365 chapter 12

A(n) _____ is suitable for an organization with a culture that promotes individual competition. A. gainsharing plan B. profit sharing plan C. merit pay plan D. ownership plan E. skill-based plan

c

According to the agency theory, the principals are the _____. A. managers B. customers C. owners D. vendors E. employees

c

Allan works as a typesetter in a publishing company. If the organization uses merit pay programs, Allan's salary would be based primarily on information collected from _____. A. his colleagues B. the human resource manager C. his immediate supervisor D. Allan himself E. performance indicators

c

As jobs become less programmable: A. outcome-oriented contracts become less likely. B. monitoring becomes less difficult. C. behavior-oriented contracts become less likely. D. the agent's risk decreases. E. the requirement for compensating wage deferential increases.

c

Employees assess fairness along the distributive dimension when their assessment is based on _____. A. organizational procedures B. the systems used to assess performance C. how much they receive D. the supervisors' feedback E. their judgment of the management

c

A(n) _____ plan gives employees the opportunity to buy the company's shares at a previously fixed price. A. mutual fund B. gainsharing C. group incentive D. profit sharing E. stock option

e

According to a merit increase grid, one of the factors that determines the size and frequency of pay increases is the _____. A. company's annual output B. attrition rate in the company C. company's stock price D. recruitment ratio E. individual's performance rating

e

In skill-based pay systems, performance measures are primarily based on _____. A. supervisor's appraisal B. individual productivity C. company profits D. company stock returns E. employees' competency acquisition

e

The Scanlon plan is an example of a(n) _____ plan. A. profit sharing B. skill-based C. merit pay D. individual incentive E. gainsharing

e

Which of the following is a compensation program that relates costs to the ability to pay? A. Skill-based program B. Incentive pay C.Fixed pay D. Merit pay E. Profit sharing

e

Agency costs are likely to arise when _____. A. principals and agents have different goals B. owners and managers are the same C. stockholders are involved in day-to-day operations of the company D. the stockholders are aware of the degree to which the agents are pursuing the principal's goals E. there is information symmetry between the agent and the principal

a

E. L. Thorndike's Law of Effect states that _____. A. a response followed by a reward is more likely to recur in the future B. behavior is a function of ability and knowledge C. valence of pay outcomes should vary under different pay systems D. monetary incentives increase intrinsic motivation E. principals have perfect information on the degree to which an agent is pursuing goals

a

Gainsharing can motivate employees as much as individual plans do because: A. it allows more control over the performance measure and the frequency of payouts. B. it uses organization-level performance measures. C. it involves payouts that are deferred. D. it encourages individual-oriented plans than broader goals. E. it focuses more on the monetary component than on employee skills.

a

Overtime pays better performers more in _____ programs. A. merit pay B. profit sharing C. gainsharing D. skill-based E. ownership

a

When an organization is using growth strategy, it will _____. A. have pay levels that are below market levels in the short run B. have a time orientation that is short term C. make centralized pay decisions D. not share risks with employees E. have benefit levels that are above market levels

a

Which of the following makes employee stock ownership plans (ESOPs) less attractive? A. Less diversification of investment risk B. Lack of tax and financial advantages C. High levels of liquidity D. Inability to serve as a takeover defense E. Giving employees the right to vote their securities

a

Which of the following makes outcome-oriented contracts less likely to occur? A. Risk aversion among agents B. High outcome uncertainty C. More programmable jobs D. Less measurability of outcomes E. Low risk premium in compensations

a

Which type of compensation program is most likely to attract learning-oriented employees? A. Skill-based pay B. Merit pay C. Incentive pay D. Gainsharing E. Profit sharing

a

______ refer to decisions about whether to join or remain with an organization. A. Membership behaviors B. Organizational behaviors C. Group dynamics D. Organizational structure E. Organizational norms

a

According to the expectancy theory, compensation systems differ according to their impact on the components of motivation; the main influence of compensation is on _____. A. expectancy B. instrumentality C. reinforcement D. valence E. equity

b

Agency theory is of particular value in compensation management because of its emphasis on the _____ trade-off. A. performance-reward B. risk-reward C. motivation-reward D. ability-reward E. behavior-reward

b

By law, what percent of assets must an employee stock ownership plan (ESOP) invest in its company's stock? A. 26 percent B. 51 percent C. 80 percent D. 75 percent E. 76 percent

b

Culture based on _____ is most likely to prevail in companies that use a profit-sharing compensation program. A. individual competition B. knowledge of business C. sense of ownership D. problem solving orientation E. learning and flexibility

b

Gainsharing plans differ from profit-sharing plans in that: A. gainsharing plans use organization-wide performance parameters. B. gainsharing plans distribute payouts more frequently. C. gainsharing plans make lump sum payments. D. gainsharing plans can be attached to all types of jobs in the organization. E. gainsharing plans discourage pursuit of broader goals of the group.

b

In incentive pay, performance measures are primarily based on _____. A. supervisor's appraisal B. individual productivity C. company profits D. company stock returns E. production costs

b

In the _____ dimension, employees base their fairness assessments on the processes that were used to decide the amount of compensation. A. distributive B. procedural C. quantitative D. ownership E. outcome

b

Separating the functions of principals and agents is likely to result in: A. immobility of financial capital. B. diversification of investment risk. C. reduction in agency costs. D. better goal congruence. E. information symmetry.

b

Which of the following compensation programs uses a management style that gives importance to control? A. Gainsharing plan B. Incentive pay C. Ownership D. Merit pay E. Profit sharing

b

Which of the following components is a perceived link between behavior and pay? A. Expectancy B. Instrumentality C. Reinforcement D. Valence E. Equity

b

Which of the following statements about outcome-oriented or behavior-oriented contracts is true? A. Merit-pay is an example of an outcome-based contract. B. Behavior-oriented contracts do not transfer risk to the agent. C. Outcome-oriented contracts do not require a compensating wage differential. D. Outcome-oriented contracts decrease the agent's risks. E. In behavior-based contracts, information asymmetry is not an important issue.

b

Which of the following theories suggests that high employee performance not followed by a monetary reward will make future high performance less likely? A. Herzberg's Two-factor theory B. Reinforcement theory C. Freud's Psychoanalytical theory D. McGregor's Theory X E. Theory Z

b

_____ can be described as a function of ability and motivation. A. Attitudes B. Behaviors C. Values D. Rewards E. Goals

b

Expectancy theory implies that linking an increased amount of rewards to performance will increase motivation and performance. Followers of cognitive evaluation theory are likely to question this assumption, arguing that: A. monetary rewards may decrease extrinsic motivation. B. intrinsic rewards do not affect job satisfaction. C. monetary rewards may decrease intrinsic motivation. D. extrinsic rewards are not effective for managers. E. behaviors are determined by genes rather than reinforcement.

c

In _____ programs, annual compensation increases are usually linked to performance appraisal ratings. A. skill-based pay B. gainsharing C. merit pay D. incentive pay E. cost-based pay

c

In a(n) _____ plan, performance is usually measured as physical output and the payment is not rolled into the base pay. A. skill-based B. profit sharing C. individual incentive D. merit pay E. gainsharing

c

In merit pay programs, an individual's compa-ratio represents his or her _____. A. ability to multitask B. performance rating C. position in the pay range D. knowledge of business E. ratio of pay to benefits

c

When an organization is using concentration strategy, it will _____. A. have short-run pay levels below the market B. have a long-term orientation C. make centralized pay decisions D. maintain high variable pay levels E. have benefit levels below the market

c

Which of the following is a compensation program that would best support an organizational culture of cooperation and problem solving? A. Fixed pay B. Merit pay C. Gainsharing D. Incentive pay E. Skill-based pay

c

Which of the following is a design feature according to which employee contribution programs differ? A. Employees' skills B. Type of work C. Frequency of payout D. Number of employee groups E. Company's annual output

c

Which of the following is a tool that allows companies to track financial results while simultaneously monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth? A. HR scorecard B. External employee grid C. Balanced scorecard D. ESOP plan E. Merit increase grid

c

Which of the following is true of how managers may differ from shareholders? A. Managers can diversify the risks more easily. B. Managers are more likely to pursue projects with high potential payoffs. C. Managers diversify investments more easily. D. Managers are less averse to risk. E. Managers are likely to prefer more emphasis on uncertain incentives than base pay.

c

_____ focuses on the link between rewards and behaviors and emphasizes anticipated rewards. A. Equity Theory B. Agency theory C. Expectancy theory D. Theory Z E. McGregor's Theory X

c

_____ perception is the perceived link between effort and performance. A. Reinforcement B. Actual C.Expectancy D. Agency E. Equity

c

A(n) _____ program is based on group or plant performance that does not become part of the employee's base salary. A. merit pay B. profit-sharing C. stock option D. gainsharing E. individual incentive

d

According to expectancy theory, motivation is hypothesized to be a function of _____. A. Cognitive capacity B. social structure C. genes D. instrumentality E. self-esteem

d

Agents prefer a behavior-based contract when _____. A. they are inclined to take more risks B. job outcomes are more measurable C. they desire higher compensation D. outcome uncertainty is high E. jobs become less programmable

d

From a(n) _____ standpoint, the effect on performance motivation may be limited in ownership program because of the less obvious link between pay and performance. A. agency theory B. equity theory C. efficiency wage theory D. reinforcement theory E. contract theory

d

Group incentives tend to measure performance in terms of _____. A. employee retention B. individual motivation C. organizational environment D. physical output E. organizational profitability

d

In a merit increase grid, the _____ determines the size and frequency of pay increases. A. time spent in the current pay grade B. overall profitability of the company C. employees' seniority D. compa-ratio of employees E. the skills developed by the employee

d

The _____ requires companies to report compensation levels for the five highest paid executives and the company's performance relative to that of competitors over a five-year period. A. Bureau of Economic Analysis B. Federal Bureau of Investigation C. Federal Trade Commission D. Securities and Exchange Commission E. Bureau of Industry and Security

d

Which of the following is a difference between profit-sharing plans and employee ownership plans? A. Unlike ownership plans, base pay is not reduced when profit-sharing plans are introduced. B. Ownership plans focus on the success of the organization as a whole unlike profit-sharing plans. C. Profit sharing plans promote individual competition whereas ownership plans promote group competition. D. The link between pay and performance is less obvious under ownership than under profit sharing. E. Ownership plans promote individual competition whereas profit-sharing plans promote group competition.

d

Which of the following is an example of a behavior-oriented contract? A. Stock option B. Profit sharing C. Commission D. Merit pay E. Revenue sharing

d

Which of the following is an example of an ownership plan used in compensation systems? A. Gainsharing plans B. Profit sharing programs C. Group incentives D. Stock options E. Individual incentive plans

d

Which of the following is most likely to provide extrinsic motivation to employees? A. Autonomy B. Challenging tasks C. Variety of work D. Recognition E. Responsibility

d

Which of the following is true of how agents may differ from principals? A. Agents can diversify the risks more easily. B. Agents are more likely to pursue projects with high potential payoffs. C. Agents can diversify investments better. D. Agents are more averse to risk. E. Agents are likely to prefer more emphasis on uncertain incentives than base pay.

d

Which of the following is true of how the agency theory views monitoring? A. Monitoring is more expensive when done by employees. B. Employees' knowledge of the workplace is not reliable. C. Monitoring is less effective when performed by employees. D. Employees understand fellow employees better than managers do. E. Compensation system does not influence peer monitoring.

d

Which of the following pay programs has the highest frequency of payout? A. Merit pay B. Profit sharing C. Skill-based D. Incentive pay E. Gainsharing

d

Which of the following pay strategy dimensions best fits with a business strategy of concentration? A. Long-term time orientation B. Below-market short-run pay level C. High levels of variable pay D. Above-market benefits levels E. Decentralization of pay decisions

d

Which of the following is a criticism of traditional merit pay programs? A. Peer and subordinate ratings are frequent and they tend to receive more weight than supervisory ratings. B. The feedback under this system tends to occur too frequently, which may cause average employees to feel more discouraged than appreciated. C. The program lacks emphasis on individual performance and focuses too much on teamwork. D. The program often involves gathering inappropriate feedback from external sources. E. Employees are encouraged to focus on personal gains than what is good for the organization.

e

Which of the following is a drawback of using profit sharing? A. It promotes individual goals rather than organizational goals. B. It promotes competition between work groups. C. It increases the probability of individual competition. D. It fails to make labor costs more variable. E. It runs the risk of contributing to employee dissatisfaction.

e

Which of the following is likely to occur when pay for performance with stronger incentive intensity is replaced with one having a weaker incentive pay? A. Greater motivation for employees in sales, executives, and stock brokers B. Motivation for high performers to stay with the organization and improve their efficiency C. Greater chance for unintended, undesirable behavior driven by pay-linked incentives D. Excessive risk-taking for greater premium and compensation E. Competitors possibly winning over high performers with stronger incentive intensity

e

Which of the following is most likely to provide intrinsic motivation? A. A sponsored vacation to Europe B. A monthly salary of $10,000 C. Medical insurance D. Paid leave for three months E. An interesting work assignment

e

Which of the following is true about outcome-oriented contracts? A. They require more supervision than behavior-oriented contracts. B. When profits drop, agent's compensation goes up in outcome-oriented contracts. C. Agents do not demand compensating wage differentials in such contracts. D. Agents face minimal risks in such contracts. E. They are typically a major component of executive compensation.

e

Which of the following is true of individual incentives? A. They contribute to a more disintegrated workforce. B. They are helpful in the pursuit of total quality management objectives. C. They encourage employees to go beyond the call of duty. D. They reduce the motivation of acquiring multiple skills and proactive problem solving. E. They must be continuously earned and re-earned.

e

Which of the following must a principal do to reduce agency costs? A. Encourage the agent to maximize his/her benefits. B. Provide complete autonomy to the agent. C. Discourage the agent from pursuing projects with high potential payoffs. D. Increase information asymmetry and goal congruence. E. Align the agent's interests with the principal's interests.

e