Management 461 Ch. 10
In the long run, merit bonuses cost employers less than merit pay.
True
Individual incentives yield higher productivity gains than group incentives.
True
Which of the following does NOT provide for incentives based on standards that are expressed in terms of time period per unit of production? Gantt plan Rowan plan Halsey 50-50 method Merrick system
Merrick system
When a firm is _____ on business risk, and its outcomes are _____, its performance is more likely to be higher without any incentive plans. variable; certain high; uncertain low; certain low; invariable
high; uncertain
In gain-sharing plan formulas, _____ are in the numerator and _____ are in the denominator. productivity measures; inputs productivity measures; labor inputs costs; revenues labor inputs; productivity outcomes
labor inputs; productivity outcomes
Components identified as vital to the success of both Scanlon and Rucker plans are: top management support and primary focus on wage incentives. a flexible pay out formula and low turnover rates. union and top management support. a productivity norm and effective worker committees.
a productivity norm and effective worker committees
The trend in recent variable-pay design is to combine the best of _____ and _____ plans. individual; group gain-sharing; profit-sharing Halsey 50-50; Rowan balanced scorecard; cash profit sharing
gain-sharing; profit-sharing
A _____ plan requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action. standard hour Rowan Bedeaux Merrick
Bedeaux
The Rowan plan uses a standard that is purposefully set high requiring high performance levels.
False
Which of the following is NOT a long-term incentive plan? ESOPs Broad-based option plans (BBOPs) Improshares Performance plans
Improshares
An incentive system with three piecework rates is the _____ plan. Taylor Gantt Halsey 50-50 Merrick
Merrick
_____ have the disadvantage of requiring employees to spend money to obtain their incentive. Cash profit sharing plans Balanced scorecard plans Stock options plans Deferred profit sharing plans
Stock options plans
Which of the following is NOT an advantage of team incentives? Stimulates problem solving May better reflect how work is performed Easy to set equitable targets for all teams Minimizes distinctions between team members
Easy to set equitable targets for all teams
For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the _____ plan. Halsey 50-50 Gantt Taylor Rowan
Gantt
Scanlon plans are designed to lower labor costs by lowering the level of a firm's activity.
False
The free-rider problem is common in firms using individual incentive plans.
False
High performance ratings are nearly always statistically related to high merit increases.
True
Many variable-pay plans have some form of profit trigger linked to revenue growth or profit margins.
True
Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants to introduce a variable-pay plan that is easy to understand and does not cost much to administer. Which of the following variable-pay plans is Maxwell most likely to introduce? Balanced scorecard plan Gain-sharing plan Stock ownership plan Cash profit sharing plan
Cash profit sharing plan
Menthorp Inc. wants to design a variable-pay plan that fosters teamwork and business knowledge of its employees. In order to ensure maximum motivation, Menthorp wants its variable-pay plan to show a clear performance-reward link. Which of the following plans is most suitable for Menthorp? Gain-sharing plan Cash profit sharing plan Stock ownership plan Stock options plan
Cash profit sharing plan
Which of the following is the most commonly used team incentive performance standard? Quality of goods Customer satisfaction measures Financial performance Quality of services
Customer satisfaction measures
An advantage of group incentives is that it leads to increased line-of-sight.
False
Which of the following is an advantage of providing stock ownership options as variable pay to employees? It reinforces team identity. It is the simplest type of variable-pay plan. It defers a portion of taxes to employees. It provides a direct pay-performance link.
It defers a portion of taxes to employees
Which of the following is a disadvantage of gain-sharing plans? Payouts can occur even if a company's financial performance is poor. Pay-performance link is indirect. Employees are required to put up money to exercise grants. Mandatory stock ownership required by gain-sharing plans can increase turnover rates.
Payouts can occur even if a company's financial performance is poor
A group performance-based pay plan is superior to an individual plan when production methods and labor mix must change to meet changing pressures.
True
One common feature of all types of incentive plans is: an established standard of performance that is used to determine the magnitude of the incentive pay. a sharing contract between the employees and employers, which stipulates that the losses incurred by the companies will be shared by both employees and employers. the established formula that specifies the maximum percentage of base pay allocated as incentives. a risk-sharing plan that increases pay depending upon the turnover rate of a company.
an established standard of performance that is used to determine the magnitude of the incentive pay
A team leader with a free-rider problem in his team can most likely maximize the performance of his team by: instructing them to do their best. specifying performance levels and due dates. assigning tasks only to the top performers in the team. punishing free riders who fail to meet standards.
specifying performance levels and due dates
If you had repair work done on your car, the shop most likely used the _____ plan to pay the mechanic. Bedeaux standard hour Halsey 50-50 straight piecework
standard hour
TreeDen Corp. experiences an increase in employee turnover rate. Upon investigating, it discovers that employees are dissatisfied with the company's pay. Employees cannot see a direct link between their performance and their pay. They are also unhappy about having to pay out of their pockets to obtain grants. In this case, TreeDen is most likely using a _____. stock ownership plan cash profit sharing plan gain-sharing plan team incentive plan
stock ownership plan
Paying a dime for every bottle collected and turned into a collection center is an example of a: standard hour plan. Merrick system. straight piecework system. Rowan plan.
straight piecework system
The most frequently used incentive system is the: standard hour plan. straight piecework system. Merrick system. Taylor differential piece-rate plan.
straight piecework system
All of the following support the use of individual incentives EXCEPT: the independent nature of task accomplishment. the high commitment levels of workers to their profession. the readily apparent performance standards. the presence of a union.
the presence of a union
Surveys show the most popular type of variable pay plans are _____. stock option plans gainsharing plans individual incentive plans special recognition plans
special recognition plans
Gain-sharing plans do not to use a historical standard to set productivity standards since environmental conditions can change quickly.
False
Unions prefer individual incentive pay plans to group incentive pay plans since members can earn more money.
False
All incentive plans share an established standard against which worker performance is compared to determine the magnitude of the incentive pay.
True
Employees working under individual incentive plans tend to resist the introduction of new technology.
True
Merit pay is a pay-for-performance plan used for more than three-quarters of all exempt, clerical, and administrative employees.
True
Standard hour plans are better for nonrepetitive jobs requiring numerous skills for completion.
True
A major problem in group incentive plans is that performance targets are not correctly set.
True
Which of the following statements is true of individual spot awards? They are an example of long-term incentives. They are more expensive than merit pay increases. They are given to employees for exceptional performance as an add-on bonus. They are given to all employees as a one-time cost-of-living adjustment.
They are given to employees for exceptional performance as an add-on bonus
Which of the following is NOT true of merit bonuses? They are viewed as less of an entitlement than merit pay. They are more expensive than merit pay in the long run. Employees dislike them. They are thought to be a substitute for merit pay.
They are more expensive than merit pay in the long run
Which of the following is NOT true about individual spot awards? Smaller companies may be more casual about recognition for spot awards. Someone in an organization alerts top management about performances deserving of an award. A majority of companies do not feel that these awards are effective. Smaller companies are more subjective about deciding the size of the award.
a majority of companies do not feel that these awards are effective
The percentage of companies using some form of variable pay is declining because many employees prefer base wages.
False
Which of the following is an advantage of gain-sharing plans? They are the simplest type of variable-pay plan. They allow payouts to occur even if a company's financial performance is poor. They are administratively easy to implement. They increase employees' knowledge of business.
They increase employees' knowledge of business
A combination plan often favored by CEOs who don't like to make payouts when the company loses money is a completely self-funding plan.
True
The authors argue that for merit pay to live up to its potential, all of the following should be done EXCEPT _____. using more peer raters than supervisor raters improving the accuracy of appraisals allocating enough merit money to truly reward performance ensuring the size of the merit increase differentiates across performance levels
using more peer raters than supervisor raters
