Variable Pay: Questions With Solutions (Rated A+)
Variable pay Right Ans - Compensation that is tied to performance
Levels of variable pay Right Ans - -Individual
-Group
-Organizational
Who is variable pay beneficial to? Right Ans - Both employers and
employees
Beneficial for employers: Right Ans - -More output per employee
-Lower fixed costs
-Some risk shifted to employee
Beneficial for employees Right Ans - -More pay (if perform well)
-Increased satisfaction and perception of equity
Are rewards/incentives for performance broader than money? Right Ans -
Yes
What do workers think of Variable Pay? Right Ans - Workers endorse pay-
for-performance concept
Are workers often satisfied or dissatisfied with variable pay in their own
organization? Right Ans - Dissatisfied
-Design flaws
-Breakdown in implementation
-Inequity perceptions
Problems with Variable Pay Plans Right Ans - -Complexity
-Does not fit Organizational Culture
-Does not Reward the right actions/behaviors
Complexity of variable pay programs Right Ans - Too complex/confusing to
understand, leading to:
-Gaming the plan
-Giving up, ignoring plan
, How do orgs combat complexity? Right Ans - -Make plan understandable
and communicate often
-Use realistic performance measures
-Keep plan current and tied to org. objectives
-Link performance to payouts that actually recognize performance differences
among employees
-Identify variable pay separately from base pay on paychecks
Does not Reward the right actions/behaviors Right Ans - Line of sight
-Employee must understand/see how their actions impact performance
measure (ex: product quality vs. org-wide profits)
Folly of rewarding A and hoping for B
Folly of rewarding A and hoping for B Example Right Ans - -Bonuses tied to
reporter posting to Oregonlive.com
-Expected to post a minimum of 3x/day
-What is being rewarded (incentivized) here? QUANTITY NOT QUALITY
Individual level profit sharing is best used when: Right Ans -
Output/results can be directly linked to specific employee
Examples of plan design at individual level Right Ans - -Piece-rate systems
-Bonuses
-Non monetary incentives
-Commissions
Work unit/team level profit sharing is best used when: Right Ans -
Interdependence and collaboration are critical to achieve results
Examples of plan design at work unit/team level Right Ans - -Group/team
results
-Gainsharing/goalsharing
-Quality improvement
-Cost reduction
Organizational level profit sharing is best used when: Right Ans -
Employees have solid line of sight to enterprise-level outcomes
Examples of plan design at organizational level Right Ans - -Profit sharing
Variable pay Right Ans - Compensation that is tied to performance
Levels of variable pay Right Ans - -Individual
-Group
-Organizational
Who is variable pay beneficial to? Right Ans - Both employers and
employees
Beneficial for employers: Right Ans - -More output per employee
-Lower fixed costs
-Some risk shifted to employee
Beneficial for employees Right Ans - -More pay (if perform well)
-Increased satisfaction and perception of equity
Are rewards/incentives for performance broader than money? Right Ans -
Yes
What do workers think of Variable Pay? Right Ans - Workers endorse pay-
for-performance concept
Are workers often satisfied or dissatisfied with variable pay in their own
organization? Right Ans - Dissatisfied
-Design flaws
-Breakdown in implementation
-Inequity perceptions
Problems with Variable Pay Plans Right Ans - -Complexity
-Does not fit Organizational Culture
-Does not Reward the right actions/behaviors
Complexity of variable pay programs Right Ans - Too complex/confusing to
understand, leading to:
-Gaming the plan
-Giving up, ignoring plan
, How do orgs combat complexity? Right Ans - -Make plan understandable
and communicate often
-Use realistic performance measures
-Keep plan current and tied to org. objectives
-Link performance to payouts that actually recognize performance differences
among employees
-Identify variable pay separately from base pay on paychecks
Does not Reward the right actions/behaviors Right Ans - Line of sight
-Employee must understand/see how their actions impact performance
measure (ex: product quality vs. org-wide profits)
Folly of rewarding A and hoping for B
Folly of rewarding A and hoping for B Example Right Ans - -Bonuses tied to
reporter posting to Oregonlive.com
-Expected to post a minimum of 3x/day
-What is being rewarded (incentivized) here? QUANTITY NOT QUALITY
Individual level profit sharing is best used when: Right Ans -
Output/results can be directly linked to specific employee
Examples of plan design at individual level Right Ans - -Piece-rate systems
-Bonuses
-Non monetary incentives
-Commissions
Work unit/team level profit sharing is best used when: Right Ans -
Interdependence and collaboration are critical to achieve results
Examples of plan design at work unit/team level Right Ans - -Group/team
results
-Gainsharing/goalsharing
-Quality improvement
-Cost reduction
Organizational level profit sharing is best used when: Right Ans -
Employees have solid line of sight to enterprise-level outcomes
Examples of plan design at organizational level Right Ans - -Profit sharing
