ch 10 Pay for Performance Plans

Three major problems with team incentives are known as "the three C's". The "three C's" refer to all of the following

complexity, control, communications

The largest component of executive pay is

long-term incentives

ll of the following are true regarding merit pay except

merit pay tends to cause higher performers to quit

team/group incentive plans

ncentive pay for meeting or exceeding group performance standards

A gain-sharing plan that has provenucker plan easy to administer and communicate, which identified the expected hours required to produce an acceptable level of output is the

Improshare

A corporate, overall performance measure that typically incorporates financial results, process improvements, customer service and innovation is called

a balanced scorecard

An advantage to companies hiring contingent workers is

Cost and flexibility

earnings-at-risk plan

risk plan incentive plan sharing profits in successful years and reducing base pay in unsuccessful years

merit pay

A system of linking pay increases to ratings on performance appraisals

Growing interest in variable pay has been attributed to greater foreign competition and changes in compensation and tax laws

FALSE

One of the difficulties of this plan is that it can be administratively complicated.

Gainsharing

In this type of plan, incentives are derived as a function of the ratio between labor costs and sales value of production.

Scanlon Plan

Research suggests that the most important and most difficult part of sales compensation is

Setting the sales targets

is used to both attract quality employees to organizations with uncertain futures and retain employees.

Stock ownership or options

Gain sharing plans include a split of the savings between management and workers.

TRUE

The incentive system with two rates, one for above production standard and one for below standard is the _____ plan

Taylor

Of the following types of pay, which one is NOT a pay-for-performance plan

across-the-board increases

Employee satisfaction, turnover rates and promotability index are all examples of _____

capability-focused measures

All of the following are advantages of group incentive pay plans

easier to develop performance measures,signals that cooperation is a desired behavior,may increase employee participation in decision-making process

Approaches to explain executive pay includes all

economic comparisons, social comparisons, agency theory

Historically, the most commonly used performance indicator for group incentive plans has been

financially focused measures

The chief benefit of ESOPs is that they _____.

foster employee willingness to participate in decision

The purpose of __________ is to support a major productivity or quality initiative.

gainsharing

In order to make merit pay plans work, managers must

improve the accuracy of performance ratings, allocate enough money to truly reward performance, be sure of the size of the merit differentiates across performance levels

Disadvantages of individual incentive plans include

increases complaints about equipment maintenance, increased turnover among new employees, greater conflict between management and workers

Companies use various methods to resolve the problem of low supervisory pay including

paying supervisors overtime, adding a supervisory differential, adding a variable pay component

employee stock ownership plan (ESOP)

plan offering employees the opportunity to purchase company stock, often partially or fully matched by employer-paid stock for the employee

The method of rate determination identifies whether pay plans pay based on _____ or _____.

production per time period; time period per unit of production

An individual incentive plan differs from a lump-sum bonus because in the individual incentive plan

rewards are linked to pre-established levels of performance

Employers like __________ plans, and most employees would prefer __________ plans.

risk-sharing, success sharing

Dual career tracks have been successful for jobs such as

scientists

broad-based option plans

stock options provided to employees at all levels

This plan is used to recruit top quality employees when an organization has a highly uncertain future.

stock ownership or options

problems with team compensation

there are many types of teams, the level problem, control of outcomes

All of the following are disadvantages of individualized incentive plans EXCEPT ____.

they can increase quantity, but decrease quality of work, employees may not suggest new production methods for fear of increases in production standards,they can increase mistrust between workers and management correct less supervision is required to maintain output levels

profit-sharing plans

variable pay plans requiring a profit target to be met before any payouts occur

Maturity curves represent the relationship between compensation and

years of experience in the labor market