434 E2.2

The most influential theory explaining pay-level differences is marginal revenue productivity.

False

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

In determining the compensation strategy, a major strategic decision is whether to mirror what competitors are paying.

True

Research shows that a lead pay strategy reduces turnover.

True

________ minimizes the distortion of the central tendency caused by outliers. A) Weighted mean B) Mean C) Mode D) Median

D) Median

________ refers to the average of the array of rates paid by an employer. A) Revenue margin B) Remuneration C) Compensation D) Pay level

D) Pay level

Talented individuals have a higher marginal value in larger organizations.

True

The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors.

True

________ is the additional output associated with the employment of one additional human resource unit, 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

Evidence shows that in manufacturing, ________ is positively correlated with hourly wage level. A) turnover B) productivity C) a job description D) total cost

B) productivity

Which of the following statements is true of 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.

In both a bourse and a quoted market, employers are the buyers and the potential employees are the sellers.

True

Wages in labor-intensive industries are generally higher than in technology-intensive industries.

False

________ 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

Many employers use market surveys to validate their own job evaluation results.

True

Regression smoothes large amounts of data while minimizing variations.

True

Which of the following is an example of the demand side of labor? A) The level of pay applicants will accept B) The qualifications of applicants C) The pay level offered by an employer D) The locations of potential employees

C) The pay level offered by an employer

Product demand and the degree of competition affect the ability of an organization to change what it charges for its products and services.

True

Segmenting sources of labor is a means of reducing labor costs.

True

The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as a A) work/life balance policy. B) security policy. C) performance-driven policy. D) market match policy.

A) work/life balance policy.

Which of the following is an assumption held by the labor supply model about the behavior of potential employees? A) The number of job seekers is low. B) Job seekers are unaware of job openings. C) Job seekers do not face barriers to mobility. D) Job seekers often lie on their résumés.

C) Job seekers do not face barriers to mobility.

Which of the following statements is true of pay ranges? A) They are flexible enough to deal with differences in quality but not with the productivity or value of these quality variations. B) They usually lead to an increase in employee turnover. C) They reflect the differences in performance or experience that an employer wishes to recognize with pay. D) They cause employees to believe that their compensation cannot increase in the same job.

C) They reflect the differences in performance or experience that an employer wishes to recognize with pay.

Smaller pay ranges may reduce the opportunities for promotion.

True

________ measures reveal competitors' use of performance-based cash payments. A) Base pay B) Short-term incentive pay C) Total cash D) Long-term incentive pay

C) Total cash

Pay ranges for office and production work commonly range between A) 5 and 15 percent. B) 15 and 30 percent. C) 30 and 40 percent. D) 40 and 60 percent.

A) 5 and 15 percent.

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

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 12th employee for a wage of $50,000. B) Druk needs to pay $10,000 as wage to the 11th employee to break even. C) Druk will break even if it hires a 13th employee for a wage of $10,000. D) Druk needs to pay $50,000 as wage to the 11th employee to break even.

D) Druk needs to pay $50,000 as wage to the 11th employee to break even.

Managers often regard external market data as more objective than internal job evaluation.

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.

True

External competitiveness affects employee attitudes and work behaviors.

True

Graduating students usually find themselves in a quoted-labor market.

True

Human capital theory assumes that people are paid at the value of their marginal product.

True

Identifying pay survey participants by company name is considered price fixing under the Sherman Act.

True

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

In a labor market, the demand side focuses on the actions of the employers.

True

In a labor market, the market rate is where the lines for labor demand and labor supply cross.

True

Pay ranges for managerial jobs are larger than ranges for other jobs because these jobs have greater opportunity for both discretion and performance than lower-level jobs.

True

Skill-based plans establish single flat rates for each skill level regardless of performance or seniority.

True

Employers tend to overestimate the importance of pay to employees and underestimate the role of relationships with the supervisor.

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 pay ranges for entry-level managerial positions.

False

________ 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

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.

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 maximum pay rates for each skill level.

B) links a company's benchmark jobs with market rates paid by competitors.

For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is A) the benchmark job approach. B) the low-high approach. C) survey leveling. D) benchmark conversion.

B) the low-high approach.

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 better. 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.

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

In the regression equation y = a + bx, job evaluation points are denoted by A) a. B) b. C) x. D) y.

C) x.

In the context of types of markets, which of the following statements is true? A) In both the bourse and the quoted market, employers are the sellers. B) Ads that list a job opening's starting wage are examples of bourse markets. C) Graduating students usually find themselves in a bourse market. D) Bourse markets allow haggling over terms and conditions until an agreement is reached.

D) Bourse markets allow haggling over terms and conditions until an agreement is reached.

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.

In the United States, the ________ is a major source of publicly available pay data, and it also calculates the consumer price index. A) Chamber of Commerce B) Bureau of Labor Statistics C) Compensation Association D) Department of Economics

B) Bureau of Labor Statistics

Which of the following labor demand theories states that work with negative characteristics requires higher pay to attract or retain workers? A) Job competition B) Compensating differentials C) Efficiency wage D) Sorting and signaling

B) Compensating differentials

________ focuses attention on the competitive positions reflected in the pay relationships among organizations. A) Labor demand B) External competitiveness C) Utility theory D) Pay satisfaction

B) External competitiveness

Which of the following is true of weighted mean as a statistical measure to analyze survey data? A) It is frequently used to set pay ranges or zones. B) It captures the size of supply and demand in a market. C) It tells how similar or dissimilar market rates are from each other. D) It minimizes distortion caused by outliers.

B) It captures the size of supply and demand in a market.

Adjustments to the different forms of pay competitors use and the relative importance they place on each form occur more frequently than adjustments to overall pay level.

False

As a measure of compensation, base pay includes performance incentives, and therefore it gives a true picture if competitors offer low base but high incentives.

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.

False

The distribution of rates around a measure of central tendency is called weighted mean.

False

The final step in determining externally competitive pay levels and structures is the merging of internal and external pressures.

False

Turnover and organizational revenues are examples of survey data collected to gather competitive intelligence.

True

When there is an unusual level of turnover in a job, an employer is likely to conduct a market survey.

True

A manager of a company could be a factor affecting the company's external competitiveness.

True

Which of the following is an example of a company that uses broad banding? A) A company in which there are more lateral movements 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 an unlimited total salary budget D) A company that pays all its employees the same salary

A) A company in which there are more lateral movements with no pay adjustment than promotions

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

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.

A pay range exists whenever two or more rates are paid to employees in the same job.

True

________ theory is based on the premise that higher earnings flow to those who improve their potential productivity by investing in themselves. A) Human capital B) Labor market C) The efficiency-wage D) The compensating differentials

A) Human capital

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.

A common first step in interpreting compensation survey data is to A) check for the accuracy of job matches. B) seek out nonresponders. C) check for anomalies. D) remove the top- and bottom-paying companies.

A) check for the accuracy of job matches.

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.

The first major decision in setting externally competitive pay and designing the corresponding pay structures is to A) specify the employer's competitive pay policy. B) conduct a job evaluation. C) select relevant market competitors. D) construct a pay policy line that reflects external pay policy.

A) specify the employer's competitive pay policy.

Which of the following is a difference between ranges and bands? A) Ranges give managers "freedom to manage" pay, whereas bands give managers "freedom with guidelines." B) Ranges offer recognition via titles or career progression, whereas bands offer cross-functional experience and lateral progression. C) Ranges are used by companies with global operations, whereas bands are used by companies with domestic operations. D) Ranges eliminate layers of managerial job, whereas bands emphasize the importance of several layers of managerial jobs.

B) Ranges offer recognition via titles or career progression, whereas bands offer cross-functional experience and lateral progression.

The second major decision in setting externally competitive pay and designing the corresponding pay structures is to A) specify relevant markets. B) define the purpose of the survey. C) specify the pay-level policy. D) design grades and ranges.

B) define the purpose of the survey.

Gramhold, Inc., a pharmaceutical company, reduces its ten 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 more career moves within bands 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 more career moves within bands than career moves between bands.

Which of the following statements 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.

Which of the following is true of the Employment Cost Index? A) It is one of three types of salary surveys published regularly by the Department of Commerce. B) It measures the rate of change in prices for goods and services in the product market, not wage changes in labor markets. C) It measures monthly changes in employer costs for compensation. D) It allows a firm to compare changes in its average costs to an all-industry or specific-industry average.

D) It allows a firm to compare changes in its average costs to an all-industry or specific-industry average.

________ is an external competitiveness policy that offers employees substantial options among their pay forms. A) A merit bonus B) A merit increase C) Total compensation D) Shared choice

D) Shared choice

The process of matching survey jobs by applying an employer's plan to the external jobs and then comparing the worth of the external job with its internal "match" is called A) pay compression. B) collective bargaining. C) due diligence. D) benchmark conversion.

D) benchmark conversion.

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

________ pay strategy emphasizes external competitiveness and deemphasizes internal alignment. A) job structure B) broad banding C) reference rate D) market pricing

D) market pricing

A pure market pricing strategy carried to its extreme tends to ignore internal alignment completely.

True

An employer offering lower base pay with high bonuses is a likely signal that it is seeking risk-taking employees.

True

Both pay-level and pay-mix decisions focus on two objectives: (1) control costs and increase revenues and (2) attract and retain employees.

True

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) The 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.

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.

Because employers are raising employee pay at various times during the year, survey data must be updated using a process called A) aging. B) leading. C) matching. D) gaining.

A) aging.

Among pay-mix alternatives, the percentage of base pay is highest in a 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 linked to high pay levels? A) Increased absenteeism B) Poorly performing employees C) Reduced vacancy rates D) Higher training time

C) Reduced vacancy rates

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

C) Standard deviation

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.

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 final major decision in setting externally competitive pay and designing the corresponding pay structures is to A) interpret survey results and construct the market line. B) construct a pay policy line that reflects external pay policy. C) design grades and ranges or bands. D) select relevant market competitors.

C) design grades and ranges or bands.

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 to maximize profits.

Aging market data to a point halfway through a plan year is called A) leveling. B) updating. C) lead/lag. D) matching

C) lead/lag.

The estimates of competitors' pay rates will be incorrect and the pay level and pay mix inappropriately established if: A) employees demand for an increase in wages. B) the marginal revenue generated is low. C) markets are incorrectly defined. D) the cost for procuring labor is high.

C) markets are incorrectly defined.

The size of pay differentials between grades should A) be based upon differentials in market surveys. B) be approximately 20 percent. C) support career movement through the pay structure. D) be between 10 and 25 percent.

C) support career movement through the pay structure.

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 percent 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 prices with the sellers of handmade goods

D) Flatcake, a website that allows buyers to negotiate prices with the sellers of handmade goods

Which of the following is true of the marginal revenue product model? A) It explains differences in workers' responses to offers. B) It helps separate the contributions of labor from those of other resources. C) It fails to tell managers how many people to hire. D) It oversimplifies business conditions in the real world.

D) It oversimplifies business conditions in the real world.

Which of the following is an example of a quoted-price market? A) Streetcash, a website that allows buyers to negotiate product prices with 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 allows sellers to sell their products for a fixed price

D) Nile, a website that allows sellers to sell their products for a fixed price