MGT of Compensation Chapter 9

Why should an organization's pay-for-performance plan comply with existing laws?

To maintain the organization's reputation

Refer to the given image and match the letters of the alphabet with the corresponding factors that influence employee behavior

A --> Ability to perform B --> Motivation to perform C --> Opportunity to perform

Eligibility (standards for elements of a pay-for-performance plan)

This determines how far down an organization the plan will run and which employees will be included.

In general, employers desire for employees to perform in ways that result in _____.

improved organizational performance

Job applicants are attracted to an organization with a reputation for compliance with compensation laws.

True (Employers tend to undervalue the reward value of a good reputation. To guard their reputation, they need to ensure that they comply with compensation laws.)

Across-the-board increase (components of compensation)

Permanent increase in salary given to all employees regardless of performance

Funding (standards for elements of a pay-for-performance plan)

This determines whether a program will be supported out of extra returns generated beyond some predetermined standard.

If other elements of a total HR plan are developed to nurture and reinforce risk-taking behavior, the compensation component of the HR plan should _____.

avoid rewarding the status quo

In organizations that exhibit low variability in performance, it is appropriate to use _____ in the compensation packages.

large-incentive components

One of the criticisms of Alfie Kohn's rejection of incentives is that without incentives, _____.

less-motivated employees will not work hard

According to expectancy theory, match the perceptions that shape employees' motivation with their descriptions

-Expectancy --> Employees' evaluation of their ability to carry out required job tasks -Instrumentality --> Employees' beliefs that their organization will reward high job performance -Valence --> The significance employees attribute to the organization rewards received for job performance

Identify the essential features of Maslow's needs hierarchy.

-Needs are arranged from basic needs to higher-order needs. -Higher-order needs become motivating after basic needs have been fulfilled.

Identify a key element in perceptions of fairness in an organization.

Communications

Identify an important point that compensation experts often miss.

Compensation is not the only reward that influences employee performance.

An organization with low variability in performance across time and stable and clear performance measures (In the context of the relationship between performance measurement and compensation strategy, match the organizations with the most appropriate compensation strategies)

Emphasizing monetary rewards and including a significant incentive component

How does the sorting effect improve productivity in an organization that uses individual incentives?

Employees who do not want to work harder leave and are replaced by better performers.

_____ provides an opportunity for employers to allow employees to develop a reward package that is less expensive and more satisfying.

Flexible compensation

In what kind of structure do group incentives work well?

In team-based structures where team members personally sanction poor performers

How does organization development help an organization with inefficient processes?

It frees up motivated employees to utilize their skills.

What significance does pay level have in the application of Herzberg's two-factor theory to designing compensation to motivate employees?

It must satisfy an employee's hygiene needs before the employee can be motivated.

_____ influences a job applicant's decision to join a company because it is one of the more visible rewards during the process of recruitment.

Level of pay

_____ is easily communicated in an offer of employment to a candidate because it is perceived as more objective than other characteristics of employment.

Level of pay

_____ involves offering what's important to a person in exchange for some desired behavior.

Motivation

Risk takers (pay systems that appeals to ppl with characteristics of job applicants' personalities)

Seek more pay based on performance

Which of the following theories claims to integrate motivation theories under a wide umbrella?

Self-determination theory

What do unionized workers consider the most important basis for salary increases?

Seniority

Identify a mistake pay-for-performance plans make that cause them to be inefficient.

They focus on quantity at the expense of quality.

Individual incentive (components of compensation)

Variable pay linked directly to an objective measure of each employee's performance

In the context of the implications of motivation theories for pay and pay for performance, Maslow's needs hierarchy suggests that _____.

base pay must be sufficient for individuals to meet their basic living needs

In order for different operating units in an organization to be able to develop flexible variations on a pay-for-performance plan, the organization should _____.

have a decentralized structure

It is appropriate to use a compensation strategy that emphasizes base pay with a low-incentive component in organizations that _____.

have highly variable annual performance

Evidence shows that skill-based pay benefits an organization by _____.

helping employees believe in the significance of quality

Organizations that use fair procedures and have managers who are perceived as allocating rewards in a fair manner are likely to have _____.

higher levels of commitment

According to recent research, job applicants seek organizations with reward systems that _____.

match their personalities

In general, group incentives result in _____.

small increases in productivity

Perceptions of fairness relating to distributive justice depend on _____ compared against a suitable standard.

the amount of pay received relative to input

The mechanisms through which pay is linked to performance are _____, which means that pay itself motivates employees to improve performance, and _____, which means that employees opt in or out of work based on its importance to them.

the incentive effect; the sorting effect

How do poorly administered skill-based pay plans create cost inefficiencies that lead to plan abandonment?

By permitting more employees to obtain certification in a skill than are needed

A negative impact of new pay systems that expect employees to bear a share of risks is that these systems _____.

work against efforts that build employee commitment

The best pay-for-performance plan is rigid and consistent across all divisions in an organization.

False (A pay-for-performance plan should be adapted to the different needs of different divisions. A rigid pay-for-performance plan detracts from all the advantages of tailoring a plan to suit the demands of different units.)

Success-sharing plans (components of compensation)

A generic category of variable pay that is linked to some measure of group performance

Studies have consistently proven that high performers in an organization _____.

are given larger merit increases than average performers

A type of fairness that is a concern for employees is fairness in the amount that is distributed to employees, and this type of fairness is labeled ____ ____

distributive justice

Arrange the wage components in the increasing order of their riskiness. (Place the least risky component at the top.)

1. Base pay 2. Across-the-abor

In order to increase the time spent on quality checks, a garage offers its employees incentives for fixing brake lines that are cut. Which of the following changes in the behavior of the employees could be considered a failure of the garage's incentive plan?

The employees begin cutting brake lines just to repair them.

Which of the following is a feature of distributive justice that differentiates it from procedural justice?

Managers have little control over distributive justice.

Materialists (pay systems that appeals to ppl with characteristics of job applicants' personalities)

Relatively more concerned about pay level than others

The approach to motivation that believes that employees have the highest quality motivation when both extrinsic and intrinsic motivators are used is _____.

self-determination theory

An organization with low variability in performance across time and unstable and unclear performance measures (In the context of the relationship between performance measurement and compensation strategy, match the organizations with the most appropriate compensation strategies)

Offering a wide array of rewards beyond just money and including a significant incentive component

Unlike distributive justice, procedural justice _____.

is more under the control of managers

There is substantial evidence that indicates that most employees and managers believe that _____.

salary increases should be tied to job performance

Merit pay (components of compensation)

Permanent increase in salary given to an employee as a function of some evaluation of employee performance

According to Herzberg's two-factor theory, _____ are factors related to basic living needs that prevent behaviors in their absence, whereas _____ are factors that motivate performance.

hygiene factors; satisfiers

If an organization fails to _____, it becomes difficult to implement revised training programs or create compensation packages to reward new skills immediately.

identify changing skill requirements

A criticism of Alfie Kohn's stance on incentives is that in the real world, performance-based incentives are _____.

required for the completion of uninteresting jobs

Match the letters in the image with the stages in the cascading link between organization strategy and employee behavior they represent

A --> Corporate Goals B --> SBU Goals C --> Department/Team Goals D --> Employee Team Results E --> Individual Goals

Objectives (standards for components of a pay-for-performance plan)

They need to be specific yet flexible, and they need to avoid the "line-of-sight" issue.

An organization with widely variable performance across time and stable and clear performance measures (In the context of the relationship between performance measurement and compensation strategy, match the organizations with the most appropriate compensation strategies)

Emphasizing monetary rewards and emphasizing base pay with a low-incentive component

Measures (standards for components of a pay-for-performance plan)

They need to be communicated to employees so that they will know what is used to determine whether their performance merits a payout.

One of the best methods an organization can adopt to successfully change employees' behavior is to develop a compensation system that rewards desired behavior.

True (and a sufficiently attractive compensation system also makes it possible to recruit and hire good potential employees and to make sure the good employees stay with the organization.)

What kind of pay systems has research shown employees to be uncomfortable with?

-Pay systems that place substantial future incomes at risk -Pay systems that offer mostly team-based incentives

Which of the following guidelines helps ensure the success of an organization's attempt to change its employees' behavior?

-The organization should design its work and culture to provide the opportunity to leverage employees' motivation and ability. -The organization should provide necessary training to people whose behavior needs to be changed. -The organization should select the right people.

In the context of the implications of motivation theories for pay and pay for performance, which of the following can be inferred from expectancy theory?

-There must be a clear and perceivably strong link between pay and performance. -Employees' responsibilities and job tasks should be clearly defined.

In the formula Behavior = f (A, M, O), if Behavior represents employee behavior, what do A, M, and O represent?

A = ability M = motivation O = opportunity

Identify the theory of motivation that emphasizes consistency and fairness of performance-based pay across employees in a company.

Equity theory

Which theory of motivation states that employees are motivated when the ratio of their perceived inputs and outputs is equal to their perceived inputs and outputs of a comparison person?

Equity theory

Why does Alfie Kohn believe that performance-based incentives are morally wrong?

He claims that they involve a person being controlled by another.

An organization with widely variable performance across time and unstable and unclear performance measures (In the context of the relationship between performance measurement and compensation strategy, match the organizations with the most appropriate compensation strategies)

Offering a wide array of rewards beyond just money and emphasizing base pay with a low-incentive component

According to agency theory, what motivates and directs employee performance?

Pay

What does reinforcement theory recommend for reinforcing performance?

Performance must be directly followed by performance-based payments.

Identify an accurate statement about the goal-setting theory's approach to performance-based pay.

Performance-based pay should be contingent upon the completion of major performance goals.

Applicants with low self-esteem (pay systems that appeals to ppl with characteristics of job applicants' personalities)

Prefer large, decentralized company with little performance-based pay

Individualists (pay systems that appeals to ppl with characteristics of job applicants' personalities)

Prefer pay that is based on individual performance rather than pay that is based on group performance

According to goal-setting theory, which type of goals generate the most employee effort?

Specific and challenging performance goals

A restaurant offers incentives to employees who eliminate cockroaches and rats. Which of the following changes in the behavior of the employees could be considered a failure of the restaurant's incentive plan?

The employees begin bringing dead cockroaches and rats into the kitchen to clean them up.

When is turnover much higher for good performers in a company?

When pay is based on group performance

When is turnover much higher for poor performers in a company?

When pay is linked to individual performance

How do employers best appeal to scarce talent?

With pay-for-performance combinations

____ ____ is based on the idea that only the individual employee knows what package of rewards would best suit personal needs; it allows tradeoffs between pay and benefits.

flexible compensation

Employees seek transparency of pay practices so that they can _____.

give input into expectations for them

Over the last several decades, companies have been moving more toward _____.

greater use of variable pay programs

Wondrous Facts Inc. is a publisher of fact books that manages to exceed its sales targets every year. It rewards its employees' performance based on highly specific objective criteria, such as the quality of work and the number of units produced. These performance measures have remained the same for many years. There is little fluctuation in the nature of work and the employee performance expectations are consistent. In this scenario, the most appropriate compensation strategy for Wondrous Facts is rewarding its employees with _____.

monetary benefits that have a large-incentive portion

Rewards have been shown by hundreds of studies to _____.

motivate performance

In the context of motivation theories, agency theory maintains that _____.

performance-based pay helps motivate and direct employee performance

Alfie Kohn believes that performance-based incentives are practically wrong because he believes that they reduce _____.

productivity

According to reinforcement theory, an organization should discourage an employee's undesirable behavior by _____.

withholding the employee's payouts