MGT of Compensation Chapter 18

Rank the steps involved in WorldatWork's six-stage process of communication in the correct order.

1. Define the objectives of an employee communication program 2. Obtain information and identify the facts 3. Select communication tools and media 4. Conduct communication sessions with employees 5. Evaluate the success of an employee communication program

Changes in prices in the product and service markets (methods to measure factors that influence wages in the labor market)

This concept is measured by certain government indexes such as the consumer price index (CPI).

Changes in wages in labor markets (methods to measure factors that influence wages in the labor market)

This concept is measured through pay surveys.

Providing consultation to managers (descriptions of steps involved in bottom-up budgeting)

This involves giving advice and salary information services to managers upon request.

Distributing forecasting instructions and worksheets (descriptions of steps involved in bottom-up budgeting)

This involves providing managers with the forms and directives necessary to preplan raises.

Instructing managers in compensation policies and techniques (descriptions of steps involved in bottom-up budgeting)

This involves training managers in the concepts of a sound pay-for-performance plan and in standard company remuneration techniques.

Average salary (fixed payments) level plus variable compensation payments such as bonuses, gain sharing, stock plans, and/or profit sharing comprise ____ ____ ____

average cash compensation

The variable component (features of components of average cash compensation)

This varies in line with business performance.

Which of the following is true of outsourcing?

Cost savings are a major potential advantage of outsourcing.

The fixed component (features of components of average cash compensation)

This is generally paid irrespective of business performance.

What is the role of pay in strategic changes in business strategy?

Compensation has to be realigned with changes in business strategy.

A decentralized strategy (features of types of compensation strategies)

This refers to a management strategy of giving separate business units the responsibility of designing and administering their own systems.

Instances where employees are paid below the minimum ranges are referred to as ____ ____ ____

green circle rates

Which of the following is true of creating a compensation budget?

It requires trade-offs.

Rank the steps involved in top-down budgeting in an organization in the correct order.

1. Pay increase budget for the entire organization is estimated by top management 2. A total budget is allocated to each manager 3. Managers distribute a total budget among subordinates

Which of the following statements is true of bottom-up budgeting?

The budget forecasted by managers represents a plan, and deviations due to unforeseen changes are common.

Software packages that process transactions (features of types of software packages for compensation enterprises systems)

These standardize forms, run analysis, and generate reports at the click of the mouse.

A communication approach (features of approaches of communicating pay information to employees)

This approach focuses on explaining practices, details, and the way wages are ascertained.

A decentralized strategy (features of types of compensation strategies)

This compensation strategy and function is more likely to be found in organizations that are larger and/or compete in different product (or geographic) markets.

A centralized strategy (features of types of compensation strategies)

This compensation strategy and function is more likely to be found in smaller and/or single line of business organizations.

The cost of living (methods to measure factors that influence wages in the labor market)

This concept is measured by examining the personal expenditures of each employee.

Checking data and compiling reports (descriptions of steps involved in bottom-up budgeting)

This involves auditing the pay raises forecasted by managers to ensure that they do not exceed the pay guidelines and are consistent with appropriate ranges.

A centralized strategy (features of types of compensation strategies)

This refers to a management strategy which positions the design and administration obligations at corporate headquarters.

In the context of the factors that influence wages in the labor market, which of the following statements is true of the consumer price index (CPI)?

The CPI measures changes in prices over time.

A marketing approach (features of approaches of communicating pay information to employees)

This approach focuses on strategy, values, and benefits of overall policies and may be silent on details such as range maximums, increase guides, and the like.

Communication portals (features of types of software packages for compensation enterprises systems)

These help managers and/or workers understand compensation policies and practices by answering frequently asked questions and describing how compensation systems affect their pay.

Software packages that support manager self-service (features of types of software packages for compensation enterprises systems)

These help managers pay their workers appropriately.

A shortage of business-related knowledge among compensation managers restricts the usefulness of compensation software.

True (limits the usefulness of compensation software and limits the contribution of compensation management.)

In the past, financial planning associated with managing compensation was solely about costs.

True (perhaps because costs are tangible and easy to measure, whereas the returns generated by compensation strategy may often be intangible and harder to quantify)

What are the factors included in the labor cost model?

-Hours worked -Cash compensation -Number of employees (also benefit costs)

Which of the following are headcount reduction strategies that are used by organizations to cut labor costs?

-Layoffs -Exit incentives

The turnover effect is also referred to as ____

churn

How is the turnover effect calculated?

Annual turnover multiplied by the planned average increase

In the context of managing labor costs, it is a viable option to _____ when the costs of fixed benefits are high.

add overtime

A typical approach to top-down budgeting is planned ____-____ ____ , which is essentially the percentage increase in average pay for the unit that is planned to occur.

pay-level rise

In order to seek bankruptcy protection from creditors, some companies have eliminated _____.

defined benefit (pension) plans

Decisions to raise the average pay level of employees is in part a function of an organization's _____.

financial circumstance

In order to reduce benefits costs, most companies have recently resorted to _____.

suspending their matching contributions to employee 401(k) plans

Activities that are not unique to an organization and those that can be done cheaper (and perhaps also better) by an outside provider are called ____ ____

transactional activities

In the context of increasing the average pay levels of employees, the _____ recognizes the fact that when workers depart (through layoffs, quitting, retiring), they are usually replaced by workers who earn lesser wages.

turnover effect

The design of ranges and the evaluation of jobs need not be reexamined if red circle rates become prevalent throughout an organization.

False (If red circle rates become common throughout an organization, then the design of the ranges and the evaluation of the jobs should be reexamined.)

What are the problems associated with headcount reductions?

-Regulatory requirements make it difficult to make targeted cuts. -Workforce reductions, if not handled well, can be detrimental to employee relations. -Owing to increases in unemployment insurance taxes, workforce reductions are costly in tangible terms up front. -Organizations with greater workforce reductions experience greater voluntary turnover.

Software packages that support employee self-service (features of types of software packages for compensation enterprises systems)

These help workers access their personal information, allocate savings between value or growth investment funds, make choices about which health care coverage they prefer, and access vacation schedules.

In the context of raising average pay level of employees, financially troubled employers increase employees' copays and deductibles for benefits as a last resort.

False (Often as a last resort, firms decrease base wages (as well as variable pay).)

Shifts in pay mix do not reflect changes in business strategy and restructuring.

False (Pay is a powerful signal of change; changing people's pay captures their attention. At a broader level, pay changes can play two roles in any restructuring. Pay can be a leading catalyst for change or a follower of change.)

Which of the following is a feature of broad bands?

They are accompanied by external market "reference rates."

In the context of allocating a salary budget to subordinates, some companies use forced distribution approaches to minimize the number of employees placed in low performance categories.

False (limited fund of money that each manager has to allocate to subordinates. To limit the number of employees placed in high performance categories (and thus the number of employees receiving the largest merit increases), some companies used forced distribution approaches.)

____ ____ ____ guarantee that different managers grant consistent raises to employees with similar performance ratings and in the same position in their ranges.

merit increase guidelines

In the context of embedded controls, which of the following is meant to offer managers greater flexibility compared to a grade-range design?

Broad bands