1. With some organizations and jobs, pay is primarily wages or salaries, and wit
ID: 336803 • Letter: 1
Question
1. With some organizations and jobs, pay is primarily wages or salaries, and with others, incentive pay is more important. For each of the following jobs, state whether you think the pay should emphasize base pay (wages and salaries) or incentive pay (bonuses, profit sharing, and so on). Give a reason for each. 2 pages, double space)
a. Accountant at a manufacturing company.
b. A salesperson for a software company.
c. A chief executive officer.
d. A physician in a health clinic
2. What are the pros and cons of linking incentive pay to individual performance? How can organizations address the negatives? (1 page, double space)
Explanation / Answer
1.
a. An accountant at a manufacturing company must be given a base pay. The job nature of an accountant is very much fixed and giving incentives does not lead to any extra profits for the firm. So, it is better to give a basic pay to an accountant.
It is always better to give a basic pay to an employee when their performance does not directly affect the performance or profitabillity of a company.
b. Any sales job must be provided with incentives and profit sharing This will motivate the sales person to work hard and sell as much as possible. The more the sales, the more the profit earned by the company.
In fact sharing a percentage of profits is a much better option than just giving incentives. This way, the company will grow along with the employee. The employee will feel more responsible and satisfied that his efforts are being fairly rewarded.
If only a basic pay is given for a sales job, the employee will just try to achieve the targets for the given time period and sell very less or nothing after that. This is only detrimental to the company as the efficiency of the employee is not being utilised to the fullest.
So, a salesperson for a software company must be given a share in the profits of the sales.
c) The case of a chief executive officeer is the same as that of a salesperson. He too must be given a share in the profits of the company. This gives him motivation to work hard and improve the profits of the company. It also makes him responsible for the company and make him feel as a partner of the firm.
Most companies give stock options to CEOs. This makes them more responsible not only for the performance of the company, but also for it's public outlook. Improving the public outlook can improve the branding of the company thereby making it easy to become more profitable.
d) A physician in a healthcare must be paid a mix of both basic pay and incentives. Basic pay would suffice for full time activities. Incentives should be given for overtime, night shifts, and for working on weekends. Further, the incentives can vary depending on the fame and efficiency of the physician.
If all the payments of a physician are based on incentives, he may hurry in his duties so as to check up more patients. This will only lead to a poor rating of the hospital, thereby leading to decrease in its performance and profits.
2. Advantages of incentives
Disadvantages of incentives
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