Transcript (Textbook) Organizational Behavior, 10ed (Fred Luthans)

SECTION 3
Organizational Context:
Reward Systems
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.
The Theory Behind Pay for
Performance

Behavioral Modification
 Behavior
is a function it’s consequence
 Reinforcing desired behaviors
 Extinguishing undesired behaviors
Taxi Drivers vs. Warehauser Plant Workers
Pay: The Dominant
Organizational Reward


The Theoretical Background on Money as a Reward
 Physical
 Psychological
 Willingness to Take a new Job
 Pay and Talent/Retention and Turnover
 Large Organizations- Pay versus Satisfaction
Research on the Effectiveness of Pay
 World Series Budgets
Pay: The Dominant
Organizational Reward

The Theoretical
Background on Money
as a Reward


Money is rarely #1
Money vs. Morale
Pay: The Dominant
Organizational Reward

Base Pay
 Hourly,
 Labor
weekly, monthly or annual basis
Market Driven
(Continued)
Pay: The Dominant
Organizational Reward

Pay for Performance
 Merit
 Pre-determined
 Percentage
Criteria
or Sum
 Challenges
 Quantifiable
 Salary
and Understandable Criteria
“catch up”
(Continued)
Pay: The Dominant
Organizational Reward

Pay for Performance
 The
Use of Bonuses
 Spot
bonus
 Signing
 The
Bonus
Use of Stock Options
 ESOP
(Continued)
Pay: The Dominant
Organizational Reward

Pay for Performance (continued)
 Potential
 Group
Incentive Pay Plans
 Potential

Limitations
Limitations
New Pay Techniques
(Continued)
Recognition as an
Organizational Reward






Don Clifton says…
Recognition versus Money
Examples of Effective Formal
Recognition Systems
Bottom Line Evidence
Recognition and the Annual
Review
Treat like Merit Pay
Recognition as an
Organizational Reward

Recognition versus Money
 Recognition
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
Recognition







fully 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; and
solicit recognition ideas from employees and managers.
Benefits as
Organizational Rewards

Traditionally Offered Benefits (40%-45% of Salary)
 Federal Government-Mandated Benefits
 Social Security
 Workers Comp
 ERISA
Benefits as
Organizational Rewards

Traditionally Offered Benefits (40%-45% of Salary)
 Life,
Disability, and Health Insurance
 Pension Benefits
 401k
 IRA
 Roth
IRA
 Time-Off

Benefit
Efficiency Wage Theory
 Save
by paying more?
 Henry Ford and $5 a day
Benefits as
Organizational Rewards

Newer Types of Benefits
 Wellness Programs and EAPs
 Life Cycle Benefits
 Other Benefits
 Flexible, Cafeteria-Style Benefits
 Education?
(Continued)
Leaders are Readers



The Art of Innovation
Kelley and Littman (2001)
“Publicly acknowledge a risk taker, a rule breaker,
even a failure, and explain why every successful
organization needs them”
CEO Pay
Made in America—My Story
Sam Walton and John Huey (1993)
“A lot of what goes on these days with high-flying
companies and these overpaid CEO’s who’re really
looting from the top and aren’t watching out for anyone
but themselves, really upsets me.”
CEO Pay
Questions