1
Q
What does traditional job management procedures/thoughts?
A
- ‘I pay the employees so they should work
- ‘Why do I need to tell them what to do?They should know’
- These statements typify the idea that: Behavior is primarily caused by internal influences
- does not have a working understanding of the science of behavior
- can not explain why employees do what they do
2
Q
OBM?
A
Organizational Behavior Management
3
Q
Definition of Organizational Behavior Management (OBM):
A
-sub-discipline of ABA, but necessary in all aspects of ABA
-Several sub-divisions of OBM:
=Performance Management (PM)
=Behavior Based Safety (BBS)
=Behavioral Systems Analysis (BSA)
=Pay for Performance/Performance Based Pay (PFP/PBP)
4
Q
Definition of Performance Management (PM)
A
- most straightforward application of ABA to a business setting
- typically involves analyzing individual or small groups of employees and modifying the environment to improve performance
5
Q
Typical Performance Management (PM) Interventions
A
- Antecedents: task clarification, checklists
- Training (antecedent)
- Consequences: lottery systems, goal setting, feedback
- Process Interventions: job redesign
6
Q
PM might include all of the following:
A
- training for employees
- reinforcement systems
- job redesign
7
Q
_______ is required for PFP to be effective.
A
PM (Performance Management)
8
Q
Why are those who are self employed not necessarily in need of PM?
A
- all contingencies are aligned with the company
- company succeeds, owner succeeds
9
Q
Why the PFP system equitably aligns?
A
A Pay for Performance (PFP) system equitably aligns the contingencies in an orgination so that the better the employees and company do, the more money they can make, all things being equal
10
Q
Definition of an Open System
A
- a system with input, an entity that changes its behavior in response to conditions outside its boundaries. Systems are rarely ever either open or closed, but open to some and closed to other influences. Adaptation, learning and all manifestations of intelligence require some openness to information
- open organization: business and workers overlap info
11
Q
Open Book Management
A
- orienting employees to financial data before sharing
- link employee work to financial results
- link non-financial measures to financial results
12
Q
Advantages of an Open System
A
- responsive to external events
- nimble, ability to change rapidly
- continuous improvement
- customer focus
- profit focus
- resilient and sustainable
13
Q
Drawbacks of an Open System
A
- burden on accounting
- employee trustworthiness
- managers fear loss of control
- information to competitors
14
Q
Open systems:
A
are very responsive to external events
15
Q
Why don’t some like PFP:
A
-some suggest that monetary incentives are counter-productive.
Reasons they offer:
-rewards encourage people to focus only on one task, to do it as often as possible, and to take few breaks
-people come to see themselves as manipulated
-problems associated with valid performance measurement
-the programs are complex
-extrinsic rewards can demotivate
-employees can game the system
-determining correct objectives is difficult (teachers)
-employers do not believe superiors will accurately evaluate their performance
-PFP is hard to put in place
16
Q
Sin of Wages
A
- Management by exception
- Pay for time
- Entitlement thinking
- Corporate socialism
- Fix-cost pay
- Performance-based promotion
- Management by perception
17
Q
Sin of Wages-Management by exception
A
- “I screwed up one thing, so the manager came and told me I am not doing a good job”
- when employees are noticed under a pay scheme, it is typically because there are performance “problems”
- results in negative reinforcement contingencies (they manage in fear)
- excessive use of negative reinforcement has unpredictable effects
- performance to the minimum standard
- restricted innovation
- adversarial relationships
- excuses
- may make necessary negative reinforcement less effective
18
Q
Sin of Wages-Pay for time
A
“I was here for 8 hours, so I need to be paid for 8 hours of work. (regardless of what was done during those 8 hours)”
- when you pay for time, jobs will fill the time
- issues with overtime
19
Q
Sin of Wages-Entitlement thinking
A
“The company owes me a paycheck because I came to this job”
-the company owes me money-not we need the company to do well
20
Q
Sin of Wages-Corporate socialism
A
“(person) and I both worked 8 hours…I worked really hard, and (s)he goofed off all day but we got the same pay and benefits”
- conventional pay rewards under-performers and punishes top performers
- eventually, what happens to top performers?
21
Q
Sin of Wages-Fix Cost Pay
A
“I worked another year, so I should get a standard raise”
- every year employees are ‘entitled’ to a 3-5% raise
- but what happens during a company/$ downturn
22
Q
Sin of Wages-Performance-based Promotion
A
“I am really good at my job, so a promotion is the next logical step”
- management can not reward top performers by increasing pay, so..
- the only way to increase pay is through promotions
- promoting in this manner creates competition/tension among employees
- top performers are not always good managers
23
Q
Sin of Wages-Management by perception
A
“The manager was really happy with me, and thought I did a good job, so I get a good bonus. (S)he doesn’t like my cube mate and they got a small bonus”
-weekly paychecks are not dependent upon performance…so, managers often use subjective measures to evaluate employees
24
Q
Management by exception involves:
A
- inequitable reinforcement delivery
- punishment of poor performance
25
Traditional Performance Pay Plans:
- Merit Increase
- Annual bonus
- Stock options
- Profit sharing
- Gain sharing
- Piece rate
- Commissions
- Goal sharing
26
Traditional Performance Pay Plans-Merit Increase
-"You did 'good', have some money"
-familiar, low effort, employees tend to prefer
-non-contingent
-inequitable
-fixed cost
-often subjective
Based upon a:
-ranking
-supervisor rating
-company performance
-peer assessment
-combination
27
Traditional Performance Pay Plans-Annual Bonus
"I like you, and I feel like you did okay this year, have a bonus"
- management discretion, variable expense, may retain employees
- non-contingent
- does not impact behavior
- may be inequitable
- employees serve manager, not the customer/company
- becomes an expectation
28
Traditional Performance Pay Plans-Stock Options
"You did 'good', have some stock."
| -management control, variable expense, tax benefit, retain employees
29
Traditional Performance Pay Plans-Profit Sharing
"The company made a profit, you can have some"
- based upon year-end profit, easy to administer, may retain employees
- non-contingent
- little impact on behavior
- inequitable
- becomes an expectation
30
Traditional Performance Pay Plans-Gain Sharing
"You saved money, so you can have some of it"
- pays from expense reduction, may promote cooperation, impacts performance relative to group size
- unbalanced
- inequitable
- modest performance gains
- self-limiting over time
31
Traditional Performance Pay Plans-Piece Rate
"you earn money per piece you produce"
- generates high production, equitable, no limits to earning
- unbalanced for quality or safety
- limited to a single output that require high volume
- discourages cooperation
32
Traditional Performance Pay Plans-(sales) Commisions
"you just need to outsell your coworkers"
- generates high production, equitable, no limits on earning potential
- may encourage discounting, selective selling, poor service, credit risks
- discourages cooperation
- ethical concerns
- not indexed to profitability
- employee does not care about others or the company
33
Traditional Performance Pay Plans-Goal Sharing
"you met your goals, have a bonus"
-setting a goal(s) and paying money when the goals are met
-provides for balanced performance goals, goal-directed plan may produce higher level of performance, can be applied to most jobs, and can be customized
-may not motivate
-payouts for each measure often independent which discourages balanced performance
-can pay out when company is unprofitable
Goal Sharing Budget:
-fixed percentage of each employee's base pay is assigned as an incentive opportunity
-each incentive pay period the employee's scorecard score is multiplied by the assigned opportunity (ex: 10% opportunity X 80% scorecard=8% payout)
34
Piece rate
- may undermine safety
| - requires a high need for products
35
Organizational Measurements
- measurements will be 'cascaded' through an organization
- start with what an organization wants to achieve (strategy) on an organizational scorecards
- Balance short- and long-term measurable goals (use the vision statement as a guide)
36
ST and LT?
ST: Short-term
LT: Long-term
37
Developing an Organizational Scorecard: 7 pieces
1. Expense Control (ST)-expenses that employees control; e.g. supplies, scrap (not labor)
2. Productivity (ST)-a ration of employee output to labor hours; e.g. volume by employee hours
3. Cash Flow (ST)-payables collections and inventory
4. Sales (ST)
5. Regulatory Compliance (LT)
6. Customer Service (LT)
7. Strategic Projects (LT)
38
Developing an Organizational Scorecard: Abernathy 2011 Tips
- decide the weight of each category
- List a specific measure that impacts the category (if more than one measure is used, adjust the percentages)
- Decide measures/ranges in each category
- List jobs and assign weights based upon what they can influence
39
Performance Scorecard
- based upon Felix and Riggs' work from the 1980s
- variation of point system
- several permutations (percent gain)
40
An organization may select measures based upon
project measures
41
Profit Indexed Performance Pay
- TM (trademarked) by Aubrey Daniels Int, Developed by Dr. Abernathy and used with permission
- we must make sure that the pay is affordable
- fairly index performance to employee performance
42
PIPP (Profit Indexed Performance Pay) Components and Formula
1. Basis Percent: Percent of monthly salary eligible for incentives
2. Monthly Compensation: employee monthly salary
3. Performance Index Score: score from card (0%-100%)
4. Company Multiplier: 0.0 to 3.0 based upon company profit-0=no profit 3=most profit)
Salary X Basis % X Scorecard PI (PI=Performance Index) X Company Multiplier=Incentive Pay
43
Create the Threshold for PIPP (Profit Indexed Performance Pay)
- Zero=no payouts to anyone, unlike piece rate, goal sharing, etc. it ensures uncontrollable expenses are met
- you could pay based upon any profit, but most companies want a reasonable return before they begin sharing (want reserves, debt reduction, return for investors, etc)
- How much money do you want to keep before you start paying out? (dollar amount)
- threshold=what you need to make to stay open
44
Determine Incentive Pay Basis
- this basis may be increased over time
- a basis is assigned to each employee
- may be based upon organizational level, key positions, tenure, or the same for everyone
- examine the culture (ie same basis for all, more key positions)
45
Compute the Multiplier Scale for Incentive Pay Basis
-calculate your exposure: all wages multiplied by the basis $300,000 x 4%= $12,000
-you could simply budget this money (if you have the money) but that doesn't tie the employees to the company
-we will calculate from the organizational level
-but a word on departments and necessary jobs that do not impact the bottom line
-if you calculate at levels smaller than the organization, you may lose the ability to tie employees to organizational results
-compute how much profit you want to share with employees. One easy way: we will share all profit over threshold 50%.
-a more systematic way: determine what percentage payroll takes up of revenue
-payroll/revenue
-whatever you do, examine this at least quarterly
$12,000/.50=$24,000
$24,000+Threshold (what you need to make to stay open)=1
Now we can create the scale by prorating the scores
46
```
What is the monthly payment to the nearest dollar for this employee according to PIPP?
Salary: $5,000
Basis: 10%
Score: 90%
Multiplier: 2.0
```
5000x.1=500
500x.9=450
450x2=900
900
47
Organizational multipliers typically run
0-3
48
Alpha company would like to share 40% of profits over the threshold of $150,000. If the exposure was $5,500 what is the revenue if the multiplier is 1?
55000/.4=13750
13750+150000=163750
$163,750
49
Beta company would like to share 30% of profits over the threshold of $300,000. If the exposure was $9,000 what is the revenue if the company multiplier is 2?
9000/.3=30000
300000x2=60000
300000+60000=360000
$360,000
50
Transition from Conventional to self-managed Pay for Performance System
```
Conventional Workplace
Level I: Results Focus
Level II: Stakeholder Pay
Level III: Job Enrichment
Level IV: Self-Managed
```
51
Level I change from Conventional to self-managed Pay for Performance System
- creation of objective measurement
- each position in the company has a scorecard developed for the role
- PM practices are instituted here
52
Level II change from Conventional to self-managed Pay for Performance System
-where the employees give up part of their base pay to receive a greater opportunity to earn based upon performance
-best to begin with voluntary switch-over
Base Pay Options
1. After base pay has been frozen for some time, raises can be reinstated below the market value
2. permanent freeze
3. reduction in base pay
Voluntary Pay Reduction:
-only when scorecard is reliable
-only top performers are eligible to volunteer
-each one percent of salary given up will be offset by a 3 percent above salary incentive opportunity
-3 to 6 month grace period
-the organization's strategy and future performance must be marketed to stakeholders
-management shifts from supervision to ensuring the opportunity to perform
53
Level I and Level II Process from Conventional to self-managed Pay for Performance System
1. assess current management practices
2. manager design seminar
3. executive session to design strategic and senior management scorecards
4. PFP design session with senior management
5. Manager interviews to design lower level scorecards
6. set up database to report the scores each month
7. data collection installation and training
8. employee orientation
9. three months of test reports and refinement
10. teach management how to improve the measures
54
Voluntary pay reductions should be implemented in which phase?
Level II (Stakeholder pay)
55
Level III change from Conventional to self-managed Pay for Performance System: Job Enrichment
- implement a hiring freeze
- ensure consistent performance pay opportunities by implementing:
- cross-utilization (train employees to complete other jobs within the company)
- job enlargement (increase the job functions of a specific position)
- job enrichment (increase the authority of a specific position)
- flexible scheduling ( a. compute the labor cost of a unit of work b. as productivity increases, allow employees to work fewer hours c. example: share 50% of productivity gain in reduced work hours with employees d. ensure schedules match work cycles e. monitor output timeliness and quality)
- work prospecting (a. be careful with paying for training - this training should increase staff ability to earn b. special projects often require separate scorecards-you then prorate based on the hours worked at each job, then average the two)
- identify work prospecting, cross-utilization, job enlargement, and flexible scheduling opportunities
- design programs to capitalize on identified opportunities
- program roll-out
56
Level IV change from Conventional to self-managed Pay for Performance System: Self-Managing Employees
- all managers practice PM
- managers' performance pay opportunities are increased as their span of control increases
- team leaders are identified and trained
- a manager hiring freeze is implemented
57
Level IV change from Conventional to self-managed Pay for Performance System: Self-Managing Employees
Implementation
- plan for increasing manager's span of control
- all for flexible scheduling opportunities
- identify team leaders and provide team leaders training (workshop)
- conduct 'lateral career path' training with employees
- program roll-out
58
Staff hiring freezes are implemented in Phase____, while management hiring freezes are implemented in Phase ____.
Staff hiring freezes are implemented in Phase 3, while management hiring freezes are implemented in Phase 4.
59
___ is a critical component to the success of a PFP system:
PM (Performance Management)
60
Managing Entrepreneurs in a PFP System
- as the organization moves toward stakeholder pay the role of the manager shifts to a facilitator
- monitoring monthly data (validate and improve scorecards)
- remove obstacles: scheduling, materials, data collection, etc
- PM practices continue
- facilitate work prospecting
- specific performance improvement plans as needed
- evaluate scorecards
- assist employees in maximizing earning potential
61
The most important role of managers in a PFP system is:
facilitate employee achievement
62
Long et al. (2012) demonstrated that PFP was ____ in increasing performance but was not preferred by ____ of the participants.
Long et al. (2012) demonstrated that PFP was EFFECTIVE in increasing performance but was not preferred by SOME of the participants.
