2. Incentive, compensation, and performance measurement systems are a common way

Question

2. Incentive, compensation, and performance measurement systems are a common way in which organizations try to enhance their overall performance. Drawing on your readings and our class discussions:

MGT303 EXAM POOL QUESTIONS

Describe at least five key challenges to designing, changing, and implementing incentive, compensation, and performance measurement systems.

UMass needs to raise more than $100 million funds continued expansion and upgrade of the campus, including the construction of a new science center. The Development Office plans to hire 15 members of the Class of 2015 to help raise this money. These 15 new staff members will be assigned to UMass’s various Colleges (College of Management, Arts & Sciences etc.) and report jointly to a dean and the head of the university’s development office. Describe the key elements of an incentive, compensation, and performance measurement system for these new development staff members and advise the director of development how he can avoid the perils of “Rewarding A While Hoping for B.” [Note: UMass does need to raise money, but the example here is fictitious.]

Explanation / Answer

Economic uncertainty can cause chaos on incentive compensation plans. A downturn can make incentive compensation objectives so impracticable that the encouragement to outperform can be mislaid whereas a boom can make incentive compensation objectives easily manageable thus it’s important to use an adjustable compensation tool efficiently that can be considered as a valuable countermeasure.

Companies must contemplate numerous lawful matters while planning and administering incentive compensation plans. However establishments that provide incentives must be able to measure worker performance in order to regulate and govern who is eligible and justified for an accolade and reward.

Thus business should be competent enough to correctly evaluate and measure if the inducements are having the anticipated outcome on business performance. If the incentives are not giving the desired results then obviously there is no point in persisting them.

Enterprise incentive management (EIM) technology assists establishments to examine, review and remunerate bonuses, commissions and other kinds of adjustable flexible compensation packages. The software gathers information from different structures to offer administrators with a wide-ranging and complete portrait of disbursement against performance.

As per World at Work and Deloitte Consulting LLP report 55 percent of companies use an enterprise system to manage short term incentive policies and the utmost predominant instrument used is a spreadsheet application. Thus organizations need to have sufficient funds to invest in the technology and workers must possess the needed knowledge for effective functional and usage.

In some cases incentive compensation programs have conveyed a substantial pay breach between individuals in the software package and individuals outside the program predominantly in multinational organizations where competition for the most competent globally accomplished workers is severe.

As per World at Work's Compensation Programs and Practices Study 85 percent of establishments with global set-ups have a compensation policy and approach that is identical all over the business with 55 percent framing compensation policies at the corporate level and 45 percent permitting for restricted adaptation at the local level.

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