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Article
Publication date: 1 October 2003

Marta M. Elvira

This case study examines how incentive pay programs are designed and changed over time in a financial organization that has typically relied on fixed salary compensation…

Abstract

This case study examines how incentive pay programs are designed and changed over time in a financial organization that has typically relied on fixed salary compensation. Once incentive programs are introduced, pay plans change frequently, and this process allows the study of assumptions embedded in various incentive theories. Economic theories tend to explain incentives from an agency perspective, which suggests that incentives satisfy elaborate contractual requirements and vary with the risk preferences and costs of managers versus employees. Power theories, by contrast, argue that the interests and resources of various firm groups determine incentive structures. For this case study, qualitative data describing a firm’s process of changing compensation were gathered from documents, personnel manuals, and interviews with company managers. The findings suggest that instead of following from complicated cost‐benefit analyses, pay plans are often implemented within short time frames and with scant performance/effectiveness information. This evidence highlights the influence of power in efforts to change compensation structures and the importance of a multidisciplinary understanding of rewards.

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Management Research: Journal of the Iberoamerican Academy of Management, vol. 1 no. 3
Type: Research Article
ISSN: 1536-5433

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Article
Publication date: 1 July 1989

Biman Das, Alberto Garcia‐Diaz and Clarence L. Hough

For machine‐paced operations a two‐factor monetary incentive planis developed by employing production quantity output and productionwaste as criteria for incentive

Abstract

For machine‐paced operations a two‐factor monetary incentive plan is developed by employing production quantity output and production waste as criteria for incentive earnings. The plan takes into account machine time allowance and increased operator work pace for manual work for establishing standards in a machine‐paced operation. The two incentive earning factors are given proper weights in terms of their relative economic importance. The weights are determined by comparing possible labour and material costs savings when the operators perform at incentive pace level. To demonstrate the working of the proposed monetary incentive plan an illustrative example is presented.

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International Journal of Operations & Production Management, vol. 9 no. 7
Type: Research Article
ISSN: 0144-3577

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Article
Publication date: 1 February 1992

Jim Abbott and Brian H. Kleiner

Demonstrates that one of the most important elements required toensure the success of any organization is to retain and motivate itsemployees, from the CEO down to the…

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1169

Abstract

Demonstrates that one of the most important elements required to ensure the success of any organization is to retain and motivate its employees, from the CEO down to the productionline worker. Argues that profit incentives can be a way to squeeze quality and productivity improvements from its remaining workers, while giving them greater control over their financial fates. Suggests ways to make incentive play plans work, and lists a number of types of incentive pay plans.

Details

Work Study, vol. 41 no. 2
Type: Research Article
ISSN: 0043-8022

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Book part
Publication date: 4 August 2008

Eduardo Schiehll

Following the optimal contracting hypothesis, this study investigates the issue of whether the board of director's ex ante choice to incorporate individual performance…

Abstract

Following the optimal contracting hypothesis, this study investigates the issue of whether the board of director's ex ante choice to incorporate individual performance evaluation (IPE) measures into the CEO bonus plan rewards managerial decisions not reflected in measures of the firm's current financial performance. Empirical results provide evidence that the use of IPE in the CEO bonus plan is an increasing function of the proportion of outsider directors on the board and a decreasing function of the informativeness of financial performance measures. This study also demonstrates how the use of IPE in incentive contracting can explain CEO cash compensation that is not explained by the firm's current performance and governance variables. Finally, the CEO incentive cash compensation not explained by observable performance measures or governance structure is positively associated with firm future performance one year after its award. Overall, results support the optimal contracting hypothesis. IPE appears to be used to increase the informativeness of CEO actions and determine the level of current CEO cash incentive compensation.

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Performance Measurement and Management Control: Measuring and Rewarding Performance
Type: Book
ISBN: 978-1-84950-571-0

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Article
Publication date: 1 August 1996

Barbara Brockie Leonard and Chandrasekhar Mishra

Long‐term performance contracts are awarded to top management in order to provide incentives to maximize shareholder value. We test the incentive hypothesis using 350…

Abstract

Long‐term performance contracts are awarded to top management in order to provide incentives to maximize shareholder value. We test the incentive hypothesis using 350 firms, one half of which has adopted long‐term performance plans over the period 1971–80. The analysis uses performance indicators such as earnings per share (EPS), rate of return on assets (ROA), rate of return on equity (ROE), rate of return on investment (ROI), and stock returns (ASR). In addition to using a control group of firms that did not adopt plans, the test period consists of a control period (six years prior to plan adoption) and a test period (six years following plan adoption). The results support the incentive hypothesis in that all performance indicators for the test firms improved compared to prior performance, but the performance of test firms in the period subsequent to plan adoption when compared to the control firms was not significantly different.

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Managerial Finance, vol. 22 no. 8
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 June 1986

Andrew Napier

Aims to discuss incentive schemes within sales management circles and illustrates effects on sales staff. Believes that there is a belief among writers that the ‘carrot…

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1373

Abstract

Aims to discuss incentive schemes within sales management circles and illustrates effects on sales staff. Believes that there is a belief among writers that the ‘carrot and stick’ method prevails within the selling/marketing fraternity, but purports to show that sales people are motivated by the anticipated satisfaction that comes with performance, rather than by performance itself, stating that self‐esteem has a direct effect on performance. States that three main areas bear on the incentive system: monetary incentives affect goal setting; lower goals allow rewards to be obtained easier so resulting in lower performance; personalized income may be increased if budgeted individuals set own goals. Proposes in summation that middle‐term sales disciplines should be quantified and assessed by means of a merit‐based appraisal scheme. Concludes that it is naive to assume that incentives motivate sales people to perform more effectively and that sales managers have the power of improved motivation in their hands.

Details

European Journal of Marketing, vol. 20 no. 6
Type: Research Article
ISSN: 0309-0566

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Article
Publication date: 1 June 1996

Steven H. Appelbaum and Loring Mackenzie

Notes the attempts by many companies today to identify innovative compensation strategies that are directly linked to improving organizational performance. Observes that…

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11887

Abstract

Notes the attempts by many companies today to identify innovative compensation strategies that are directly linked to improving organizational performance. Observes that there are many approaches to incentive compensation such as cash bonuses, stock purchase and profit sharing. Examines the individual and group incentive concepts that reward performance based on predetermined organizational goals and metrics, several behavioural theories that can be associated with reward and compensation, and convergent and divergent views and conclusions from the business community.

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Health Manpower Management, vol. 22 no. 3
Type: Research Article
ISSN: 0955-2065

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Article
Publication date: 10 April 2017

Sasanka Sekhar Ghosh

This paper, in fact is the saga of turnaround of an ailing PSU plant, which in spite of all kinds of improvements measures taken up by the Company had never seen…

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1150

Abstract

Purpose

This paper, in fact is the saga of turnaround of an ailing PSU plant, which in spite of all kinds of improvements measures taken up by the Company had never seen productivity beyond 65 percent of installed capacity. The purpose of this paper is also to showcase the amazing power of financial incentives in enhancing productivity, if rightly designed. On the other hand, it will also serve a lesson of caution to the users by highlighting the extent of damages what a faulty incentive plan can cause.

Design/methodology/approach

The methodology of Lean Six Sigma helped analyzing and improving the problem and tools like “Fishbone diagram” and “Analytical Hierarchy process” were very handy in identifying root causes for this complex problem and prioritization of those, respectively.

Findings

Root cause of low productivity being identified as “demotivated workforce on account of poor incentive earnings”, the existing financial incentive plans were given a relook. LSS tools like SIPOC, “heijunka”, “brainstorming” etc. were applied for revealing critical faults in the existing financial incentive schemes. Some unorthodox and very common methods were adopted in modifications and implementation of incentive plans.

Research limitations/implications

Modification of incentive scheme involving labor union bargain is commonly resisted by both the parties, i.e. labor unions as well as the management. Although their interest behind the same remains different. One fears to loose, while other is afraid of conceding more. This case study was not an exception too.

Practical implications

Expecting resistances, a good and thorough Shadow working with all kinds of “extremities tests” were prepared. This along with complete transparency followed by well explanations made both the parties happy. Accordingly, the modified incentive plans were agreed upon and subsequently were approved by the management for implementation. Few other remedies and countermeasures suggested were also implemented.

Social implications

The entire workforce was extremely happy and highly motivated. Provisions of equal incentive weightage with ample individual scope of earnings for both rival production groups in the modified incentive scheme successfully converted the inter-group hatred into healthy completion. Both the groups were gearing for much higher performance and earn more. Self-motivations were turned into group motivation, which is always a blessings for any incentive scheme.

Originality/value

Post-implementation period results were extra ordinary and unprecedented. Productivity was significantly enhanced to 15 percent in first six months, which increase up to 39 percent next year. Customer order and quality fulfillment met for the first time, relieving the management from great embarrassment. The annual incremental financial gain was more than Rs 1,000 millions. The methodology of identification of the root causes and the unique style of finding the solution are original in nature and would be helpful and guide for students, professionals of financial incentive designers, industrial engineers, managers and entrepreneurs.

Details

International Journal of Productivity and Performance Management, vol. 66 no. 4
Type: Research Article
ISSN: 1741-0401

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Article
Publication date: 1 December 1965

ONE effect of sharing a common language with America is the imposition of a surfeit of books on matters like work study, in which our own literature is modest indeed. The…

Abstract

ONE effect of sharing a common language with America is the imposition of a surfeit of books on matters like work study, in which our own literature is modest indeed. The almost simultaneous publication of two books with a common subject is therefore very unusual. They both deal with work measurement, one in forty‐seven chapters and the other in fifteen. Since books are not judged by a quantitative standard this is no guide to their respective merits.

Details

Work Study, vol. 14 no. 12
Type: Research Article
ISSN: 0043-8022

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Book part
Publication date: 20 March 2007

Chalmer E. Labig and Kenneth Zantow

Managed care organizations use physician incentives to control costs and ensure their financial viability. While the efficacy of incentives may be questioned, substantial…

Abstract

Managed care organizations use physician incentives to control costs and ensure their financial viability. While the efficacy of incentives may be questioned, substantial challenges exist for physicians who must balance the well-being of their patients and the focus of their professional training with organizational financial concerns. Many physicians experience difficulty in discussing incentive pay with patients (Pearson & Hyams, 2002), even though patients want to know (Pereira & Pearson, 2001) and tend to trust physicians more who are forthright about the issue (Levinson, Kao, Kuby, & Thisted, 2005). Of interest here are patients’ perceptions of the ethicalness of commonly used physician pay incentives. The results of our findings suggest that patients may view these incentives from a different perspective than health policy experts and physician executives. Specifically, our findings indicate that patients perceive incentives based upon patient satisfaction and clinical efficiency more ethically than incentives based upon revenue generation. These views are significantly related to physician visits. We offer suggestions for future research in light of recent pay disclosure regulations.

Details

Insurance Ethics for a More Ethical World
Type: Book
ISBN: 978-1-84950-431-7

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