Compensation Exam 3

________ have indirect pay-performance links and require employees to put up money to exercise grants. A) Bedeaux plans B) Balanced scorecard plans C) Stock options plans D) Merit pay plans

C) Stock options plans

Pay ranges for office and production work commonly range between _____ and_____ percent.

5; 15

Which of the following is an example of the sorting effect in action? A) An employee leaving a high-paying job for one that provides more work/life balance B) The provision of across-the-board pay increases by a company C) The provision of cost-of-living increases by a company D) An employee choosing fewer incentives in his flexible compensation plan

A) An employee leaving a high-paying job for one that provides more work/life balance

Which of the following statements is true of the Halsey 50-50 method? A) It derives its name from the shared split between worker and employer of any savings in direct cost. B) In this method, a worker's bonus increases as the time required to complete a task decreases. C) In this method, the standard time for a task is purposely set at a level requiring high effort to complete. D) It is usually offered to top managers and professionals to get them to focus on long-term organization objectives.

A) It derives its name from the shared split between worker and employer of any savings in direct cost.

Which of the following motivational theories states that performance-based payments work best when they closely follow performance? A) Reinforcement theory B) Equity theory C) Expectancy theory D) Agency theory

A) Reinforcement theory

Which of the following is an advantage of team incentives? A) They are effective in stimulating ideas and problem solving. B) They are administratively easy to implement. C) They can easily set equitable targets for all teams. D) They are effective in isolating the impact of a team.

A) They are effective in stimulating ideas and problem solving

In the context of pay influencing turnovers, which of the following is a result of too little pay? A) Higher individual performance among employees B) Feelings of unfair treatment among employees C) More employees requesting for training D) Employees finding the company more attractive

B) Feelings of unfair treatment among employees

For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the A) Merrick plan. B) Gantt plan. C) Taylor plan. D) Rowan plan

B) Gantt plan.

Which of the following is a disadvantage of gain-sharing plans? A) Payouts can occur even if a company's financial performance is poor. B) Pay-performance links are indirect. C) Employees are required to put up money to exercise grants. D) Mandatory stock ownership required by gain-sharing plans can increase turnover rates.

B) Pay-performance links are indirect.

Which of the following are an example of a long-term incentive plan? A) Merit bonuses B) Performance plans C) Bedeaux plans D) Spot awards

B) Performance plans

Which of the following is a disadvantage of team incentives? A) They fail to reflect how work is performed. B) They maximize distinctions between team members. C) They are ineffective in stimulating ideas and problem solving. D) They are administratively complex to implement.

B) They maximize distinctions between team members.

If you had repair work done on your car, the shop most likely used ________ to pay the mechanic. A) a Bedeaux plan B) a standard hour plan C) the Halsey 50-50 method D) a straight piecework plan

B) a standard hour plan

The most frequently implemented incentive system is: A) a standard hour plan. B) a straight piecework system. C) the Merrick system. D) the Taylor differential piece-rate plan.

B) a straight piecework system.

The most obvious sorting factor is A) seniority. B) ability. C) experience. D) educational qualification.

B) ability.

The _____ publishes extensive information on various occupations in different geographic areas. It is a major source of publicly available compensation data.

Bureau of Labor Statistics

Most experts agree that employees do not begin to consider changing their behavior unless payouts are at least ________ percent higher. A) 5 B) 8 C) 20 D) 10

C) 20

________ requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action. A) A standard hour plan B) The Rowan plan C) A Bedeaux plan D) The Merrick plan

C) A Bedeaux plan

Which of the following is often used to set pay ranges? A. Median B. Weighted mean C. Quartiles and percentiles D. Standard deviation

C. Quartiles and percentiles

Which of the following statements is true about market pricers? A. They align pay structures with the business strategy. B. Their pay structures are unique and difficult to imitate. C. They assume that little value is added through internal alignment. D. They emphasize pay structures based on unique technology or the way work is organized

C. They assume that little value is added through internal alignment.

Aging market data to a point halfway through the plan year is called _____. A. leveling B. updating C. lead/lag D. lag

C. lead/lag

Which of the following is an individual incentive plan? A) A balanced scorecard system B) A stock ownership plan C) A gain-sharing plan D) A straight piecework system

D) A straight piecework system

________ is a variable pay plan where payout depends not on company level performance such as profitability, but rather on performance at some subunit such as a plant or facility .A) Individual incentive B) Profit sharing C) Merit bonus D) Gain sharing

D) Gain sharing

Which of the following is a reward that recognizes outstanding past performance? A) Insurance B) An allowance C) A remittance D) Merit pay

D) Merit pay

In gain-sharing plan formulas, A) productivity measures are in the numerator and revenues are in the denominator. B) productivity measures are in the numerator and labor inputs are in the denominator. C) costs are in the numerator and revenues are in the denominator. D) labor inputs are in the numerator and productivity outcomes are in the denominator.

D) labor inputs are in the numerator and productivity outcomes are in the denominator.

Available evidence indicates that managers believe the most important factor for pay increases is A) experience. B) nature of the job. C) seniority. D) performance.

D) performance.

The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment. A. job structure B. broad banding C. reference rate D. market pricing

D. market pricing

The amount of fairness given to employees refers to A) total justice. B) quantitative justice. C) procedural justice. D) distributive justice.

Distributive justice.

In the context of a pay-for-performance plan, which of the following questions is related to equity? A) Does the plan help improve quality of service? B) How far down the organization will the plan run? C) Does the reward system maintain and enhance the reputation of the firm? D) Do employees view the amount of compensation received as fair?

Do employees view the amount of compensation received as fair?

Gramhold Inc., a pharmaceutical company, reduces its 10 salary grades to just three broad bands. Which of the following statements is most likely to be true in this case?

Gramhold will experience more career moves within bands than career moves between bands

Which of the following is true regarding the Employment Cost Index (ECI)?

It allows comparison of changes in its average cost to an all-industry average

A company using a skill-based pay system prices the job of lead assembler between $10 and $22 per hour. Survey data showed that the job of assembler averaged $10 per hour and the job of assembly supervisor averaged $22 per hour. The company is using the _____ method of job matching.

Low-High Method of Job Matching. See pg. 275 of the text for a further discussion of this topic. The method works as follows: Identify the lowest and highest paid benchmark jobs for the relevant skills in the relevant market and to use the wages for those jobs as anchors for the skill-based structures.

The _____ minimizes the distortion of the central tendency caused by outliers.

Median

reflect the differences of performances or experience that an employer wishes to recognize with pay

Pay ranges

The _______ theory of motivation states that employee motivation is the product of instrumentality and valence.

Reinforcement

Asai uses a skill- based plan that establishes single flat rates for each skill level. Mark performs better than Steve even though Steve has more seniority. Which of the following statements is most likely to be true in this scenario?

Steve will be paid more than Mark as he has more seniority.

Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?

The Standard Deviation

Which of the following is true of pay ranges? A. Pay ranges are most common for blue-collar jobs and those covered by union contracts. B. Pay ranges are often widest for employees who are at lower levels in terms of their job evaluation points. C. Pay ranges generally are designed so that they do not overlap. D. The market rate or the pay policy line generally serves as the midpoint of a range for the job. E. The less overlap, the more flexibility in transferring employees among jobs.

The market rate or the pay policy line generally serves as the midpoint of a range for the job.

Which of the following statements is true regarding broad bands?

They foster cross-functional growth

_____ measures reveal competitors' use of performance-based cash payments.

Total Cash

Pay ranges for managerial jobs are larger than ranges for other jobs because these jobs have greater opportunity for both discretion and performance than lower level jobs.

True

When an organization's performance has regular and large swings and individual performance is unclear and hard to measure, the most effective compensation mix is to offer?

a base pay with low incentives and a wide array of awards.

When an organization's performance has frequent highs and lows, but individual performance is fairly stable, and performance measures are clear, the most effective compensation mix is to offer _____.

a large base pay and low incentive pay

_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.

agency

The process of matching survey jobs by applying an employer's plan to the external jobs and then comparing the worth of the external job with its internal "match" is called

benchmark conversion.

Size of pay differentials between grades should _____. a. be based upon differentials in market surveys b. be approximately 15 percent c. support career movement through the pay structured. be between 10 and 25 percent

c. support career movement through the pay structure

A common first step in interpreting survey data is to _____.

check for the accuracy of job matches

The motivation triangle includes ____

culture

The second major decision in pay-level determination is to _____.

define the purpose of a survey steps in order: Specify pay-level policy Define purpose of survey Specify relevant market Design and conduct survey Interpret and apply result Design grades and ranges or bands

The final major decision in pay-level determination is to _____.

design grades and ranges or bands

According to the _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.

equity

Which of the following theories states that people choose the behavior that leads to the greatest reward?

expectancy

_____ is employees' beliefs that requisite job performance will be rewarded by the organization.

instrumentality

A market pay line _____.

links a company's benchmark jobs with market rates paid by competitors

_____ is an individual level form of performance pay.

merit bonuses

When employee performance is easily measured and the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

monetary rewards with large incentives

The ability triangle includes ____

selection

The first major decision in setting externally competitive pay and designing the corresponding pay structures is to

specify the employer's competitive pay policy.

For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is _____.

the Low-High Approach

In most organizations, the responsibility for managing a pay survey lies with _____.

the compensation manager

_____ is the value employees attach to the organization rewards offered for satisfactory job performance.

valence

When employee performance measures are ambiguous and vary from time to time, but the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

variety of rewards with significant incentive pay

The corporate performance of Yellow Corp. is fairly stable. However, it is difficult to measure individual performance. In this case, the most effective compensation mix is to offer _____.

wide range of awards beyond just money

Which of the following jobs would most likely fall into a fuzzy market?

would most likely fall into a fuzzy market? A fuzzy market fuses together diverse knowledge and experience, so "relevant markets appear more "fuzzy". Example: The position of senior director of Future Vision Services that was filled by a Software Engineer with e-commerce, marketing and theatre experience.

In the regression equation, y = a + bx, job evaluation points are _____.

x

________ theory argues that pay should be based on outcomes if monitoring of behaviors is difficult or costly and if risk due to variability in outcomes is not large. A) Reinforcement B) Goal-setting C) Agency D) Expectancy

C) Agency

Which of the following is the most commonly used team incentive performance standard? A) Quality of goods B) Productivity improvements C) Financial performance D) Quality of services

C) Financial performance

________ is employees' beliefs that higher job performance will be rewarded by the organization. A) Valence B) Expectancy C) Instrumentality D) Utility

C) Instrumentality

________ is the value employees attach to the organization rewards received for job performance. A) Equity B) Instrumentality C) Valence D) Reinforcement

C) Valence

Company X pays for performance. Allan, an employee of the company, is not in favor of this reward system and, therefore, leaves Company X in search of another company with different rules for getting rewards. This is an example of the: A) design effect. B) compensation effect. C) sorting effect. D) incentive effect.

C) sorting effect.

An incentive system with three piecework rates is the A) Taylor plan. B) Gantt plan. C) Rowan plan. D) Merrick plan

D) Merrick plan.

A person with low self-esteem is likely to seek A) a small, hierarchical organization with pay plans based upon individual performance. B) a flat organization with a significant amount of pay based upon performance. C) a small organization with large benefits based on group performance. D) a large, decentralized organization with little pay for performance.

D) a large, decentralized organization with little pay for performance.

Components identified as vital to the success of both Scanlon and Rucker plans are: A) top management support and primary focus on wage incentives. B) a flexible payout formula and low turnover rates. C) union and top management support. D) a productivity norm and effective worker committees.

D) a productivity norm and effective worker committees.

Which of the following is an advantage of providing stock ownership as variable pay to employees? A) It reinforces team identity. B) It is the simplest type of variable pay plan. C) It defers a portion of taxes to employees. D) It provides a direct pay-performance link.

C) It defers a portion of taxes to employees.

Which of the following statements is true of individual spot awards? A) They are an example of long-term incentives. B) They are more expensive than merit pay increases. C) They are given to employees for exceptional performance as an add-on bonus. D) They are given to all employees as a one-time cost-of-living adjustment.

C) It is an individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production.

Which of the following statements is true of the Rowan plan? A) It is an individual incentive plan that motivates top managers and professionals to focus on long-term organization objectives. B) In this plan, the standard time for a task is purposely set at a level requiring high effort to complete. C) It is an individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production. D) In this plan, a worker's bonus remains constant irrespective of the time required to complete a task.

C) It is an individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production.

________ is a nonpermanent (variable) payment (bonus or lump sum) form of variable pay granted to employee as function of some (typically primarily subjective) assessment of individual employee performance. A) Risk sharing B) Gain sharing C) Merit bonus D) Success sharing

C) Merit bonus

Paying a dime for every bottle collected and turned to a collection center is an example of: A) a standard hour plan. B) the Merrick system. C) a straight piecework system. D) the Rowan plan.

C) a straight piecework system

Which of the following is true of merit bonuses? A) They are viewed as less of an entitlement than merit pay. B) They are more expensive than merit pay in the long run. C) Cost-conscious firms avoid using merit bonuses. D) Employees receive merit bonuses that build into base pay.

A) They are viewed as less of an entitlement than merit pay.

One common feature of all types of incentive plans is: A) an established standard of performance that is used to determine the magnitude of the incentive pay. B) a sharing contract between the employees and employers, which stipulates that the losses incurred by the companies will be shared by both employees and employers. C) an established formula that specifies the maximum percentage of base pay allocated as incentives .D) a risk-sharing plan that increases pay depending upon the turnover rate of a company.

A) an established standard of performance that is used to determine the magnitude of the incentive pay.

According to ________ theory, relative pay is important as employees evaluate the adequacy of their pay via comparisons with other employees. A) equity B) expectancy C) agency D) reinforcement

A) equity

When pay is based on individual performance, turnover tends to be highest among A) poor performers. B) good performers. C) single women with children. D) ethnic minorities.

A) poor performers.

The ________ theory of motivation states that employee motivation is the product of instrumentality and valence. A) equity B) expectancy C) reinforcement D) agency

B) expectancy

The trend in recent variable-pay design is to combine the best of A) individual and group incentive plans. B) gain-sharing and profit-sharing plans. C) the Halsey and Rowan plans D) balanced scorecard and cash profit-sharing plans.

B) gain-sharing and profit-sharing plans.

Which of the following is an advantage of gain-sharing plans? A) They are the simplest type of variable pay plan. B) They prevent payouts if a company's financial performance is poor. C) They are administratively easy to implement. D) They increase employees' knowledge of business.

C) They are administratively easy to implement.

Which of the following statements is true of merit pay? A) Merit pay differentials based on performance are usually large enough to motivate performance. B) Merit pay decreases fixed compensation costs over time. C) Merit pay is inexpensive even when too many high-performance ratings are awarded. D) Merit programs are commonly designed to pay different amounts depending on the level of performance.

D) Merit programs are commonly designed to pay different amounts depending on the level of performance.

A team leader with a free-rider problem in his team can most likely maximize the performance of his team by: A) instructing the team to do their best. B) specifying performance levels and due dates. C) assigning tasks only to the top performers in the team. D) punishing free riders who fail to meet standards.

B) specifying performance levels and due dates