Comp & Benefits Ch 1

Ways to measure an merit increase program

Is usually based on a subjective rating of performance

Which policy decision of the pay model emphasizes paying for performance? a. compliance to guidelines b. employee contributions c. external competitiveness d. internal alignment

b

Allowances are a type of: a. incentive b. relational return c. cash compensation d. benefit

d

Which of the following is true of allowances? a. they often grow out of whatever is in limited supply b. they often help in protecting employees from financial risks c. they are aimed at helping employees better integrate their work and life responsibilities d. they are part of the relational returns offered by an organization

a

Identify the ways in which shareholders influence executive compensation decisions. (Select all that apply) a. through the election of directors in proxy votes b. through shareholder proposals c. through standardized job evaluations d. through the investment of venture capital

a, b

Identify the examples of programs that help employees balance their work and personal responsibilities. (Select all that apply) a. time away from work b. access to services to meet specific needs c. housing and transportation allowances d. income protection e. flexible work arrangements

a, b, e

Edward Lazear conducted an informative study on incentive and sorting effects in which he measured individual work productivity before and after a glass installation company switched one of its plants from a salary-only system to an individual incentive plan. What were the findings of his study? (Select all that apply) a. approximately 1/2 of the increase in productivity was caused by less productive workers leaving and being replaced by more productive workers b. switching from a salary-only system to an individual incentive plan caused a decline in productivity c. approximately 1/2 of the decline in productivity was caused by more productive workers leaving and being replaced by less productive workers d. switching from a salary-only system to an individual incentive plan caused an increase in productivity

a, d

In which of the following ways can employees view compensation? (Select all that apply) a. as a return in an exchange between their employer and themselves b. as a major expense that must be managed c. as a major determinant of worker attitudes and behaviors d. as a reward for having done well in a job e. as an entitlement for being an employee of the company f. as an incentive to take or stay in a job and try to perform well in that job

a, d, e, f

Why has Nucor Steel done well despite paying its workers higher than companies inside and outside of the steel industry? a. it has strictly stayed away from performance based compensation b. it has much higher productivity than is usually seen in the steel industry c. it has traditionally provided special programs, such as the employee stock purchase plan, only to executives d. it has a highly centralized management philosophy

b

Identify the provisions of the Dodd-Frank Wall street Reform and Consumer Protection Act. (Select all that apply) a. lock-up provisions that allow shareholders to sell company stock only to the potential buyer during a takeover b. clawback provisions designed to allow companies to take back compensation from executives in some instances c. "say on pay" that makes it obligatory for public companies to submit their executive compensation plan to a vote by shareholders d. individual incentive plans that provide for variable incentives on the basis of the number of units produced in a particular time period

b, c

Which of the following features of research should be kept in mind while deciding the usefulness and relevance of a research study? (Select all that apply) a. whether the research was conducted globally b. whether the research is useful c. whether the research separates correlation from causation d. whether the results of the research have ever been successfully applied e. whether there are alternate explanations

b, c, e

Identify the true statements about incentives. (Select all that apply) a. they permanently increase labor costs b. they are one-time payments c. they restrict employee efforts to short-term results d. they are often known as variable pay

b, d

Identify the ways in which compensation affects the success of managers. (Select all that apply) a. it is an important obstacle to increasing flexibility in internal structures b. it is a major expense that must be managed c. it is an important focus of labor unions' efforts to serve their members' interests d. it is a major factor determining employee attitudes and behaviors and thus, organization performance

b, d

Unlike merit increases, merit bonuses are: a. given as increments to base pay b. based on performance assessment c. paid in the form of a lump sum d. provided in the form of long-term incentives

c

Identify common examples of income protection benefits provided by employers. (Select all that apply) a. life insurance b. allowances c. incentive programs d. medical insurance e. retirement programs

a, d, e

Recognition and status, employment security, challenging work, and opportunities to learn are examples of: a. long-term incentives b. relational returns c. income protection d. total compensation

b

Wall Street financial services firms and banks rewarded employees for developing "innovative" new financial investment vehicles and for taking risks that helped them and their firms earn a significant amount of money by using: a. cafeteria benefit plans b. incentive plans c. flexible benefit plans d. broad-based option plans

b

The importance given to employee contribution is a significant policy decision because it directly affects: a. the competitiveness of an organization's product or service in the external environment b. employees' skill sets and know-how c. employees' attitudes and work behaviors d. an organization's compliance to guidelines

c

T/F: A present-value perspective focuses on the value of a company's initial offers to job applicants.

False A present-value perspective shifts the comparison of a company's initial offers to consideration of future bonuses, merit increases, and promotions

T/F: Cost of living adjustments (COLAs) to base wages are becoming increasingly common nowadays.

False COLAs to base wages have become less common than in the past because employers continually try to control fixed costs and link pay increases to individual and/or company performance

Relational returns

Learning opportunities, status, challenging work, and so on

__________ refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

Compensation

Way in which the sorting effect can influence employee motivation and behavior

The effect of differences in the types of pay strategies on the types of people who apply to and stay with an organization

Way in which the incentive effect can influence employee motivation and behavior

The extent to which pay influences individual and aggregate motivation among employees at a particular point in time

Attora Inc., an advertising company, provides its employees with benefits that include paid vacations, work from home facilities, and access to an onsite child care center. Identify a true statement about these benefits. a. they help employees balance their work and personal lives b. they are examples of relational returns from work c. they help protect employees from financial risks d. they are examples of special allowances

a

Identify a true statement about merit increases: a. they are based on an assessment of employees' performance in the recent past b. they do not permanently increase labor costs c. they are paid in the form of a lump sum d. they do not include any kind of cash compensation

a

Identify a true statement about relative compensation costs and productivity rates across nations. a. countries like Mexico and China have much lower hourly compensation rates than the U.S. b. the U.S. has stopped sending white collar work overseas as the compensation costs for this type of work are similar all over the world c. the U.S. has stopped outsourcing manufacturing work as the productivity of workers overseas is very low d. countries like Mexico and China have much higher productivity than the U.S.

a

Long-term incentives are usually in the form of: a. stock ownership b. income protection c. allowances d. merit increases

a

Managing compensation means: a. identifying the impact of a policy, technique, or decision b. developing pay techniques that align with the organizational strategy c. studying external market rates for various jobs d. conducting job evaluations to create an internal structure

a

Stockholders who are not in favor of using stock to pay employees believe that: a. granting employees too much ownership dilutes stockholder wealth b. granting employees too much ownership reduces risk taking c. granting stock options decreases employee loyality and commitment to an organization d. granting stock ptions decreases the difference between

a

Identify common examples of income protection benefits provided by employers. (Select all that apply) a. medical insurance b. retirement programs c. incentive programs d. life insurance e. allowances

a, b, d

Which of the following are likely to be the focus of employees when they are given long-term incentives in the form of stock ownership? (Select all that apply) a. market share b. return on net assets c. compliance with guidelines d. return on investment e. service level agreement targets

a, b, d

Which of the following can form the basis for a cost of living adjustment (COLA) to base wages? (Select all that apply) a. changes in incentive plans b. changes in what other employers are paying for the same work c. changes in performance evaluation results d. changes in living costs e. changes in experience or skill

b, d, e

A company that justifies comparatively low starting offers with assurances of large future pay increases is: a. involving employees in the company's long-term financial objectives b. selling the present value of the future stream of earnings c. emphasizing the relational returns that can be obtained from work d. trying to help protect applicants from the financial risks inherent in daily life

b

According to which of the following compensation objectives should an organization give importance to the way in which its results are achieved? a. fairness b. efficiency c. ethics d. compliance

c

__________ force managers to consider the affordability of their compensation decisions. a. shareholder proposals b. the nature of relational returns c. global and local competitive pressures d. the results of job evaluation studies

c

________ _________ is the cash compensation that an employer pays an employee for the work performed.

Base wage

Ways to measure an incentive program

Based on an objective measure of performance

Meaning of the objective compliance

Conforming to federal and state compensation laws and regulations

T/F: The nature of the legal framework governing pay highlights the fact that pay is not important to employees in the employment relationship.

False

Aim of merit adjustments

Reward past behavior, which is hoped to influence future behavior

Total compensation

Base merit, incentives, cost-of-living adjustments, medical insurance, programs to help balance work and life demands, and so on

Meaning of the objective fairness

Equitable treatment of all employees through the recognition of employee contributions and needs

Aim of incentives

Explicitly attempt to influence future behavior

_______ _______ refers to pay comparisons with competitors.

External competitiveness

T/F: Most managers read research because they find it relevant and useful while making compensation decisions.

F - most managers don't read research. They do not describe to research journals because they find them to be impractical, irrelevant, and filled with jargon and esoterica

________ _________ is the policy that refers to comparisons among jobs or skill levels inside a single organization.

Internal alignment

Meaning of the objective efficiency

Improving performance and quality, pleasing customers and stockholders, and keeping labor costs under control

_________ __________ refers to the process used to make pay decisions and suggests that the way a pay decision is made may be equally as important to employees as the result of the decision.

Procedural fairness

Which of the following statements about compensation may be seen as a reflection of equity or justice in society? a. U.S. companies exhibit strong links between executive pay and company performance b. individuals and businesses in the U.S. spend a significant amount of money per year on health care c. higher pay levels help organizations attract more high-quality applicants d. stockholders believe that using stock to pay employees creates a sense of ownership that improves performance

b

An important motivation for risk taking among traders and others is: a. the institution of legislation such as the Troubled Asset Relief Program (TARP) to encourage executives to take risks b. the restructuring of executive compensation packages to make executives' prospective wealth the same as their current wealth c. the subjective performance-based pay system that often guarantees better growth opportunities to those who take risks, irrespective of the outcome d. the incentive system that often results in those who thrive under this incentive reaching top leadership positions

d

In the U.S., the pay for employees who are exempt from regulations of the Fair Labor Standards Act (FLSA) and hence do not receive overtime pay is referred to as _________.

salary