Compensation MGT QUIZAM 2
Pay ranges for office and production work commonly range between _____ and _____ percent. A. 5; 15 B. 15; 30 C. 30; 40 D. 40; 60
A: 5; 15
Which of the following is an example of a company that uses broad banding? A. A company in which there is more lateral movement with no pay adjustment than promotions B. A company that has pay guidelines and controls designed right into the pay system C. A company that has unlimited total salary budget D. A company that pays all its employees the same salary
A: A company in which there is more lateral movement with no pay adjustment than promotions
Which of the following is the best appraisal format in terms of legal defensibility? A. BARS B. MBO C. Essay format D. Ranking method
A: BARS
According to the _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees. A. equity B. expectancy C. agency D. reinforcement
A: equity
The _____ theory is the most influential in explaining pay-level differences. A. human capital B. marginal productivity C. efficiency-wage D. signaling
A: human capital
The ability triangle includes _____. A. selection B. performance management C. compensation D. organization development
A: selection
There is evidence that every 10 percent increase in the bonus paid to employees by a firm yields a _____ percent increase in ROA to the firm. A. 1 B. 1.5 C. 5 D. 15
B: 1.5
The _____ publishes extensive information on various occupations in different geographic areas. It is a major source of publicly available compensation data. A. Chamber of Commerce B. Bureau of Labor Statistics C. Compensation Association D. Department of Economics
B: Bureau of Labor statistics
For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the _____ plan. A. Halsey 50-50 B. Gantt C. Taylor D. Rowan
B: Gantt
The most common form of outcomes-based appraisal is: A. the essay method. B. MBO. C. the performance standards review. D. the BARS.
B: MBO
_____ is the additional output associated with the employment of one additional person, with other production factors held constant. A. Productivity B. The marginal product of labor C. Incremental productivity D. The marginal revenue of labor
B: The marginal product of labor
The most obvious sorting factor is _____. A. seniority B. ability C. experience D. educational qualification
B: ability
Among pay-mix alternatives, the percentage of base pay is highest in _____. A. work-life balance policy B. security or commitment policy C. performance-driven policy D. market match policy
B: security or commitment policy
Which of the following is NOT 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. Employees dislike them. D. They are thought to be a substitute for merit pay.
B: they are more expensive then merit pay in the long run
Which of the following is NOT a reason a company might pay base wages above market? A. To increase employee productivity B. To increase turnover rates C. To increase wage satisfaction D. To attract more job applicants
B: to increase turnover rates
When a job involves very routine, mechanistic tasks, the most appropriate appraisal format is: A. BARS. B. MBO. C. standard rating scales. D. alternation ranking.
BARS
Most experts agree that employees do not begin to consider changing their behaviors unless payouts are at least _____ percent higher. A. 5 B. 8 C. 20 D. 10
C: 20
A _____ plan requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action. A. standard hour B. Rowan C. Bedeaux D. Merrick
C: Bedeaux
A study of ratings of managers found that approximately only _____ percent of the managers were rated below average. A. 30 B. 20 C. 10 D. 5
D: 5
The most common pay policy is a(n) _____. A. lead policy B. lag policy C. hybrid policy D. match policy
D: a match policy
All of the following EXCEPT _____ require periodically re-earning the added pay. A. success-sharing plans B. merit bonuses C. profit-sharing plans D. cost-of-living increases
D: cost-of-living increases
Which of the following statistical measures shows how similar or dissimilar the market rates are from each other? A. Weighted mean B. Mean C. Standard deviation D. Median
D: standard deviation
The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____. A. updating B. point factor adjustment C. lead/lag policy adjustment D. survey leveling
D: survey leveling
All of the following support the use of individual incentives EXCEPT: A. the independent nature of task accomplishment. B. the high commitment levels of workers to their profession. C. the readily apparent performance standards. D. the presence of a union.
D: the presence of a union
Adjustments to forms of pay occur more often than adjustments to overall pay level
False
Career moves between bands are more common than within bands.
False
Employers in highly competitive markets are more able to raise prices without loss of revenues. (T/F)
False
In the formula "Behavior = f (M, A, E)," M denotes monetary incentives.
False
The final step in determining externally competitive pay levels and structures is the merging of internal and external pressure.
False
The most influential theory explaining pay-level differences is marginal revenue productivity. (T/F)
False
The percentage of companies using some form of variable pay is declining because many employees prefer base wages.
False
The product market sets the floor on the minimum wage required to attract sufficient numbers of employees. (T/F)
False
Wages in labor-intensive industries are generally higher than in technology-intensive industries. (T/F)
False
A manager of a company could be a factor affecting the company's external competitiveness. (T/F)
True
A pay range exists when at least two employees in the same job are paid different rates.
True
A pure market pricing strategy carried to its extreme tends to ignore internal alignment completely.
True
According to efficiency-wage theory, paying higher wages than competitors can lower labor costs due to more efficient workers. (T/F)
True
Aging the market data to a point halfway through the plan year is called lead/lag.
True
In a labor market, the demand side focuses on the actions of the employers. (T/F)
True
In a labor market, the market rate is where the lines for labor demand and labor supply cross. (T/F)
True
Managers often regard external market data as more objective than internal job evaluation.
True
Pay ranges for managerial jobs are larger than the ranges for other jobs because these jobs have greater opportunity for both discretion and performance than lower-level jobs.
True
Regression smoothes large amounts of data while minimizing variations.
True
Segmenting sources of labor is a means of reducing labor costs. (T/F)
True
Skill-based plans establish single flat rates for each skill level regardless of performance or seniority.
True
Smaller pay ranges may reduce the opportunities for promotion
True
Talented individuals have a higher marginal value in larger organizations. (T/F)
True
Goal-setting theory argues that employees' performance is maximized when performance targets are unchallenging and unspecific.
false
Subordinate ratings are more accurate when they are not anonymous.
false
The behaviorally anchored rating scales are inexpensive to develop but time-consuming to use.
false
The total-quality-management advocates contend that informing raters that the work environment has more influence on performance than individual employee behavior will make the raters' rate lower.
false
In the long run, merit bonuses cost employers less than merit pay.
true
Research shows that a lead pay strategy reduces turnover. (T/F)
true
Supervisors tend to weigh negative attributes more heavily than positive attributes.
true
The authors argue that a system of flexible compensation could lead to more desirable employee behaviors at a lower total cost.
true
The central issue involving merit pay is how to get employees to view raises as a reward for performance.
true
When pay raises are based on events over which employees lack significant control, they are likely to regard the system as unfair.
true
Which of the following theories states that people choose the behavior that leads to the greatest reward? A. Maslow's need theory B. Expectancy theory C. Herzberg's two-factor theory D. Goal-setting theory
B: expectancy theory
Which of the following statements about merit pay is NOT true? A. It has a small but significant effect on performance. B. Removal of merit pay lowers satisfaction but not performance. C. Departments and units with merit pay show higher performance. D. Merit pay has a sorting effect.
B: removal of merit pay lowers satisfaction but not performance
High performance ratings are nearly always statistically related to high merit increases.
true
In contrast to ranking formats, rating formats require raters to evaluate employees on some absolute standard rather than relative to other employees.
true
Workload and work variety are both components of a total reward system.
true
_____ is an individual level form of performance pay. A. Risk sharing B. Gain sharing C. Merit bonus D. Success sharing
C: merit bonus
A team leader with a free-rider problem in his team can most likely maximize the performance of his team by: A. instructing them 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
_____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating. A. Equity B. Expectancy and agency C. Herzberg's two-factor D. Agency
C: Herzberg's two-factor
Employers continue to hire until the marginal revenue of the last hire equals his or her wage rate. This is based on the first labor market theory assumption that: A. markets are competitive. B. pay rates reflect all costs of employment. C. employers seek to maximize profits. D. workers are homogeneous and interchangeable.
C: employers seek the maximize profits
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 structure D. be between 10 and 25 percent
C: support career movement through the pay structure
_____ measures reveal competitors' use of performance-based cash payments. A. Base cash pay B. Short-term incentive pay C. Total cash D. Long-term incentive pay
C: total cash
In the regression equation, y = a + bx, job evaluation points are denoted by _____. A. a B. b C. x D. y
C: x
Employers tend to overestimate the importance of pay to employees and underestimate the role of relationships with the supervisor. (T/F)
False
Flexible compensation is based on the idea that the organization knows what package of rewards would best suit an individual employee's needs.
False
It is easier for employers to determine the worth of jobs that fall into fuzzy markets than traditionally relevant markets.
False
Market pricers emphasize any unique or difficult-to-imitate aspects of an organization's pay structure.
False
Pay ranges for top-level management positions are smaller than the pay ranges for entry-level managerial positions.
False
Stores that label each item's price or ads that list a job opening's starting wage are examples of bourses. (T/F)
False
Graduating students usually find themselves in a quoted-labor market. (T/F)
True
Central tendency errors are the most difficult form of error to eliminate.
false
Gain sharing poses greater risk to individual employees than profit sharing.
false
Gain-sharing plans do not to use a historical standard to set productivity standards since environmental conditions can change quickly.
false
Group pay is always more effective than individual pay.
false
Halo error is the error that occurs when an employee is downgraded across all performance dimensions exclusively because of poor performance in one dimension.
false
A combination plan often favored by CEOs who don't like to make payouts when the company loses money is a completely self-funding plan.
true
A fast and efficient worker would earn more money under a Rowan plan than under a Halsey 50-50.
true
A group performance-based pay plan is superior to an individual plan when production methods and labor mix must change to meet changing pressures.
true
A major problem in group incentive plans is that performance targets are not correctly set.
true
A problem with incentive pay plans is workers may end up focusing exclusively on behaviors that are rewarded.
true
A small lawn care company has two mowers and four employees. If it hires another employee and the factors of production remain the same, how will the productivity of the fifth employee compare to that of the current four employees? A. The productivity will reduce. B. The productivity will increase. C. The productivity will remain the same. D. There is not enough information to determine productivity.
A: The productivity will reduce
Which of the following is NOT true regarding performance appraisals? A. Race has no effect in layoff decisions. B. Males are rated higher than females. C. Raters with traditional stereotypes rate females less accurately. D. Variation in performance affects ratings.
A: race has no effect in layoff decisions
TreeDen Corp. experiences an increase in employee turnover rate. Upon investigating, it discovers that employees are dissatisfied with the company's pay. Employees cannot see a direct link between their performance and their pay. They are also unhappy about having to pay out of their pockets to obtain grants. In this case, TreeDen is most likely using a _____. A. stock ownership plan B. cash profit sharing plan C. gain-sharing plan D. team incentive plan
A: stock ownership plan
According to research, which of the following is NOT one of the most important factors for employees influencing their pay systems? A. Team-based pay B. Changes in cost of living C. Pay at market rate D. Seniority
A: team-based pay
Deming's major argument regarding performance appraisals is that: A. the work situation is the major determinant of performance. B. performance appraisals reduce teamwork. C. peer ratings are better than supervisor ratings. D. lack of training makes performance appraisals redundant.
A: the work situation is the major determinant of performance
All of the following are advantages of a lead pay-level policy EXCEPT _____. A. reduced vacancy rates B. higher turnover rates C. reduced absenteeism D. better-quality employees
B: higher turnover rates
The most frequently used incentive system is the: A. standard hour plan. B. straight piecework system. C. Merrick system. D. Taylor differential piece-rate plan.
B: straight piecework system
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? A. Gramhold will face difficulty in defining job responsibilities broadly with the new structure. B. Gramhold will find that the new structure hinders cross-functional growth. C. Gramhold will experience career moves within bands more than career moves between bands. D. Gramhold will offer recognition via titles rather than through cross-functional experience and lateral progression.
C: Gramhold will experience career moves within bands more than career moves between bands
Which of the following rating formats has the lowest rating errors? A. Standard rating scales B. BARS C. MBO D. Ranking
C: MBO
When identifying what is important to employees, which theory would be most useful? A. Expectancy theory B. Equity theory C. Maslow's need theory D. Agency theory
C: Maslow's need theory
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
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
Which of the following jobs would most likely fall into a fuzzy market? A. The position of English professor that was filled by a Ph.D. holder in English Language and Literature with five years of teaching experience B. The position of Sound Engineer that was filled by a graduate with a degree in audio engineering C. The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience D. The position of Vice-President of a marketing firm that was filled by a marketing manager with 15 years of experience in the marketing field
C: The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience
The motivation triangle includes _____. A. selection B. organization design C. culture D. organization development
C: culture
The final major decision in pay-level determination is to _____. A. interpret and apply the results of the survey B. obtain top-management acceptance of the final decisions C. design grades and ranges or bands D. draw policy lines
C: design grades and ranges or bands
Which of the following is NOT a long-term incentive plan? A. ESOPs B. Broad-based option plans (BBOPs) C. Improshares D. Performance plans
C: improshares
Which of the following types of rankings would be least preferred by managers of more than 10-15 employees? A. Straight ranking B. Alternation ranking C. Paired-comparison ranking D. Forced distribution ranking
C: paired-comparison ranking
_____ is the value employees attach to the organization rewards offered for satisfactory job performance. A. Equity B. Instrumentality C. Valence D. Reinforcement
C: valence
In most organizations, the responsibility for managing a pay survey lies with _____. A. top management B. the facility or plant manager C. outside consultants D. the compensation manager
D: The compensation manager
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 _____. A. a high base pay with high incentives B. monetary rewards alone C. a large base pay and low-incentive pay D. a wide range of awards beyond just money
D: a wide range of rewards beyond just money
In gain-sharing plan formulas, _____ are in the numerator and _____ are in the denominator. A. productivity measures; inputs B. productivity measures; labor inputs C. costs; revenues D. labor inputs; productivity outcomes
D: labor inputs; productivity outcomes
Surveys show the most popular type of variable pay plans are _____. A. stock option plans B. gainsharing plans C. individual incentive plans D. special recognition plans
D: special recognition plans
Which of the following is an advantage of gain-sharing plans? A. They are the simplest type of variable-pay plan. B. They allow payouts to occur even if a company's financial performance is poor. C. They are administratively easy to implement. D. They increase employees' knowledge of business.
D: they increase employees' knowledge of business
Which of the following statements is true regarding rater training? A. Training programs lasting over two hours are less successful than shorter ones. B. Rater-error training is more effective than performance-standard or performance-dimension training. C. Lectures to raters on how to improve ratings are always ineffective. D. Training to reduce halo errors and improve accuracy has been most successful.
D: training to reduce halo errors and improve accuracy has been most successful
An employer offering lower base pay with high bonuses is a likely signal that it is seeking risk-taking employees. (T/F)
True
In determining the compensation strategy, a major strategic decision is whether to mirror what competitors are paying. (T/F)
True
Many employers use market surveys to validate their own job evaluation results
True
Agency theory argues that employees prefer risky pay as rewards can be greater than a salary.
false
An advantage of group incentives is that it leads to increased line-of-sight.
false
MBO is particularly well suited as a basis for administrative decisions such as pay raises.
false
Rankings are more popular among managers than ratings as they are less complex.
false
Scanlon plans are designed to lower labor costs by lowering the level of a firm's activity.
false
The Rowan plan uses a standard that is purposefully set high requiring high performance levels.
false
The free-rider problem is common in firms using individual incentive plans.
false
The performance of hourly workers is more accurately tied to quantifiable measures than the performance of managerial workers.
false
Unions prefer individual incentive pay plans to group incentive pay plans since members can earn more money.
false
According to the agency theory, because employees prefer a salary, they will demand a wage premium in exchange for accepting performance-based pay.
true
All incentive plans share an established standard against which worker performance is compared to determine the magnitude of the incentive pay.
true
An important implication of reinforcement theory is that the timing of payouts to employees is very important.
true
During performance appraisals, managers tend to focus on either good performance, counterproductive performance, or both.
true
Employees who are dissatisfied with performance appraisals are less satisfied with their pay.
true
_____ is an example of a bourse. A. The stated starting wage of a job in an ad B. The total compensation for a top athlete C. The price of a product on Amazon D. The price of a box of cereal at a grocery store
B: The total compensation for a top athlete
In situations where the nature of the task is so uncertain that it may be difficult to specify expected goals, the most appropriate rating format is _____. A. an MBO format B. a standard rating scale C. a behaviorally anchored rating scale D. an essay format
B: a standard rating scale
Which of the following is the most commonly used team incentive performance standard? A. Quality of goods B. Customer satisfaction measures C. Financial performance D. Quality of services
B: customer satisfaction measures
The second major decision in pay-level determination is to _____. A. specify relevant markets B. define the purpose of a survey C. design and conduct a survey D. select product and labor market competitors
B: define a purpose of a survey
For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is _____. A. benchmark-job approach B. low-high approach C. survey leveling D. benchmark conversion
B: low-high approach
The best appraisal format for employee development is: A. the BARS format. B. the MBO format. C. the essay format. D. the ranking format.
B: the MBO format
In most Asian cultures, employees do not welcome performance feedback.
true
The trend today is toward less stable and less secure compensation packages.
true
When there is an unusual level of turnover in a job, an employer is likely to conduct a market survey.
true
Group incentive pay increases turnover of better performers, while individual incentive increases turnover of poorer performers.
true
Herzberg's two-factor theory argues success-sharing plans will be motivating, while at-risk plans will be demotivating.
true
Standard hour plans are better for nonrepetitive jobs requiring numerous skills for completion.
true
Louie received the highest performance rating and is in the second quartile of his pay range. He received a pay increase of 8 percent. Bart also received the highest performance rating and is in the fourth quartile. Given the way most merit increase grids work, what size of pay increase would you expect Bart to receive? A. Less than 8 percent B. More than 8 percent C. 8 percent D. There is no relationship between ratings and position in pay range.
A: less than 8%
A survey conducted in January 2013 found that the median pay effective January 1, 2013, for a clerk was $22,000 and that the forecast rate of wage increases in the market for 2013 was 5 percent and another 5 percent for 2014. An employer choosing to follow a lead strategy of 4 percent above the market for the plan year will need to _____. A. multiply the salary by 105 percent and then by 109 percent B. increase the clerk salary by $2,200 C. multiply the salary by 109 percent D. multiply the salary by 114 percent
A: multiply the salary by 105% and then by 109%
A major criticism of standard rating scales is that: A. raters have different definitions of scale levels. B. raters find them hard to use. C. they are expensive to develop. D. they encourage halo and horns errors.
A: raters have different definitions of scale levels
The first step in setting competitive pay and designing a pay structure is to _____. A. specify a pay-level policy B. conduct a job evaluation C. draw policy lines D. specify the relevant market
A: specify a pay-level policy
_____ is the best appraisal format across the five criteria for evaluating rating formats. A. Ranking B. MBO C. BARS D. Standard rating scales
C: BARS
Which of the following is an example of the demand side of labor? A. Level of pay applicants will accept B. Qualifications of applicants C. Pay level offered by an employer D. Locations of potential employees
C: Pay level offered by an employer
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. a base pay with low incentives and a variety of rewards B. monetary rewards with large incentives C. a large base pay and low-incentive pay D. a wide range of rewards and significant incentives
C: a large base pay and low-incentive pay
In _____ ranking, raters look at a list of employees, decide who the best employee is, and cross that person's name off the list. From the remaining names, the manager decides who the worst employee is and crosses that name off the list—and so forth. A. paired-comparison B. straight C. alternation D. forced distribution
C: alternation
In which of the following jobs is it most appropriate to use behaviorally anchored rating scales? A. The job of a trainer that requires training new employees every month B. The job of a web designer that requires designing websites according to client expectations C. An assembly line job that requires tightening nuts on an engine D. A client relations job that requires bringing in new clients to a firm
C: an assembly line job that requires tightening nuts on an engine
Which of the following is NOT an advantage of team incentives? A. Stimulates problem solving B. May better reflect how work is performed C. Easy to set equitable targets for all teams D. Minimizes distinctions between team members
C: easy to set equitable targets for all teams
Which of the following statements is NOT true? A. Workers who start out high in performance and then get worse are rated lower than workers who remain consistently low. B. Workers whose performance improves over time are seen as more motivated. C. Workers whose performance is consistently average are rated higher than those who perform better at the end of a rating cycle. D. Workers whose performance varies over time are seen as less motivated.
C: workers whose performance is consistently average are rated higher than those who perform better at the end of a rating cycle
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 _____. A. a large base pay and low-incentive pay B. an increase in base pay C. a variety of rewards with significant incentive pay D. monetary rewards with no benefits
C; a variety of rewards with significant incentive pay
An incentive system with three piecework rates is the _____ plan. A. Taylor B. Gantt C. Halsey 50-50 D. Merrick
D: Merrick
The market pay rate is the: A. minimum wage rate set by the Department of Labor. B. pay rate at which applicants will deny a job offer. C. difference between use value and surplus value. D. point at which supply and demand lines cross.
D: point at which supply and demand lines cross
Last year your performance was not very good and your performance rating was below average, but this year you have done very well by exceeding your performance goals. To your surprise, your boss gives you just an average performance rating. What error has your boss most likely committed? A. Horn error B. Halo error C. Severity error D. Spillover error
D: spillover error
Which of the following is NOT true regarding self-ratings? A. They are done by someone who has the most complete knowledge about the ratee's performance. B. They are best used for development. C. They are often used as the first step in the appraisal process. D. They are immune to leniency errors.
D: they are immune to leniency errors
Both pay level and pay mix decisions focus on two objectives: (1) control costs and increase revenues and (2) attract and retain employees. (T/F)
True
Combat pay premiums paid to military personnel to offset some of the risk of being fired upon is an example of a lead pay-level policy. (T/F)
True
Human capital theory assumes that people are paid at the value of their marginal product. (T/F)
True
Identifying pay survey participants by company name is considered price fixing under the Sherman Act.
True
In cases where the content of an organization's jobs does not sufficiently match that of the jobs in the salary survey, an effort can be made to quantify the difference via benchmark conversion.
True
The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors. (T/F)
True
Turnover and organizational revenues are examples of survey data collected to gather competitive intelligence.
True
When raters must justify their scoring of subordinates in writing, the rating is less accurate.
false
Employees working under individual incentive plans tend to resist the introduction of new technology.
true
Evidence suggests that skill-based pay may not increase productivity.
true
Evidence suggests that talented people are motivated to join organizations with strong links between performance and pay.
true
For the same level of performance, employees low in a pay range receive higher percentage increases than employees higher in the range.
true
When a company moves from an individual incentive plan to a group incentive plan, the company is most likely to experience _____. A. higher turnover among high performers B. an increase in instrumentality C. higher turnover among poor performers D. an increase in perceived equity
A: higher turnover among high performers
If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result? A. The labor costs for Company A will increase, but it will be unable to hire additional workers. B. Company A will hire the needed workers at a higher wage rate. C. Competitors of Company A will lose employees to Company A. D. Company A will hire higher quality workers.
A: The labor costs for Company A will increase, but it will be unable to hire additional workers
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. a base pay with low incentives and a variety of rewards B. monetary rewards with large incentives C. a large base pay and low-incentive pay D. a wide range of rewards and significant incentives
A: a base pay with low incentives and a variety of rewards
Because employers are raising employee pay at various times during the year, survey data must be updated using a process called _____ or _____. A. aging; trending B. leading; smoothing C. matching; leveling D. gaining; smoothing
A: aging; trending
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
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. the 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
Subordinate ratings _____. A. are likely to be inflated if they are not anonymous B. are immune to halo errors C. are immune to horn errors D. are used by 70 percent of all team-style organizations
A: are likely to be inflated if they are not anonymous
A common first step in interpreting survey data is to _____. A. check for the accuracy of job matches B. seek out non-responders C. check for anomalies D. remove the top- and bottom-paying companies
A: check for the accuracy of job matches
Wages tend to be the lowest in which of the following industries? A. Education and health care B. Technology-intensive industries C. Professional services D. Pharmaceuticals
A: education and health care
Grabhouse Inc. is experiencing an increase in turnover rates of its top employees. Upon consulting with its managers for the reasons for this increase, Grabhouse finds that employees are uneasy with the current pay mix as it involves too many risky elements. In order to make its pay mix less risky, Grabhouse needs to: A. increase the base pay component of its pay mix. B. introduce a profit-sharing plan to its pay mix. C. introduce a risk-sharing plan to its pay mix. D. increase the merit bonus component of its pay mix.
A: increase the base pay component of its pay mix
Which of the following is statements is true of leniency errors? A. It is the error of consistently rating someone higher than is deserved. B. It is the error of avoiding extremes in ratings across employees. C. It is the error of downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension. D. It is the error of giving better ratings to individuals who are like the rater in behavior and personality.
A: it is the error of consistently rating someone higher than is deserved
The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____. A. lead policy B. employer of choice policy C. lag policy D. match policy
A: lead policy
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 link is 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.
A: payouts can occur even if a company's financial performance is poor
Teaching raters what constitutes good, average, and poor performance is _____ training. A. performance-standard B. rater-error C. performance-dimension D. Six-Sigma
A: performance - standard
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
Which of the following is NOT true of the relationship between employer size and its ability to pay? A. Talented individuals have a lower marginal value in a larger organization. B. Talented people can influence more people and decisions. C. Influence of talented people leads to more profits. D. Talented people prefer to work in larger organizations.
A: talented individuals have a lower marginal value in a larger organization
The authors argue that for merit pay to live up to its potential, all of the following should be done EXCEPT _____. A. using more peer raters than supervisor raters B. improving the accuracy of appraisals C. allocating enough merit money to truly reward performance D. ensuring the size of the merit increase differentiates across performance levels
A: using more peer raters than supervisor raters
The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as _____. A. work/life balance policy B. security policy C. performance-driven policy D. market match policy
A: work/ life balance policy
Menthorp Inc. wants to design a variable-pay plan that fosters teamwork and business knowledge of its employees. In order to ensure maximum motivation, Menthorp wants its variable-pay plan to show a clear performance-reward link. Which of the following plans is most suitable for Menthorp? A. Gain-sharing plan B. Cash profit sharing plan C. Stock ownership plan D. Stock options plan
B: cash profit sharing plan
The trend in recent variable-pay design is to combine the best of _____ and _____ plans. A. individual; group B. gain-sharing; profit-sharing C. Halsey 50-50; Rowan D. balanced scorecard; cash profit sharing
B: gain-sharing; profit-sharing
When a firm is _____ on business risk, and its outcomes are _____, its performance is more likely to be higher without any incentive plans. A. variable; certain B. high; uncertain C. low; certain D. low; invariable
B: high; uncertain
Pay level decisions ave a significant impact on expenses. Other things being equal, the higher the pay level, the higher the: A. profit margins. B. labor costs. C. return on investments. D. revenues.
B: labor costs
Telling raters that sometimes the work environment and system affect job performance more than the individual employee's behavior: A. makes the ratings completely accurate. B. leads to higher ratings. C. has no effect on the ratings. D. leads to lower ratings.
B: leads to higher ratings
A market pay line _____. A. reflects an organization's pay scale based on the ratings given by its employees B. links a company's benchmark jobs with market rates paid by competitors C. provides an accurate prediction of an organization's entry level pay rates D. compares an organization's minimum and maxi mum pay rates for each skill level
B: links a company's benchmark jobs with market rates paid by competitors
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. A. benchmark-job B. low-high C. survey leveling D. benchmark conversion
B: low-high
Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level. A. turnover B. productivity C. job description D. total cost
B: productivity
Jake's new car was dented by his employee, Steve. Ever since then, Jake has been consistently giving lower ratings to Steve during performance reviews to get back at him. Which of the following errors has been exhibited by Jake? A. Halo error B. Severity error C. Leniency error D. Clone error
B: severity error
If you had repair work done on your car, the shop most likely used the _____ plan to pay the mechanic. A. Bedeaux B. standard hour C. Halsey 50-50 D. straight piecework
B: standard hour
_____ puts a lid on the maximum pay level an employer can set. A. Government legislation B. The product market C. The labor market D. Labor market competition
B: the product market
Which of the following is NOT a strength of supervisors as raters? A. They are knowledgeable about subordinates' jobs. B. Their ratings are immune to halo and leniency errors. C. Supervisors have rating experience. D. They assign work to subordinates.
B: their ratings are immune to halo and leniency errors
A study of graduating college students found they sought jobs with all of the following pay characteristics EXCEPT _____. A. individual-based pay B. variable pay C. flexible benefits D. job-based pay
B: variable pay
Droppiece Inc. is a company that provides more performance-based pay and less base pay than its competitors. Who among the following is most likely to join Droppiece? A. George, a recently married man who wants a stable income B. Stella, a recent college graduate who loves to take on a challenge C. Mark, a musician who wants to supplement his income D. Sara, a senior citizen who wants a job only to keep herself busy
B; Stella, a recent college graduate who loves to take on a challenge
Which of the following is NOT true about individual spot awards? A. Smaller companies may be more casual about recognition for spot awards. B. Someone in an organization alerts top management about performances deserving of an award. C. A majority of companies do not feel that these awards are effective. D. Smaller companies are more subjective about deciding the size of the award.
C: a majority of companies do not feel that these awards are effective
_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult. A. Reinforcement B. Goal-setting C. Agency D. Expectancy
C: agency
All of the following are categories of rater training EXCEPT _____ training. A. rater-error B. performance-standard C. behavior modeling D. performance-dimension
C: behavior modeling
Mark and Steve work as crane operators in a construction company called Asai Corp. 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? A. Mark will be paid more than Steve as his performance is higher. B. Steve will be paid more than Mark as he has more seniority. C. Both Mark and Steve will be paid the same amount. D. Steve will be given more incentives than Mark.
C: both Mark and Steve will be paid the same amount
A horn error occurs when an employee is: A. consistently rated higher than deserved. B. given a favorable rating on all job duties based on his or her impressive performance in just one job function. C. downgraded across all performance dimensions because of poor performance on one dimension. D. consistently rated lower than deserved.
C: downgraded across all performance dimensions because of poor performance on one dimension
Among peer raters, the most objective evaluations are given by: A. workers who are friends of the ratees. B. workers who are not close friends with ratees. C. high-performing workers. D. low-performing workers.
C: high-performing workers
Which of the following is a negative outcome of the management by objectives method? A. Increased difficulty of the planning process B. Decrease in superior/subordinate communication C. Increase in performance pressure and stress D. Lack of direction for work units
C: increase in performance pressure and stress
_____ is employees' beliefs that requisite job performance will be rewarded by the organization. A. Valence B. Expectancy C. Instrumentality D. Utility
C: instrumentality
Which of the following is an advantage of providing stock ownership options 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
The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy. A. lead B. match C. lag D. employer of choice
C: lag
Aging the market data to a point halfway through a plan year is called _____. A. leveling B. updating C. lead/lag D. matching
C: lead / lag
Which of the following is true of pay level? A. Pay level is the same across all organizations for the same job. B. The higher the pay level relative to what competitors pay, the lower the relative costs to provide similar products or services. C. Pay level is directly proportional to labor costs. D. Pay level is independent of the number of employees in an organization.
C: pay level is directly proportional to labor costs
In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors? A. Labor costs are a small share of total costs. B. Employee skills are generic across all product markets. C. Product demand is responsive to price changes. D. The supply of labor is not responsive to changes in pay.
C: product demand is responsive to price changes
Pay ranges: A. are flexible enough to deal with differences in quality but not with the productivity or value of these quality variations. B. usually lead to an increase in employee turnover. C. reflect the differences in performance or experience that an employer wishes to recognize with pay. D. cause employees to believe that their compensation cannot increase in the same job.
C: reflect the difference in performance or experience that an employer wishes to recognize with pay
_____ have the disadvantage of requiring employees to spend money to obtain their incentive. A. Cash profit sharing plans B. Balanced scorecard plans C. Stock options plans D. Deferred profit sharing plans
C: stock options plans
Paying a dime for every bottle collected and turned into a collection center is an example of a: A. standard hour plan. B. Merrick system. C. straight piecework system. D. Rowan plan.
C: straight piecework system
All of the following are important factors in defining a market for compensation purposes EXCEPT: A. the skill or knowledge required. B. geography. C. the ability to pay. D. product and/or labor market competitors.
C: the ability to pay
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: they are given to employees for exceptional performance as an add-on bonus
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
Which of the following statements is true regarding broad bands? A. They remove limits on total salary budgets. B. They support recognition via titles or career progression. C. They foster cross-functional growth. D. They increase the hierarchical nature of organizations.
C: they foster cross-functional growth
The assumption of the upward sloping supply curve that offers of higher pay will increase supply will most likely NOT hold when _____. A. absenteeism is high B. turnover is low C. unemployment is low D. unemployment is high
C: unemployment is low
During the performance review of her employees, Sarah gives higher ratings to employees from her hometown, Oklahoma, as she believes that people from Oklahoma are hard working and trustworthy. Which of the following rating errors is Sarah exhibiting? A. Severity error B. Horn error C. Spillover error D. Clone error
D: clone error
Druk Inc. is a consulting firm with 10 employees. Each new client generates $10,000 in revenue. If the company hires another employee who brings in five new clients and all other factors of production are constant, which of the following statements is true? A. Druk will break even if it hires a twelfth employee for a wage of $50,000. B. Druk needs to pay $10,000 as wage to the eleventh employee to break even. C. Druk will break even if it hires a thirteenth employee for a wage of $10,000. D. Druk needs to pay $50,000 as wage to the eleventh employee to break even.
D: Druk needs to pay $50,000 as wage to the eleventh employee to break even
Which of the following is an example of a bourse market? A: Neurofort, a website that sells surgical equipment in bulk at fixed prices B: Hardknox, a hardware store that sells all its products at 10% above the maximum retail price C: Needlefarm, a store that sells premium furniture at discounted rates D: Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods
D: Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods
Which of the following does NOT provide for incentives based on standards that are expressed in terms of time period per unit of production? A. Gantt plan B. Rowan plan C. Halsey 50-50 method D. Merrick system
D: Merrick system
Which of the following is an example of a quoted-price market? A. Streetcash, a website that allows buyers to negotiate product prices with the sellers B. Vidwom, a website that allows buyers to bid for items sold by other users C. Gramspot, a website where cars are auctioned by sellers for charity D. Nile, a website that allow sellers to sell their product
D: Nile, a website that allow sellers to sell their product
_____ refers to the average of the array of rates inside an organization A. Revenue margin B. Remuneration C. Compensation D. Pay level
D: Pay level
All of the following are examples of potential anomalies EXCEPT _____. A. outliers B. a large variation in base pay for a job at one company C. one company dominating the results D. a large variation in average base pay for a job across companies
D: a large variation in average base pay for a job across companies
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 performance-based pay
D: a large, decentralized organization with little performance-based pay
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 pay out 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
Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants to introduce a variable-pay plan that is easy to understand and does not cost much to administer. Which of the following variable-pay plans is Maxwell most likely to introduce? A. Balanced scorecard plan B. Gain-sharing plan C. Stock ownership plan D. Cash profit sharing plan
D: cash profit sharing plan
Which of the following is NOT true? A. More companies are using pay systems based upon individual, group, and organization performance. B. Workers with high security needs may accept lower pay if they come in a package that is stable. C. Workers may need higher pay to stay and perform in a company that uses at-risk pay plan. D. Companies are moving back to entitlement-oriented pay to reduce turnover.
D: companies are moving back to entitlement-oriented pay to reduce turnover
The amount of fairness given to employees refers to _____. A. total justice B. quantitative justice C. procedural justice D. distributive justice
D: distributive justice
Which of the following is true regarding the Employment Cost Index (ECI)? A. It is published by the Department of Commerce. B. It is an excellent source of competitor labor costs. C. It measures annual changes in employer compensation costs. D. It allows comparison of changes in its average costs to an all-industry average.
D: it allows comparison of changes in its average costs to an all-industry average
In a hiring situation, considering that other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the _____ of the last hire is equal to the _____ for that hire. A. demand factor; supply factor B. marginal output; market price C. incremental output; marginal output D. marginal revenue; wage rate
D: marginal revenue; wage rate
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 _____ minimizes the distortion of the central tendency caused by outliers. A. weighted mean B. mean C. mode D. median
D: median
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 _____. A. a large base pay and low-incentive pay B. a variety of rewards in addition to base pay C. a variety of rewards with significant incentive pay D. monetary rewards with large incentives
D: monetary rewards with large incentives
Available evidence indicates managers believe the most important factor for pay increases is _____. A. experience B. nature of the job C. seniority D. performance
D: performance
If the purpose of a survey is to price the entire structure of a job, then benchmark jobs can be selected to include the entire job structure.
true
Individual incentives yield higher productivity gains than group incentives.
true
Keeping a performance diary can help employers defend against discrimination charges stemming from performance ratings.
true
MBO requires more paperwork than other rating methods and increases both performance pressure and stress.
true
Many variable-pay plans have some form of profit trigger linked to revenue growth or profit margins.
true
Maslow's theory suggests that performance-based pay can be demotivating if it impinges upon employees' capacity to meet daily living needs.
true
Merit pay is a pay-for-performance plan used for more than three-quarters of all exempt, clerical, and administrative employees.
true
Performance plans typically feature corporate performance objectives for a time three years in the future.
true
Performance-standard training provides raters with a standard of comparison or frame of reference for making appraisals.
true
Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when an organization meets performance objectives.
true
Security in terms of compensation refers to the predictability of one's paycheck from one time to the next.
true
Some experts argue that applying total-quality-management principles to performance appraisals can improve them.
true