Individual Incentive Pay Plan Paper

1. There are a number of Pay for Performance (PFP) Plans available. I considered Individual and Group incentive pay plans. Then, I looked at the make-up of Dee’s business. I concluded that the best PFP system for Dee’s Company would be the individual incentive pay plan. I think you could apply Individual incentive pay plans for different categories of employees at Dee’s Baskets. I think the Merit plan which is a form of the Individual pay for performance plan would be more suitable for the hourly and clerical employees. Merit plans are attached to individual levels of performance measurement (usually performance appraisals ratings), and the wages assigned under the merit plans are usually added into an individual employees’ base salary.

Gainsharing is a type of Pay for Performance in which a company seeks higher levels of performances through the involvement and participation of its employees. As the employee’s performances improve, employees share financially in the gain. Companies that usually use Gainsharing, measure performance and through a pre-determined formula which would distribute the savings to all the employees participating. Usually, gainsharing bonuses are paid out on a monthly or quarterly bases. Gainsharing is typically based on operational measures (productivity, spending, quality, customer service) which are more controllable by employees rather than organization-wide profits (Masernak, n.d.). Different elements to gainsharing is that gains and resulting payouts are self-funded based on savings generated by improved performance, employees are often involved in the design process, many plans typically have a year-end reserve fund to account for deficit periods, and a supporting employee involvement system is part of the plan to drive improvement initiatives, stated by Robert L. Masternak. Gainsharing promotes morale, pride, and more positive attitudes toward the organization. Nancy Harrison, HRM vice president of Dee’s Personalized Baskets, stated she was intrigued by the results of a recent attitude survey of her employees. Based on the reading in Exhibit 11.2.1 in the Exercise 11.2, the employee’s attitudes are good when it comes to the business. Gainsharing would also enhance

Even though there are some disadvantages to forced ranking and a forced distribution system, I do agree with Harrison that one should be put in place at Dee’s Baskets. The forces ranking system requires management to rank people per their performance (ex. Top 20 Percent, The middle 70 percent, & the low performing 10 percent) (Lipman, 2012). Victor Lipman, Forbes Contributor, states that the forced ranking system forces managers to have difficult conversations with employees that they might otherwise have avoided. Lipman feels that there is no doubt that forced ranking does bring disciplined to the management process. He feels like it is easier for managers to avoid difficult, painful performance-related conversations than to confront them head on (Lipman, 2012). Lipman states in a forced ranking system, managers and employees have no place to hide. It literally forces performance issues to be addressed; for an organization that wants to tighten or formalized its management processes (Lipman, 2012). Forces ranking creates and sustains a high-performance culture, it correlates with total return to shareholders, it establishes well-defined consequences, it makes performance management a corporate priority, and it lets employees know where they stand (Lipman, 2012). Dee’s management would be able to rank each worker according to his or her own performance. Then they would be able to place them in their ranking group which would determine their bonuses, incentives,