1. Indicate whether you agree or disagree with the following statement: “Individual incentive plans are less preferable than group incentives and companywide incentives.”
Incentives play an important role in motivating employees as it encourages them to be more dedicated and productive in their work. When presented with the two types of incentives, which are the individual and countrywide, group incentive plans are more preferable than the other. While individual incentives are said to bring about a better performance because “the link between a person’s pay and his or her performance is tighter” (McGee et al, 2006), group incentives are preferable because it boost employees’ to work as a team. This is because individual incentives are seen as motivation to translate efforts to a higher level of performance, but it “undermine productivity in a team environment where cooperation is a key to improved performance” (Azasu, 2004).
The system of rewarding people as a team stems from the concept that superior performance will result from the collective responsibility of the group members. Studies revealed that an incentive plan that put emphasis on the members who were once rewarded as individuals tend to exert higher performance when cooperating with the group when such effort is rewarded accordingly (Azasu, 2004). Currently, there is an increasing number of companies that reward the achievements, and this result in the provision of incentive to a group of people instead of the individual (Alghren et al, 2007). The group incentive system will encourage people to work as groups, instead of individuals attempting to do a task. This was proven to be effective, especially in organizations where the employees are required to perform similar tasks (Alghren et al, 2007).
2. Critics of profit sharing plans maintain that these plans do not motivate employees to perform at higher levels. Under what conditions are profit sharing plans not likely to motivate employees?
Profit sharing is considered as an appropriate method of rewarding employee performance and this has been widely used by companies in many countries. However, there are instances when profit sharing schemes are not likely to motivate the employees. One instance when this scheme may not motivate the workers is when the people do not understand the overall goal of the company, thus they remain to be passive towards improving their output despite the existence of a profit sharing incentive (Stack, 2000).
Moreover, while the scheme is said to increase the commitment of the employee to the company, motivation can only be achieved when both the company and the employee share the same interest. That is, there is a need for every member of the team to share the same goals and that they are rewarded equivocally (Mikander, 2010). Failure on the part of the company to meet its profit objective may have a negative impact on employee motivation. A study revealed that more often than not, employees “take the total level of remuneration and not base wage as the marginal cost labor” (Jana, 2013). Therefore, it was concluded that profit-sharing scheme does not offer job stabilization, which can eventually impact on the commitment and motivation of the workers.
3. Pay grades limit a company’s ability to achieve competitive advantage. Do you agree? Provide a rationale for your position.
There are several reasons why pay grades are created such as the ease of salary administration, as well as it allows for the proper categorization of jobs that do not have an available benchmark data. However, the use of pay grades can be detrimental to the growth of the company by limiting its competitive advantage. When a pay grade is used, employees may not find it necessary to exert more effort because they are no longer motivated to do so. In Rynes et al (2004), it was suggested that a well-designed compensation system is vital in maintaining a company’s competitive advantage. This was validated by a previous research on the performance of teachers, and it was claimed that it is not reasonable to maintain a single salary structure for the educators (Hanushek, 2007).
While the use of pay grades are considered to be advantageous due to its transparency and ease of administration, it was suggested that a more innovative way of salary scheme must be implemented. This is especially so in the private sectors where the it is paramount to consider the “economic and financial pressures and a desire to increase productivity” (O’Riordan, 2008). Further, the use of pay grades may lead to unrecognized employee performance; that is, the changes in modern organizations necessitate the need to regularly evaluate jobs, employee performance and pay for better competitiveness. Failure to do so will lead to less motivated employees due to the inability of the company to provide compensation and recognition.
4. Describe some ethical dilemmas sales professionals may encounter. How can sales compensation programs be modified to minimize ethical dilemmas?
Some of the ethical dilemmas faced by sales professionals include, a) accepting overpriced listing contract, b) suggesting a low reservation price and, c) demanding for a longer listing contract (Waller et al, n.d). These are just among the many ethical dilemmas faced by sales professionals and these can be changed with the adoption of better pay schemes. Studies revealed that sales target and size of commission among other factors, are found to be among the elements that influence ethical behavior (Haron et al, 2011). One of possible ways to minimize unethical behavior among sales persons is the adoption of “a combination of salary and commission for their sales staff, because they assume that incentives linked to performance outcomes will stimulate effort” (Suff and Reilly, 2006).
It was found that sales compensation has not changed considerably in the past years, such that a large amount of the sales persons pay is dependent on sales volume. There is therefore a need to adopt a pay scheme where the base salary, variable pay and non-financial rewards right are largely dependent on the sales process category as well as the company type and the services it offers (Suff and Reilly, 2006). An appropriate compensation scheme for sales persons should be one that allows sales professionals to be sufficiently prepared to take some risks associated with their work. It is typical for companies to implement a strategic pay scheme that combines salary, commission and bonus accordingly (Suff and Reilly, 2006).
5. Discuss your views about whether discretionary employee benefits should be an entitlement or something earned based on job performance
As a means to motivate employees, discretionary benefits must be earned based on performance. When management deemed it appropriate that the employees should receive discretionary pay, it should be an outlay that will also benefit the company. That is, the generosity of the company must be met with corresponding effort on the part of the employees. Moreover, as suggested, in order for a payment scheme to become contributory to the success of the company, “it must be aligned with the vision and mission of the company” (Greene, n.d.). That is, the administration of discretionary benefits must be done with the overall goal and objective the company in mind.
References
Ahlgren, A., Anderson, I., and Skold, H. (2007) Individuals versus Team Based Rewards Systems: A Study on How Organizations Argue for Their Choice. School of Business Economic Law, Retrieved from https://gupea.ub.gu.se/bitstream/2077/4706/1/06-07-135.pdf.
Asazu, S. (2004) Using pay and benefits in real estate firms – an initial look at the Swedish experience. N.p. Retrieved from http://eres.scix.net/data/works/att/db82.content.00379.pdf
Greene, R. (n.d) Variable Pay. Illinois: Rewards Systems, Inc, Retrieved from https://www.shrm.org/multimedia/webcasts/Documents/12greene_VariablePay.pdf
Hanushek, E. (2007) The Single Salary Schedule and Other Issues of Teacher Pay. Peabody Journal of Education 82.4 (2007): 574-586. Retrieved from http://hanushek.stanford.edu/sites/default/files/publications/hanushek.2007%20PeabodyJEd%2082(4).pdf.
Haron, H., Ismail, I., and Razak, S. (2011) Factors Influencing Unethical Behavior of Insurance Agents. International Journal of Business and Social Science 2 (1) 84-100. Retrieved from http://ijbssnet.com/journals/Vol._2_No._1;_January_2011/8.pdf
Jana, F., and Petr, P. (2013) Profit Sharing-A Tool for Improving Productivity, Profitability and Competitiveness of Firms? Journal of Competitiveness 5 (4) 3-25. Retrieved from http://www.cjournal.cz/files/148.pdf
References
McGee, H., Dickinson, A., Huitema, B., and Culig, K. (2014)The Effects of Individual and Group Monetary Incentives on High Performance. Performance Improvement Quarterly 19 (4) 101-124. Web. https://www.researchgate.net/publication/227515611_The_Effects_of_Individual_and_Group_Monetary_Incentives_on_High_Performance
Mikander, C. (2010) The Impact of a Reward System on Employee Motivation in Motonet-Espoo. Diss. Arcada, Print.
O'Riordan, J. (2008) A Review of the Civil Service Grading and Pay System."Institute of Public Administration Retrieved from http://www.ipa.ie/pdf/cpmr/CPMR_DP_38_Review_ofthe_Civil_Service_Grading_Pay_System.pdf
Rynes, S., Gerhart, B., and Minette, K. (2004) The Importance of Pay in employee Motivation: Discrepancies Between what People Say and What They Do. Human Resource Management 43 (4)381-394. Retrieved from https://www.utm.edu/staff/mikem/documents/Payasamotivator.pdf
Stack, J. (2000) The Problem with Profit Sharing. Grow Your Company, Inc. http://www.inc.com/magazine/19961101/1864.html, 2000. Web.
Suff, P., and Reilly, P. (2006) Selling Rewards Paying for Performance in Your Sales Force." Institute of Employment Studies Retrieved from http://www.employment-studies.co.uk/system/files/resources/files/mp74.pdf
References
Waller, B., Barret, P., and Waller, L. (n.d) Ethical Dilemmas Facing Today’s Real Estate Professional. Retrieved from http://www.aabri.com/OC2010Manuscripts/OC10086.pdf
