CHAPTER 14
SHORT-TERM INCENTIVES
Organizations have devised many different methods or procedures for supplementing the base
pay of employees who perform assignments outside the normal range of activities or above and beyond
accepted standards. One of the most important issues here is the setting of standards that are meaningful
and valid. These types of programs provide the greatest incentive opportunities when they recognize
unusual or above-average contributions. Through these various programs, the organization provides its
employees with a “piece of the action” or “pay for doing a good job.” The organization does more than
give a “pat on the back” it puts its money where its mouth is.
KEY CONCEPTS:
2. The relationship of pay as a motivator to improved individual, work unit, and organizational
performance.
4. The need and desire of workers to be recognized.
6. Removing many of the unacceptable, subjective actions that block effective supervisor-
subordinate relationships through the establishment of performance standards.
8. Benefits and costs related to overtime premiums from the perspective of the employer and
the worker.
10. Supporting team efforts through bonuses.
12. The rebirth of suggestion plans.
14. Applying industrial engineering concepts to a knowledge-directed, service-based economy.
SIGNIFICANT POINTS OF INTEREST
2. When an organization requests an employee to perform a service that is normally considered
hazardous, distasteful, inconvenient, or burdensome to most people, it pays a premium or
differential for that service.
3. Premiums or differentials (supplements to base pay) are frequently paid to employees who
work the second turn or evening shift (4:00 P.M. to 12:00 P.M.) and the third turn or
4. Individual productivity plans provide additional pay for output considered greater than
5. Over the years, some organizations have developed profit-sharing or cost-reduction
6. The concept underlying individual pay-for-output plans and group profit-sharing and cost-
reduction plans is that if the employee has an opportunity to gain “a piece of the action,”
there is a greater likelihood that the employee will take a more active role in improving
organizational productivity or reducing production costs.
7. Over the years, many unions and union leaders have fought any kind of pay-for-improved
performance plans. Their view is that these plans are a tool used by management to
8. Some unions, specifically the United Steel Workers and unions representing garment
9. A few businesses like Lincoln Electric Co., Eastman Kodak, and Andersen Corp. have used
bonus plans for many years to stimulate employee involvement in improving their
productivity.
10. Providing employees with ownership opportunities is becoming increasingly more common.
Many firms relate their growth and profitability to profit-sharing programs that grant
11. One-time bonuses and special prizes also reward employees who have made a special,
exceptional, or outstanding contribution. Employee suggestion programs are still alive and
12. All of the premiums, differentials, bonuses, etc., act as consequences that reinforce certain