November 17, 2025
MODULE 13: RECOGNIZING
EMPLOYEE
CONTRIBUTIONS WITH PAY
Ambatcan, Marjorie
Apias, Jian Kristel Maidap, Fraulien Legacy
Bergonia, Rainier Fort Regua, Aceisha Kitch Coreen
Gunayon, Khrisha Sacragon, Jasmine Grail
Learning Objectives:
LO 13-1: Discuss the connection between incentive pay and employee
performance.
LO 13-2: Describe how organizations recognize individual performance.
LO 13-3: Identify ways to recognize group performance.
LO 13-4: Explain how organizations link pay to their overall performance.
LO 13-5: Describe how organizations combine incentive plans in a
"balanced scorecard."
LO 13-6: Summarize processes that can contribute to the success of
incentive programs.
LO 13-7: Discuss issues related to performance-based pay for executives.
MODULE 13 2
Pay for Individual
Performance
• Piecework Rates
• Standard Hour Plans
• Merit Pay
• Performance Bonuses
• Metrics
• Sales Commissions
MODULE 13 5
Pay for Individual
Performance
PIECEWORK RATES
• “Paid per unit accomplished”
• Calculated in terms of the
quantity or the “pieces” that
employees complete.
• Direct compensation
MODULE 13 6
Pay for Individual Performance
PIECEWORK RATES
- used by;
(a) Garment Factories
(b) Logistics (Flash Express, J&T
Express, etc.)
(c) Agriculture
MODULE 13 7
Pay for Individual
Performance
STANDARD HOUR PLANS
• Based on the standard work hours.
• Employees are paid a fixed amount
for completing their work within a
standard time, regardless of how
quickly they finish.
MODULE 13 8
Pay for Individual
Performance
STANDARD HOUR PLANS
• Used by automotive and heavy
equipment repair services
• Encourages efficiency
• Guaranteed minimum wage and
allows for flexibility
MODULE 13 9
Pay for Individual
Performance
MERIT PAY
• Not mandated by law in the
Philippines.
• Salary increases or bonuses based
on employees’ performance and
achievements.
MODULE 13 10
Pay for Individual Performance
MERIT PAY
ADVANTAGES: DISADVANTAGES:
• Motivates employees to • May be subjective.
perform better.
• Might discourage collaboration
• Allows for a more competitive among employees.
and productive workplace.
• Challenges in implementation.
• Reduces employee turnover.
MODULE 13 11
Pay for Individual
Performance
PERFORMANCE BONUSES
• Given when employees meet
specific goals or targets.
• Motivates employees to
perform at their best by
rewarding their
accomplishments.
MODULE 13 12
Pay for Individual Performance
METRICS FOR MEASURING INDIVIDUAL EMPLOYEE
PERFORMANCE
QUANTITATIVE MEASURES QUALITATIVE MEASURES
[Link] - volume of work an [Link] Satisfaction - direct customer
employee produces. feedback.
[Link] of Work - accuracy scores of their [Link] - whether an employee has
task/work.
initiative without prompts.
[Link] - time it takes to complete their
[Link] - feedback from managers, and
work.
[Link] - on-time task completions direct reports.
and attendance records. [Link] - employee’s attitude towards
working with others.
MODULE 13 13
Pay for Individual
Performance
SALES COMMISSIONS
• Variations on piece rates and
bonuses.
• Pay calculated as a percentage of
sales.
• Commissions in addition to a
salesperson’s base salary.
MODULE 13 14
Pay for Individual
Performance
SALES COMMISSION
• Motivates the salesperson to focus on
closing sales.
• Attracts high-performing salespeople
and helps retain them.
• Increases customer satisfaction and the
company’s revenue.
MODULE 13 15
Pay for Group
Performance
• Gainsharing
• Group Bonuses and Team Awards
MODULE 13 16
Pay for Group Performance
GAINSHARING
• Measures increases in productivity
and effectiveness
• Distributes portion of gain to
employees
MODULE 13 17
Pay for Group Performance
Success Conditions for Gainsharing:
✓ Management commitment
✓ Need for change or strong commitment
to continuous improvement
✓ Management acceptance and
encouragement of employee input
✓ High levels of cooperation and interaction
✓ Employment security
MODULE 13 18
Pay for Group Performance
Success Conditions for Gainsharing:
✓ Information sharing on productivity and costs
✓ Goal setting
✓ Commitment of all involved parties to
change and improvement
✓ Performance standards employees
understand and consider fair
✓ Employees who value working in groups
MODULE 13 19
Special Form of Gainsharing
SCANLON PLAN
• Rewards based on labor
efficiency ratio
• Labor costs ÷ Sales value of
production
MODULE 13 20
Pay for Group Performance
Group Bonuses
• Reward for specific goal, usually
measured in terms of physical output.
Team Awards
• Broad range of performance measures,
like cost savings, successful
completion of a project, or even
meeting deadlines.
MODULE 13 21
Pay for Group Performance
ADVANTAGES DISADVANTAGES
• Encourages cooperation and • Unhealthy competition
knowledge sharing between groups
• Appropriate for complex jobs • Free rider problem
MODULE 13 22
Pay for Organizational
Performance
• Profit Sharing
• Stock Ownership
MODULE 13 23
Pay for Organizational
Performance
Profit Sharing
• a compensation method where a
company distributes a portion of its
profits to employees, either as a
direct cash bonus or as a
contribution to a retirement
account. (Investopedia)
MODULE 13 24
Advantages of Profit Disadvantages of Profit
Sharing Sharing
• Encourages Ownership Mentality
• Perceived Inequity
• Promotes Teamwork and
• Time Lag
Cooperation
• Limited Control
• Increases Commitment
MODULE 13 25
Pay for Organizational
Performance
Stock Ownership
• stock ownership actually makes
employees part owners of the
organization.
• Aims to motivate employees to work
toward the organization’s overall
success
MODULE 13 26
Stock Options
• Stock options give employees the right
to buy company shares at a fixed price
(exercise price).
• Traditionally, only executives received
stock options.
Purpose: Encourages employees to think
like owners and focus on company
success.
MODULE 13 27
Employee Stock Ownership Plans
(ESOPs).
• A company distributes shares of its stock to
employees.
• Shares are placed into a trust managed on
behalf of the employees.
• Employees receive regular updates on their
stock value.
• When employees leave, they can sell their
shares back to the company or, if publicly
traded, on the open market.
MODULE 13 28
BALANCE
SCORECARD
A strategic management performance
metric used to identify and improve
various internal business functions and
their resulting external outcomes.
"What you measure is
what you get"
MODULE 13
BALANCE SCORECARD
GOAL BSC as a tool
To quantify a business' • Strategic Planning and
performance beyond its Performance Reviews
finances, while also (Board - Level)
• Foundation for Incentive
broadening the Compensation Models
company's focus toward • Aligning departmental
long-term success and goals
growth. • Driving cultural change
MODULE 13
BALANCE SCORECARD
Four
Perspectives
MODULE 13
FINANCIAL
• Focuses on traditional financial goals:
revenue growth, profitability, cost
control.
• Measures include ROCE, net profit
margin, and cash flow.
• Ensures strategic initiatives lead to
real financial performance, not just
abstract goals.
• Helps assess asset utilization and
overall financial health.
MODULE 13
CUSTOMER
• Focuses on understanding and
satisfying customer needs.
• Key metrics: customer
satisfaction, retention rate,
market share.
• Uses NPS and CLV to evaluate
customer loyalty and value.
• Goal: Build brand loyalty and
encourage repeat business.
MODULE 13
INTERNAL BUSINESS
• Examines how well internal
processes operate.
• KPIs include: cycle time, defect
rate, process yield.
• Identifies bottlenecks and drives
process improvements.
• Ensures operations support
customer value and financial
goals.
MODULE 13
INNOVATION AND
LEARNING
• Focuses on organizational growth,
innovation, and capability building.
• Metrics include training hours, skill
development, technology investment,
employee engagement.
• Supports long-term success through
continuous improvement and new
product innovation.
• Highlights the importance of human
MODULE 13 capital development.
BUILDING OUT THE SCORECARD
1. Define the organizational vision and strategy
2. Identify strategic objectives for each perspective
3. Determine the relevant metrics
4. Set targets
5. Identify strategic initiatives
6. Set out cause - and - effect links
7. Cascade throughout the organization
8. Integrate with management processes
9. Assess and refine regularly
MODULE 13
Combining Incentive Plans in the BSC
Organizations use the BSC to unify different
incentive types by treating the BSC score as the
single determinant of the overall incentive payout.
This ensures employees aren't just rewarded for one
metric but for a balanced mix of strategic
achievements.
MODULE 13
Strategic Weighting Linking Different Cascading Incentives
Perspective Incentive Time Horizons for Alignment
The first step is The BSC allows The corporate BSC is broken
assigning a weight to organizations to combine down to align different types
short-term and long-term of incentive plans at different
each of the four BSC
incentives strategically. organizational levels.
perspectives. This This tiered approach ensures
By including KPIs from all
weight determines the that every bonus is
four areas, the BSC ensures
proportion of the total strategically justified, linking
that short-term bonus
incentive bonus that is the individual's motivation to
incentives are not earned the organization's
tied to achieving that at the expense of long-term overarching strategic
perspective's goals. strategic health. success.
MODULE 13
Incentive Pay for Executives
• Executive incentive pay is composed of
the financial compensation and other
non-financial awards received by an
executive from their firm for their service
to the organization.
• It is typically a mixture of salary,
bonuses, shares of or call options on the
company stock, benefits, and
perquisites.
Incentive Pay for Executives
• It must attract executives with the skills,
experiences, and behavioral profile necessary
to succeed in the position.
• It must be sufficient to retain these
individuals, so they do not leave for
alternative employment.
• It must motivate them to perform in a
manner consistent with the strategy and risk-
profile of the organization and discourage
self-interested behavior.
Two Types of Executive Incentives
Short-Term Incentives Long-Term Incentives
• The short term pay of the executives is • The shareholders use these long term
about the base salary and short term compensation components to protect the
bonuses, which are paid on the basis of the value of the organization and betting of the
immediate performance of the top executives on the growing value of the
organization. organization on the market.
• The bonuses are usually deferred over a • The long term compensation components
period of time. Once in a year for example. can be realized just in case, the stock price
The short term pay is usually fully cash of the organization grows. The long term pay
based executive compensation component is usually non-cash based.
component. Examples:
Examples: • Stock Options
• Annual Bonuses • Stock Purchase Plans
• Performance-Based Cash Rewards • Performance Shares
Other Types of Executive Incentives
Perquisites Benefits for Executives
• Companies provide health club • Retirement benefits
memberships with personal trainers • Health insurance
• Discounted company products • Vacations
• Automobiles • Health plans with no payments by executive
• Country club memberships and no limitations are popular among small
• First class airfare or use of the corporate and middle sized business
jet • Trust may be designed to help executives to
• Executive health plans deal with estate issues
• Personal car service • Deferred compensation offers another
• Personal computers and cell phones possible means of helping executives to
• Entertainment overcome tax liabilities
• Financial planning assistance
What Makes Executive Incentives
Unique
• Managerial pay is fundamentally non-
comparable to standard wage and salary
schemes intended for non-managerial employees.
• Unlike non-managers, executives are denied the
privilege of unions and collective bargaining,
meaning compensation is determined individually.
• Pay packages are highly performance-driven,
determined by factors like individual competence,
verifiable contributions, length of service, and
loyalty to the company.
What Makes Executive Incentives
Unique
• Compensation is not uniform, it is common for two
managers in the same grade to receive different
pay packages based on individual merit.
• Strict secrecy is maintained regarding the specific
details of managerial remuneration to protect
competitive intelligence and internal salary
dynamics.
Performance Measures for
Executives
BALANCED SCORECARD APPROACH
• MEASURING PERFORMANCE THAT USES
MULTIPLE CATEGORIES (FINANCIAL,
CUSTOMER, INTERNAL BUSINESS, AND
INNOVATION AND LEARNING)
• Prevents focus on only one area
• Reduces temptation to manipulate financial data
Regulators and shareholders have pressured
companies to do a better job of linking executive pay
and performance. (Securities and Exchange
Commission (SEC))
Ethical Issues with
Executive Incentives
Ambitious Performance Goals
• Setting "stretch goals" that are
unrealistic or impossible
Difficulty Setting the "Right" Measures
• If you measure the wrong thing, you get
the wrong behavior.
Insider Trading
• Executive uses secret, non-public
information to buy or sell stock for
personal gain
MA Elec 2 - BSMA 3E 2025 November 17
THANK YOU
For Listening
MODULE 13