Short-Term Incentives

							Short-Term Incentives

 Those additions to base pay
 provided to employees
 within the current year.




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    Short-Term Incentives
   In reviewing opportunities for granting
    short-term incentives, employees must
    be viewed from four different
    perspectives:
            • Individual contributors
            • Team members
            • Work units
            • Organization members

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  Premiums & Differentials

Defined and Proscribed By:
  Wage    and Hour Laws
  Pay   Policy and Procedures
  Union   Contracts
  Industry   Practices

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    Premiums & Differentials


   Overtime Pay            Standby
   Shift Differential      Cleanup Time
   Weekend                 Burdensome
   Holiday Work            Distasteful
   Call-back               Hazardous Work
   Reporting


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    Pay-For-Units-Produced

   The oldest of all incentive programs.
   It was sophisticated in the scientific
    management theories of Frederick
    Taylor in the late 19th century.
   The basic three S’s of workplace
    efficiency programs are:
     Standardize - Simplify -
      Specialize
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    Pay-For-Units-Produced

   The three building blocks that
    provide the foundation for many
    pay-for-units-produced incentive
    plans are:
    Establishing the time required…..
    Determining what should be
     considered an acceptable level of
     performance…...
    Establishing an acceptable level of
     pay….
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     Team Incentive Plans

   Most of the various kinds of
    individual incentive plans
    described in our text can be
    used in rewarding the efforts
    and contributions of teams.



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    Aggregating Employees For
     Incentive Opportunities

   It is not unusual for executives to receive
    short-term bonuses equal to 50% of base pay
    and for other senior managers to receive
    bonuses equaling 25% to 50% of base pay.
   While short-term incentive programs have
    descended through the management
    structure, the major recipients continue to be
    the senior managers.


                                                     8
  Aggregating Employees For
   Incentive Opportunities

The size of the
bonus pool from
which management
short-term
incentives are taken
is normally
determined by some
form of profit
measurement.
                              9
Aggregating Employees For
 Incentive Opportunities

The measures
                       Profit Before Taxes
used will vary by
organization and       Profit After Taxes
they are
normally formula       Return On Equity
driven plans with      Return On Invested
one or more of          Capital
the following
characteristics:

                                         10
Aggregating Employees For
 Incentive Opportunities


 The amount of the bonus
 is normally established as
 a percentage of base pay.




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         Organization-Wide
        Short-Term Incentives

   Productivity Gain Sharing Plans
    This is basically a sharing by the
     organization with employees of "bottom-
     line" improvements obtained through
     increased productivity.

    A first requirement for a gain sharing
     plan is determination of a standard
     measure of performance.

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         Scanlon Plan
   Scanlon's philosophy was that if the
    company would foster and use
    employee ideas and suggestions
    and, in turn, reward employees for
    their constructive efforts, the
    company would improve profitability
    and workers would gain through
    steady employment and increased
    pay.
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         Scanlon Plan

   The Basic Elements of the Scanlon
    Plan are:
    The Ratio
     Total labor cost / sales value
     of production .
    The Bonus
     Depends on the reduction in costs
     below the preset ratio.

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        Scanlon Plan

   The Production Committee
    Formed in each major
    department and is used to
    tap into the imagination and
    ingenuity of the workers.



                                   15
         Scanlon Plan
   The Screening Committee
    Consists of top members of the plant
     management and workers
     representatives, usually eight to
     twelve members.
    It reviews the monthly bonus,
     discusses current production
     problems, and considers all
     suggestions for organizational
     improvement.
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         Profit Sharing
   Any procedure under which an
    employer pays or makes available
    to regular employees, (subject to
    reasonable eligibility rules) in
    addition to prevailing rates of pay,
    special current or deferred sums
    based on the profits of business.

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        Profit Sharing
   There are essentially three
    different types of profit sharing
    plans in existence today
    Cash or current payment plan
    Deferred plan (pension support)
    Combined plan

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Lincoln's Incentive System

   The company guarantees 30 hours
    of work 50 weeks a year to each
    employee who has a least 3 years
    of service.
   Standard job evaluation
    procedures set the base wage,
    using six compensable factors to
    determine the importance of each
    job.
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Lincoln's Incentive System

   The majority of workers are on a
    piecework incentive plan.
   All employees may participate in
    the suggestion program with the
    exception of department heads
    and members of the engineering
    and time-study departments.

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Lincoln's Incentive System

   Twice a year, a merit rating program
    appraises the actual work performance of
    each employee.
   After the first year of service, each
    employee annually has the opportunity to
    purchase a limited number of shares of
    company stock. (Currently, about 75% of
    the employees own 40% of the stock)


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Lincoln's Incentive System

   Employees elect representatives to
    an "advisory board". The board has
    the opportunity to suggest changes
    in policies and operations.
   The annual cash bonus earned by
    the employees closely
    approximates their annual
    earnings.
                                      22
Lincoln's Incentive System

   Independent work groups or
      "subcontractor shop"
    operations, perform their own
    quality control and develop their
    own production procedures in
    completing subassembly
    operations within given cost,
    quantity, and quality parameters.
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Lincoln's Incentive System

   All profits of the business are split
    three ways:
    The corporation retains a share for
     capital improvement and financial
     security.
    Shareholders receive approximately
     6% to 8% dividends.
    Employees receive all remaining
     profits.
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Timing Of Bonus Payments


    Christmas Bonus

    Vacation Bonus

    Annual Lump-sum Bonuses

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