MGT3045 WK 4 Project

Executive Bonuses and Incentives © 2017 South University

2 Executive Bonuses and Incentives

Performance Management Benefits; Compensation Strategies and Practices

Customer satisfaction, employee satisfaction, market share, learning and development, productivity, and quality are other areas that can be measured to determine executive performance rewards. Measurement of executive performance varies from one company to another. Some executive compensation packages use a short-term focus of one year, which may lead to large rewards for executive performance in a given year even though corporate performance over a multiyear period is mediocre, especially if the yearly measures are not carefully chosen. Executives may manipulate earnings per share by selling assets, liquidating inventories, or reducing research and development expenditures.66 All of these actions may make organizational performance look better in the short run but impair the long-term growth of the organization. Other executive compensation issues and concerns exist. Figure 12-13 highlights some of the criticisms and counterarguments related to executive compensation. One of the more controversial issues is that some executives seem to receive large awards for negative actions. Some people find it contradictory to reward executives who improve corporate results by cutting staff, laying off employees, negatively changing pension plans, or increasing health insurance deductibles, although sometimes cost-cutting measures are necessary to keep a company afloat.67 However, a sense of reasonableness must be maintained. If rank-and-file employees are suffering, giving bonuses and large payouts to executives appears counterproductive and even hypocritical.

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Human Resource Management

©2017 South University

3 Executive Bonuses and Incentives

Performance Management Benefits; Compensation Strategies and Practices

FIGURE 12-13 Point/Counterpoint Regarding Executive Compensation

Incentives must be thoughtfully designed and carefully managed to produce the desired results. Employees from front-line workers to top executives pay attention to what behaviors and decisions will earn them the greatest rewards. Therefore, designing incentives to focus them on valued organization outcomes is central to effective incentive programs. (Mathis et al., 2017). Mathis, R.L., Jackson, J.H., Valentine, S.R. & Meglich, P. (2017). Human resource management. (15th ed.).

Boston, MA: Cengage Learning.

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Human Resource Management

©2017 South University