HR Chapter 13 Quiz Questions

In a company's merit pay program, individuals' compa-ratio represents their: A. pay relative to average pay B. the average worth of the skills possessed by the individual C. pay relative to performance of other workers in the industry D. ratio of pay to benefits E. comparable worth versus others

A. pay relative to average pay

Which of the following is an organization-level incentive plan that is intended to motivate employees to align their activities with the organization's goals? A. profit sharing B. gainsharing C. merit pay D. scanlon pay E. group bonus

A. profit sharing

The many kinds of incentive pay fall into three broad categories: _____ A. pay linked to goals, focus, or achievements of an organization B. incentives linked to individual, group, or organizational performance C. pay related to base salary, bonus, and travel allowances D. incentives obtained in the form of company shares, gift coupons, and trial products E. incentives linked to output, productivity, or quality of a product

B. incentives linked to individual, group, or organizational performance

T/F: An organization should keep information, such as changes made to its incentive plan, confidential from its employees

false

T/F: As in the case of merit pay, performance bonuses for rewarding individual performance are rolled into employee's base pay

false

Which of the following is an advantage of group incentive? A. They encourage employees to achieve their goals irrespective of the cooperation of team members B. They always use a broad range of performance measures C. They result in groups trying to outdo one another in satisfying customers, and thus create healthy competition D. They always result in cooperation among team members without any competition E. They reward the performance of all the employees at a facility

C. They result in groups trying to outdo one another in satisfying customers and thus creates healthy competition

In the context of stock ownership, what is meant by backdating a stock option? A. Buying company's sock just before the date of key product launch B. Falsifying numbers in the company's annual report to hide losses and inflate stock prices C. Re-evaluating a company's stocks to adjust it to a previous date so that the shareholders and employees minimized the losses D. Changing the price in the original option agreement so that the option holder can buy stock at bargain price E. Reaping windfall in the stock market by selling stock based on company's nonpublic information

D. Changing the price in the original option agreement so that the option holder can buy stock at a bargain price

T/F: Under profit sharing, payments are a percentage of the organization's profits and become part of the employee's base salary

false

T/F: Employees should exercise the stock options even if the stock price has decreased

false

The Rudd-Mitchell organization uses the Scanlon plan to provide incentives to its employees. The workers produce electrical components worth $5 million. The target ratio set by the organization is 30%. The employees will be given a bonus if the actual labor costs are less than: A. $1.5 million B. $0.5 million C. $1 million D. $2.5 million E. $2 million

A. $1.5 million

Which of the following statements is true about standard hour plans? A. They succeed only for employees who are not motivated by money B. In terms of their pros and cons, they are very different from piecework plans C. They encourage employees to focus mainly on quality D. They encourage employees to focus exclusively on customer service E. They encourage employees to work as fast at they can

E. They encourage employees to work as fast as they can

Which of the following types of incentive plans are used to reward individual performance? A. gainsharing B. profit sharing C. scallion plan D. stock ownership E. merit pay

merit pay

T/F: In larger organizations that have stock ownership plan, the employees may not see a strong link between their actions and the company's stock price

true

T/F: Incentive pay for executives lays the groundwork for significant ethical issues

true

T/F: Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk

true

T/F: Merit pay is a system of linking pay increases to ratings on performance appraisals

true

T/F: Retention bonuses are one-time incentives paid to top managers, engineers, top-performing salespeople, and information technology specialists in exchange for remaining with the company.

true

T/F: The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of product is below a set standard

true

The primary function of a merit increase grid is to: A. stabilize economic conditions B. further increase the pay for those whose pay is relatively higher for their job C. make the increases consistent D. increase incentives on a year-by-year basis E. increase the employees' compa-ratio

C. make the increases consistent

T/F: ESOP denies employees the right to participate in votes by shareholders even if the stock is registered on a national exchange

false

T/F: Standard hour plans are quality-oriented incentives for professional employees

false

Which of the following best describes profit sharing? A. A combination of performance measures directed toward the company's profit and used as the basis for awarding incentive pay B. An incentive pay in which payments are a percentage of of the organization's profits and do not become part of the employees' base salary C. A gainsharing program in which employees receive a bonus if the ration of labor costs to the sales value of production is below a set standard D. An incentive plan where a percentage of the previous year's profits is provided to the employees as part of their salary E. A group incentive program that measures improvements in productivity and effectiveness and distributes a portion of profit to employees

B. An incentive pay in which payments are a percentage of of the organization's profits and do not become part of the employees' base salary

Developed in the 1930s, the Scanlon plan is a variation of the: A. profit sharing plans B. gainsharing plans C. individual bonus plans D. merit pay plans E. commission plans

B. gainsharing plans

How does linking executive pay to stock performance lead to unethical behavior? A. Executives can use the employee stock ownership plan to buy their company if it experiencing financial problems B. Executives can roll in the stock price into their base pay to avoid paying a huge tax C. Executives will lower the stock prices in order to employ bonuses D. Executives can use the advantage of knowing the company's inside information to buy or sell sock and create huge personal gains E. The executives can obtain as many shares as they need at a price that is much lower than the market rate

D. Executives can use the advantage of knowing the company's inside information to buy or sell sock and create huge personal gains

Kolese Inc., a manufacturing company, includes stock options and stock purchase plans. Executives at the company will want to do what is best for Kolese because that will cause the value of the stock to grow. Which of the following is being exemplified in this scenario? A. Scanlon plan B. Merit plan C. Balanced scorecard D. Long-term incentives E. Short-term incentive

D. long-term incentive

Wayan Inc., a health care insurance company, pays an incentive based on the average work per hour. Wayan pays $10 for billing 20 medical charts per hour. An employee who bills 30 charts would earn $15 per hour. Hence, Wayan pays the same rate per chart no matter how many charts an employee produces per hour. Which of the following is being exemplified in this scenario? A. merit pay system B. straight commission plan C. skill-baed pay system D. straight piecework plan E. quality-based pay system

D. straight piecework plan

The distribution of a portion of a company's earnings to its employees will motivate them to focus more on efficiency and productivity. Which of the following would strengthen this argument? A. Employees spend long hours working B. It helps avoid competition among employees C. It helps create job opportunities D. Employees avoid taking days off when they are given a share of profit E. Employees consider the organization's goals along with their personal interests

E. Employees consider the organization's goals along with their personal interests

Keytechi and Sons, a marketing company, has implemented a few incentive plans to motivate its employees. The organization encourages employees to learn new skills and cooperate with others. Which of the following will contribute to employees' feeling that the organization's incentive pay plans are fair? A. Employees should make decisions that are only in favor of their interests B. Employees must be the key decision makers when creating incentive pay plans C. Equal incentives should be offered to all the employees of the organization D. The company should not inform the employees about incentive plan changes E. Employees must be able to understand the requirements of the incentive pay plan

E. Employees must be able to understand the requirements of the incentive pay plans

______ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees A. Group bonus B. Profit rate C. Commission sharing D. Merit Rate E. Gainsharing

E. Gainsharing

What is the difference between stock options and an employee stock ownership plan (ESOP)? A. Stock options carry significant risk whereas ESOPs are risk-free B. Earnings from stock options are exempt from income taxes whereas earnings from ESOPs are taxable C. In stock options, stocks are placed into a trust whereas ESOPs tie employees the right to by a certain number of shares of stock D. Under stock options, employees can sell their stocks whereas ESOPs do not allow employees to sell their stocks E. Stock options are usually granted to company executives whereas ESOPs are provided to all employees

E. Stock options are usually granted to company executives whereas ESOPs are provided to all employees

What should employees typically do to earn bonuses under the Scanlon plan? A. They should follow a defined set of quality standard to produce the desired outcome B. They should improve their performance year after year so that they re-earn the bonus during each performance period C. They should produce products at a rate that is much higher than the standard production time D. They should create goodwill with customers and close as many sales as possible E. They should keep labor costs to a minimum and produce as much as possible with that amount of labor

E. They should keep labor costs to a minimum and produce as much as possible with that amount of labor

Kelltech Inc. is a sales and marketing company based in Baltimore. It wants to combine the advantages of different incentive-pay plans and help employees understand the organization's goals. Which of the following will help the company accomplish this goal? A. a scanlon plan B. a dashboard C. a differential piece rate system D. an employee stock ownership plan E. a balanced scoreboard

E. a balanced scoreboard

Merit pay system decisions are based on two factors: an individual's performance rating and their: A. pay grade B. seniority C. experience D. educational qualification E. compa-ratio

E. compa-ratio

_____ refers to an incentive pay in which wage paid is higher when a greater amount is produced A. gain sharing B. merit pay C. Scanlon pay D. profit sharing E. differential piece rate

E. differential piece rate

A pay structure specifically designed to energize, direct, or control employees' behavior is known as: A. annual salary B. monthly salary C. fixed pay D. wage E. incentive pay

E. incentive pay

_______ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management systems. A. piece rate B. commission C. differential piece rate D. standard hour plan E. merit pay

E. merit pay

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country to profit from its technological know-how which is its core competency. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology? A. standard hour plan B. merit plan C. differential plan D. piecework plan E. skill-based plan

A. standard hour plan

Which of the following is a disadvantage of using incentive plans? A. Incentive plans are not very effective for jobs other than sales and services. B. Incentive plans cause dissatisfaction among the non-performing employees in the organization C. Incentive plans cannot be used to promote group and organizational performance. D. The goals of an incentive plan may interfere with other management goals E. The goals of incentive plans can seldom be linked to particular outcomes or behaviors

D. The goals of incentive plans may interfere with other management goals

Jennifer believes that the challenge of identifying appropriate performance measures for complex jobs can be resolved by implementing a gainsharing plan. Natalie argues that it is a poor incentive program in an organization that wants to encourage teamwork. Which of the following statements weakens Natalie's argument? A. It encourages employees to learn new skills from other team members B. It creates a competitive environment among the employees working in a team C. It encourages teams to take pay-related decisions D. It offers less incentives because the incentives are distributed equally among team members E. It oversimplifies the responsibilities involved in teamwork and motivates employees work hard

E. It oversimplifies the responsibilities involved in teamwork and motivates employees work hard

The ______ has required companies to more clearly report executive compensation levels and the company's performance relative to that of competitors A. National Credit Union Administration B. Commodity Futures Trading Commission C. Omnibus Budget Reconciliation Act D. Financial Industry Regulatory Authority E. Securities and Exchange Commission

E. Securities and Exchange Commission

Which of the following statements is true of using stock options as incentive pay? A. A company's performance in the stock market tends to be significantly better if its low-level employees are provided stock options B. The use of stock options ensures that managers add value in terms of efficiency and customer satisfaction C. Low-level employees with stock options are more likely to think like owners that executives who have stock options D. Stock options require an option holder to purchase the organization's stocks at its present market rate E. Stock options are rewarding for employees who exercise their option when the company's stock value has rise

E. Stock option are rewarding for employees who exercise their option when the company's stock has rise

Which of the following is method where a combination of performance measures directed toward the company's long- and short-term goals are used as the basis for awarding incentive pay? A. merit pay B. balanced scorecard C. gainsharing D. profit sharing E. scanlon plan

balanced-scorecard

How does the balanced scorecard help organizations deal with unethical behaviors of executives? A. It ensures that by rewarding the achievement of a variety of goals, temptation on the executive's part to gain bonuses by manipulating data are reduced B. It allows companies to deduct executive pay that exceeds $1.5 million C. It forces executives to focus on the company's long-term success because ESOP funds are guaranteed by the Pension Benefit Guarantee Corporation D. It mandates that an ESOP invest at least 51%of its assets in the company's own stock E. It encourages executives to hold on their stock options when the company is undergoing financial problems

A. It ensures that by rewarding the achievement of a variety of goals, temptation on the executive's part to gain bonuses by manipulating data are reduced

Which of the following is an advantage of using balanced scorecard? A. It helps employees understand the organization's goals B. It eliminates managerial effort when providing incentives to employees C. It increases the pay for all employees in the organization regardless of their performances D. It reduced employee stress because it does not focus on financial targets E. It eliminates the need to communicate the details of the plan to the employees

A. It helps employees understand the organization's goals

Harry, the HR manager at Kopi Co., has been asked to reward good performance. However, the budget allocated for rewards is limited. He therefore decides to offer raises to a few employees and spot bonuses to the remaining employees. Which of the following would further strengthen his decision? A. The organization believes that merit pay if for exceptional and not regular work B. The spot bonuses have been increased by 10 percent form the previous financial year C. The performance measures used to evaluate employees had been communicated to the employees before the start of the preview period D. The organization had decided to reward teams that worked on new types of projects E. The performance appraisals of each employee were performed by two supervisors to avoid bias

A. The organization believes that merit pay is for exceptional and not regular work

Alan, a manager at Conephase, decides to sell his shares at the current market value. He had purchased the stock at $20 per share a few years ago. However, the current market rate per share is $15. In this case, Alan should: A. avoid selling the stock and wait for the market value to be higher than $20 B. ask a lower-level employee to purchase the stocks at his price C. negotiate with stock market authorities to increase the market value D. sell his shares at the current rate or wait for the rate decrease E. apply the Scanlon plan

A. avoid selling the stock and wait for the market value to be higher than $20

A feature of an effective incentive pay plan is that it should: A. have performance measures linked to the organization's goals B. have performance measures based on employees' requirements C. be the same for all employees in the organization D. not be provided as a direct percentage of employees' performance E. encourage group performance and sideline individual achievements

A. have performance measures linked to organization's goals

Which of the following is a short-term incentive? A. return on investment B. company shares C. straight salary D. stock options E. stock purchase plans

A. return on investment

Ashance Inc., a manufacturing company, includes bonuses based on the year's profits or other measures related to the organization's goals as an incentive method. Sometimes, to gain tax advantages, the actual payment of the bonus is deferred. Which of the following is being exemplified in this scenario? A. short term incentive B. balanced scorecard C. piecework plan D. long-term incentive E. employee stock incentive plan

A. short-term incentive

Jeff owns and manages a small electronics repair store. He determines the time required by his employees to complete each task assigned by him. When employees complete the repairs in less time, they receive an amount of pay equal to that time determined by him. In this scenario, Jeff is using the: A. standard hour plan B. merit pay plan C. Scanlon plan D. straight-piecework plan E. differential piecework plan

A. standard hour plan

T/F: The balanced scorecard approach should be avoided while designing executive pay

false

What is the drawback of stock ownership as a form of incentive pay? A. Stock options do not provide any ownership to employees, instead it offers an equivalent sum B. Financial benefits mostly come when the employee leaves the organization C. The employees will not benefit even if the organization is performing well D. Employees have the right to participate in votes by shareholders, hence reducing the negotiating power of the employer E. It causes the employers to lose control over their employees

B. Financial benefits mostly come when the employee leaves the organization

Which of the following would be a reason for organizations to implement profit sharing? A. It motivates employees more than individual incentives B. It costs less when the organization is experiencing financial difficulties C. It makes employees feel that they have control over the company D. It has been established that profit sharing helps organizations perform better E. It helps employees find a direct relation between their performance and gain

B. It costs less when the organization is experiencing financial difficulties

Which of the following is an advantage of the merit pay incentive system? A. It promotes group performance instead of promoting individual behavior B. It makes the reward more valuable by relating it to economic conditions C. It is the most economical incentive system for the employers D. It provides a direct link between the work done by the employee and the amount earned E. It provides merit increases to employees solely on the basis of performance

B. It makes the reward more valuable by relating it to economic conditions

Michael, formerly a model employee at his organization, has recently begun losing interest in his work due to personal and financial issues. He has spoken to his manager about leaving the company, complaining that he hasn't been receiving enough recognition for his work of the last 12 years. In an effort to change Michael's mind, his manager decides to give him a large amount of money as an incentive. In this scenario, Michael's manager is giving him ___. A. a commission B. a retention bonus C. stock options D. an attendance bonus E. merit pay

B. a retention bonus

In the process of designing incentives, managers should make sure that: A. even the lowest performing employees are rewarded B. all the employees are paid the same amount C. employees focus only on completing the task quickly D. employees believe that the pay plan is fair E. they hire employees who consider earning Monty as their sole reason to perform well

B. all the employees are paid the same amount

Which of the following incentive plans would enable its employees to think like owners, taking a broadview of what they need to do in oder to make the organization effective? A. performance bonuses B. profit sharing C. gain sharing D. the scanlon plan E. merit pay

B. profit sharing

The link between employees' performance and pay is harder to establish in: A. Scanlon plan B. stock ownership plans C. standard hour plans D. merit pay plans E. piece rate plans

B. stock ownership plans

T/F: The costs associated with profit sharing increases substantially when the organization experience financial difficulties

false

John, a manager of a construction company, believes that a piecework plan benefits all types of work areas. However, his colleague, George, argues that a piecework plan is not suitable for a few complex jobs and that it might have a negative impact on the work production. Which of the following statements, if true, strengthens George's argument? A. It is easy to measure the output of managers using a piecework plan B. A piecework plan is not suitable for very routine, standardized jobs C. Complex jobs involve the coordination of many team members to complete tasks D. Using a piecework plan helps employee empowerment E. Incentive plans do not impact productivity when work involves complex jobs.

C. Complex jobs involve the coordination of many team members to complete tasks

Which of the following is a common condition for gainsharing to be a success in an organization? A. Employees who prefer minimum interaction and cooperation B. Employers who do not set short-term goals for employees C. Employees who value working in groups D. Low levels of cooperation and interaction E. Work environment with minimum management commitment

C. Employees who value working in groups

Which of the following is a disadvantage of a merit pay system? A. It does not provide rewards for performance in all the dimensions measured in the organization's performance management system B. Comparative pay is not considered in its evaluation C. It can quickly become expensive for company D. It does not relate the rewards to economic conditions E. It cannot be used effectively with performance appraisals

C. It can quickly become expensive for the company

Mike, the CEO of an automobile company, believes that profit sharing has increased the productivity of his organization. He feels that an incentive plan motivates employees to be more productive. Which of the following statements strengthens Mike's argument? A. Profit sharing makes employees workaholics B. Profits sharing benefits employees even if the organization makes less profits or no profit. C. Profit sharing helps employees to cooperate and to focus on organizational interests D. In profit sharing, employees contribute their base salary for the development of the organization E. In a profit-sharing plan, employees are the owners of the organization

C. Profit sharing helps employees to cooperate and to focus on organizational interests

Team awards differ from group bonuses in that they: A. encourage competition among individual employees to achieve higher bonuses B. are typically plant-wide group incentive programs C. are more likely to use a broad range or performance measures D. make payments in company stock rather than in cash E. give more importance to organizational performance than small groups' performances

C. are more likely to use a broad range of performance measures

Electrix Inc. is an electrical appliances manufacturing company. It distributes shares of stock to its employees by placing the stock in a trust managed on the employees' behalf. Which of the following has been implemented by Electrix in this scenario? A. balanced scorecard B. piecework stock plan C. employee stock ownership plan D. differential piece stock plan E. scanlon plan

C. employee stock ownership plan

QVO Financial, an auditing firm, distributes a portion of the profits, resulting from improvements in productivity and efficiency among its employees. If the company enjoys an improvement of $45,000, 60% of the improvement might be the company's share. The other 40%would be distributed among the employees in the company. Which of the following is being exemplified in this scenario? A. group bonus B. profit rate C. gainsharing D. commission sharing E. merit gain

C. gainsharing

To make merit increases consistent, administrators of merit pay programs must closely monitor the compa-ratio and the A. company' stock price in the current financial price B. number of new hires in the company C. individual's performance ratings D. average pay of the area where the organization is based E. number of grades in the pay structure

C. individual's performance ratings

The primary function of a merit increase grid is to: A. increase incentives on a year-by-year basis B. further increase the pay for those whose pay is relatively higher for their job C. make the increase consistent D. increase the employees' compa-ratio E. stabilize economic conditions

C. make the increases consistent

Songreen Inc., a firm that manufactures ready-to-eat soups, offers incentives based on an employee's performance rating and the employee's compa-ratio. Which of the following payment plans is exemplified in this scenario? A. piecework plan B. differential plan C. merit pay D. standard hour plan E. skill-based plan

C. merit pay

Retention bonuses refer to: A. the special reward programs used to satisfy the lower and middle-level managers B. annual incentives paid to daily wage workers to remain in the organization C. one-time incentives paid in exchange for remaining with the company D. the bonuses provided to employees who take long leaves without pay E. the bonuses provided to union members to withhold a strike

C. one-time incentives paid in exchange for remaining with the company

Which of the following is a long-term incentive? A. piece rate B. sales commission C. stock option D. merit pay E. group bonus

C. stock option

An employee at CellWorks who produces 10 components in an hour earns $9 ($.90 × 10) per hour, while another employee who produces 15 components earns $13.50 ($.90 × 15). This is an example of a: A. differential piece rate plan B. commission plan C. straight piecework plan D. direct commission plan E. profit sharing plan

C. straight piecework plan

What is the difference between bonuses and team awards? A. Unlike team awards, bonuses encourage competition among individuals B. Bonuses are usually given to employees who meet deadlines, whereas team awards are given only when the team as a whole meets the targets C. Bonuses are for bigger work groups whereas team awards are for small teams D. Bonuses reward attainment of goals measured in terms of physical output, whereas awards reward performance in terms of cost savings E. Unlike bonuses, team awards encourage cooperation

D. Bonuses reward attainment of goals measured in terms of physical output, whereas awards reward performance in terms of cost savings

Which of the following is a reason for ESOPs popularity? A. Employees can use ESOPs to buy their company during financial crises B. ESOPs must invest at least 51 percent of its assets in the company's own stocks C. ESOPs provide very high risk-free retirement income D. ESOPs provide tax advantages to employers E. The employees are provided with many more stocks than they actually own

D. ESOPs provide tax advantages to employers

Employees should participate in pay-related decisions. This will most likely help in the success of incentive plans, and the plans are more likely to influence employee behavior as desired. Which of the following statements weakens this argument? A. Employees should be a part of the human resource department to be involved in pay-related decisions B. It is difficult to monitor an employee'w work output when decisions are made by the employee C. It will have a negative impact on the top-level management of the company D. Employees will make decisions that are in their best interests at the expense of the organization's interests E. When employees become more involved in pay decisions, they neglect the work assigned to them

D. Employees will make decisions that are in their best interests at the expense of the organization's interests

An organization wants to provide its employees information about what its goals are and what it expects employees to accomplish. It is planning to implement an incentive plan that helps employees understand the organization's goals. Which of the following should be used by this organization? A. a retention bonus B. piecework rate system C. the Scanlon plan D. a balanced scorecard E. a merit pay system

D. a balanced scorecard

Which of the following statements is true about a balanced scorecard? A. It increases cooperation but does little to motivate day-to-day effort or to attract and retain top individual performers B. It allows employees to buy their company when it is experiencing financial problems C. It is the only measure used by top management to measure the performance of HR professionals and managers D. It encourages employees to compete at the expense of cooperating to achieve organizational goals E. It combines the advantages of different pay plans and helps employees understand the organization's goals

E. It combines the advantages of different pay plans and helps employees understand the organization's goals

Maria, an employee of a finance company, believes that purchasing the company's stock will always be profitable regardless of the stock's market value. She feels that stock options are long- term incentive plans that make employees part owners of the organization. Which of the following statements contradicts Maria's belief? A. Offering stock options discourages employees from thinking like owners B. A large percentage of top and middle managers avoid stock options C. A company does not allow its employees to purchase its own stock D. Stock options are not profitable to employees E. Stock prices in the market may fall below their purchases value

E. Stock pries in the market may fall below their purchases value

Gerald, the CEO of Logiworks, decides to scrap the current individual incentive pay scheme for a group incentive structure in an effort to increase the overall benefit to the organization. Which of the following statements, if true, would weaken his decision? A. The move was a response to problems that arouse out of a poorly constructed bonus plan B. The organization was divided into departments whose managers were rewarded as one group C. Most of the employees had exercised their stock options before this change D. The employees in the company are required to work in teams in order to accomplish their goals E. The employees were unaware of the impact of their actions on the company's finances

E. The employees were unaware of the impact of their actions on the company's finances

T/F: A merit pay incentive system is used to attract employees who are more team-oriented

false

T/F: Stock options are best suited to motivate day-to-day efforts or to attract and retain top individual performers

false

T/F: The balanced scorecard helps employees understand the organization's goals and how they can contribute to these goals

true

T/F: Under incentive pay, piecework rates are most suited for routine, standardized jobs with output that is easy to measure

true