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Incentives and Gain sharing

Incentives and Gain sharing CHAPTER OBJECTIVES After studying this chapter, you should be able to: DISTINGUISH between incentives and gain sharing. EXPLAIN why incentives and gain sharing are growing in popularity. DISCUSS the major challenges in developing incentives and gain sharing for international operations. IDENTIFY non monetary incentives. EXPLAIN what the key factors are in executive…

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Incentive Matrix Summary

Incentive Matrix Summary Summarizes the various incentive and gain sharing approaches discussed in this chapter according to whether the employee receives cash. As can be seen from the figure, some incentives do not put cash into the employee’s Incentive Summary Matrix


Companies-accounting When the final distribution of shares is made, employees will have control of 80 percent of the stock. The company will be substantially owned and controlled by its employees.” With employee ownership, workers may accept lower wages since they share in the company’s profits. After the spin-off from National, for example, employee participation teams were created to enhance communications…

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Summarizes Scanlon, Rucker, and Improshare plans primarily aim to reduce costs and create improved commitment from workers through various approaches. The Scanlon Plan focuses primarily on labor costs and quality. Employees usually get to vote for a one-year trial of the plan. A vote at the endof the trial period makes it a permanent form…

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Profitability To overcome these criticisms, companies are trying to tie executive incentives to gains for shareholders. As two writers observed: Th. n w reward Ire being built around p doorman m Aurei that will contently pr to obtain long- rm b pollinator the Corneille, According to compensation experts, a top manager’s salary should be based on: Company…

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Performance standards

Performance standards The development of performance standards and measures, the tracking of performance measures, and the related administrative and clerical support often add to the costs and complexity of compensation management. If competitiv e, technological, or other changes lead to a redesign of the firm’s nontraditional compensation, additional expenses are incurred. And if employees see these changes as cutting their…

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Maximum bonus

Maximum bonus  In the third year the maximum bonus could reach 18’1..of base salary.”.’ Although performance-based compensation has a long history, it often is considered a nontraditional compensation approach, since most people receive wages and salaries. However, with inflation-adjusted pay per employee in the United States stuck under $24,000 a year since the early 1970s, incentives and gainsharing offer employees…

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Cost Reduction Plans

Cost Reduction Plans  Some critics of group incentive plans argue that profit-sharing schemes such as those found at Nucor and Lincoln Electric do not always reward employees’ efforts. For example, the pay received by workers at Lincoln Electric fell from $44,000 in one year to $22,500 two years later because of a slowdown in the…

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Profit-Sharing Plans

Profit-Sharing Plans Profit-sharing plans share profits with the employees. When these plans work well, they create trust and a feeling of a common fate among workers and management. Usually profit plans reserve a percentage of the firm’s overall profits or a percentage above a threshold and distribute those monies to employees. The distribution formulas vary, though many give a…

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Administration The administration of an incentive system can be complex. As with any control system, standards have to be established and results must be measured. For many jobs, the standards and measures are too imprecise or costly to develop. This means that the incentive system may result in inequities. For example, sometimes workers make more money than do their…

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