Organizational Context:Reward Systems

Chapter 4

“If you must have motivation, think of your paycheck on Friday.”

Learning ObjectivesDiscuss 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.

The Theory Behind Pay for PerformanceBehavioral Modification

Behavior is a function it’s consequenceReinforcing desired behaviorsExtinguishing undesired behaviors

Taxi drivers vs. Boeing Machinists

Pay: The DominantOrganizational RewardThe Theoretical

Background on Money as a RewardPhysicalPsychological

Research on the Effectiveness of PayWorld Series

Budgets

Pay: The DominantOrganizational RewardThe Theoretical

Background on Money as a RewardMoney is rarely #1Money vs. Morale

Pay: The DominantOrganizational Reward

Pay for PerformanceBase

Hourly, weekly, monthly or annual basis

Labor Market Driven

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Pay: The DominantOrganizational Reward

Pay for PerformanceMerit

Pre-determined CriteriaPercentage or Sum

ChallengesQuantifiable and Understandable CriteriaSalary “catch up”

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Pay: The DominantOrganizational Reward

Pay for PerformanceThe Use of BonusesThe Use of Stock Options

ESOP

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Pay: The DominantOrganizational Reward

Pay for Performance (continued)Potential LimitationsGroup Incentive Pay PlansPotential Limitations

New Pay Techniques

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Recognition as anOrganizational Reward

Recognition versus MoneyExamples of Effective Formal

Recognition SystemsBottom Line EvidenceTreat like Merit Pay

Recognition as anOrganizational Reward

Recognition versus MoneyRecognition rewards can take many forms

and are often controllable by the manager.Unlike many financial forms of reward, there

is no limit to the number of people who can receive this type of reward of how often it is given.

Research indicates that managers often underestimate how useful recognition can be in motivating employees to achieve goals.

5 Love Languages- Book

Recognitionfully communicate new recognition

procedures/programs to all in the organization;educate and encourage managers to use recognition

as part of the overall compensation package;integrate recognition into the overall performance

management process;hold and promote site-specific recognition

ceremonies;publicize best practices;continually review and revise the recognition

process to ensure maximum effectiveness; andsolicit recognition ideas from employees and

managers.

Benefits asOrganizational Rewards

Traditionally Offered Benefits (40%-45% of Salary)Federal Government-Mandated

BenefitsSocial SecurityWorkers CompERISA

Benefits asOrganizational Rewards

Traditionally Offered Benefits (30%-35% of Salary)Life, Disability, and Health InsurancePension Benefits

401kIRARoth IRA

Time-Off BenefitEfficiency Wage Theory

Save by paying more?

Benefits asOrganizational Rewards

Newer Types of BenefitsWellness Programs

EAPsLife Cycle BenefitsOther BenefitsFlexible, Cafeteria-Style BenefitsEducation?

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Questions