Chapter 12 Pay-For-Performance and Financial Incentives
◼ Chapter 12 ◼ Pay-For-Performance and Financial Incentives
Behavioral Objectives When you finish studying this chapter,you should be able to: Discuss how to use piecework,standard hour,and team or group incentive plans. Discuss how to use short-term and long-term incentives for managers and executives. List the pros and cons of salary plans and commission plans for salespeople. Explain how an incentive plan might backfire and how to avoid such a problem
Behavioral Objectives Discuss how to use piecework, standard hour, and team or group incentive plans. Discuss how to use short-term and long-term incentives for managers and executives. List the pros and cons of salary plans and commission plans for salespeople. Explain how an incentive plan might backfire and how to avoid such a problem. When you finish studying this chapter, you should be able to: 1
Incentives for Operations Employees Piecework Plans Standard Hour Plan Team or Group Variable Pay Incentive Plans 2
Incentives for Operations Employees Piecework Plans Standard Hour Plan Team or Group Variable Pay Incentive Plans 2
Incentives for Managers and Executives Short-Term Incentives: the annual bonus Long-Term Incentives: capital accumulation programs 3
Incentives for Managers and Executives Short-Term Incentives: the annual bonus Long-Term Incentives: capital accumulation programs 3
Defining the Strategic Context for the Executive Compensation Plan Define the strategic context for the executive compensation program, including the internal and external issues that lace the company and its business objectives-boosting sales abroad,downsizing,and so on. Based on your strategic aims,shape each component of the executive compensation package(base salary,short-term incentives,long-term incentives,and benefits and perquisites),and then group the components into a balanced whole. Create a stock option plan to give the executive compensation package the special character it needs to meet the unique needs of the executives and the company. Check the executive compensation plan for compliance with all legal and regulatory requirements and for tax effectiveness. Install a process for reviewing and evaluating the executive compensation plan whenever a major business change occurs. 4
Defining the Strategic Context for the Executive Compensation Plan Define the strategic context for the executive compensation program, including the internal and external issues that lace the company and its business objectives—boosting sales abroad, downsizing, and so on. Based on your strategic aims, shape each component of the executive compensation package (base salary, short-term incentives, long-term incentives, and benefits and perquisites), and then group the components into a balanced whole. Create a stock option plan to give the executive compensation package the special character it needs to meet the unique needs of the executives and the company. Check the executive compensation plan for compliance with all legal and regulatory requirements and for tax effectiveness. Install a process for reviewing and evaluating the executive compensation plan whenever a major business change occurs. 4