Comp & Benefits Chapter 8

What are the principal decisions involved in determining externally competitive pay and forming corresponding pay structures through a survey? (Select all that apply) a. create a biased survey on the external market b. ensure that pay structures exploit employees maximally c. define the purpose of the survey d. design the survey e. interpret survey results and construct the market line f. construct a pay policy line that reflects external pay policy

c, d, e, f

Unlike job evaluations, market surveys lack: a. quantitative data b. discrepancies across surveys c. high standards of reliability and validity d. the involvement of employers

c

Unlike the pay structure of an organization, the job structure: a. is reflected in the organization's pay-policy line b. is anchored by the organization's competitive position in the market c. orders the organization's jobs according to internal factors d. orders the organization's jobs according to pay surveys conducted in the market

c

Which component of a total pay structure includes the salaries paid by relevant competitors for the benchmark jobs measured by a pay survey? a. diminishing marginal product b. marginal product revenue c. external competitive data d. internally aligned structure

c

Why do surveys of upper-level and executive positions in an organization include reporting relationships and financial data? a. because financial and reporting relationships data have always been used to compare competitors' productivity b. because reporting relationships and financial data are always used to directly assess competitors' performance c. because the organization's financial performance is directly related to compensation for these positions d. because the reservation wages for these positions are directly related to reporting relationships in the organization

c

Survey data are used by employers to gather _________ _________ in order to better understand how competitors achieve their market share and price their products and services.

competitive intelligence

________ is used to estimate the relative value of job evaluation points for survey jobs and internal jobs in order to provide guidance for adjusting market data. a. diminishing marginal product b. labor segmentation c. benchmark conversion d. differential compensation

c

What are the anomalies in pay survey data that an analyst should look for when verifying survey data? (Select all that apply) a. whether the survey job is nonexistent b. whether all employers show similar patterns c. whether there are any outliers d. whether total compensation exceeds total cash e. whether a single company dominates

b, c, e

A __________ is the systematic process of collecting and making judgments about the compensation paid by other employers.

survey

Which of the following is true of adjustments to a company's pay mix? a. they are based on internal pressures rather than external ones b. redesigning a different pay mix costs less than changing the pay level c. they occur less frequently than do adjustments to overall pay level d. pay mix decisions are given more attention than pay level decisions

c

What can make it difficult to maintain manager-employee differentials among pay grades? a. single flat rates for each skill level b. large overlap between pay grades c. no overlap between pay ranges d. single flat rates for each job

b

While verifying pay survey data, in most cases, the match between the survey job and an organization's job is: a. exact b. imperfect c. accurate d. indeterminable

b

The range midpoint of a pay range is $58,000, and its range minimum is $45,000. Calculate the range maximum of the pay range.

$71,000

_________ _________ is a technique that collapses salary grades into only a few broad bands, each with a sizable range.

Broad banding

T/F: A pay-policy line always specifies a percent above the market line so that an organization can match its competitors.

False

Base pay

The amount of cash each job and incumbent is worth

Total cash

The amount of cash each job and incumbent is worth plus bonus

Total compensation

The amount of cash each job and incumbent is worth plus bonus, stock options, and benefits

T/F: Analyses for designing pay grades and pay ranges focus on the basic value of the work in consideration rather than the performance levels of employees.

True

T/F: There is no research to show how much of a pay-grade differential is required to induce employees to seek promotion into a higher grade.

True

Adjustments made by employers to workers' pay levels on a regular basis can be based on the overall movement of wage rates caused by: a. the competition for labor in the market b. regular cycles of compulsory promotions c. consistently declining reservation wages d. the stagnation of labor demand and supply

a

Identify a disadvantage of pay grades: a. a pay structure is rendered inflexible by them b. they are quite challenging to design c. all jobs in a single grade have disparate pay ranges d. they restrict movement among jobs

b

An issue encountered while adjusting an organization's pay structure is that the job structure that emerges from internal job evaluation: a. is always the same as that of the external alignment b. may not cost as much as redesigning the pay mix c. may not match the pay structure of competitors d. is always unrealistic and impractical

c

Competitive intelligence is increasingly being gathered in salary surveys, and this is causing metrics of organization performance such as ________ to be collected. a. earnings per share b. recruiting yield ratios c. revenues and turnover d. employee pay satisfaction

c

A low-high approach to managing surveys is used when an organization: a. has benchmark jobs that match the jobs of competitors b. uses a standard reservation-wage-based structure c. uses traditional job-based structures d. has skill-competency-based structures

d

Analyses for the purpose of designing pay grades and pay ranges are usually done with: a. standard reservation wage data b. compensating differential data c. incentive data d. base pay data

d

Rank the jobs in an organization's hierarchy in decreasing order of the sizes of their pay ranges, beginning with the positions that have the largest percent above and below their range midpoint. -Entry to midlevel professional and managerial positions -Office and production work -Top level management positions

1. Top level management positions 2. Entry to midlevel professional and managerial positions 3. Office and production work

External competitiveness perspective

Pay range is a control device because a range maximum is the highest an organization is willing to pay for the work and the range minimum is the lowest

Internal alignment perspective

Pay range reflects the variations in experience of performance that an organization wishes to acknowledge with pay

A pure market pricing strategy carried to the extreme ignores ________ entirely. a. internal alignment b. pay survey data c. external market rates d. competitors' pricing

a

According to supporters of broad banding, the principal benefit of this technique is: a. the cross-fertilization of ideas within an organization b. the invulnerability to charges of illegal practices it brings c. the complexity and layers it adds to an organization d. the elimination of inconsistencies and favoritism

a

Pay grades enhance an organization's ability to: a. transfer people among jobs with no change in pay b. acknowledge differences in employee performance levels c. set wide limits on the pay for a given job d. change the pay for a single job as many times as possible in a plan year

a

The pay data for a salary survey are usually updated through a process called trending or aging to predict the: a. competitive rates for when pay decisions will be implemented b. reservation wages for when new applicants enter the labor market c. frequency distribution graphs for the subsequent pay survey d. compensating differentials for jobs in an ever-changing market

a

The primary source of publicly available compensation data in the U.S. is: a. the Bureau of Labor Statistics b. the Employment Cost Index c. the Sherman Commission d. the Department of Compensation

a

When are survey participants declared guilty of price fixing? (Select all that apply) a. when they cause wages to be held down artificially b. when they cause interference with competitive prices c. when they uphold Section 1 of the Sherman Act d. when they outlaw conspiracies in restraint of trade

a, b

What do unusual shapes of frequency distributions in a pay survey reflect? (Select all that apply) a. companies with very different pay policies b. issues with job matches c. high level of match between all companies' jobs and the survey job d. greatly dispersed pay rates e. consistency across all organizations

a, b, d

Identify the principal decisions in determining externally competitive pay and creating corresponding pay structures. (Select all that apply) a. create a pay policy line that reflects external pay policy b. define an employer's competitive pay policy c. ensure that pay structures exploit employees maximally d. create a biased survey of the external market e. balance competitiveness with internal alignment f. choose relevant market competitors

a, b, e, f

What are the areas in which employers belonging to a labor market must compete? (Select all that apply) a. employees situated in the same geographic area b. employees within the same ethnic group c. the same services and products d. the same headquarters e. the same skills or occupations

a, c, e

Identify the advantages of broad banding. (Select all that apply) a. it fosters cross-functional growth and development b. it allows employees to move vertically at will c. it allows employees to gain a depth of experience by moving laterally across functions d. it helps manage the realities of more promotion opportunities in tall organization structures e. it allows job responsibilities to be defined more broadly and flexibly f. it supports organizations that have eliminated levels of managerial positions

a, c, e, f

Identify a drawback of using the Bureau of Labor Statistics as a source in a pay structure. a. it only contains information on stock ownership data b. its data are usually not specific enough to be used alone c. its data are usually not inclusive of cash, bonus, and benefits data d. it does not contain information on various occupations

b

In most companies, the person responsible for managing a pay survey is the: a. company president b. compensation manager c. chief executive officer d. competitor's auditor

b

The distribution of rates around a measure of central tendency is called: a. individualization b. variation c. centralization d. conversion

b

Unlike the job structure of a company, the pay structure: a. orders jobs on the basis of internal factors b. is anchored by the company's external competitive position c. orders jobs on the basis of employees' individual performance levels d. is reflected in job evaluation or skill certification

b

Why are market data weighed more heavily than internal job evaluation data when reconciling differences in pay structures? a. market data are completely unbiased b. market data are usually perceived as more objective c. market data usually lay heavier emphasis on internal alignment d. market data are usually more judgement based

b

What are the steps involved in broad banding? (Select all that apply) a. divide the bands into ranges b. price the bands with reference to market rates c. determine the midpoints of the bands d. set the number of bands

b, d

For determining the pay level of nonbenchmark jobs, ________ are useful. a. compensating differentials b. marginal product revenues c. market pay lines d. reservation wages

c

If a pay survey's purpose is to price a company's entire pay structure, then _________ can be chosen to include the entire job structure, with all its important functions and all its levels. a. differential jobs b. marginal jobs c. benchmark jobs d. reservation jobs

c

In a pay survey, an analyst calculates the ________ by adding the base wages for all the employees in the survey and dividing that amount by the number of employees in the survey. a. weighted median b. weighted range c. weighted mean d. weighted mode

c

One of the drawbacks of the salary data available on the Web is that much of the data: a. is illegal b. represents breaches of contracts c. is of questionable quality d. is unethically obtained

c

The goal of using a salary increase matrix is to keep adjusting employee pay so that it is: a. consistently lagging behind the market rate b. higher than the marginal revenue generated by each employee c. appropriately positioned relative to the market d. higher than that of all the top-paying competitors in the market

c

Unlike grades-and-ranges approaches, broad-banding approaches have controls in the form of: a. range maximums and minimums b. midpoints and zones c. a total salary budget d. a diminishing marginal product

c

How do frequency distributions aid an analyst during the statistical analysis of a pay survey? a. they highlight the difference between reservation and efficiency wages b. they help determine compensating differentials c. they illustrate diminishing marginal product across companies d. they aid in visualizing information and reveal anomalies

d

Jobs in an organization that are seen as considerably equal for pay purposes are grouped into a ________ to build flexibility into the organization's pay structure. a. salary increase matrix b. merit increase grid c. pay range d. pay grade

d

Which of the following approaches determines pay structure almost entirely on external market rates? a. broad banding b. survey leveling c. job evaluating d. market pricing

d

While managing a survey, the easiest way to convert market data to fit a skill or competency structure is to use ________ as anchors for the competency-based structures. a. the lowest and highest reservation wages of job applicants b. the wages for the lowest and highest paid managers in the market c. the lowest and highest standard reservation wages of the competitors d. the wages for the lowest and highest paid benchmark jobs in the market

d

A(n) ________ ________ links a company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis.

market line