C12: Variable Pay - Improving Performance With
Variable Pay (Part 2): Qs And As
Two Primary Elements of Compensation Right Ans - Fixed pay rewards are
based on an employee's value
- Market based = rewards ind for their value relative to the labor market
- Performance based = rewards ind for their sustained performance over time
- Skill based = rewards ind for their acquisition of new skills and competencies
Variable pay rewards for accomplishments and results
- Organizational, group or individual results
- Performance-based compensation
- Flexible and adaptable
The Goal of Variable Pay Right Ans - The ultimate goal of variable pay is to
improve organizational performance.
Once an organization has identified its key business objectives, the proper
design and implementation of variable pay programs will help motivate
employees to behave in ways that accomplish those objectives.
Variable pay influences organizational performance by providing:
- Focus
- Alignment
- Motivation
- Reinforcement
Business Strategies Right Ans - Operational Excellence
primarily a price-cost-based strategy. This strategy often includes a
combination of price, quality, dependability and ease of purchase that
competitors cannot match. The corp culture typically strives to minimize
waste and reward efficiency. (Fast food rest)
Product/Service Leadership
primarily an innovation-based strategy. This strategy focuses on innovation,
product development and market exploitation. The corp culture encourages
imagination and a mind-set driven by the prospect of creating the future.
(High tech companies)
,Customer Intimacy
primarily a solutions-based strategy. This strategy focuses on creating results
for carefully selected customers (making them successful.) The corp culture
encourages deep and lasting relationships with customers. (High end hotel
chains)
Business Strategies' Business Objectives Right Ans - Operational Excellence
- Product quality
- Operational efficiency improvement
- Process improvement
- Cost reduction
Product/Service Leadership
- Market share/market penetration
- Product development
- Cost reduction
Customer Intimacy
- Customer opinion of products
- Product quality
- Customer retention
- Customer satisfaction
Business Life Cycles' Business Objectives Right Ans - Start-up
- Obtaining capital
- Cash conservation
- Develop brand awareness
- Develop marketing plan
Growth
- Production capability
- Market share/market penetration
- Sales volume/revenue growth
Mature
- Improve operational efficiency
- Stock price appreciation
- Maintain/increase market share
, Decline
- Maximize profits
- Extend product demand
- New product development
Three Categories of Variable Pay Right Ans - Incentives, Bonuses and
Recognition
Incentives Right Ans - - Criteria determined in advance
- Amount of payment can vary
- Monetary or nonmonetary
- Self-funded or budgeted
- Nondiscretionary
Bonuses Right Ans - - Completion of specific task
- Amount determined in advance
- Monetary
- Budgeted
- Nondiscretionary
Recognition Right Ans - - Criteria broadly defined and subjective
- Awarded spontaneously
- Decision made after the fact
- Focused on behaviors
- Monetary or nonmonetary
- Budgeted
- Discretionary
Short-Term Incentive Plans Right Ans - Profit-sharing
Performance-sharing
Individual performance based
Short-Term Incentive Plans
Profit-Sharing Right Ans - Plans:
- Share profits with employees
- Base rewards on financial performance
- Typically include entire organization
- Payout in equal or graduated amounts
Variable Pay (Part 2): Qs And As
Two Primary Elements of Compensation Right Ans - Fixed pay rewards are
based on an employee's value
- Market based = rewards ind for their value relative to the labor market
- Performance based = rewards ind for their sustained performance over time
- Skill based = rewards ind for their acquisition of new skills and competencies
Variable pay rewards for accomplishments and results
- Organizational, group or individual results
- Performance-based compensation
- Flexible and adaptable
The Goal of Variable Pay Right Ans - The ultimate goal of variable pay is to
improve organizational performance.
Once an organization has identified its key business objectives, the proper
design and implementation of variable pay programs will help motivate
employees to behave in ways that accomplish those objectives.
Variable pay influences organizational performance by providing:
- Focus
- Alignment
- Motivation
- Reinforcement
Business Strategies Right Ans - Operational Excellence
primarily a price-cost-based strategy. This strategy often includes a
combination of price, quality, dependability and ease of purchase that
competitors cannot match. The corp culture typically strives to minimize
waste and reward efficiency. (Fast food rest)
Product/Service Leadership
primarily an innovation-based strategy. This strategy focuses on innovation,
product development and market exploitation. The corp culture encourages
imagination and a mind-set driven by the prospect of creating the future.
(High tech companies)
,Customer Intimacy
primarily a solutions-based strategy. This strategy focuses on creating results
for carefully selected customers (making them successful.) The corp culture
encourages deep and lasting relationships with customers. (High end hotel
chains)
Business Strategies' Business Objectives Right Ans - Operational Excellence
- Product quality
- Operational efficiency improvement
- Process improvement
- Cost reduction
Product/Service Leadership
- Market share/market penetration
- Product development
- Cost reduction
Customer Intimacy
- Customer opinion of products
- Product quality
- Customer retention
- Customer satisfaction
Business Life Cycles' Business Objectives Right Ans - Start-up
- Obtaining capital
- Cash conservation
- Develop brand awareness
- Develop marketing plan
Growth
- Production capability
- Market share/market penetration
- Sales volume/revenue growth
Mature
- Improve operational efficiency
- Stock price appreciation
- Maintain/increase market share
, Decline
- Maximize profits
- Extend product demand
- New product development
Three Categories of Variable Pay Right Ans - Incentives, Bonuses and
Recognition
Incentives Right Ans - - Criteria determined in advance
- Amount of payment can vary
- Monetary or nonmonetary
- Self-funded or budgeted
- Nondiscretionary
Bonuses Right Ans - - Completion of specific task
- Amount determined in advance
- Monetary
- Budgeted
- Nondiscretionary
Recognition Right Ans - - Criteria broadly defined and subjective
- Awarded spontaneously
- Decision made after the fact
- Focused on behaviors
- Monetary or nonmonetary
- Budgeted
- Discretionary
Short-Term Incentive Plans Right Ans - Profit-sharing
Performance-sharing
Individual performance based
Short-Term Incentive Plans
Profit-Sharing Right Ans - Plans:
- Share profits with employees
- Base rewards on financial performance
- Typically include entire organization
- Payout in equal or graduated amounts
