Flashcards in Chapter 8 Vocab Deck (44)
There are reasons for and against telecommuting. The advantages include a larger labor pool of workers, higher productivity, less turnover, improved morale, and reduced office-space costs.
Disadvantages of telecommuting for the employer include less direct supervision of employees, difficulty coordinating teamwork, and difficulty evaluating non-quantitative performance. Disadvantages for the employee include that he or she may not be as noticed for his or her efforts.
The job characteristics model shows most employees are more motivated and satisfied when their intrinsic work tasks are engaging.
Having the most interesting workplace characteristics in the world may not always lead to satisfaction if you feel isolated from your co-workers, and having good social relationships can make even the most boring and onerous tasks more fulfilling. Research demonstrates that social aspects and work context are as important as other job design features.
Some social characteristics that improve job performance include interdependence, social support, and interactions with other people outside work.
The work context is also likely to affect employee satisfaction.
To assess why an employee is not performing to her best level, look at the work environment to see whether it’s supportive.
Employee involvement draws on several of the theories on motivation that we discussed in Chapter 7. Theory Y is consistent with participative management.
Theory X aligns with autocratic style. The two-factor theory aligns with employee involvement programs in providing intrinsic motivation. And extensive employee involvement programs clearly have the potential to increase employee intrinsic motivation in work tasks.
Now, let’s talk about using rewards to motivate people, and specifically, what to pay employees. As we saw in Chapter 3, pay is not a primary factor driving job satisfaction. However, it does motivate people, and companies often underestimate its importance in keeping top talent. A 2006 study found that while 45% of employers thought pay was a key factor in losing top talent, 71% of top performers called it a top reason.
So, what should an organization do? How should the pay structure be established? The answer is not easy – it’s a complex process that entails balancing internal equity and external equity. Some organizations prefer to pay leaders by paying above market. Keep in mind that paying more may net better-qualified and more highly motivated employees who may stay with the firm longer.
Rewarding individual employees through variable-pay programs is becoming more common in the workplace. A number of organizations are moving away from paying solely on credentials or length of service. Piece-rate plans, merit-based pay, bonuses, profit sharing, gain sharing, and employee stock ownership plans are all forms of a variable-pay program, which base a portion of an employee’s pay on some individual and/or organizational measure of performance. Individual earnings therefore fluctuate up and down.
The second variable pay method is the merit-based pay plan. These plans are based on performance appraisal ratings. Their main advantage is that they allow employers to differentiate pay based on performance, and so create perceptions of relationships between performance and rewards. Most large organizations have merit pay plans, particularly for salaried employees. Limitations to merit-based plans include that they are based on annual performance appraisal, that the merit pool fluctuates based on economic conditions, and that unions typically resist merit-based pay plans.
. The incentive effects of performance bonuses should be higher than those of merit pay because rather than paying for performance years ago, which was rolled into base pay, bonuses reward recent performance. When times are bad, firms can cut bonuses to reduce compensation costs. The downside of bonuses is that employees’ pay is more vulnerable to cuts
Skill-based pay is also called competency-based or knowledge-based pay and is an alternative to job-based pay that bases pay levels on how many skills employees have or how many jobs they can do. For employers, the lure of skill-based pay plans is that they increase the flexibility of the workforce, because filling staffing needs is easier when employee skills are interchangeable. Skill-based pay also facilitates communication across the organization because people gain a better understanding of each other’s jobs. The disadvantages to skill-based pay are few. However, people can “top out”—that is, they can learn all the skills the program calls for them to learn. Finally, skill-based plans don’t address level of performance—they deal only with whether someone can perform the skill.
Gainsharing is a formula-based group incentive plan. Its popularity seems narrowly focused among large manufacturing companies, although some healthcare organizations have experimented with it as a cost-saving mechanism. Gainsharing differs from profit sharing in tying rewards to productivity gains rather than profits, so employees can receive incentive awards even when the organization isn’t profitable. Because the benefits accrue to groups of workers, high performers pressure weaker ones to work harder, improving performance for the group as a whole.
Another variable-pay option is the employee stock ownership plan, or ESOP. An ESOP is a company-established benefit plan in which employees acquire stock, often at below-market prices, as part of their benefits. Most of the 10,000 or so ESOPs in the United States are in small, privately held companies. Research on ESOPs indicates that they increase employee satisfaction and innovation. ESOPs have the potential to increase employee job satisfaction and work motivation, but employees need to psychologically experience ownership.
ESOP plans for top management can reduce unethical behavior. CEOs are more likely to manipulate firm earnings reports to make themselves look good in the short run when they don’t have an ownership share, even though this manipulation will eventually lead to lower stock prices. However, when CEOs own a large amount of stock, they report earnings accurately because they don’t want the negative consequences of declining stock prices.
Do variable-pay programs increase motivation and productivity? The answer is a qualified yes. Studies generally support the idea that organizations with profit-sharing plans have higher levels of profitability than those without them. One study found that whereas piece-rate pay-for performance plans stimulated higher levels of productivity, this positive affect was not observed for risk-averse employees.
You’d probably think individual pay systems such as merit pay or pay-for-performance work better in individualistic cultures such as the United States or that group-based rewards such as gain sharing or profit sharing work better in collectivistic cultures. Unfortunately, there isn’t much research on the issue. One recent study did suggest that employee beliefs about the fairness of a group incentive plan were more predictive of pay satisfaction in the United States than in Hong Kong. One interpretation is that U.S. employees are more critical in appraising a group pay plan, and therefore it’s more critical that the plan be communicated clearly and administered fairly.
Flexible benefits individualize rewards by allowing each employee to choose the compensation package that best satisfies his or her current needs and situation. These plans replace the “one-benefit-plan-fits-all” programs designed for a male with a wife and two children at home that dominated organizations for more than 50 years. Fewer than 10% of employees now fit that image. About 25% are single, and one-third are part of two-income families with no children.
Flexible benefits can accommodate differences in employee needs based on age, marital status, spouses’ benefit status, and number and age of dependents.
There are three basic types of programs:
Modular plans: pre-designed with each module put together to meet the needs of a specific group of employees.
Core-plus plans: a core of essential benefits and a menu-like selection of other benefit options.
Flexible spending plans: employees set aside pretax dollars up to the amount offered in the plan to pay for particular benefits, such as healthcare and dental premiums.
Today, almost all major corporations in the United States offer flexible benefits. They’re becoming the norm in other countries too. A recent survey of 211 Canadian organizations found that 60% offer flexible benefits, up from 41% in 2005. A similar survey of firms in the United Kingdom found that nearly all major organizations were offering flexible benefits programs, with options ranging from private supplemental medical insurance to holiday trading, discounted bus travel, and childcare vouchers.