Chapter 10

Variable pay as a percent of payroll is ___ percent

12%

If you had repair work done on your car, the compensation system the shop uses to pay the mechanics is most likely the ___ plan

?

In which of the following incentive pay plans does the wage rate not increase for production above the standard?

?

What does not use the time period per unit of production to determine the rate?

?

What is not true about individual spot awards?

A majority of companies do not fell that these rewards are effective.

Surveys show that the most popular type of variable pay plan is

Gainsharing

Compensation security is highest for workers who fail to complete tasks within the standard time under the ___

Gantt plan

A___ plan divides a task into simple actions and determines the time an average worker takes to complete each action

bedeaux

All of the following are true regarding merit pay except

merit pay tends to cause higher performers to quit.

Is greater trust between workers and management an advantages of individual incentive plans?

no

Paying a dime for every bottle collected and turned into a collection center is an example of

straight piecework

The authors argue that for merit pay to live up to its potential the following should not be done

use more peer than supervisor raters.

What is the trend in team incentive plans?

Historically, financial measures have been the most widely used performance indicator for group incentive plans. Increasingly, though, top executives express concern that these measures provide a financial picture rather than one of operating effectiveness. Managers are increasingly using the balanced scorecard to offset this challenge. The balanced scorecard evaluates strategic measures that fall into four categories: financial results, process improvements, customer service, and innovation.

What is the difference between success-sharing plans and risk-sharing plans?

In success-sharing plans, employee base wages are constant and variable pay adds on during successful years. If the company does well, you receive a predetermined amount of variable pay. If the company does poorly, you simply forgo any variable pay—there is no reduction in your base pay, though. In a risk-sharing plan, base pay is reduced by some amount relative to the level that would be offered in a success-sharing plan. At-risk plans shift part of the risk of doing business from the company to the employee.

Discuss the plans that provide for variable incentives linked to a standard expressed as a time period per unit of production.

In the Halsey 50-50 plan, an allowed time for a task is determined via time study. The savings from completion of a task in less than the standard time are allocated 50-50 (the most frequent division) between the worker and the company. The Rowan plan is similar to the Halsey plan in that an employer and employee both share in savings resulting from work completed in less than standard time. The major distinction in this plan, however, is that a worker's bonus increases as the time required to complete the task decreases. The Gantt plan differs from both the Halsey and the Rowan plans in that the standard time for a task is purposely set at a level requiring high effort to complete. Any worker who fails to complete the task in the standard time is guaranteed a pre-established wage.

Why do companies prefer lump-sum pay over merit pay increases?

Lump-sum bonuses can be considerably less expensive than merit pay over the long run. Analysis says that over a fixed period, the increase in merit pay will higher than it is under a lump-sum bonus plan. By giving lump-sum bonuses for several years, a company is essentially freezing base pay. Therefore, cost-conscious firms report switching to lump-sum pay. It also should be no surprise that employees aren't particularly fond of lump-sum bonuses.

How can merit pay systems be better managed?

Management merit pay systems requires a complete overhaul of the way raise are allocated: improving the accuracy of performance ratings, allocating enough merit money to truly reward performance, and making sure the size of the merit increase differentiates across performance levels.

An incentive system with 3 piecework rates is the ___

Merrick plan

A penalty for poor performance rather than reward for good is an example of

Reverse incentive plan

What are the basic dimensions on which individual incentive plans vary?

The first dimension on which incentive systems vary is in the method of rate determination. Plans set up a rate based either on units of production per time period or on time period per unit of production. The second dimension on which individual incentive systems vary is the specified relationship between production level and wages.

What are the key elements in designing a gainsharing plan?

The following issues are key elements in designing a gain-sharing plan: • Strength of reinforcement • Productivity standards • Sharing the gains split between management and workers • Scope of the formula • Perceived fairness of the formula • Ease of administration • Production variability

Discuss SVOP

Scanlon plans are designed to lower labor costs without lowering the level of a firm's activity. Incentives are derived as a function of the ratio between labor costs and sales value of production (SVOP). The SVOP includes sales revenue and the value of goods in inventory.

The most frequently used incentive system is the

Straight piecework

Standard hour plan is to Rowan plan as straight piecework is to _____ plan

Taylor

What are the advantages of using the productivity/gainsharing methods of group incentives?

The advantages of using the productivity/gain sharing methods are: • Awards that share economic benefits of improved productivity, quality, or other measurable results • Focus on group, plant, department, or division results • Designed to capitalize on untapped knowledge of employees

Discuss the trends that are leading to the increased interest in variable pay.

The greater interest in variable pay probably can be traced to two trends. First, the increasing competition from foreign producers forces American firms to cut costs and/ or increase productivity. Second, today's fast-paced business environment means that workers must be willing to adjust what they do and how they do it. Failure to adapt to new technologies, new work processes, and new work relationships could lead to possible layoffs and terminations. The ability and incentive to learn these come partially from reward systems that more closely link worker interests with the objectives of the company

What is not true of lump-sum bonuses

They help maintain competitive pay position relative to competitors

It is observed that ___ is/are commanding a larger share of the total compensation for all employee groups?

Variable pay

The common feature to all types of incentives plan is

a standard of performance to determine magnitude of incentive pay

Usually ___ are awarded for exceptional performance, often on special projects or for performance that so exceeds expectations as to be deserving of an add-on bonus?

individual spot awards