MADM 425 - Chapter 04 (Updated)

labor hour ratio formula

A standard is determined by analyzing historical accounting data to find the number of labor hours needed to complete a product

sorting effect

Addresses an employee's choice to stay versus leave his or her employer for another job, presumably one without an incentive pay contingency

variable

Another name for incentive pay is ________ pay.

management incentive plans

Award bonuses to managers when they meet or exceed objectives based on sales, profit, production, or other measures for their division, department, or unit

current profit sharing

Award cash to employees, typically on a quarterly or annual basis

incentive

Companies can control costs by replacing annual merit or seniority increases or fixed salaries with which type of plans?

cyclical

Companies in such ________ industries as retail sales could benefit by including an incentive component in the core compensation programs they offer to employees.

stock options

Describe an employee's right to purchase company stock

referral plans

Employees receive monetary bonuses under for referring new customers or recruiting successful job applicants

behavioral encouragement plans

Employees receive payments for specific behavioral accomplishments

gainsharing

Group incentive systems that provide participating employees with an incentive payment based on improved company performance for increased productivity, increased customer satisfaction, lower costs, or better safety records

gainsharing plan

Gunther Rohn was rewarded for making a suggestion that saved Ewe and Eye Electronics thousands of dollars. Which type of incentive compensation approach might have worked best?

Improshare

Improved Productivity through Sharing—measures productivity physically rather than in terms of dollar savings like those used in the Scanlon and Rucker plans

piecework plans

In addition to the guaranteed hourly pay rate, John receives incentives for every item produced over the designated production standard. Which kind of incentive plan is used in this situation?

the level of risk employees will accept in their overall compensation package

In general, which of the following is an incentive plan design consideration?

Rucker plan

Incentive plan that emphasizes employee involvement and provides monetary incentives to encourage employee participation using a value-added formula to measure productivity

Scanlon plan

Include monetary rewards to employees for productivity improvements

performance

Individual incentive plans help to promote the relationship between pay and ________.

parallel

John is a design engineer in an auto manufacturer's research and development department. In addition to his normal duties, he is assigned to a team of other engineers developing a highly automated assembly line for the new model of a passenger car. To which type of team is John assigned?

signing bonuses

Monetary awards given to promote recruitment and job offer acceptance

traditional pay plans and incentive pay plans

Nowadays, most companies use a mix of which types of pay plans?

25 percent

Over the past 10 years, Lincoln's profit-sharing payments have been substantial. Maria's annual salary was $40,000 last year, and she earned a profit-sharing payment of $10,000. Maria's profit-sharing award represents approximately what percentage of her annual salary?

profit sharing plans

Pay a portion of company profits to employees, separate from base pay, cost-of-living adjustments, or permanent merit pay increases

deferred profit sharing

Place cash awards in trust accounts for employees

employee stock option plans

Present a long-term company-wide incentive plan that provide employees with stock options

company-wide

Profit-sharing plans and employee stock option plans are incentives on what level?

incentive effect

Refers to a worker's willingness to work diligently to produce more quality output than simply attending work without putting in the effort

spot bonuses

Relatively small monetary gifts provided to employees for outstanding work or effort during a reasonably short period of time

company stock shares

Represent equity segments of equal value

company stock

Represents total equity of a company

group incentive programs

Reward employees for their collective performance, rather than for each employee's individual performance

piecework plans

Rewards employees based on their individual hourly production against an objective output standard and are determined by the pace at which manufacturing equipment operates

incentive pay

Rewards employees for partially or completely attaining a predetermined work objective

variable pay

Rewards employees for partially or completely attaining a predetermined work objective

options

Stock ________ describe an employee's right to purchase equity in the company.

labor hour

The Improshare bonus is based on a ________ ratio formula.

productivity

The Rucker Plan use a value-added formula to measure ________.

deferred profit sharing

The XYZ Company pays a portion of company profits to its employees. The management offers this incentive plan as one kind of retirement program. Which kind of companywide incentive plan does XYZ Co. offer?

Improshare

The XYZ Manufacturing Co. uses a gainsharing plan that gives incentives to employees to finish products rather than to incentivize dollar savings. Therefore, this company measures productivity as the ratio of standard labor hours and actual labor hours. Which kind of gainsharing program does XYZ Manufacturing Co. use?

incentive

The ________ effect refers to a worker's willingness to work diligently to produce more quality output rather than simply attending work without putting in the effort.

5 years

The general rule of thumb is that short-term company goals last less than how long?

turnover

The main disadvantage of group incentive compensation is employee ________.

revenue

The sales value of production (SVOP) is the sum of sales ________ plus the value of goods in inventory.

sales value of production (SVOP

The sum of sales revenue plus the value of goods in inventory

current

These profit-sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.

graduated first-dollar-of-profits

This formula for calculating profit-sharing awards gives the employees a higher percentage of the profits as the profits increase.

fixed first-dollar-of-profits

This formula for determining the amount available for profit sharing uses a specific percentage of annual profits contingent upon the successful attainment of a specified profit goal.

referral

This type of individual incentive plan rewards employees who recruit new customers or new employees.

behavioral encouragement plans

To have better safety records, the XYZ Company gives monetary incentive awards to its workers for lower accident rates due to improper use of heavy equipment. Which of the following incentive plans describes this example?

employees' performance can be measured objectively, employees have sufficient control over work outcomes, and when there is not an unhealth level of competition among workers that ultimately leads to poor quality

Under which three conditions are individual incentive plans most appropriate?

value-added formula

Value added is the difference between the value of the sales price of a product and the value of materials purchased to make the product

individual, group, and companywide

What are the three categories of incentive pay plans

to increase employee involvement

What is the main objective of Scanlon plans?

team-based incentives

When each group member receives a financial reward for the attainment of a group goal

free-rider effect

When some employees make fewer contributions to the group goals because they possess lower ability, skills, or experience than other group members

employee stock option plans

Which arrangement represents a long-term companywide incentive plan that provides employees with the option to purchase ownership in the company?

the criteria for judging an award tend to be objective, such as quantity produced.

Which best describes incentive pay?

Scanlon Plan

Which gainsharing plan bases incentives on the ratio between labor costs and sales value of production (SVOP)?

management incentive plans

Which individual incentive plans require the achievement of multiple, complex objectives without compromising the quality and quantity of output?

sorting

Which of the following effects describe the concept that a hard working employee is likely to stay at an incentive pay position?

operating efficiency

Which of the following is NOT a financial measure?

it depends on the extent to which employees control the attainment of a desired goal

Which of the following is true about the level of risk involved with incentive pay?

incentive pay awards are granted as one-time payments.

Which of the following is true concerning incentive pay?

they reinforce teamwork, cultivate loyalty to the company, and increase productivity.

Which of the following is true regarding group incentive plans?

quality of work output, customer satisfaction, and revenue

Which of the following performance measures corresponds to individual, group, and companywide incentive plans, respectively?

project teams

Which of the following teams consists of a group of people who are assembled to complete a one-time assignment?

profitability threshold

With which profit-sharing formula does the profit-sharing pool become funded only after profits exceed a predetermined level, but fall below some established maximum level?

deferred

________ profit-sharing plans place cash awards in trust accounts for employees and are set aside on employees' behalf as a source of retirement income.

project

________ teams consist of a group of people assigned to complete a one-time task.