CHAPTER 12

Which of the following focuses on how employee compensation can be used to align the divergent interests and goals of an organizations' various stakeholders?

agency theory

Contracts that generally do not result in a transfer of risk to the agent and, as such, do not require a wage differential are known as _______-based contracts.

behavior

When considering employee compensation, ______ theory is focused on the effects of incentives.

expectancy

Employees notice how some employees get paid differently, and their perceptions of ______ will influence their behaviors.

fairness

For the modern corporation, ownership is nearly always separate from ______.

management

Which of the following are design features that potentially help differentiate pay-for-performance programs? (Select all that apply.)

payment method ways of measuring performance frequency of payout

Which of the following may be factors that give rise to agency costs? (Select all that apply.)

principals and agents who have goal incongruence principals and agents who have information asymmetry

The effect pay has on workforce composition is known as a(n) ______.

sorting effect

Which of the following statements are true about agents in large, modern corporations? (Select all that apply.)

Agents are expected to act on behalf of principals. Owners (principals) and managers (agents) are usually different people.

Which of the following can a principal do to overcome the information asymmetry issue that exists with behavior-based contracts? (Select all that apply.)

Link pay partly to outcomes. Invest in monitoring. Add more supervisors.

Which of the following differentiate between gainsharing and profit sharing plans? (Select all that apply.)

Payouts in gainsharing plans are not deferred and are paid out more frequently. Gainsharing plans use group or plant-level performance rather than organization-level performance.

Some scholars using cognitive evaluation theory believe which of the following regarding extrinsic and intrinsic motivation?

They argue that monetary rewards might increase extrinsic motivation but decrease intrinsic motivation.

True or false: Merit pay exists in most organizations.

True

Which of the following statements are true? (Select all that apply.)

What is best for the manager may not be best for the principal. What is best for the agent may not be best for the principal.

Pay programs that recognize employee contributions differ depending on whether payouts are ______. (Select all that apply.)

a fixed cost variable part of base pay

Extrinsic motivation is dependent on rewards that are under the control of ______.

an external source

When used well, pay plans have ______.

an incentive effect

When choosing a contracting scheme that helps align the interests of the agent and principal, the principal must choose between ______-oriented (such as merit pay) and ______-oriented (such as commissions and stock options) contracts.

behavior; outcome

The main influence of compensation is on instrumentality, which can be described as the perceived link between ______.

behaviors and pay

Pay plans are used in part to do which of the following? (Select all that apply.)

direct employee behavior control employee behavior energize employee behavior

Which of the following are suitable considerations for using a balanced scorecard to structure employee compensation? (Select all that apply.)

financial results nonfinancial measures how financial results are achieved

When designing either managerial or nonmanagerial compensation, the central issue is determining ______.

how agency costs can be minimized

The strength of the relationship between pay and performance is known as ______.

incentive intensity

A key drawback to outcome-oriented contracts is that they tend to ______ the agent's risk.

increase

In an outcome-oriented contract, when profits are high, compensation ______.

increases

When organizations link pay to an employee's performance, they are likely to attract candidates who are ______.

individualistic

What happens when a principal has imperfect information concerning the degree to which the agent is pursuing and achieving the principal's goals?

information asymmetry

Which of the following are among the factors used in determining what type of contract an organization should use? (Select all that apply.)

job programmability outcome uncertainty ability to pay

According to agency theory, the likely agent of a business owner would be a(n) ______.

manager

Outcome-oriented contracts are more likely when outcomes are more ______.

measurable

It is important to pay high performers an amount they believe is equitable in order to ______ them. (Select all that apply.)

motivate attract retain

In order to make high performance more likely in the future, employers are well advised to ______.

offer a monetary reward for high employee performance

In agency theory, a business's principal is typically a(n) ______.

owner

According to the law of effect, rewards make responses ______.

recur in the future

Which of the following increase with increasing incentive intensity?

the chance of unintended consequences the possibility of undesirable outcomes motivation

The process that matches people, over time, to jobs that fit their preferences, including reward preferences, and helps ensure that extrinsic incentives do not adversely affect intrinsic motivation, is known as ______.

the sorting process