Chapter 9 Assignment

Measurement

If an incentive plan is to be successful, managers must start by paying close attention to ___________ of performance. a. Measurement b. Administration c. Implementation

A. Giving them prompt feedback B. Tolerating their impatience D. Involving them in decision making

Which of the following actions are likely to motivate professional employees? Check all that apply. A. Giving them prompt feedback B. Tolerating their impatience C. Closely supervising their work D. Involving them in decision making

Incentive

The philosophy of an __________ pay plan is that every employee makes a direct contribution to organizational performance and success. a. Salary b. Incentive c. Overtime

Improshare

In a brushless motor factory in Ohio, the entire factory was given a bonus every time workers were able to reduce the number of person-hours it took to manufacture a single object.

Cash or stock award determined by an increase in stock price during any time chosen by the executive in the option period; it doesn't require executive financing.

Stock appreciation rights (SARs)

D. Incentives tied to seniority improve motivation and productivity in an organization.

Which of the following is not an advantage to the employer from an incentive pay program? A. Incentives are a means to reward or attract top performers when salary budgets are low. B. Incentives foster teamwork and unit cohesiveness when payments to individuals are based on team results. C. Incentives are a way to increase equity and justice in an organization. D. Incentives tied to seniority improve motivation and productivity in an organization.

B. Allowing them to work in the way they think is best

Suppose that you took over Dan Henry's job as Chief Human Resources Officer for Bright Horizons. One day Mary Ann Tocio, the president and COO, comes to you and says, "We've got to find a way to encourage our employees to use all of their creativity on the job." What would be the best tool for motivating your professional employees to be creative? A. Paying them for each new idea they bring to staff meetings B. Allowing them to work in the way they think is best C. Giving them bonuses for completing work on or before deadlines D. Paying them for accomplishing specific productivity goals each year

Grants of actual stock or phantom stock units. Value is contingent on both predetermined performance objectives over a specified period of time and the stock market.

Performance shares

Grant of units equal in value to the fair market value or book value of a share of stock; on a specified date, the executive will be paid the appreciation in the value of the units up to that time.

Phantom stock

Opportunities for executives to purchase shares of their organization's stock valued at full market or a discount price, often with the organization providing financial assistance.

Stock purchase

A. Has greater concern for ethics and accountability in compensation

Dan Henry, chief human resources officer for Bright Horizons, comments, "Bright Horizons feels they need to be reasonable at every level in terms of compensation structure." This statement best characterizes Bright Horizons as a company that: A. Has greater concern for ethics and accountability in compensation B. Has more short-term executive incentives C. Has few long-term executive incentives D. Has greater gaps in their compensation packages

Grants analogous to an annual bonus except that the measurement period exceeds one year. The value of the grant can be expressed as a flat dollar amount or converted to a number of "units" of equivalent aggregate value.

Performance units

Grant of stock or stock units at a reduced price with the condition that the stock not be transferred or sold (by risk of forfeiture) before a specified employment date.

Restricted stock

1. Piecework 2. Standard hour plan 3. Merit Pay 4. Incentives awards and recognition

Type of work incentive plan: 1. Differential piece rate 2. Uses a Standard time 3. Should be distinguishable from cost-of-living increases 4. Individuals recognized in company meetings Piecework Standard hour plan Bonuses Merit Pay Incentive awards/recognition Sales incentives

D. Base salary

Based on the board's understanding of their most important objective, they should focus their conversation about CEO pay on which of the following areas? A. Short-term incentives or bonuses B. Perks C. Long-term incentives or bonuses D. Base salary

Scanlon plan

At Watermark Credit Union, managers wanted to increase assets and improve their capital ratio. They solicited ideas from investors, customers, and employees to develop ideas for making these changes happen. The Credit Union paid a bonus to all employees after ideas were implemented successfully.

A. The cost of bonuses paid out

Which of the following is not an overhead cost associated with incentive plans? A. The cost of bonuses paid out B. The cost of record-keeping C. The cost of establishing performance standards

1. Profit sharing 2. Employee stock ownership 3. Stock options

For each disadvantage listed, choose the appropriate enterprise pay plan. 1. Profits shared with employees may be due to factors outside of the control of the employee. 2. The pensioner is dependent upon the price of the company profit-sharing stock. 3. These have been criticized for extravagance. Employee stock ownership Profit sharing Stock options

Bonus merit pay: Individual Lump sum merit pay: Individual Professional employee incentives: Individual Sales incentives: Individual Executive incentives: Individual Profit sharing: Enterprise Team compensation: Group

For each plan component listed, identify the relevant type of incentive plan.

D. The payout formulas for the team incentive system are oftentimes complex and difficult to understand, or they may yield payouts that are not large enough to reward workers for their efforts and to motivate them to continue working hard in the future.

The CEO of a medical systems manufacturer has launched a company-wide team initiative that uses teams as the basic work unit for completing most work and key projects. This initiative includes a team incentive system as well. The CEO is completely confident that the team initiative and incentive system will be a total success in the future. As the director of HR, what might you want to caution him about so that his expectations may be more realistic? A. Team incentive systems require an organizational culture to support them, and most organizations do not possess the right kind of culture. B. Team incentive systems are extremely expensive to maintain. C. Team incentive systems require five years to implement to a point where they are truly effective and sustainable, and many top managers are too impatient to wait this long to see results. D. The payout formulas for the team incentive system are oftentimes complex and difficult to understand, or they may yield payouts that are not large enough to reward workers for their efforts and to motivate them to continue working hard in the future.

C. The CEO's salary is justified in that business competition is pressure-filled and demanding.

The board of directors at a global telecommunications firm has been strongly criticized for what many investors and customers view as gross overcompensation of the company's CEO (annual salary of $50 million). The board of directors has contacted you, the vice president of HR, to attend their next meeting to discuss how to create an education and communication strategy for defending the CEO's high salary. What point would you make to the board of directors in this situation? A. There are other CEOs who are making more than $50 million per year. B. The CEO's total compensation is $50 million, and this includes other things, like bonuses, perks, etc., so his base salary is not $50 million. C. The CEO's salary is justified in that business competition is pressure-filled and demanding. D. The company received a substantial monetary donation from an anonymous donor, which will support paying the CEO's salary.

C. Make the base salary component of the executive compensation package around 30-40% of total annual compensation.

The board of directors in a relatively new news and media conglomerate wants to go through a formal process to piece together an effective executive pay package. They have contacted you, the vice president of HR, to obtain some guidance on how to structure the package. What would you say to the board of directors in this situation? A. Make the base salary component of the executive compensation package around 70-80% of total annual compensation. B. Be sure to offer a generous severance package, if the executive needs to be terminated. C. Make the base salary component of the executive compensation package around 30-40% of total annual compensation. D. Do not include any benefits or perquisites in the executive compensation package.

1. Organizations set performance measures on which incentive payments are based. Improvements in efficiency or product quality and reductions in materials or labor costs are common benchmark criteria. 2. The size of the incentive bonus must be determined. 3. A payout formula is established and fully explained to employees.

Steps in Deciding Team Compensation _____Organizations set performance measures on which incentive payments are based. Improvements in efficiency or product quality and reductions in materials or labor costs are common benchmark criteria. _____A payout formula is established and fully explained to employees. _____The size of the incentive bonus must be determined.

Rights granted to executives to purchase shares of their organization's stock at an established price for a fixed period of time. Stock price is usually set at market value at the time the option is granted.

Stock options