To meet business challenges today and tomorrow, companies must maximise the potential of their workforce while increasing efficiency. In a highly competitive business environment, companies can differentiate themselves through their employees. Employees understanding the business carry out operations, mitigate risk, and build strong brands.
Today, there is much more concentration and focus on the strategic outcomes of human resource activity than ever before. The area of compensation is no exception. Compensation can be used to recruit and retain qualified employees, to increase or maintain morale / satisfaction, reward and encourage peak performance, achieve internal and external equity, reduce turnover and encourage company loyalty.
As a result, pay-for-performance systems using variable pay components are becoming more and more popular to reward for exceptional job performance. There is far more interest in more closely linking the reward mechanisms to the achievement of corporate objectives. Performance pay as one component in the total employee compensation can be assessed based on individual or team contribution, on business unit results or a corporate profit or share price. It can be rewarded through traditional salary adjustments but also through variable pay techniques such as lump-sum bonuses or stock options. There are no standard schemes or rules on how and to what volume a company should integrate variable pay into its total compensation systems. It not only depends on what the company focuses on but also on the company’s employees, their attitude to work and to the company as a whole. But employers should have in mind that a compensation plan that fails to motivate employees can stagnate a company as fast as any other factor.
Inhaltsverzeichnis (Table of Contents)
- Overview
- Introduction
- Compensation Components
- Drivers of Employee Motivation
- Why Stimulating Labour by Motivation
- Behavioural Theories
- Maslow's Hierarchy of Needs
- Herzberg's Hygiene-Motivator Theory
- Adam's Equity Theory
- Application of the Models
- Variable Compensation
- Overview of Variable Compensation Options
- Principles of a Successful Compensation Plan
- How to Build a Prosperous Compensation System
- Aligning with Organisational Objectives and Strategies
- Clear Communication and Appropriate Messages
- Linking Pay to Performance
- Creating a Performance Culture
- Creating an Efficient Compensation System
- Successful Performance Rewarding
- Critique on Variable Compensation Plans
- The Range of This Critique
- Variable Pay Does Not Always Benefit
- A Question of Common Justice
- The Horizon in Human Behaviour
- Practical example: Variable Components in the Executive Compensation of the TUI AG
- Company Profile of TUI Group
- Compensation Components of the Supervisory Board
- Compensation Components of the Executive Board
- Principles of the Executive Compensation System
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to explore various options for variable compensation and analyze their effectiveness in motivating employees. It examines relevant behavioral theories and applies them to the design and implementation of successful compensation plans. A case study of TUI AG provides a practical example of variable compensation in a real-world setting.
- Variable compensation strategies and their impact on employee motivation.
- Application of behavioral theories (Maslow, Herzberg, Adams) to compensation design.
- Principles of creating effective and equitable compensation systems.
- Analysis of the advantages and disadvantages of variable compensation plans.
- Case study of variable compensation components within the TUI AG executive compensation structure.
Zusammenfassung der Kapitel (Chapter Summaries)
The initial chapters introduce the concept of variable compensation, defining its components and exploring the foundational behavioral theories influencing employee motivation. Subsequent sections delve into the principles of creating successful variable compensation plans, addressing considerations such as alignment with organizational objectives, communication, and performance linkage. A critique of variable compensation plans is also presented, examining potential downsides and ethical considerations. The paper concludes with a detailed case study focusing on the variable compensation structure within TUI AG, analyzing the company's approach and the components involved in their executive compensation strategy.
Schlüsselwörter (Keywords)
Variable compensation, employee motivation, behavioral theories, compensation design, performance management, organizational objectives, TUI AG, executive compensation, equity, fairness.
- Quote paper
- Nadine Pahl (Author), Axel Hinze (Author), Anne Richter (Author), 2007, Options for Variable Compensation, Munich, GRIN Verlag, https://www.grin.com/document/124633
