Factors to Consider in Designing Incentive Pay Programs Essay

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You are the Director of Compensation and Benefits for Lansing-Smith Corporation, a 6-month-old sales and service organization that currently has a workforce of 150 employees. You recently joined the organization when the Vice President of Operations decided to move the Compensation and Benefits function out of the accounting department and into a separate function. From your own observations, you have identified several areas in need of review, redesign, or development, including the following projects:

•An audit of current pay plans to ensure they are aligned with federal regulations
•An analysis of various pay plans to assess which plans will provide maximum benefit for Lansing-Smith
•Extensive job analyses to ensure a solid understanding of each position
•Job evaluations to determine the worth of the positions
•Consideration of various incentive plan designs to identify a plan that effectively drives individual and group performance to achieve production goals
•Research development, communication, and management training for a company-wide performance appraisal process
You are dedicated to developing compensation and benefit practices that are motivating and empowering for employees. You are confident that with well-developed programs and practices, employees will be motivated to perform at higher levels, thereby driving overall company performance.


You are a member of a national human resource management society that provides Web materials for members, as well as online-chat learning events with field experts. You have just finished reading a live chat presentation with Martocchio, leading author on strategic compensation. Martocchio says that when designing incentive pay programs, there are 5 factors that should be considered.

•Whether the plan should be based on group or individual employee performance

•The level of risk employees will be willing to accept in their overall compensation package

•Whether incentive pay should replace or complement traditional pay
•The criteria by which performance should be judged

•The time horizons for goals—long term, short term, or a combination of both

You are asked by the chat moderator to contribute to the learning event by choosing 2 of the 5 factors and posting chat on them. Discuss why those factors are important to consider and the role each plays in developing effective incentive programs.


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