HRM Chapter 13

By law, an ESOP must invest at least _______ of its assets in the company's own stock.

51%

Commissions

Pay calculated as a percentage of sales

Stock options

The right to buy a certain number of shares of stock at a specified price

Why do organizations pay workers at a piecework rate?

To motivate them to work efficiently

T/F: Merit pay is an expensive option from an employer's standpoint.

True

The Dodd-Frank Wall Street Reform and Consumer Protection Act gives shareholders of public companies ______.

a vote of approval or disapproval on the companies' executive pay plans

Incentive pay can be linked to the performance of which of the following? (Select all that apply) a. individuals b. organization c. competitor d. group

a, b, d

Which of the following conditions are important for success in gainsharing? (Select all that apply) a. management encouragement of employee input b. a need to maintain current working conditions c. employment security d. employees who prefer to work individually e. goal setting

a, c, e

What is one advantage of a profit-sharing program? a. it allows employees to focus on their own interests, not the company's interests b. it does not require employee cooperation c. when the company generates little or no profit, there is no need to spend much on this type of incentive d. it puts pressure on employees to think like consultants

c

Which of the following are examples of short-term incentives used for executives? (Select all that apply) a. stock purchase plan b. stock options c. bonus based on profits d. return on investment

c, d

Caroline works in a candy production plant. If she fills at least 10 boxes of candy in an hour, she earns $1 for each box, but if she fills more than 10 boxes, she earns $1.50 per box. This demonstrates the idea of a _______ piece rate.

differential

Compared to gainsharing plans, group bonuses are typically designed for ________.

smaller work groups

Balanced scorecard

A combination of performance measures directed toward the company's long and short term goals and used as the basis for awarding incentive pay

Merit pay

A system of linking pay increases to ratings on performance appraisals

Differential piece rates

A variation on straight piecework in which the piece rate depends on the amount produced

Piecework rate

A wage based on the amount they produce

Standard hour plan

An incentive plan that pays workers extra for work done in less than a preset "standard time"

Straight piecework plan

Employer pays the same rate per piece no matter how much the worker produces

T/F: Profit-sharing payments become part of an employee's base salary.

False

Target ratio

Labor costs/sales value of production

What is the disadvantage of offering bonuses for group performance?

May prevent cooperation among groups within the organization

Gainsharing

Measures increases in productivity and effectiveness and distributes a portion of each gain to employees

Profit sharing

Payments are a percentage of the organization's profits and do not become part of the employees' base salary

Incentive pay

Performance-related pay Select incentives based on their costs, expected influence on performance, and fit with the organization's broader HR and company policies and goals

Scanlon plan

Popular form of gainsharing; gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard

In one type of gainsharing plan, employees get a bonus if the ratio of labor costs to the sales value of production falls below a specified standard. This is called a ________ plan.

Scanlon

Which federal agency requires companies to reveal how much their executives are paid and how well the company has performed in comparison to its business rivals?

The Securities and Exchange Commission (SEC)

T/F: The process by which an organization creates and administers incentive pay can help motivate employees.

True

What is the downside to using a standard hour plan as incentive for production workers?

Workers may not worry about quality or customer service

Since there are advantages and disadvantages for all types of incentive pay, organizations offset the disadvantages by: a. using a balanced scorecard approach b. giving senior executives special incentive pay packages c. authorizing HR to eliminate incentive pay that costs the company too much money d. making employees choose among several types of incentive programs

a

Incentive pay based on a percentage of sales is called ________.

a commission

Companies select pay incentives based on: (Select all that apply) a. their costs to the company b. their expected influence on performance c. how they affect competing organizations d. their fit with the company's policies and goals

a, b, d

Which of the following components are most apt to ensure success for a gainsharing plan? (Select all that apply) a. specific goals b. individuals who like to "go it alone" c. committed managers d. employees who enjoy working as a team

a, c, d

Incentive pay is typically based on __________.

an employee's performance

In which of the following occupations would a straight commission plan NOT likely be used? a. real estate agent b. human resource professional c. car sales professional d. insurance agent

b

For which type of job is a gainsharing plan most useful? a. for a one-person job b. for an entry-level job c. for a complex job d. for a repetitive job

c

Giuseppa works for a company that distributes shares of stock to all the employees by placing the stock in a trust. Her company has a(n) _______ ownership plan.

employee stock

One negative aspect of an ESOP is that it carries significant risk for _________.

employees

When employees understand the requirements of an incentive pay program, the plan is likely to ______.

influence their behavior as desired

When executive pay includes stock or stock options, companies need to be aware of the possibility of _______.

insider training Because executives who own company stock may have confidential information that affects the share price, they would be acting illegally if they sold or bought stock based on this "inside" information

An incentive system that gives a raise to employees who rank high on performance appraisals is called ________ pay.

merit

An incentive paid once to an employee for agreeing to stay with the organization is called _________.

retention bonus

The opportunity to purchase a specific number of stock shares at a predetermined price is referred to as ______ _______.

stock options

Samira makes necklaces. Her buyer pays her $50 per necklace. This is an example of _________.

straight piecework plan

W. Edwards Deming criticizes merit pay because he believes it discourages ________.

teamwork

Incentives to reward individual performance

-Piecework rates -Standard hour plans -Merit pay -Individual bonuses -Sales commissions

Conditions for gainsharing to succeed

-Management commitment -Need for change or strong commitment to continuous improvement -Management acceptance and encouragement of employee input -High levels of cooperation and interaction -Employment security -Information sharing on productivity and costs -Goal setting -Commitment of all involved parties to the process of change and improvement -Performance standard and calculation that employees understand and consider fair and that is closely related to managerial objectives -Employees who value working in groups

Effective plans for incentive pay to motivate employees

-Performance measures are linked to the organization's goals -Employees believe they can meet performance standards -The organization gives employees the resources they need to meet their goals -Employees value the rewards given -Employees believe the reward system is fair -The pay plan takes into account that employees may ignore any goals that are not rewarded