more on compensation. compensation based on inputs or outputs –pay by the hour or –pay by the...
Post on 21-Dec-2015
222 views
TRANSCRIPT
![Page 1: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/1.jpg)
More on Compensation
![Page 2: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/2.jpg)
More on Compensation
• Compensation based on inputs or outputs– Pay by the hour or– Pay by the job
![Page 3: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/3.jpg)
Inputs or Outputs
• Pay by Inputs– You get paid by the hour or month
• Pay by Outputs– You get paid by output.
![Page 4: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/4.jpg)
Piecework
• Piecework seems the way to go where it is easy to measure productivity.
![Page 5: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/5.jpg)
Piecework
• Piecework seems the way to go where it is easy to measure productivity.
• There are situations where monitoring is quite difficult.
![Page 6: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/6.jpg)
Piecework
• Piecework seems the way to go where it is easy to measure productivity.
• There are situations where monitoring is quite difficult.– Suppose you pay a lettuce picker by
the pounds of lettuce picked. – Workers will not look at the quality of
heads and will overlook smaller heads.
![Page 7: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/7.jpg)
Piecework
• Output is stochastic. – A salesman’s success depends in
part on skills and motivation (which argues for piecework) and in part on factors beyond his control
– A risk averse salesman will prefer not to be paid on output.
![Page 8: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/8.jpg)
Piecework
• An aside• Any waiter or waitress would
prefer to work weekends: the tips are better.
• A sensible restaurant requires that all wait staff work weekdays as well
![Page 9: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/9.jpg)
Piecework
• Work is often a team effort. – Workers paid strictly on
piecework may not maximize total output.
• In sum, the choice of how to pay workers is not straightforward.
![Page 10: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/10.jpg)
Piecework
• In sum, the choice of how to pay workers is not straightforward.
![Page 11: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/11.jpg)
Using Wage Policy as an Incentive Mechanism
• Suppose I have employees whose performance is difficult to monitor.
![Page 12: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/12.jpg)
Using Wage Policy as an Incentive Mechanism
• Suppose I have employees whose performance is difficult to monitor.
• Pay a premium, where they lose the premium if they are caught mis-performing.
![Page 13: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/13.jpg)
Using Wage Policy as an Incentive Mechanism
• Suppose I have employees whose performance is difficult to monitor.
• Pay a premium, where they lose the premium if they are caught mis-performing.– Police officers– McDonald’s Franchises– Bank Tellers
![Page 14: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/14.jpg)
An Example
• John Smith and Bill Wilson are both product managers for Baker Electronics.
![Page 15: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/15.jpg)
An Example
• John Smith and Bill Wilson are both product managers for Baker Electronics.
• They know that when a senior product manager’s slot opens, it will be filled by “promotion from within”.
![Page 16: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/16.jpg)
An Example
• That way they are best motivated to do their job. – Smith and Wilson can be paid the
same salary, even though Smith is a better worker.
– There will be a little griping about salary, but Smith will get his reward through a promotion.
![Page 17: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/17.jpg)
An Example
• Now suppose that it appears that Smith is the better worker, but it may take a year or two before that is clear.
![Page 18: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/18.jpg)
An Example
• Now suppose that it appears that Smith is the best worker, but it may take a year or two before that is clear.
• Smith has brought in all sorts of profitable clients for the firm. He deserves a reward of (say) $25,000 for that.
• It may turn out however that the clients will turn out to be unprofitable, perhaps because Smith made promises that can be kept only at high cost.
![Page 19: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/19.jpg)
An Example
• Why not give Smith a promotion and a $5,000 a year increase in pay? If it turns out a year from now that Smith screwed up, he can be fired.
![Page 20: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/20.jpg)
An Example
• There is a drawback. Smith and Wilson may need to work together, and the opportunities for “back-stabbing” seem to grow when they are competing for the same job.
![Page 21: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/21.jpg)
Summary
• We have only scratched the surface.
• Compensation policy would be easy if we could monitor performance at no cost.
• We cannot, so it becomes more complicated.
![Page 22: More on Compensation. Compensation based on inputs or outputs –Pay by the hour or –Pay by the job](https://reader036.vdocument.in/reader036/viewer/2022062421/56649d595503460f94a39f20/html5/thumbnails/22.jpg)
End
©2003 Charles W. Upton