Manajemen Sumber Daya Manusia (Human Resource Management)

Manajemen Sumber Daya Manusia

1. Prof. Dr. H. Pahlawansjah Harahap, ME
Bohlander and Snell (Managing Human Resources, 2005)
MANAJEMEN
SUMBERDAYA MANUSIA
(Human Resources Management)
MAGISTER MANAJEMEN – UNIVERSITAS SEMARANG
2008

2. Chapter 1
The Challenge of
Human Resources Management

3. Overall Framework for
Human Resource Management
COMPETITIVE
CHALLENGES
• Globalization
• Technology
• Managing change
• Human capital
• Responsiveness
• Cost containment
HUMAN
RESOURCES
• Planning
• Recruitment
• Staffing
• Job design
•Training/
development
• Appraisal
• Communications
• Compensation
• Benefits
• Labor relations
EMPLOYEE
CONCERNS
• Background
diversity
• Age distribution
• Gender issues
• Educational levels
• Employee rights
• Privacy issues
• Work attitudes
• Family concerns

4. Going Global
Globalization
–The trend toward opening up foreign
markets to international trade and
investment.
Impact of Globalization
–Partnerships with foreign firms
–“Anything, anywhere, anytime”
markets
–Lower trade and tariff barriers
NAFTA, EU, APEC trade agreements
WTO and GATT

5. Going Global (cont’d)
Impact on HRM
–Different geographies, cultures, laws,
and business practices
–Issues:
Identifying capable expatriate
managers.
Developing foreign culture and work
practice training programs.
Adjusting compensation plans for
overseas work.

6. Embracing New Technology
Knowledge Workers
–Workers whose responsibilities extend
beyond the physical execution of work
to include planning, decision making,
and problem solving.
The Spread of E-commerce
The Rise of Virtual Workers

7. Influence of Technology in HRM
Human Resources Information System
(HRIS)
–Computerized system that provides current
and accurate data for purposes of control and
decision making.
–Benefits:
Store and retrieve of large quantities of data.
Combine and reconfigure data to create new
information.
Institutionalization of organizational knowledge.
Easier communications.
Lower administrative costs, increase
productivity and response times.

8. Impact of IT on HRM
Transformational
Impact
Operational
Impact
Relational
Impact
HRM

9. Productivity Enhancements
MOTIVATION
• Job enrichment
• Promotions
• Coaching
• Feedback
• Rewards
ENVIRONMENT
• Empowerment
• Teams
• Leader support
• Culture
ABILITY
• Recruitment
• Selection
• Training
• Development
Perf = f (A,M,E)

10. Human Resource
Competency Model
Source: Arthur Yeung, Wayne Brockbank, and Dave Ulrich, “Lower Cost, Higher Value: Human Resource Function in
Transformation.” Reprinted with permission from Human Resource Planning, Vol. 17, No. 3 (1994). Copyright 1994 by The Human
Resource Planning Society, 317 Madison Avenue, Suite 1509, New York, NY 10017, Phone: [phone], Fax: [phone].
Business
Mastery
• Business acumen
• Customer orientation
• External Relations
HR
Mastery
• Staffing
• Performance appraisal
• Rewards system
• Communication
• Organization design
Change
Mastery
• Interpersonal skills
and influence
• Problem-solving skills
• Rewards system
• Innovation and creativity
Personal
Credibility
• Trust
• Personal
relationships
• Lived values
• Courage

11. Chapter 2
Job Analysis, Employee
Involvement, and Flexible
Work Schedules

12. What is a Job?
Job
–A group of related
activities and duties
Position
–The different duties and
responsibilities performed
by only one employee
Job Family
–A group of individual jobs
with similar
characteristics
Job
Job Job Job

13. Job Requirements
Job Specification
–Statement of the needed knowledge, skills,
and abilities (KSAs) of the person who is to
perform the job
–Since Griggs v Duke Power and the Civil
Rights Act of 1991, job specifications used in
selection must relate specifically to the
duties of the job.
Job Description
–Statement of the tasks, duties, and
responsibilities (TDRs) of a job to be
performed

14. Job Requirements
Relationship of Job Requirements
to Other HRM Functions
Recruitment
Selection
Performance
Appraisal
Training and
Development
Compensation
Management
Determine recruitment qualifications
Provide job duties and job
specifications for selection process
Provide performance criteria for
evaluating employees
Determine training needs and develop
instructional programs
Provide basis for determining
employee’s rate of pay

15. Job Analysis
Job Analysis
–The process of obtaining information
about jobs by determining what the
duties, tasks, or activities of jobs are.
HR managers use the data to develop job
descriptions and job specifications that are
the basis for employee performance appraisal
and development.

16. The Process
of Job
Analysis

17. Determining Job Requirements
•What employee does
•Why employee does it
•How employee does it
•Determining job requirements
•Summary statement of the job
•List of essential functions of the
job
•Employee orientation
•Employee instruction
•Disciplinary action
•Personal qualifications required
in terms of skills, education and
experience
•Recruitment
•Selection
•Development
Nature of:
Job Analysis
Job Description
Job Specification
Basis for:

18. Job Analysis and Essential Job
Functions
Essential Functions
–Statements in the job description of job duties
and responsibilities that are critical for success
on the job.
The purpose of essential functions is to match and
accommodate human capabilities to job requirements.
A job function is essential if:
–The position exists to perform the function.
–A limited number of employees are available to
perform the function.
–The function is specialized, requiring needed
expertise or abilities to complete the job.

19. Performing Job Analysis
1.Select jobs to study
2.Determine information to collect: Tasks,
responsibilities, skill requirements
3.Identify sources of data: Employees,
supervisors/managers
4.Methods of data collection: Interviews,
questionnaires, observation, diaries and
records
5.Evaluate and verify data collection: Other
employees, supervisors/managers
6.Write job analysis report

20. Human Resources
Planning and Recruitment
Chapter 3

21. Human Resources Planning
Human Resources Planning (HRP)
–Process of anticipating and making provision
for the movement (flow) of people into,
within, and out of an organization.
–HRP’s purpose is the the effective
deployment of human resources through:
Anticipating organizational labor supply and
demand.
Providing expanded employment
opportunities for women, minorities, and the
disabled.
Guiding the development and training the
workforce.

22. HRP and Strategic Planning
Strategic Analysis
–What human resources are needed and
what are available?
Strategic Formulation
–What is required and necessary in support
of human resources?
Strategic Implementation
–How will the human resources be allocated?
Human Resources
Planning
Strategic
Planning

23. Linking the Processes of HRP and
Strategic Planning
Source: Adapted from James W. Walker, “Integrating the Human Resource Function with the
Business,” Human Resource Planning 14, no. 2 (1996): 59–77. Reprinted with permission.
Strategic
Analysis
Establish the context:
•Business goals
•Company
strengths/weaknesses
•External
opportunities/threats
•Source of
competitive
advantage
Strategy
Formulation
Clarify performance
expectations and future
management method:
•Values, guiding
principles
•Business mission
•Objectives and
priorities
•Resource allocations
Strategy
Implementation
Implement processes to
achieve desired results:
•Business goals
•Company
strengths/weaknesses
•External
opportunities/threats
•Source of
competitive
advantage
Identify people-related
business issues
Define HR strategies,
objectives, and action plans
Implement HR processes,
policies, and practices

24. FORECASTING DEMAND
Human Resource Planning Model
Considerations
• Product/service demand
• Technology
• Financial resources
• Absenteeism/turnover
• Organizational growth
• Management philosophy
Techniques
• Trend analysis
• Managerial estimates
• Delphi technique
Techniques
• Staffing tables
• Markov analysis
• Skills inventories
• Management inventories
• Replacement charts
• Succession Planning
External Considerations
• Demographic changes
• Education of the workforce
• Labor Mobility
• Government policies
• Unemployment rate
FORECASTING SUPPLY
BALANCING
SUPPLY AND DEMAND
(Shortage)
Recruitment
• Full-time
• Part-time
• Recalls
(Surplus)
Reductions
• Layoffs
• Terminations
• Demotions
• Retirements

25. Forecasting Demand for
Employees
Quantitative Methods
Qualitative Methods
Forecasting Demand

26. Quantitative Approach: Trend Analysis
Forecasting labor demand based on an
organizational index such as sales:
–Select a business factor that best predicts
human resources needs.
–Plot the business factor in relation to the
number of employees to determine the labor
productivity ratio.
–Compute the productivity ratio for the past five
years.
–Calculate human resources demand by
multiplying the business factor by the
productivity ratio.
–Project human resources demand out to the
target year(s).

27. Example of Trend Analysis of HR
Demand
1997 $2,351 14.33 164
1998 $2,613 11.12 235
1999 $2,935 8.34 352
2000 $3,306 10.02 330
2001 $3,613 11.12 325
2002 $3,748 11.12 337
2003 $3,880 12.52 310
2004* $4,095 12.52 327
2005* $4,283 12.52 342
2006* $4,446 12.52 355
BUSINESS  LABOR = HUMAN RESOURCES
FACTOR PRODUCTIVITY DEMAND
YEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)
*Projected figures

28. Qualitative Approaches to
Demand Forecasting
Management Forecasts
–The opinions (judgments) of supervisors,
department managers, experts, or others
knowledgeable about the organization’s
future employment needs.
Delphi Technique
–An attempt to decrease the subjectivity of
forecasts by soliciting and summarizing the
judgments of a preselected group of
individuals.
–The final forecast represents a composite
group judgment.

29. Forecasting Supply of Employees:
Internal Labor Supply
Staffing Tables
Markov Analysis
Skill Inventories
Replacement Charts
Succession Planning

30. Forecasting Internal Labor Supply
Staffing Tables
–Graphic representations of all organizational
jobs, along with the numbers of employees
currently occupying those jobs and future
(monthly or yearly) employment
requirements.
Markov Analysis
–A method for tracking the pattern of
employee movements through various jobs.

31. Hypothetical Markov Analysis for a
Retail Company
Figure 4.5

32. An Executive
Replacement
Chart

33. Recruiting within the Organization
Benefits of a promotion-from-within
policy:
–Capitalizes on past investments
(recruiting, selecting, training, and
developing) in current employees.
–Rewards past performance and
encourages continued commitment to the
organization.
–Signals to employees that similar efforts
by them will lead to promotion.
–Fosters advancement of members of
protected classes within an organization.

34. Recruiting within the Organization
Limitations of a promotion-from-within
policy:
–Current employees may lack the knowledge,
experience or skills needed for placement in
the vacant/new position.
–The hazards of inbreeding of ideas and
attitudes (“employee cloning”) increase
when no outsiders are considered for hiring.
–The organization has exhausted its supply
of viable internal candidates and must seek
additional employees in the external job
market.

35. Internal Methods of Locating
Qualified Job Candidates
Human Resources Information
Systems (HRIS)
–Database systems containing the records
and qualifications of each employee that
can be accessed to identify and screen
candidates for an internal job opening.
Job Posting and Bidding
–Posting vacancy notices and maintaining
lists of employees looking for upgraded
positions.

36. Recruiting Outside the Organization
Labor Market
–Area from which applicants are to be
recruited.
Tight market: high employment, few available
workers
Loose market: low employment, many
available workers
Factors determining the relevant labor market:
–Skills and knowledge required for a job
–Level of compensation offered for a job
–Reluctance of job seekers to relocate
–Ease of commuting to workplace
–Location of job (urban or nonurban)

37. Outside Sources of Recruitment
Advertisements
Unsolicited
applications and
resumes
Internet recruiting
Employee referrals
Executive search
firms
Educational
institutions
Professional
organizations
Labor unions
Public employment
agencies
Private employment
agencies
Temporary help
agencies
Employee leasing

38. Effectiveness of Recruitment
Sources
Source: David E. Terpstra, “The Search for Effective Methods.” Reprinted from HRFocus, May 1996.
© 1996 American Management Association International. Reprinted by permission of American
Management Association International, New York, NY. All rights reserved. http://www.amanet.org/.

39. Increasing the Effectiveness of
Employee Referrals
Up the ante.
Pay for performance.
Tailor the program.
Increase visibility.
Keep the data.
Rethink your taboos.
Widen the program.
Measure the results.

40. Chapter 4
Selection

41. Matching People and Jobs
Selection
–The process of choosing individuals who have
relevant qualifications to fill existing or
projected job openings.
Selection Considerations
–Person-job fit: job analysis identifies required
individual competencies (KSAOs) for job
success.
–Person-organization fit: the degree to which
individuals are matched to the culture and
values of the organization.

42. Steps in the
Selection
Process
Note: Steps may vary. An
applicant may be rejected
after any step in the process.
Completion of application
Initial interview in
HR department
Employment testing
(aptitude, achievement)
Background investigation
Preliminary selection in
HR department
Supervisor/team interview
Medical exam/drug test
Hiring decision

43. The Selection Process
Obtaining Reliable and Valid
Information
–Reliability
The degree to which interviews, tests, and
other selection procedures yield comparable
data over time and alternative measures.
–Validity
Degree to which a test or selection procedure
measures a person’s attributes.

44. Chapter 5
Training and Development

45. Use of the Types of Training
Figure 6.1
How Often the Types of
Training Are Offered
Source: Tammy Galvin, “The Methods,” Training 38, no. 10 (October 2001): 48–56.

46. Systems Model of Training
Phase 1:
Needs
Assessment
________________
• Organization
analysis
• Task analysis
• Person analysis
Phase 2:
Design
________________
• Instructional
objectives
• Trainee
readiness
• Learning
principles
Phase 3:
Implementation
________________
• On-the-job
methods
• Off-the-job
methods
• Management
development
Phase 4:
Evaluation
________________
• Reactions
• Learning
• Behavior transfer
• Results

47. Needs Assessment for Training
Competency assessment
–Analysis of the sets of skills and knowledge
needed for decision-oriented and knowledge-
intensive jobs.
• ORGANIZATIONAL
ANALYSIS
TASK ANALYSIS
• PERSON ANALYSIS
…of environment, strategies, and resources
to determine where to emphasize training
…of the activities to be performed in order to
determine the KSAs needed.
…of performance, knowledge, and skills in
order to determine who needs training.

48. Phase 1: Conducting the Needs
Assessment
Organization Analysis
–An examination of the environment, strategies,
and resources of the organization to determine
where training emphasis should be placed.
Task Analysis
–The process of determining what the content of
a training program should be on the basis of a
study of the tasks and duties involved in the
job.
Person Analysis
–A determination of the specific individuals who
need training.

49. Phase 2: Designing Training
Programs
Characteristics of successful trainers
Trainee readiness and motivation
Issues in training design
Instructional objectives
Principles of learning

50. Designing The Training Program
Instructional Objectives
–Represent the desired outcomes of a
training program
Performance-centered objectives
–Provide a basis for choosing methods
and materials and for selecting
the means for assessing
whether the instruction
will be successful.

51. Trainee Readiness and Motivation
Strategies for Creating a Motivated
Training Environment:
–Use positive reinforcement.
–Eliminate threats and punishment.
–Be flexible.
–Have participants set personal goals.
–Design interesting instruction.
–Break down physical and psychological
obstacles to learning.

52. Principles of
Learning
Individual
differences
Goal setting
Meaning-
fulness of
presentation
Modeling
Feedback and
reinforcement
Whole-versus-
part learning
Massed-versus-
distributed
learning
Active practice
and repetition
PRINCIPLES
OF LEARNING

53. Chapter 6
Career Development

54. HR’s Role in
Career
Development
THE GOAL: MATCH
INDIVIDUAL AND
ORGANIZATION NEEDS
---------------------------------
The Goal: Matching
•Encourage employee ownership
of career.
•Create a supportive context.
•Communicate direction of
company.
•Establish mutual goal setting
and planning
IDENTIFY CAREER
OPPORTUNITIES AND
REQUIREMENTS
---------------------------------
Opportunities & Requirements
•Identify future competency
needs.
•Establish job
progressions/career paths.
•Balance promotions, transfers,
exits, etc.
•Establish dual career paths.
GAUGE
EMPLOYEE
POTENTIAL
---------------------------------
Gauge Employee Potential
•Measure competencies
(appraisals).
•Establish talent inventories.
•Establish succession plans.
•Use assessment centers.
INSTITUTE CAREER
DEVELOPMENT
INITIATIVES
------------------------------------
Career Development Initiatives
•Provide workbooks and
workshops.
•Provide career counseling.
•Provide career self-management
training.
•Give developmental feedback.
•Provide mentoring.
1 2
4 3

55. Balancing Individual and
Organizational Needs
Figure 7.2

56. Identifying Career Opportunities
and Requirements
Competency Analysis
–Measures three basic competencies for each
job: know-how, problem solving, and
accountability.
Job Progressions
–The hierarchy of jobs a new employee might
experience, ranging from a starting job to jobs
that require more knowledge and/or skill.
Career Paths
–Lines of advancement in an occupational field
within an organization.

57. Career Changes
Promotion
–A change of assignment to a job at a
higher level in the organization.
–Principal criteria for determining
promotions are merit, seniority, and
potential.
Transfer
–The placement of an individual in another
job for which the duties, responsibilities,
status, and remuneration are
approximately equal to those of the
previous job.

58. Career Change Organizational
Assistance
Relocation services
–Services provided to an employee who is
transferred to a new location:
Help in moving, in selling a home, in
orienting to a new culture, and/or in learning
a new language.
Outplacement services
–Services provided by organizations to
help terminated employees find a new
job.

59. Alternative Career Moves

60. Chapter 7
Appraising and
Improving Performance

61. Performance Appraisal
Appraisal Programs
Administrative Developmental
Compensation Ind. Evaluation
Job Evaluation
EEO/AA Support
Training
Career Planning

62. Purposes for Performance
Appraisal

63. Reasons Appraisal Programs Fail
Lack of top-management
information and support
Unclear performance
standards
Rater bias
Too many forms to
complete
Use of the appraisal
program for conflicting
purposes.

64. Common Appraisal Problems
Inadequate
preparation on the
part of the manager.
Employee is not given
clear objectives at the
beginning of
performance period.
Manager may not be
able to observe
performance or have
all the information.
Inconsistency in
ratings among
supervisors or other
raters.
Performance standards
may not be clear.
Rating personality
rather than
performance.
The halo effect,
contrast effect, or
some other perceptual
bias.

65. Common Appraisal Problems
(cont’d)
Inappropriate time
span (either too short
or too long).
Overemphasis on
uncharacteristic
performance.
Inflated ratings because
managers do not want
to deal with “bad
news.”
Subjective or vague
language in written
appraisals.
Organizational politics
or personal
relationships cloud
judgements.
No thorough discussion
of causes of
performance problems.
Manager may not be
trained at evaluation or
giving feedback.
No follow-up and
coaching after the
evaluation.

66. Why Appraisal Systems Are
Ineffective
Inadequate preparation on the part of the
manager.
Employee is not given clear objectives at the
beginning of performance period.
Manager may not be able to observe
performance or have all the information.
Performance standards may not be clear.
Inconsistency in ratings among supervisors or
other raters.
Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no.
16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and
Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.

67. Why Appraisal Systems Are
Ineffective (cont’d)
Rating personality rather than performance.
The halo effect, contrast effect, or some other
perceptual bias.
Inappropriate time span (too short or too long).
Overemphasis on uncharacteristic performance.
Inflated ratings because managers do not want
to deal with “bad news.”
Subjective or vague language in written
appraisals.
Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no.
16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and
Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.

68. Why Appraisal Systems Are
Ineffective (cont’d)
Organizational politics or personal
relationships cloud judgments.
No thorough discussion of causes of
performance problems.
Manager may not be trained at evaluation or
giving feedback.
No follow-up and coaching after the
evaluation.
Sources: Patricia Evres, “Problems to Avoid during Performance Evaluations,” Air Conditioning, Heating & Refrigeration News 216, no.
16 (August 19, 2002): 24–26; Clinton Longnecker and Dennis Gioia, “The Politics of Executive Appraisals,” Journal of Compensation and
Benefits 10, no. 2 (1994): 5–11; “Seven Deadly Sins of Performance Appraisals,” Supervisory Management 39, no. 1 (1994): 7–8.

69. Behavioral Methods
Behavioral
Methods
Critical Incident
Behavioral Checklist
Behaviorally Anchored
Rating Scale (BARS)
Behavior Observation
Scale (BOS)

70. Behavioral Methods
Critical Incident
–An unusual event denoting superior or
inferior employee performance in some part
of the job.
Behaviorally Anchored Rating Scale (BARS)
–A performance appraisal that consists of a
series of vertical scales, one for each
dimension of job performance.
Behavior Observation Scale (BOS)
–A performance appraisal that measures the
frequency of observed behavior.

71. Chapter 8
Managing Compensation

72. Compensation
Pay is a statement of an
employee’s worth by an employer.
Pay is a perception of worth by an
employee.

73. Total Compensation
Direct Indirect
Bonuses
Gainsharing
Security Plans
• Pensions
Employee Services
• Educational assistance
• Recreational programs
Commissions
Wages / Salaries
Insurance Plans
• Medical
• Dental
• Life
Time Not Worked
• Vacations
• Breaks
• Holidays

74. Compensation Management and
Other HRM Functions
Pay rates affect selectivity Selection
Selection standards affect
level of pay required
Pay can motivate training
Training and
Development
Increased knowledge leads
to higher pay
Training and development may
lead to higher pay
Compensation
Management
A basis for determining
employee’s rate of pay
Aid or impair recruitment Recruitment
Supply of applicants
affects wage rates
Low pay encourages
unionization
Labor Relations
Pay rates determined
through negotiation

75. The Pay-for-Performance Standard
Pay-for-Performance Standard
–The standard by which managers tie
compensation to employee effort and
performance.
–Refers to a wide range of compensation
options, including merit-based pay,
bonuses, salary commissions, job and
pay banding, team/ group incentives,
and various gainsharing programs.

76. Designing a Pay-for-Performance
System
How will performance be measured?
How will monies to be allocated for
compensation increases.
Which employees will be eligible?
How will payouts be made?
How often will payouts occur?
How large will the payouts be?
Will employees perceive the rewards as
valued?

77. The Bases for Compensation
Hourly Work
–Work paid on an hourly basis.
Piecework
–Work paid according to the number of
units produced.
Salary Workers
–Employees whose compensation is
computed on the basis of weekly,
biweekly, or monthly pay periods.

78. The Bases for Compensation
(cont’d)
Nonexempt Employees
–Employees covered by the overtime
provisions of the Fair Labor Standards
Act.
They must be paid time and one-half their
regular pay for all work performed after forty
regular hours of work.

79. The Bases for Compensation
(cont’d)
Exempt employees
–Employees who not covered in the
overtime provisions of the Fair Labor
Standards Act.
Managers, supervisors, and white-collar
professional employees are exempted on the
basis of their exercise of independent
judgment and other criteria.

80. Components of the Wage Mix
WAGE
MIX
Labor Market
Conditions
Area Wage
Rates
Cost of
Living
Collective
Bargaining
Legal
Requirements
Compensation Strategy
of the Organization
Worth of
the Job
Employee’s
Relative
Worth
Employer’s
Ability
to Pay

81. Chapter 9
Pay-for-Performance :
Incentive Rewards

82. Strategic Reasons for Incentive
Plans
Variable Pay
–Tying pay to some measure of individual, group,
or organizational performance.
Incentive Pay Programs
–Establish a performance “threshold” to qualify
for incentive payments.
–Emphasize a shared focus on organizational
objectives.
–Create shared commitment in that every
individual contributes to organizational
performance and success.

83. Advantages of Incentive Pay
Programs
Incentives are most useful when:
–Focused on key performance targets that
produce employee and organizational gains.
–Variable costs of payouts are linked to the
achievement of competitively important results.
–Directly relating payouts to achieving operating
performance objectives (quantity and/or
quality).
–Teamwork and unit cohesiveness are fostered by
basing payments to individuals on team results.
–Used to distribute success among those
responsible for producing that success.

84. Employee Opposition to
Incentive Plans
Production standards are set unfairly.
Incentive plans are really “work speedup.”
Incentive plans create competition among
workers.
Increased earnings result in tougher
standards.
Payout formulas are complex and difficult to
understand.
Incentive plans cause friction between
employees and management.

85. Types of Incentive Plans
INDIVIDUAL GROUP ENTERPRISE
Piecework Team compensation Profit sharing
Standard hour plan Scanlon Plan Stock options
Bonuses Rucker Plan Employee stock
Merit pay Improshare ownership plans
Lump-sum merit pay Earnings-at-risk plans (ESOPs)
Sales incentives
Incentives for
professional employees
Executive compensation

86. Successful Incentive Plans
Employees have a desire for an incentive plan.
Employees are encouraged to participate.
Employees see a clear connection between the
incentive payments they receive and their job
performance.
Employees are committed to meeting the
standards.
Standards are challenging but achievable.
Payout formulas are simple and understandable.
Payouts are a separate, distinct part of
compensation.

87. Individual Incentive Plans
Straight Piecework
–An incentive plan under which employees
receive a certain rate for each unit
produced.
Differential Piece Rate
–A compensation rate under which
employees whose production exceeds the
standard amount of output receive a higher
rate for all of their work than the rate paid
to those who do not exceed the standard
amount.

88. Computing The Piece Rate
hourper units 5
unit)per time(standard minutes 12
hour)(per minutes 60
=
unitper $1.50
hour)(per units 5
rate)(hourly $7.50
=

89. Piecework drawbacks
Problems with piecework systems:
–Piecework standards can be difficult to develop.
–Individual contributions can be difficult
measure.
–Not easily applied to work that is highly
mechanized with little employee control over
output.
–Piecework may conflict with organizational
culture (teamwork) and/or group norms (“rate
busting”).
–When quality is more important than quantity.
–When technology changes are frequent.
–When cross-training is required for scheduling
flexibility.

90. Individual Incentive Plans:
Standard hour plan
–An incentive plan that sets pay rates based
on the completion of a job in a
predetermined “standard time.”
If employees finish the work in less than
the expected time, their pay is still based
on the standard time for the job multiplied
by their hourly rate.

91. Bonuses
Bonus
–Incentive payment that is
supplemental to the base wage for
cost reduction, quality improvement,
or other performance criteria.
Spot bonus
–Unplanned bonus given for employee
effort unrelated to an established
performance measure.

92. Merit Pay
Merit Pay Program (merit raise)
–Links an increase in base pay to how
successfully an employee achieved some
objective performance standard.
Merit Guidelines
–Guidelines for awarding merit raises that
are tied to performance objectives.

93. Merit Pay Guidelines Chart
QUINTILE (POSITION IN RANGE),%
PERFORMANCE LEVEL 1 2 3 4 5
Outstanding (5) 9 9 8 7 6
Superior (4) 7 7 6 5 4
Competent (3) 5 5 4 3 3
Needs improvement (2)0 0 0 0 0
Unsatisfactory (1) 0 0 0 0 0
MERIT PAY GUIDE CHART

94. Problems with Merit Raises
Inadequate funding for merit increases.
Vagueness in how to define and measure
performance.
Employees not believing that merit compensation
is tied to effort and performance
Allowing organizational politics to influence merit
pay decisions.
Failing to differentiate between merit pay and
other types of pay increases.
Mistrust between management and employees.
An “overall” merit pay plan that does not
motivate.

95. Group Incentive Plans
Gainsharing Plans
–Programs under which both employees
and the organization share the financial
gains according to a predetermined
formula that reflects improved
productivity and profitability.

96. The Pros of Team Incentive Plans
Team incentives are effective when:
–They support group planning and problem
solving, thereby building a team culture.
–The contributions of individual employees
depend on group cooperation.
–They broaden the scope of the contribution that
employees are motivated to make.
–They reduce employee jealousies and
complaints over “tight” or “loose” individual
standards.
–They encourage cross-training and the acquiring
of new interpersonal competencies.

97. The Cons of Team Incentive Plans
Team incentives are ineffective when:
–Individual team members perceive that “their”
efforts contribute little to team success or to
the attainment of the incentive bonus.
–Intergroup social problems—pressure to limit
performance and the “free-ride” effect— arise.
–Complex payout formulas are difficult for team
members to understand.

98. - THANK YOU -