Organizational behavior 7e by luthans chap004

All rights reserved.Organizational Context: Reward Systems Chapter Four... • Explain how recognition is used as an organizational reward.. • Discuss the role of benefits as organizatio

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc All rights reserved.

Organizational Context: Reward

Systems

Chapter Four

Learning Objectives

• Discuss the theoretical background on money as a

reward.

• Present the latest research on the effectiveness of

pay.

• Describe some of the traditional methods of

administering pay.

• Relate some of the latest forms of “new” pay and their

value in helping attract and retain talented employees.

• Explain how recognition is used as an organizational

reward.

• Discuss the role of benefits as organizational rewards.

organizational context.

– Consequences and contingencies play an important role in organizational behavior

– Emphasize the emerging importance of

human capital – to sustain and leverage it

dimension of the organizational

environment.

Pay: Dominant Organizational

Reward

• Rewards are provided with the objective:

– Of motivation which affects performance

– To encourage loyalty and retention

• Theoretical background on money as a

reward

– Money can explain behavior

• Achievement and recognition, status and respect

– Agency theory

• Aligning diverse interests and goals with rewards

Pay: Dominant Organizational

Reward Continued

• Research on the effectiveness of pay –

three considerations:

– Outcomes that an organization seeks

– Measurement of these results

– Tie rewards to these outcomes

• Traditional methods of administrating pay

– Base pay approach: market conditions

– Merit pay approach: predetermined criteria

Pay: Dominant Organizational

Reward Continued

• Pay for performance

– Individual incentive pay plans

• Use of bonuses: upper-level managers

• Use of stock options: senior-level managers

• Potential limitations: excesses and ethical

breakdowns, encourage narrow range of behavior, and may cause conflicts among individuals

Pay: Dominant Organizational

Reward Continued

• Pay for performance

– Group incentive pay plans

• Gain sharing plan: net gain from productivity

• Profit sharing: profit sharing pool distributed to

employees

• Employee stock ownership plan (ESOP)

• Potential limitations: equal distribution among the

group, late or regular payments

Pay: Dominant Organizational

Reward Continued

• New pay techniques

– Commissions beyond sales to customers – Rewarding leadership effectiveness

– Rewarding new goals

– Pay for knowledge workers in teams

– Skill pay

– Competency pay

– Broadbanding

Recognition as an Organizational

Reward

• Recognition versus money

– Frequent nonfinancial rewards that have a big

impact on employee productivity and quality service behaviors

– They can take many different forms, can be

given in small or large amounts, and in many instances are controllable by the manager

– Recognizing creativity is becoming

increasingly necessary for competitive

advantage

Recognition as an Organizational

Reward Continued

• Steps needed to be set up to effectively manage a formal

and informal recognition program:

Recognition as an Organizational

Reward Continued

• Examples of effective formal recognition

systems.

– Dierbergs Family Market: “extra step” program – Hotel Sofitel Minneapolis: “Sofitel Service

Champions”

– Fremont Hotel & Casino: “Personality with a

Hustle”

Benefits as Organizational

Rewards

• Traditionally offered benefits

– Federal government-mandated benefits

• Social security

• Medicare benefits

– Life, disability, and health insurance

– Pension benefits

• Private pension plan

– Time-off benefit

• Paid vacation, religious holiday, and sick leave

Benefits as Organizational

Rewards Continued

• Newer types of benefits

– Wellness programs

– Life cycle benefits

– Other benefits

– Flexible, cafeteria-style benefits

Questions