ch 13 hrm
What is a stock option?
an incentive in which the employee is granted the right to buy shares of the company at a specified price
What two factors determine the size and frequency of pay increases on the merit increase grid?
an individual's performance rating. an individual's compa-ratio.
A grid that combines an employee's performance rating with his or her position within a pay range so as to determine the size and frequency of pay increases is known as the ______ grid.
merit increase
What is the disadvantage of offering bonuses for group performance?
may prevent cooperation among groups within the organization
An incentive system that gives a raise to employees who rank high on performance appraisals is called _____ pay.
merit
At her last performance review, Marlo received a 4% pay increase because she had met all of the goals her manager had set for her the previous year. Her pay increase is an example of _____ pay.
merit
What is the most common form of employee ownership?
an ESOP plan
Incentive pay is typically based on _____.
an employee's performance
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
Incentive plans often work best when ______.
employees are involved in crafting the plan itself.
An incentive paid once to an employee for agreeing to stay with an organization is called a(n) _____.
retention bonus
When one organization acquires another, it commonly uses ______ to keep certain valuable employees in the organization it is buying.
retention bonuses
Tyrone is the chief financial officer for a bank holding company and received a bonus last year based on the company's profits. He is not sure if he will get a bonus this year as the company is not doing as well financially. His bonus is an example of _____ incentive pay.
short-term
Compared to gainsharing plans, group bonuses are typically designed for _____.
smaller work groups
An incentive plan that pays workers more if they finish their work in less than the normal amount of time is called a(n) _____.
standard hour plan
Stock ownership plans usually take the form of ______.
stock options. employee stock ownership plans.
What are two examples of a long-term incentive used for executives?
stock purchase plan. stock options.
Some managers dislike merit pay because they believe it discourages _____.
teamwork
In one study, employees said that in addition to being paid more money, the most important factor that prompted them to participate in the company's incentive plan was ______.
the ability to affect the way their work was done
Since there are advantages and disadvantages for all types of incentive pay, organizations offset the disadvantages by ______.
using a balanced scorecard approach
What should an organization consider when offering incentive pay?
what kind of employee will be attracted to the organization because of the incentives being offered. how the incentive will help achieve the organization's goals. the strengths and weaknesses of each type of incentive.
When is it most important to communicate with employees about a pay plan?
when the plan changes
What are some risks associated with involving employees in pay-related decisions?
Employees may make decisions that benefit them but not the organization. The process of creating and administering incentive plans can become more complex.
It is important that incentive pay plan meet which of the following requirements?
Employees value the reward offered. The organization can provide resources employees need to achieve their goals. The performance measures will help achieve the company's goals.
Which are characteristics of a balanced scorecard?
It allows for combining the advantages of different incentive plans. It helps employees understand the organization's goals.
What are the disadvantages of merit pay?
It can quickly increase payroll expenses. Employees sometimes perceive that it is unfair. It encourages individual achievement instead of teamwork.
Why is it important to communicate with employees about their pay plan?
It increases the chances that incentives will influence employee behavior as desired. It demonstrates that the pay plan is fair.
What is the difference between performance bonuses and merit pay?
Performance bonuses are not built into base pay.
Which statement is accurate regarding performance bonuses?
They must be re-earned by employees during each performance period.
Why do organizations pay workers a piecework rate?
To motivate them to work efficiently
What are some disadvantages of a profit-sharing program?
Waiting months to receive a check causes workers to lose their motivation. Workers expect their profit-sharing check to be about the same as what competing companies are offering. Workers might not be motivated, because they feel they have little effect on the amount of profit the business generates.
What is one advantage of a profit-sharing program?
When the company generates little or no profit, there is no need to spend much on this type of incentive.
Employee participation in pay-related decisions can contribute to the success of an incentive pay plan under what conditions?
When the organization fosters trust and cooperation. When the incentives encourage employees to monitor their performance.
What is using a standard hour plan as incentive for production workers?
Workers may not worry about quality or customer service
Incentive pay based on a percentage of sales is called _____.
a commission
Janine works as a seamstress at a tailor shop and sews buttons on clothing. She earns $2 for each item she completes. Her pay is an example of ____.
a piecework rate
Some companies adopt a set of performance measures that focus on the company's long and short term goals. This system of awarding incentive pay is called a _____.
balanced scorecard
Which of the following are examples of short-term incentives used for executives?
bonus based on profits. return on investment.
Organizations establish and revise merit increase grids based on ______.
changing economic conditions
Lori is a realtor and earns 5% on the sale of each house. Her pay is an example of a _____.
commission
For which type of job is a gainsharing plan most useful?
for a complex job
A group incentive program that measures improvements in productivity and distributes a portion of the profits to each employee is called _____.
gainsharing
Forms of pay that are linked to an employee's performance as an individual, group member or organization member are called _____ pay.
incentive
Jake's sales team earned a 5% bonus for meeting its goals last quarter. This bonus is an example of _____.
incentive pay
What are the three broad categories of incentive pay?
incentives linked to individuals. incentives linked to groups. incentives linked to organizational performance.
Under a profit sharing system, payments are ______.
not part of base salary
What three elements are used to customize a balanced scorecard?
objectives markets products
Stock ownership plans make employees ______.
part owner's of the organization
Under a ______ plan, an employer pays an employee a specific amount of money for every unit produced by the employee.
piece rate plan
The compensation plan known as ______ involves payments being based on some measure of organizational performance, and the payments do not become part of the base salary.
profit sharing
Stock options are given to ______.
provide incentives for employees to work harder
