Answer two discussion questions and respond to two classmates for each discussion question

Discussion post Assignment

Please review lecture notes to assist with questions

Week 2 Lecture

In Week 2, this course will discuss the uses of incentive pay plans including the pros and cons of the various employee pay plans. This week will also discuss the relationship between performance management and compensation.

Employee incentive compensation programs grew from the philosophy that employees will be driven by rewards. As a result, organizations use incentive compensation programs to produce their targeted results. Organizations reward employees who produce. Organizations need to improve or keep employee motivation and the key is finding out what employees want and value as incentives. There are a variety of incentive pay plans. A few such plans are discretionary bonus plans, annual pay increase plan, profit sharing, retention bonusses and project-based bonus. A common compensation plan is based on the employee’s seniority and hence called “seniority pay.” An employee under this plan receives compensation due to the length of time he/she has been with the organization or tenure with the organization. Many times, this type of plan is found in unionized workforces, however it can be found in many different types of organizations as well. The one issue with this type of plan is the increase in compensation may not be appropriate, especially if the employee is not performing and as a result, it may have a negative impact on the organization.  The employee may have an expectation of an increase regardless of performance or organizational productivity.  If the organization doesn’t produce, the employee will expect an increase regardless. Another incentive plan is the “merit plan” where employees are paid based on past performance usually during a specific period. The merit plan pays employees for meeting standards or performance goals and can be utilized in conjunction with annual performance evaluations. For this type of pay plan to work, the organization needs to set goals that are obtainable and realistic. Some organizations utilize SMART goals. SMART goals are goals that are set that are specific, measurable, attainable, relevant and time framed. Additionally, employees need to be made aware of the terms of the merit pay plan so they know how and when to reach their goals. Goals should be aligned with the organizational mission, vision and guiding principles. Merit pay programs are not appropriate for all companies and for the plan to be successful, top management must agree to reward the top performers with meaningful pay differentials that match the levels of the employee performance (Martocchio, 2017). Another incentive plan is the “person-centered pay” which is a plan that rewards employees for acquiring job related knowledge, skills or competencies (Martocchio, 2017).  The person-centered play plan is not based on job performance. This plan is a means of rewarding employees for their actions acquiring skills. Furthermore, person-centered pay rewards employees for the promise of performance in the future based on the employee acquiring certain job-related skill sets.  

As with most strategies and plans, there will be pros and cons. The advantages of an employee incentive plan are that it can motivate employees to be more productive and reduce turnover by creating loyalty. It can also reward employee performance. However, a disadvantage is that it could cause employee competition along with resentment among the employees. Students need to keep in mind that there is not a single incentive plan that will be appropriate for all employees within in an organization since employees may be motivated by different methods. Many times, an organization will use various compensation plans to achieve their organizational goals. The design and implementation of the compensation plans need to be most effective for the organization and the employee.

Please review the Incentive Pay (Links to an external site.) video which will provide an overview of incentive pay plans for employees.

References

Gregg Learning. (2016). Incentive pay (Links to an external site.) [Video file]. Retrieved from https://www.youtube.com/watch?v=cr5IdfWUpxc

Martocchio, J. (2017). Strategic compensation: A human resource management approach (9th ed.). New York, New York: Pearson.

DISCUSSION QUESTION NUMBER ONE:

Define the concept of seniority and merit pay plans, including the strengths and limitations of such plans within an organization.  Discuss the job, organizational and/or other factors that should be considered when deciding between the two.  Respond to at least two of your fellow students’ postings.

RESPOND TO CLASSMATE ONE:

The seniority pay plan is where the employees experience is measured by the working habits of the employee and what they have accomplish for the organization.  Some organizations are paying the same increase for all employees.  For example, recently in the organization that I am employed at all the employees received an four percent raise. The seniority pay plan also pays the old employees more than they would new hires. Many organizations assumes that the longer an employee has been with the organization has more value than those are just hired.   Martocchio (2011), states that "the employee will remain with the company because he knows that every year another increase in his pay".  In the seniority pay plan many organizations will often reward their employees for the experience that they have on their job and for establishing their career though the organization.  

The merit pay plan often provides the motivation leading to the increased productivity of the employees.  The merit pay plan also recognizes the employees that are putting forth the efforts that will help them to receive a promotion from the organization.  In this plan employees are often rewarded for their efforts that will help the organization in the long run

The factors that should be considered in deciding which plan is best for the organization we should look at the future.  In the seniority plan they are only concerned with how many years and the experience that an employee has.  Whereas the merit pay plan is concerned about the long run effects that an employee has for the organization.  The merit pay plan has benefits for the organization and the employees.  They are concerned about the employees whether old employees or new new employees which offer the most in the long run.

Reference

Martocchio, J.J. (2017). Strategic compensation: A human resource management approach (9th ed.). Retrieved from https://content.ashford.edu

RESPOND TO CLASSMATE TWO:

Week 2 Discussion 1

Seniority and Merit Pay

Define the concept of seniority and merit pay plans, including the strengths and limitations of such plans within an organization.  Discuss the job, organizational and/or other factors that should be considered when deciding between the two.

Seniority pay rewards employees by adding to their base pay based on the amount of time that the employee has been with a particular company. Employees that are knowledgeable and productive want to know that they are appreciated by their organization and seniority plans can do that. When employees continue to improve by training on new skills and making sure they are up to date on old skills, this is when the seniority pay should be offered. One strength is If organizations continue to offer seniority pay to good employees, they will continue to be productive and If new employees know that seniority pay is an option, they will work harder to become more successful in all aspects of the organization (Martocchio, 2017).

Merit pay is based on performance and rewards employees that perform at a high level with additional pay. Merit pay is a huge motivation within organization because it isn’t necessarily based on how long you have been with the company. A merit increase for an employee can be determined by the managers performance appraisal of that particular employee. A strength of merit pay is that it sets the bar for current and future employees letting them know how the company is expecting them to perform. Organizations want employees to perform at a certain level and most are willing to use the merit pay system to keep the best employees in the industry (Martocchio, 2017).

When an organization decides between adding seniority pay or merit pay for their employees, the decision should go along with the goals and objectives of the particular organization. The seniority pay option can remove any perception of favoritism being shown in the workplace. Because the merit pay option is usually based on managerial performance appraisals or reviews, some employees may feel that managers show favoritism which can cause problems in the workplace. However, merit pay plans can assist in increasing  motivation within the workplace because this is based on performance, so most employees will want to work harder to increase their compensation. Either one an organization decides to implement will help ensure their employees that working hard and being productive will increase their compensation at some point (Joseph, n.d.).

Joseph, C. (n.d.). The Effects of Merit-Based Promotion Vs. Seniority. Retrieved from Small Business: https://smallbusiness.chron.com/effects-meritbased-promotion-vs-seniority-11565.html

Martocchio, J. (2017). Strategic compensation: A human resource management approach (9th ed.). https://content.ashford.edu.

DISCUSSION QUESTION NUMBER TWO:

Discuss how incentive pay plans – both individual and group – motivate employees to achieve high levels of performance.  Identify potential weaknesses of these plans and suggest steps that can be taken to make these plans highly effective.  Then, choose one industry that either an individual or group incentive pay plan would work best providing support for your reasoning (using personal examples to illustrate your point if possible).  Explain your answer. Respond to at least two of your fellow students’ postings. 

RESPOND TO CLASSMATE ONE:

JULIE-

Incentive pay plans can be based on individual or group performance.  It is important for a company to understand what metrics the pay will be based on, and whether it is reasonable to tie the results to an individual or a group.  For example, I work in government contracting, and we will often give awards to entire teams.  When a new contract is won, the entire proposal team will receive a cash bonus for their hard work.  This is usually about a dozen people.  "Group incentive programs are most suitable where the nature of the work is interdependent and the individual contributions of employees are difficult to measure" (Martocchio, 2017).  On the other hand, if a single Finance Analyst found a billing error that saved the company a large sum of money, it would be more appropriate to give an individual bonus.  

These incentive plans can be used in place of a base salary, or in conjunction with a base salary.  Personally, I am risk-adverse, so I prefer to have my entire paycheck come from salary.  This way I know exactly how much my paycheck will be week after week.  However, there are others who like to be in control of their pay and may prefer to work long hours in exchange for more pay.  This would be common for commission-based employees like realtors.  While some optimistic employees may see the endless opportunity of a commission-based pay, others who are realists may see that there is the potential to earn very little if the market is not strong.  Offering a combination of salary and commission may help ease some employees an make the overall package more appealing.  In the case of realtors, a group incentive plan would not make sense because each home is represented by a single realtor whose level of effort is directly related to the sale of that home.  Another local realtor would not have an effect on the other realtor's sales.  

Martocchio, J.J. (2017).  Strategic compensation: A human resource management approach (9th ed.). Retrieved from https://content.ashford.edu

RESPOND TO CLASSMATE TWO:

Ethel-

Week 2 Discussion 2

Incentive pay plan is a manner for which employers pay their employees for a higher productivity by giving them a larger pay or a bonus.  Many employees are motivated to achieve high levels of performance by the type of incentive that the organization is offering them.  The employees are motivated by knowing that the more productivity that they produce the more money we be put in their pocket, thus causing them to provide more for their families.  

Some of the potential weaknesses that the incentive pay plans can display are:  That some of the employees may care more about the incentive more than they care about the productivity and how the goal is completed and they may take the incentive for granted.  These weaknesses could cause a decrease in the quality of the work and product that is put out by the organization.  Some steps that could help with making the incentive plan more effective are: Lay out some goals for the incentive to be paid out, Establish some guidelines for the employees to follow, Communicate to the employees about the specific goals and the incentives, and  take action when it comes to the employees and the incentives.

For me I would choose the cash payout incentive because the organization that I am employed at offer this type if incentive pay plan. The reason that I would choose this one is because it would help me and my family financially and with the cost of living going up this would truly help out with saving for the future.  The stock option would be good also but the stocks could fall and we would have nothing.

References

Martocchio, J.J. (2017). "Strategic compensation: A human resource management approach",

      Retrieved from https://ashford.instructure.com/53029/external_tools/retrieve?

Rowe, R. (2018). "Six Types of Incentive Plans",

      Retrieved from https://bizfluent.com/list6557258-six-types-incentive-plans.html