee puts forth the effort, will the employee believe that he or she will be able to complete the task satisfactorily? The performance-reward relationship asks if the...
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...MGT320 Portfolio Project Post-Enron Era Ethics The time for change is now! CEO’s must continue to be held accountable for the accuracy of their financial statements, and the performance of their company. To assure the accuracy of a publicly traded company’s financial status reporting, an additional requirement of an outside industry experienced auditing firm is needed, as well as performance based pay contracts for publically traded companies’ officers. The goal is simple, change the mindset of CEO’s, boards of directors (BOD’s), and shareholders by teaching them the fundamentals of business ethics. To obtain our goal, we must first have a basic understanding of existing legislation and the willingness to create new legislation for the betterment of America. To begin, a discussion in regards to the Sarbanes-Oxley Act is important for the purposes of an overview of existing legislation. In the past the US government has relied on the states to monitor and enforce the rules of auditors. Typically public accountants were licensed by the states to audit corporate financials; however the states had very little, if any, money to provide the necessary funds for enforcement. “Public accountants were licensed by the states, but states devote few resources to supervising auditors; federal regulation of auditing was light; and no federal agency supervised auditors. A Public Oversight Board for auditors was created in 1978, but it was dominated by accountants, funded by the audit...
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...Question : | Discuss progressive discipline—what is it, why do employers use it and what are the most common four steps in a progressive discipline process? ch. 7 | | | | Student Answer: | Progressive discipline is a form of corrective action where the management team increases the severity of punishment for an employees’ negative behavior. Employers use this form of corrective action because not all negative behavior is reason for an employee’s termination. Progressive discipline gives the employee an opportunity to correct the negative behavior without any additional corrective action. However, if the negative behavior continues, the punishment becomes harsher. Progressive discipline progresses up to and including termination. The four common steps in progressive behavior are verbal warning, written warning, suspension and discharge. When an employee receives a verbal warning, the supervisor meets with the employee and tells them what was done wrong and the next step in the process if the negative behavior is repeated. If the behavior continues, the next step is the written warning. A written warning is placed in the employee’s personnel file for a specific amount of time. If the negative behavior continues, the employee is suspended from work and the time off is usually unpaid. At this stage, the employee receives a written warning notifying them that any further negative behavior will result in discharge (termination of employment). | | | | Points...
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...6 ASDAS methods of motivation 6 FINACIAL MOTIVATION 6 NON-FINACIAL MOTIVATION 6 Empowerment 6 Enrichment 7 Team work 7 Profit related pay/bonus’ 7 PROMOTION 7 IMPROVEMENTS TO MOTIVATION 8 STAFF FORUMS 8 Fringe benefits 9 P4 9 P5, M3 12 Employee Performance 13 D2 17 Improve relationship with staff and managers. 17 Enable manager to identify a weakness that they can rectify 17 Measuring underperforming workers 18 Promotions of staff 18 Introduction. Within this unit, I will be describing the internal and external factors to consider when planning the human resource requirements of an organisation, describe how the skills that employees require to carry out jobs in an organisation are identified. I will also be outlining how an organisation motivate its employees. Then explaining how organisations obtain the cooperation of their employees, how employee performance is measured and managed, why human resource planning is important to an organisation. I will need be comparing the use of motivation theories in an organisation, and explaining how the results from measuring and managing performance inform employee development. Finally, suggesting, with justification, ways of improving motivation in an organisational setting and assess the importance of measuring and managing employee performance at work. P1 In this section, I will be describing the internal and external factors to consider when planning the human resource requirements of an...
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