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Chapter 10
Implementing Productivity
Improvement Programs
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HR Planning
Job Analysis
Recruitment
Selection
Workplace Justice
Unions
Safety & Health
International
Competence
Motivation
Work Attitudes
Output
Retention
Legal Compliance
Company Image
Cost
Leadership
Product
Differentiation
Training/Develop.
Performance App.
Compensation
Productivity Imp.
HRM and Competitive Advantage
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Productivity Improvement Programs and
Competitive Advantage
Increase
Employee
Motivation
Enhance
RecruitingEfforts
Increase
Productivity
Hire More
ProductiveEmployees
Productivity
Improvement
Programs
Competitive
Advantage
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Desirable Employee Behaviors
Attend work
regularly
Come to work on
time Work well with
others
Work smart Work hard
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Types of Rewards
Rewards
Extrinsic Intrinsic
Given by someone else Come from within
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Expectancy Theory Model
EffortSuccessful
PerformanceValued Extrinsic Reward
Valued Intrinsic Reward
Achievement ofOrganizational
Goals
Perceived
Probability
Perceived
Probability
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Types of Productivity Improvement
Programs
Productivity Improvement Programs
Pay-for-Performance
Programs
Employee Empowerment
Programs
Extrinsic
Rewards
Intrinsic
Rewards
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Rationale for Pay-for-Performance
Programs
Pay Linkedto
Performance
Top Performers
Rewarded
Low PerformersNot Rewarded
High Levels of
Performance
Maintained
Increase Performance
to Receive Future
Rewards
Leave the Organization
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Standards for Effective Pay-for-
Performance Programs
Effort-performance links Performance-reward links Value of rewards Timeliness of rewards Performance-organizational
mission links Cost efficiency
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Effort--->Performance Links
Clarify what behavior(s) is expected.
Set achievable goals.
Ensure that job performance ismeasured accurately.
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Performance--->Rewards Links
Ensure that rewards are received only if
desired level of performance is
achieved.
Do not allow successful performance to
go unrewarded!!!
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Value of Reward
Sufficient
Important
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Timeliness of Reward
As soon as possible after desired
behavior has occurred
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Performance--->Organizational Mission
Links
Rewarded performance MUST
contribute to the organizations mission.
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Cost Efficiency
Cost of rewards < benefits to
organization
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Merit Pay
Annual pay raises
Based on levels of performance
Performance Pay Raises
High
Low
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Merit Pay Plans
Merit pay guidecharts
Supervisory discretion
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Merit Pay Guidecharts
Performance Rating (%)
Current Above Below
Pay Quartile Superior Average Average Average
4th 6 4 0 0
3rd 8 6 4 0
2nd 10 8 6 0
1st 12 10 8 0
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Why Merit Pay Plans Often Fail
o Poor performance appraisal system
o Unclear performance-reward link
o Rewards arent valued by employeeso Failure to distinguish among employees
o Time lag between behavior and reward
o Not cost efficiento Reward the wrong behaviors
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Six Steps to an Effective Merit Pay Plan
Give rewards large enough to make a
difference.
Make pay increases public.
Use bonuses, not salary increases.
Make rewards timely.
Develop an effective performanceappraisal system.
Involve employees in plan design.
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Piece Rate Plans
Wages based on number of pieces or
units produced
Work best
manufacturing
jobs simple and highly structured
employees control their own output
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Piece Rate Plans
StrengthsStrengths
Clear performance
expectations
Objectiveperformance
standards
Rewards tied directly
to performance
Cost efficient
WeaknessesWeaknesses
May create high job
stress
May encourageundesired and
discourage desired
behaviors that
contribute to
performance-
organizational link
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Gainsharing Plans
Cash award to employees
for meeting or exceeding
goals based on collaborative
performance of a team ofemployees
Increase Production
orReduce Costs
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Characteristics of Gainsharing Plans
Productivity goals that can be achieved
through effective teamwork
Employees receive cash bonuses if
goals are met
Productivity measured by an explicit
formula with objective measures
Employees encouraged to help
increase productivity or cut costs
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Implementing a Scanlon Plan
Production cost criteria?
Means to reduce costs?
Allocation of gains?
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Scanlon Plans
Calculate the labor cost/production cost
ratio expected in a typical year.
Decide how production costs are to be
cut.
Allocate bonuses: 75% paid out, 25%
held in reserve for lean periods.
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Where Scanlon Plans Work Best
Manufacturing organizations
Recent adoption in some service
organizations
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Gainsharing Plans
StrengthsStrengths
Effort-performance
and performance-
reward links strong Performance linked
to organizations
mission
Promote teamwork
Cost effective
WeaknessesWeaknesses
High-performing
individuals may feel
cheated Suggestions may
dwindle over time
Inflexible payoutformulas may create
problems
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How to Make Gainsharing Plans
Succeed
Create a culture of respect,
cooperation, and open communication.
Make payout based on factors
employees can control.
Share information with employees and
gather suggestions.
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Profit-Sharing vs. Gainsharing Plans
Profit-Sharing Gainsharing
Reward groupperformance
Reward groupperformance
Payout isprofit
Payout is gains from
increased productivity/
decreased costs
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Profit-Sharing
StrengthsStrengths
Links employees
interests with
employers goals Employees
identify with
organization
internalize goals
work harder
WeaknessesWeaknesses
Payouts based on
many factors
outside of employeecontrol
Not always cost
efficient
Not timely
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Employee Empowerment Programs
Decision
Making
Issues
give
suggestionsmake
decisions
job-
relatedcompany
policy
veto
decisions
working
conditions
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How Employee Empowerment Programs
Improve Productivity
EmployeeEmpowerment
Programs
Provide
opportunity for
employees to
obtain intrinsicrewards
Improveorganizational
decision making
Improve
Productivity
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Informal Participative Decision-Making
Managers and
subordinates make
joint decisions on a
day-to-day basis.
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Informal Participative Decision-Making
StrengthsStrengths
Positive impact on
productivity
WeaknessesWeaknesses
Interests of
employees may not
align with those ofemployer
Some employees
dont want to
participate
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What Makes a Job Intrinsically
Motivating?
Job
Characteristics
skill variety
taskidentify
task
significanceautonomy
jobfeedback
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Job Enrichment Strategies
Combine tasks.
Establish client relationship.
Reduce direct supervision. Increase identification with
product/service.
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Job Enrichment
StrengthsStrengths
Often leads to
improvements in
productivity, quality,absenteeism rates,
and retention
WeaknessesWeaknesses
Production may
become less
efficient
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Quality Circles
Six to twelve
employees
Identify and resolve
production problemsin their unit
Meet once a week
Led by a coordinator
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Quality Circles
StrengthsStrengths
Gain valuable input
from employees
Improvecommunications
among workers and
management
Increase motivation
through
empowerment
WeaknessesWeaknesses
Often used as a
quick fix
Creates an insider-outsider culture
Sometimes operated
improperly
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Self-Managed Work Teams
Six to eighteen
employees
From different
departments Work together
Produce a well-
defined segment of
finished work
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Self-Managed Work Teams
Plan
Organize
Coordinate
Take corrective action
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Training for Self-Managed Work Teams
Technical skills
Interpersonal skills
Administrative skills
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Self-Managed Work Teams
StrengthsStrengths
Empower
employees to make
day-to-day decisions Provide greater
flexibility
WeaknessesWeaknesses
Departmental
rivalries when teams
formed Absence of
supervisor may
cause problems
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Li M d I f l
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Line Managers and Informal
Participation
Match the level ofparticipation to
each employees
desire for
challenge,responsibility, and
opportunity
Match the level ofparticipation to
each employees
KSAs
Li M d S lf M d
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Line Managers and Self-Managed
Work Teams
Serve as a
technical consultant
to teams
Serve as afacilitator
Serve as an area
manager
Th HRM D d P d i i
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The HRM Department and Productivity
Improvement Programs
Work with top management to
establish an appropriate corporate
culture
Provide training