Learning Objectives
        1. Explain two reasons why companies use 
               incentive pay.
        2. Concisely provide a contrast between incentive 
               pay methods and traditional pay methods.
        3. List three categories of incentive pay plans.
        4. Define individual incentive plans and give one 
               example.
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              Learning Objectives (cont’d)
        5. Provide the definition group incentives and 
               summarize two examples of group incentive 
               plans.
        6. Discuss the advantages and disadvantages of 
               group incentive plans.
        7. Offer a definition of company-wide incentive 
               plans with an example.
        8. List and summarize five factors in the design of 
               incentive pay programs.
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                          Learning Objective 1
        Explain two reasons why companies use 
        incentive pay.
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                                        Incentive Pay
        • Compensation fluctuates according to:
               –  A preestablished formula
               –  Individual or group goals
               –  Company earnings
        • Adds to base pay
        • Controls costs 
        • Motivates employees
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              Incentive Pay Assumptions
        • Effective incentive pay systems are based on 
             three assumptions:
               1. Individual employees and work teams differ 
                      in how much they contribute to the company, 
                      both in what they do as well as in how well 
                      they do it.
               2. The company’s overall performance 
                      depends to a large degree on the 
                      performance of individuals and groups within 
                      the company.
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