MGMT Ch.8

Pay Plans are used to

Energize, Direct, Sustain, and Control behavior

Compensation Theories

- Reinforcement Theory
- Expectancy Theory
- Agency Theory

______ A response followed by a reward is more likely to recur in the future

Reinforcement Theory

______ Emphasizes EXPECTED (not experienced) rewards

Expectancy Theory

______ Focuses on interests and goals of the organization's stakeholders and the ways compensation can be used to align these interests and goals

Agency Theory

Principal

A person (generally an owner) who seeks to direct another person's behavior

Agent

A person (generally manager) who is expected to act on behalf of a principal

Merit Pay Programs

link performance-appraisal ratings to annual pay increases

Merit Increase Grid

combines an employee's performance rating with employee's position in a pay range to determine size and frequency of his or her pay increases.

Merit Bonus

merit pay paid in the form of a bonus, instead of a salary increase

Profit Sharing

payments are based on a measure of organization performance (profits), and payments do not become a part of base pay

Gainsharing

Compensation based on a group or plants performance