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l_h_chapter_12.pptxIncentive Pay and Total Rewards
Chapter 12
Introduction to Total Rewards
“Let’s Talk Total Rewards”
Which words sound familiar?
https:// www.youtube.com/watch?v=fGfemoNZUIc
Total Rewards Approach
Attract, motivate, and retain employees
Positive changes in workforce behavior
Reinforce organizational strategy
Ensure organizational success
Compensation
Benefits
Work-Life Effectiveness
Recognition
Performance Management
Talent Development
Goals
“The Mix”
Total Rewards Applied…
https:// www.youtube.com/watch?v=vMasl-AifEE
Beyond Compensation: How Employees Prioritize Total Rewards at Various Life Stages
What are the three key findings discussed?
Other Key Findings from the Research
Older Employees Value Benefits More; Younger Employees Value Work-Life and Development More
More Experienced Workers Value Benefits More; Less Experienced Workers Value Work-Life and Development More
Men Favor Money; Women Favor Balance
Work-Life Is Significantly More Important for Parents with Young Children
Benefits Are Significantly More Important for Breadwinners
Trends in Total Rewards (SHRM 2015)
Longer working lifespans
Increased health care costs
Managing five generations with varying concerns and priorities in the workforce
Income growth divergence between the highest-paid talent (executives) and everyone else will continue
Salary growth from promotion, not base pay increase
Benefits will shift to exchange models which allow for customization
Use of data analytics to identify what drives performance and to design incentives based on those drivers
More contingent workers and free agent contractors
Why Total Rewards is Important to Your Organization
In the near future, an organization’s ability to attract, motivate and retain will emerge as the primary indicator of fiscal performance and survival. To that end, given the diverse workforce, organizations will be offering more variety in rewards as they try to access the best and brightest in a seller’s market. … For a diverse global workforce, no single reward element will be a value driver. There will be increased importance on the value proposition for individuals. (Kelley, Moore and Holloway, 2011)
Variable Pay: Incentives
Compensation that depends on some measure of performance or results in order to be awarded.
Incentive Pay
Individual Incentives Work Best When…
There are distinct, measurable outcomes for individual efforts.
Individual jobs require autonomy.
Group Incentives Work Best When…
We need people to cooperate.
Individual contributions are difficult to identify.
Members possess similar or complimentary skills.
Executive Compensation
What are the concepts discussed in the video that we have previously talked about?
Executive Compensation
Too Much or Just Enough?
Excesses in executive pay, (CEO’s pay increased while other employees took pay cuts and were laid off) resulted in questions about companies acting ethically and being socially responsible.
The practice harmed a large number of stakeholders (including employees and shareholders) in order to reward relatively few executives.
Resulted in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
Limits executive pay in public corporations and adds requirements for reporting of compensation and shareholder involvement with executive compensation.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
Significant provisions:
Shareholders can vote on executives’ compensation packages (“say on pay”) and “golden parachutes”.
Every public company must disclose the CEO’s total compensation and the total median compensation of all employees, and the ratio.
All public firms must provide annual information on the relationship between executive compensation and the total shareholder return.
Incentive Pay
Executive Incentives
Should be designed to motivate the executive to make decisions that will benefit the organization over both the short and the long term.
Stock incentives.
Perquisites.
Short-term bonuses.
Long-term stock awards or options.
Incentive Pay
The Goal of Executive Compensation
To create a system that aligns the behavior of the executive with the interests of the owners of the firm by combining short and long-term incentives.
Incentive Pay
