CCP 7 - Variable Pay: Improving Performance with Variable Pay CCIFP
UPDATED ACTUAL Questions and CORRECT Answers
Variable Pay based on an individual, group or organizational results
flexible, adaptable
Performance based compensation
Goal: improve organizational performance
Purpose: differentiate the pay of individuals who achieve results vs those who do
not
Compensation that is discretionary or contingent on performance or results
achieved, and can be designed for any individual or combination of individuals.
The amount actually paid will vary based on whatever criteria the organization
chooses.
Elements of Compensation Fixed Pay - nondiscretionary
Variable Pay - discretionary
Fixed Pay Non Discretionary compensation that does not regularly vary according to
performance of results achieved.
Designing a Variable Pay Plan Start with business strategy
-Operational excellence
-Product service leadership
-Customer intimacy
, operational excellence Combination of price, quality, dependability and ease of purchase other
competitors cannot match
Primarily a price / cost based strategy
Minimize waste and reward efficiency
Strategy: product quality, operational efficiency improvement, process
improvement, cost reduction
product service leadership Time to market shorter than 90 days (time from innovation to market)
Primarily an innovation based strategy
Focuses on innovation, product development and market exploitation
Strategy: market share, market penetration, product development, tie from
innovation to market
customer intimacy Measure guest satisfaction scores
Guest retention score
Primarily a solutions based strategy
Deep and lasting relationships with customers - build customer loyalty
Strategy: customer opinion of products, product quality, customer retention,
customer satisfaction
start-up new with little or no formal policies or procedures. Focus is obtaining capital,
marketing products or services, initial sales growth and cash conservation.
growth focused on growing sales, increasing distribution capability and determining how
to efficiently produce products or services to meet growing demand. Need to
begin standardizing procedures through policy creation
maturity focus on maintaining / increasing market share, improving productivity and
reducing cost of sales. Improvements to products are more evolutionary than
revolutionary. Higher levels of bureaucracy and greater amounts of cash on hand
than at other stages.
decline revenues are declining. Must decide to reinvest in current products, create new
products or maximize profits with current products as long as possible.
Variable Pay helps achieve business objectives in 4 ways focus your employees
aligns them with tasks
provides motivation
reinforce the behavior
focus, alignment, motivation, reinforcement
high variable low base Sales people
Keep base low to conserve fixed cash expenses while providing the opportunity
to receive high levels of variable pay based on company growth objectives
High variable high base High potential employees, hard to hire, want them aligned with company success,
CEOs, Research and Development, & technological types
Attract the very best talent
Low variable high base Precision effort - doctors
Promote retention
UPDATED ACTUAL Questions and CORRECT Answers
Variable Pay based on an individual, group or organizational results
flexible, adaptable
Performance based compensation
Goal: improve organizational performance
Purpose: differentiate the pay of individuals who achieve results vs those who do
not
Compensation that is discretionary or contingent on performance or results
achieved, and can be designed for any individual or combination of individuals.
The amount actually paid will vary based on whatever criteria the organization
chooses.
Elements of Compensation Fixed Pay - nondiscretionary
Variable Pay - discretionary
Fixed Pay Non Discretionary compensation that does not regularly vary according to
performance of results achieved.
Designing a Variable Pay Plan Start with business strategy
-Operational excellence
-Product service leadership
-Customer intimacy
, operational excellence Combination of price, quality, dependability and ease of purchase other
competitors cannot match
Primarily a price / cost based strategy
Minimize waste and reward efficiency
Strategy: product quality, operational efficiency improvement, process
improvement, cost reduction
product service leadership Time to market shorter than 90 days (time from innovation to market)
Primarily an innovation based strategy
Focuses on innovation, product development and market exploitation
Strategy: market share, market penetration, product development, tie from
innovation to market
customer intimacy Measure guest satisfaction scores
Guest retention score
Primarily a solutions based strategy
Deep and lasting relationships with customers - build customer loyalty
Strategy: customer opinion of products, product quality, customer retention,
customer satisfaction
start-up new with little or no formal policies or procedures. Focus is obtaining capital,
marketing products or services, initial sales growth and cash conservation.
growth focused on growing sales, increasing distribution capability and determining how
to efficiently produce products or services to meet growing demand. Need to
begin standardizing procedures through policy creation
maturity focus on maintaining / increasing market share, improving productivity and
reducing cost of sales. Improvements to products are more evolutionary than
revolutionary. Higher levels of bureaucracy and greater amounts of cash on hand
than at other stages.
decline revenues are declining. Must decide to reinvest in current products, create new
products or maximize profits with current products as long as possible.
Variable Pay helps achieve business objectives in 4 ways focus your employees
aligns them with tasks
provides motivation
reinforce the behavior
focus, alignment, motivation, reinforcement
high variable low base Sales people
Keep base low to conserve fixed cash expenses while providing the opportunity
to receive high levels of variable pay based on company growth objectives
High variable high base High potential employees, hard to hire, want them aligned with company success,
CEOs, Research and Development, & technological types
Attract the very best talent
Low variable high base Precision effort - doctors
Promote retention
