Preview

Six Dangerous Myths About Pay

Satisfactory Essays
Open Document
Open Document
335 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Six Dangerous Myths About Pay
“Six Dangerous Myths About Pay” – Jeffrey Pfeffer (8/18/14)
Topic of Paper: Decisions regarding compensation and their effects on organizational performance
Purpose of Paper: Organizations are trapped in unproductive ways of approaching pay, which they find difficult to escape. Pay cannot substitute for a working environment high on trust, fun, and meaningful work.
Why prof chose it: Interesting notion of higher ROI on spending to improve the culture of the firm than the individual compensation.
Outline:
Four decisions about compensation:
How much to pay employees?
How much emphasis to place on financial compensation as a part of the total reward system?
How much emphasis to place on attempting to hold down the rate of pay?
Whether to implement a system of individual incentives to reward performance?
Leaders can’t delegate matters of pay
The Myths:
Labor Rates = Labor Costs
Rates need to be discussed in relation to productivity
Cut Labor Costs by Cutting Labor Rates
Labor Costs are a significant portion of total costs
Low labor costs are a potent competitive strategy
The most effective way to motivate people to work productively is through individual incentive compensation
People work primarily for money
Myths are disseminated through media, economic theories and compensation consultants
Compensation
Studies show that individual comp programs don’t increase productivity. Rather, they tend to undermine teamwork, lead employees to focus on the short-term, and lead employees to think that compensation is linked to political skills
When individual compensation programs are eliminated, grievances decreased, product quality increased, teamwork improved
Collective systems work much better
Important to create a work space where people can have fun and feel valued, and are exposed to variety and opportunity
Advice on Pay
Include increased collective rewards in employee compensation packages
De-emphasize pay as the main reward for working at a company
Make pay practices

You May Also Find These Documents Helpful

  • Best Essays

    Rwt1 Research Paper

    • 2313 Words
    • 10 Pages

    This report examines 3 different compensation systems that our company can develop and enforce within our company for our employees. Compensation is the most important and rewarding factor for employees, so a thorough and thoughtful approach should be taken as we think about changing the way in which this company rewards it's employees for the work they do for us each and every day.…

    • 2313 Words
    • 10 Pages
    Best Essays
  • Satisfactory Essays

    These remarks paint a completely different picture than what is listed on the corporate career web page. In my paper, my focus will be on the challenging monetary compensation of the company and to offer strategies on how to…

    • 345 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    We know that incentives and awards are some of the factors that motivate employees, and it is true that by nature we say that people get paid for doing their jobs and even sometimes we forget to thank them, that is why it is so important that we have a good incentive program in place because people do respond well to incentives for good performance, recognition and doing especially good work.…

    • 889 Words
    • 4 Pages
    Satisfactory Essays
  • Best Essays

    A company’s fundamental purpose and objective of compensation is to provide adequate and equitable rewards to employees at a level that matches theirs skills, abilities and contributions to the company (DeNisi, Angelo S., Griffin, Ricky W., 2008, p. 284. Para. 1). Compensation is the human resource management function that deals with every type of reward that individuals receive in return for performing work – including financial and nonfinancial rewards. Financial rewards include direct payments (e.g. salary) plus indirect payments in the form of employee benefits. Nonfinancial rewards include everything in a work environment that enhances a worker’s sense of self-respect and esteem by others (Cascio, 2006, p.418, Para. 1).…

    • 1391 Words
    • 6 Pages
    Best Essays
  • Good Essays

    Cake Consulting

    • 13842 Words
    • 56 Pages

    Duplox’s current compensation strategy has developed conflicting goals for the sales and technical support services departments. These conflicting goals are creating rivalry among the employees, and the compensation system is perceived inequitable.…

    • 13842 Words
    • 56 Pages
    Good Essays
  • Better Essays

    Holland Enterprises

    • 1807 Words
    • 8 Pages

    Increasing organizational productivity is important to any organization. “Managers know that simply paying employees more will not result in increased output and improved quality. They frequently find that employees who are overpaid or highly paid relative to others doing comparable work are sometimes less productive than their lower-paid peers or counterparts…Organizations realize that if they are to be more competitive, they must change this “I’m owed it” mentality to an “I earned it” mentality. A major opportunity available to organizations to bring about this change in attitude is to reduce the fixed part of compensation packages and increase the variable part. The variable components consist of all short- and long-term incentives and awards. The kind and amount of incentives and awards must be linked directly to desired employee behaviors, contributions, or results achieved. These incentives and awards comprise a pay-for-performance program “(Henderson, 2006). In other words Holland needs to have a system in place that rewards employees fairly while exciting them to provide the very best customer service to meet the demand of the business. “ Through the use of a fair and stimulating compensation system, Holland Enterprises can motivate their employees to complete their assigned tasks at the standards expected and in return the employee is compensated with a…

    • 1807 Words
    • 8 Pages
    Better Essays
  • Powerful Essays

    Motivation and Employees

    • 2237 Words
    • 9 Pages

    It has been suggested that “financial rewards do not guarantee more productivity, but paying attention to employees’ motivational needs does” and that “managers need to pay less attention to financial incentives and more to the actual motivation needs of their employees” (Sunday Business Post 2012). This is further supported by the results of the 2011 Mercer’s What’s Working survey where “being treated with respect, a work-life balance, the type of work undertaken … were ranked ahead of overall compensation” (Sunday Business Post 2012).…

    • 2237 Words
    • 9 Pages
    Powerful Essays
  • Better Essays

    Martocchio, J. J. (2011). Strategic compensation: A human resource management approach: 2011 custom edition (6th ed.). Upper Saddle River, NJ: Prentice Hall.…

    • 1736 Words
    • 5 Pages
    Better Essays
  • Good Essays

    On another hand, incentive compensation is likely to increase the effort of the employee which can increase these gains from trade. Incentive problems exist within firms that the interests of employees and employers are not aligned perfectly. Fixed salaries do not provide strong incentives. There’s a trade-off between incentive compensation which aims to motivate employees and reducing inefficient risk bearing costs.…

    • 310 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Pay for Performance

    • 1107 Words
    • 5 Pages

    Traditionally, all incentive plans are “pay-for-performance” plans. They pay all employees based on the employee’s performance (Dessler). Compensation is a primary motivator for employees. People look for jobs that not only suit their creativity and talents, but compensate them both in terms of salary and other benefits accordingly. Compensation is also one of the fastest changing fields in Human Resources, as companies continue to investigate various ways of rewarding employees for performance. It is very important for organizations to make sure that the incentive plans are well structured to need the needs of the employee and in return make the organization profitable. Giving incentive pay to employees that has not earned them destroys the motivation and moral of employees which leads to less productivity. Thanks to public outcry, shareholder outrage, and increased government scrutiny, companies are making some adjustments to their executive incentive programs. At the very least, it gives the appearance of linking pay to performance.…

    • 1107 Words
    • 5 Pages
    Good Essays
  • Good Essays

    When evaluating compensation issues, economists often assume that both an employer and an employee make rational, albeit self-interested choices while working toward a goal. The problem, says Assistant Professor Ian Larkin, is that the most powerful workplace motivator is our natural tendency to measure our own performance against the performance of others. Key concepts include:…

    • 1803 Words
    • 8 Pages
    Good Essays
  • Better Essays

    Total Rewards

    • 1506 Words
    • 5 Pages

    Phoenix, T. (2006). Rewards Transformation: Understanding the Internal Total Rewards Marketplace. Benefits & Compensation Digest, 43(9), 1-14.…

    • 1506 Words
    • 5 Pages
    Better Essays
  • Good Essays

    Globalization and economy downturn are forcing companies’ to structure their benefit programs differently. Before some companies had a wide array of compensation for employees, but that has changed and these companies had to find ways to cut cost of benefits offer to new employees and find new programs to retain their current employees. Companies are basing their compensation and benefits programs on the economy decline and are attempting to contain staff sizes, payrolls, and benefits costs. On the other hand, small businesses have hard time competing with large companies (Cascio p. 463) because they have limited resources. For instance, BC Laboratories has been in business for more than 50 years and for the past two years has been struggling because business has slowed down. The company had to restructure the organization and combined some of the positions to save money and stay in business. Their employees’ morale is low and lately they have had high employee turnover. The human resources department has presented a new compensation and benefit proposal to the BC Labs owner. Because BC Labs is going through hard times, a non-monetary incentive program has been proposed without affecting the company’s budget. This will increase employees’ morale and their motivation, yielding positive results.…

    • 756 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    The company pays virtually no one on the basis of individual merit or performance. Does it stand a chance of success? Myth#5: The most effective way to motivate people to work productively is through individual incentive compensation.…

    • 793 Words
    • 5 Pages
    Satisfactory Essays
  • Powerful Essays

    Variable Pay

    • 3778 Words
    • 16 Pages

    Jeffrey P. & Robert I. S. (2006). What 's Wrong with Pay-for-Performance? Industrial Management. 12-17.…

    • 3778 Words
    • 16 Pages
    Powerful Essays