The Organizational Reward System. Chapter 12. Learning Objectives. Define organizational rewards. Distinguish between intrinsic and extrinsic rewards. List several desirable preconditions for implementing a pay-for-performance program.
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Define organizational rewards.
Distinguish between intrinsic and extrinsic rewards.
List several desirable preconditions for implementing a pay-for-performance program.
Define job satisfaction and list its five major components.
Summarize the satisfaction–performance relationship.
Define compensation, pay, incentives, and benefits.
List several pieces of government legislation that have had a significant impact on organizational compensation.
Explain the equity theory of motivation.
Discuss internal, external, individual, and organizational equity.
Management must recognize what employees perceive as meaningful rewards
Pay is usually the first, and sometimes the only, reward most people think about
May include office location, allocation of certain pieces of equipment, assignment of preferred work tasks, and informal recognition
Primary organizational variable used to reward employees and reinforce performance is pay
Even though many U.S. companies have some type of pay-for-performance program, most do a poor job of relating the two
Surveys repeatedly show that employees do not have much confidence that a positive relationship exists between the two
Evidence shows that paying for performance is working at the highest levels in many companies
Trust in management
Absence of performance constraints
Trained supervisors and managers
Good measurement systems
Ability to pay
Clear distinction among cost of living, seniority, and merit
Well-communicated total pay policy
Flexible reward schedule
Two propositions concerning the satisfaction-performance theory exist
Satisfaction causes performance
Satisfaction is the effect rather than the cause of performance
Rewards constitute a more direct cause of satisfaction than does performance
Rewards based on current performance enhance subsequent performance
Justification for pay secrecy
To avoid any discontent that might result from employees’ knowing what everybody else is being paid
Many employees feel very strongly that their pay is nobody else’s business
A compromise on issue of pay secrecy is to disclose pay ranges for various job levels within the organization
Clearly communicates general ranges of pay for different jobs, but it does not disclose exactly what any particular employee is making
Based on the idea that employees will be satisfied with their pay when their perception of what their pay is and of what they think it should be agree
Happens when employees feel good about internal and external equity of their pay
An employee’s perception of what pay should be depends on several factors:
Role of human resource manager in overall organizational reward system is to assist in its design and to administer the system
Administering the system – Carries responsibility of ensuring that system is fair to all employees and that it is clearly communicated to all employees