Chapter 13 PDF

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The Commission Plus Bonus Plan Applications

- One that uses brokers or independent sales reps - stockbrokers and bond traders

The Commission Plus Bonus Plan Disadvantages

- Perceived equity of the year end bonus - would quit - hard to retain these high producers when they attribute their smaller bonus to something outside their control (ex: bad territory) - recruiting adv can be a liability when you lose your best salespeople to competitors - salespeople could develop a mercenary attitude toward year-end to achieve the bonus- could affect customer relationships

benefits of ESOPs

-builds pride and commitment to the organization -employees participate somewhat in corporate-level decision making

Attitudes that influence the success of incentive pay

-whether employees value rewards -if employees think the pay plan is fair

3 Expense Reimbursement Programs

1) Unlimited Plans 2) Per Diem Plans 3) Limited Repayment Plans t

Which of the following is a drawback of a standard hour plan? A. It does not focus on quality or customer service. B. It escalates costs for an employer in the long term. C. It is applicable only in team-based work environments. D. It helps employees work at a comfortable pace. E. It does not pay workers extra for work done in less than the standard time.

A. It does not focus on quality or customer service.

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

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

_____ refers to an incentive pay in which the wage paid is higher when a greater amount is produced. A. Profit sharing B. Differential piece rate C. Gain sharing D. Scanlon pay E. Merit pay

B. Differential piece rate

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

_____ gives the biggest pay increases to the best performers and to those whose pay is relatively low for their job. A. Piecework pay system B. Merit pay system C. Standard hour plan D. Differential plan E. Skill-based plan

B. Merit pay system

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

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

_____ 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

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

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

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. commission plan. B. differential piece rate plan. C. direct commission plan. D. profit sharing plan. E. straight piecework plan.

E. straight piecework plan.

Stan, the CEO of a company, considers dropping medical insurance from the list of benefits provided to employees. Alisha, the operations director, disagrees with Stan by stating that medical insurance is a high-value benefit. Which of the following supports Alisha's statement?

Employees usually realize that surgery or a major illness can be financially devastating.

Generally, team awards do not use cost savings as a performance measure.

FALSE Team awards are similar to group bonuses, but they are more likely to use a broad range of performance measures, such as cost savings, successful completion of a project, or even meeting deadlines.

Which of the following is most likely a consequence of paying most or all of a salesperson's compensation in the form of commissions?

It encourages the salesperson to focus on closing the sale

Jack has to decide between two jobs that provide equal pay. He decides to compare the health care benefits provided by both jobs to arrive at a decision. He wants to choose the job that offers him a flexible spending account over the job that offers him managed care. Which of the following statements best supports Jack's preference?

Money in flexible spending accounts is not taxed, so employees get more take-home 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?

Profit sharing

Identify the disadvantage of using profit sharing plans.

Profit sharing is not directly linked to individual behavior.

Risks involved will directly affect employees' retirement income.

The balanced scorecard helps employees understand the organization's goals and how they can contribute to these goals.

TRUE Not only does the balanced scorecard combine the advantages of different incentive-pay plans, it helps employees understand the organization's goals.

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

Which statement is true of equal employment opportunity laws?

The goal of these laws is for employers to provide equal pay for equal work.

Which of the following is a disadvantage of using incentive plans?

The goals of an inventive plan may interfere with other management goals. In the process of designing incentives, managers should make sure that:

Rita, who recently moved to a new city, evaluates several insurance options from her new employer. Owing to her recent medical issues, she wants to choose her health care providers, even if seeing them costs more than seeing the providers in a specific insurance network. Which of the following health care plans is Rita most likely to find suitable for her needs?

a preferred provider organization

The flexibility of bonuses makes it easy to determine what kind of _________ is being rewarded

behavior

incentive pay

forms of pay linked to an employee's performance as an individual, group member, or organization member

The CEO of Logiworks asked the human resource manager, April, to propose an approach to incentive pay. April proposes that the company create a gainsharing plan. What action(s) by the company will best increase the likelihood that gainsharing will succeed?

sharing data about costs and setting up time for employees to interact

The CEO of Workforce asked the human resource manager, May, to propose an approach to incentive pay. May proposes that the company create a gainsharing plan. What action(s) by the company will best increase the likelihood that gainsharing will succeed?

sharing data about costs and setting up time for employees to interact

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

true

Straight Commission Advantages

- Foster independence of action and provide the max possible incentive - easy to understand, simple to calculate wages and administer the plan

Popular basis for determining bonus pay

- Quota - Average gross margin achieved by the rep - # of new accounts, unit sales, and overall comp performance

disadvantages of ESOPs

-carry a risk for employees -problems with performance can take away significant value -funds are not guaranteed -can take away from retirement income

types of ownership programs

-stock options -employee stock ownership plans

By law, what is the minimum percentage of assets that an employee stock ownership plan (ESOP) must invest in its company's stock?

Merit Pay

A system of linking pay increases to ratings on a performance scale; advantage is system wide reward/raise system and disadvantage is tied to economic conditions and pay ranges

The differential piece rates system refers to:

An incentive pay in which the piece rate is higher when a greater amount it produced.

Standard Hour Plan

An incentive plan that pays workers extra for work done in less than a preset "standard time"; advantage is instrumentality and disadvantage is quality not rewarded

Straight commission plans are plans which:

Are common among insurance and real estate agents.

Team awards differ from group bonuses in that they:

Are more likely to use a broad range of performance measures.

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

The Commission Plus Bonus Plan

Combines incentives of a commission plus special rewards for meeting objectives

Tradition

Custom of using (or not using) outcome oriented systems will make such contracts more (or less) likely

Kotochi 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 condition will contribute to employees' feeling that the organization's incentive pay plans are fair and something to pursue?

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

For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. Which of the following statements describes a characteristic of a well-designed plan?

Employees value the rewards or incentives that are being offered.

The balanced-scorecard approach should be avoided while designing executive pay.

False

Which of the following incentive plans are specifically designed to promote group performance?

Gainsharing

Long-Term Incentives

Includes stock options and stock purchase plans; Rationale is that executives will want to do what is best for the organization because that will cause the value of their stock to grow

To make the merit increases consistent, administrators of merit pay programs must closely monitor the compa-ratio and the

Individuals performance ratings

Which of the following is a disadvantage of using group bonuses?

It could result in competition among groups.

Which of the following best defines job withdrawal?

It is a set of behaviors with which employees try to avoid the work situation physically, mentally, or emotionally.

FastForward Technology depends heavily on a workforce of software engineers, systems analysts, and coders. Which statement best explains why FastForward would offer its employees paid maternity and paternity leave?

It makes the company more attractive to workers who are in high demand.

Risk Aversion

Makes outcome oriented compensation less likely

Which of the following types of incentive plans are used to reward individual performance?

Merit Pay

_____ gives the biggest pay increases to the best performers and to those whose pay is relatively low for their job.

Merit Pay System

_____ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.

Merit pay

_____ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.

Merit pay

Team Selling Plans

More common- due to customer demands and an increasingly complex business environment

In 2014, a company employee received an option to purchase the company's stock at $45 per share. If the stock is trading at $40 a share in 2016, the employee will most likely:

Not bother to exercise the options.

Retention Bonuses

One time incentives paid in exchange for remaining with the company

Retention bonuses refer to:

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

Straight Salary

Paying a fixed amount each pay period Adv: more control over wage levels+ salesperson's activities. Easier for sales manager to divide territories and reassign salespeople to new areas. FC so portion of wage expense decrease as sales increase. Security. Disadv: do not provide strong incentives to exert extra effort to meet needs of comp. Much closer supervision, salary plans often overpay least productive members, and cause morale problems

Equity Theory

People strive for fairness and justice in social exchanges

Choose the correct statement about personal dispositions.

People with a positive core self-evaluation tend to experience job satisfaction.

A major problem with ESOPs is that: A. they carry a significant risk for employees. B. employees are not allowed to participate in votes by shareholders. C. the stocks within the trust are too widely diversified to earn high returns. D. any earnings from the trust holdings are taxed at an extremely high rate. E. they result in reduced profitability for the employees.

A. they carry a significant risk for employees.

Outcome Uncertainty

Agents are less willing to have their pay linked to profits to the extent that there is a risk of low profits; they would prefer a behavior oriented system

Which of the following is a short-term incentive?

Return on investment

Stock Options

Rights to buy a certain number of shares of stock at a specified prices; drawback is that it can be costly if stock price falls

Risks involved will directly affect employees' retirement income.

Piecework rate plans are most suited for

Routine jobs

Ryan and Peggy hold the same position at Vineyard Rustica. However, Ryan earns more than Peggy. In the context of pay structure, which statement justifies the organization's decision to pay Ryan more than Peggy?

Ryan works the night shift, and night hours are less desirable for most workers.

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:

Straight Piecework Plan

A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals.

TRUE A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay.

An organization employs Rick, a bilateral amputee, to work as a research analyst. When Sarah, the organization's chief advisor, becomes aware of this, she argues that the organization is going to experience legal challenges. According to the Americans with Disabilities Act, which of the following will strengthen Sarah's argument?

The organization switched to a risk-based policy after hiring Rick.

Valence

The value a person places on the rewards he or she expects to receive from an organization

Organizations customize their balanced scorecards according to what?

Their markets, products, and objectives

Which of the following statements is true about the differential piece rate system?

There is a direct link between how much work employees do and the amount they earn.

Which statement is true of compensable factors?

They are the characteristics of a job that a firm values and chooses to pay for.

Which of the following is a similarity between group bonuses and team awards?

They both encourage members to cooperate so that they can achieve their goals.

A major problem with ESOPs is that:

They carry a significant risk for employees

Which of the following statements is true about standard hour plans?

They encourage employees to work as fast as they can.

Profit- Based Commissions

To ensure a sales force is working ot achieve the highest profits possible Ex: Gross margin commission plan

Merit Increase Grid

Tool to ensure fairness and consistency in applying merit raises

Executive pay has drawn public scrutiny in recent years. Which statement best explains the reason?

Top executives' pay is much higher than average workers' pay.

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

True

A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals.

True.

Measurable Job Outcomes

When outcomes are more measurable, outcome oriented systems are more likely

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

A. Employees who value working in groups

Brendan, the HR manager at Baretta & Co., is trying to implement an effective group incentive plan which measures increases in productivity and effectiveness and distributes a portion of its earnings to all employees. In this case, Brendan should apply the incentive scheme of _____.

gainsharing

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program.

gainsharing

commissions

incentive pay calculated as a percentage of sales

profit sharing

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

A pay structure specifically designed to energize, direct, or control employees' behavior is known as

incentive pay.

A pay structure specifically designed to energize, direct, or control employees' behavior is known as:

incentive pay.

Employee participation can contribute to the success of an

incentive plan

Most pay-related communications come through

individual discussions between employees and their supervisors.

To make the merit increases consistent, administrators of merit pay programs must closely monitor the compa-ratio and the:

individual's performance ratings.

Terminating an employee for the use of illegal drugs is an example of a(n) __________ turnover.

involuntary

Ryan, an employee at GoBiz Inc., is known for his short-tempered and argumentative nature. During a heated exchange at work one day, Ryan makes a derogatory gesture toward his manager, which causes Ryan to be fired. This scenario is an example of

involuntary turnover

Compa-ratio

is defined as the ratio of average pay to the midpoint of the pay range.

The aspects of a task—namely the complexity of the task, the degree of physical strain and exertion required, and the value an employee places on the task—have particular significance when they are viewed as linked to

job dissatisfaction

Under the FLSA, exempt status of employees depends on their

job responsibilities

Which element establishes an organization's pay structure?

job structure and pay level

Kolese Inc., a manufacturing company, includes stock options and stock purchase plans in executive pay. 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?

long-term incentive

To improve job satisfaction, organizations can

make jobs more complex

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

Bonuses for group performance tend to be for __________ work groups

smaller -reward members for attaining a specific goal

The pay ratio reporting policy, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that companies report the ratio of their average worker's pay to that of

the CEO

A major problem with ESOPs is that:

they carry a significant risk for employees.

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

true

Instrumentality

An individuals beliefs regarding the likelihood of being rewarded in accord with his or her own level of performance

Law of Effect

Behavior with favorable consequences is repeated, behavior with unfavorable consequences disappears

What is the difference between bonuses and team awards?

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

How can agency costs be minimized?

By the principal choosing a compensation system that helps align the interests of the agent with the interests of the principals

advantages of merit pay

-makes the reward more valuable by relating it to economic conditions -provides a method for warding performance in the behaviors the organization desires

Types of incentives

-piecework rates -standard hour plans -merit pay -individual bonuses -sales commissions

Two important ways organizations measure their performance

-profits -stock price

By law, what is the minimum percentage of assets that an ESOP must invest in its company's stock?

51.

Helen is a marketing manager at a local equipment manufacturer. She and her husband know that saving for college for their 4-year-old twin boys is a challenge. Her employer recently implemented a college tuition plan that lets parents and other family members defer taxes on their contributions to the plan. What is the type of plan recently implemented?

529 savings plan

In your job analysis of the salesperson's activities, you discover that a significant level of activity of a successful salesperson includes taking orders for inventory replenishment, equipment installation and maintenance, and shelf-management programs. Based on this analysis you know that a larger percentage of the salesperson's pay should be _____________ as compared to ______________ for the best results. a. incentive, salary b. commission, bonus c. salary, commission d. commission, salary e. none of the above

c. salary, commission

When more than one individual works together to make a sale, the selling process is described as: a. networked commissions. b. grouped territories. c. team selling. d. cross-functional territories. e. none of the above.

c. team selling.

Disadvantages of paying straight salary include all of the following except: a. not providing strong incentives for extra effort. b. they are fixed costs. c. they are a relatively insecure form of payment, as compared to commission. d. they overpay the least productive members of a sales team. e. new trainees may earn almost as much as experienced salespeople with much less productivity.

c. they are a relatively insecure form of payment, as compared to commission.

A pay policy line

can be generated using a statistical method called regression analysis.

Paying a salesperson's compensation in the form of commissions encourages them to focus on

closing sales

Conducting personal business online during work hours is called

cyberslacking

__________ tends to help give the sales force the needed push to sell complex products or services and can be used to redirect salesperson efforts toward specific product lines; under this plan administrative costs tend to be high. a. Straight commission. b. Straight salary. c. Salary plus commission. d. Salary plus commission plus bonus. e. None of the above.

d. Salary plus commission plus bonus

Despite some obvious advantages of straight commission, it has a number of drawbacks which include: a. encourages salespeople to secure only the best accounts in their territories. b. non-selling activities are apt to be neglected. c. salespeople are tempted to sell themselves rather than the company. d. both b and c of the above. e. all of the above.

e. all of the above.

Rashana is a human resource specialist at Piper Co., a business consulting company. To support human resource planning, Rashana monitors trends in the Consumer Price Index. In recent months, the CPI has been rising at an increasing rate. What can Rashana predict based on this information?

A rising cost of living will lead workers in the labor market to seek higher pay.

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

________ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.

Gainsharing

Sheldon, the manager of a manufacturing firm, wants the organization to perform better. He expects his employees to think more like owners, taking a broad view of what they need to do in order to make the organization more effective. In this case, Sheldon should:

Implement a profit-sharing incentive plan.

The many kinds of incentive pay fall into three broad categories: _____

Incentives linked to individual, group, or organizational performance.

Which of the following is a disadvantage of a merit pay system?

It can quickly become expensive for the company.

Which of the following statements is true about a balanced scorecard?

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

Which of the following would be a reason for organizations to implement profit sharing?

It costs less when the organization is experiencing financial difficulties.

Which of the following is a drawback of a standard hour plan?

It does not focus on quality or customer service

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?

Long-term incentive.

Nick, a highly skilled technician, has been one of the most productive employees at Swank Inc. But after the company went through a downsizing effort, Nick has taken on many more responsibilities and is struggling to keep up. What is the most likely consequence of this situation?

Nick experiences role overload and becomes dissatisfied with his job.

In the context of stock options, _____ is called exercising the option.

Purchasing stock

Elliot, a human resource manager, tells managers in his organization that following the system of progressive discipline requires written documentation at every step of the process. In which situation could this be optional?

The manager reminds an employee that a minor first-time offense is against policy.

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

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. Long-term incentive B. Balanced scorecard C. Piecework plan D. Employee stock incentive plan E. Short-term incentive

E. Short-term incentive

Julianna, the HR manager at Hudson Corp., wants to ensure that incentive pay rewards the individuals who contribute the most to the organization and whose contributions have grown since their pay rates were originally set. She determines that she can best accomplish these goals by paying an incentive amount based on individuals' performance ratings and compa-ratios. In this scenario, Julianna would be applying the system of

merit pay.

Which provision is included in the Fair Labor Standards Act (FLSA)?

minimum wage

retention bonus

one-time incentive paid in exchange for remaining with the company

Retention bonuses refer to

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

Retention bonuses refer to:

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

What is the simplest, most direct, and least expensive way to settle a dispute?

open-door policy

Andrew, an employee at Fulton Corp., arrives late at the office on a Monday morning due to a personal emergency. His manager fires him, although this was the first instance of Andrew arriving late at work. Andrew is upset because some of his other co-workers are chronically late to work, but they have not been fired. In this scenario, Andrew would conclude a lack of __________ in dealing with employees who arrive late at work.

outcome fairness

piecework rate plan.

What is an organization-level incentive plan that is intended to motivate employees to align their activities with the organization's goals?

profit sharing

Which incentive plan would enable its employees to think like owners, taking a broad view of what they need to do in order to make the organization more effective?

profit sharing

_____ is a type of incentive pay in which payments are a percentage of an organization's profits and do not become part of its employees' base salary.

profit sharing

piecework rate

rate of pay per unit produced -rewards for above-average production

After Fran, a human resource manager, hears reports that some employees are drinking liquor on the job, she arranges to conduct a random search for evidence. Which action would be the most appropriate way for Fran's company to act fairly regarding employees' privacy in this scenario?

requesting consent before gathering information

Gainsharing is most likely to succeed when organizations provide the ___________

right conditions

stock options

rights to buy a certain number of shares of stock at a specified price -purchasing the stock is called exercising the option

Piece rate pay is most suited for ___________ jobs with output that is easy to measure.

routine, standardized

straight commission plan

salespeople who earn only commissions with no base salary ex: insurance, real estate, car salespeople

Promoting employee engagement is a way to improve all of the following EXCEPT

self-evaluations

Jupiter Systems, an information technology company, determines that most problems handled by employees at its help desk can be resolved within 20 minutes. The company sets 20 minutes as the standard time for resolving a customer problem. If an employee solves a customer's problem in less than 20 minutes, the employee still earns 20 minutes' worth of wages. Which of the following payment methods does this scenario illustrate?

standard hour plan

Trent 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, Trent is using a

standard hour plan.

The link between employees' performance and pay is hardest to establish in

stock ownership plans.

Which statement is true about standard hour plans?

They encourage employees to work as fast as they can.

The balanced scorecard helps employees understand the organization's goals and how they can contribute to these goals.

True

Benefits

Used to attract and reward salespeople Have to decide how much the salesperson should be required to contribute to the benefit program

balanced scorecard

a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay

Scanlon plan

a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard -workers have to keep labor to a minimum and produce as much as possible under that minimum

As an incentive to work efficiently, some organizations pay production workers _____, a wage based on the amount they produce.

a piecework rate

When Greater Aircraft acquired Middling Aircraft, the executives of the two companies identified key employees they needed for the combined companies' success. One of them was Michael, the vice president of engineering. The executives offered Michael a one-time bonus of $25,000 if he stayed with Greater Middling for 12 months following the acquisition. In this scenario, Michael's the $25,000 represents _____.

a retention bonus

merit pay

a system of linking pay increases to ratings on performance appraisals

Courtney is the human resource manager at Automation Specialists. The company's executives want to give employees an ownership stake in the company, so employees will think more like owners, focusing on how they contribute to the organization's success. What kind of pay system could Courtney suggest that would best support the desired attitude at all levels of the organization?

an employee stock ownership plan

When changing a pay plan, it's important the HR department and supervisors communicates this with

employees

Beckwith Corporation has a benefits package that includes paid vacations and sick leave. The human resource manager proposes shifting this time into a bank of paid time off. What would be an advantage of this change?

employees have more flexibility and privacy for their personal matters

Incentive pay for _______ warrants special attention

executives

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 is the company's share. The other 40% is distributed among the employees in the company. Which of the following is being exemplified in this scenario?

gainsharing

Developed in the 1930s, the Scanlon plan is a variation of a(n)

gainsharing plan

Vactin Motors, an automobile company, ties individual performance, profits, and other measures of employees' success to a particular form of pay. This form of pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. Which of the following is exemplified in this scenario?

incentive pay

Steve is a human resource manager at an advertising firm. Steve proposes that the company adopt defined-benefit plans to attract and retain its employees. In which situation will this benefit be most valuable to the firm's employees?

the firm employs experienced, older people

In a company's merit pay program, an individual's compa-ratio represents

the individual's pay relative to company's average pay for that position.

The balanced scorecard combines the advantages of different incentive pay plans and helps employees understand

the organization's goals

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

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

James is the founder of a new start-up company. He hires mostly young employees who are fresh out of college. He finds that most of his employees are willing to develop their knowledge and skills and would like to take courses to improve themselves. This additional knowledge would benefit James' company, so he decides to encourage this behavior. Which of the following programs is James most likely to use in order to do so?

tuition reimbursement program

Salary Plus Bonus Advantages

- Balance the need to control selling expenses and provide extra rewards for added results - Lead to lower turnover - Security of salary allows reps time to: court prospects over a considerable period of time and to service existing customers

Straight Commission Applications

- When max incentive is needed - when a minimum of after-sale service and missionary work is required - Ex: life insurance, real estate, stock brokerage, printing, wholesalers - rates range from 5-14% of sales

Straight Salary Applications

- in competitive labor environments, in situations where it is difficult to assess sales force activities and performance - in companies where salespeople spend a lot of time on service and paperwork - where it is difficult to relate the efforts of individual salespeople to the size or timing of a sale - when teamwork of other departments are required in sales process - products are presold through ads and salesperson primarily takes orders

Short-term incentives

-bonuses based on year's profits, return on investment, etc.

Ways companies boost price of their stock

-hiding losses -inflating the recorded value of revenues

Which of the following is a 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?

Balanced scorecard.

Short-Term Incentives

Bonuses based on ROI, year's profits, or other measures related to the organizations goals; actual payment of bonus may be delayed to gain tax advantages

Group Bonuses

Bonuses for group performance tend to be for smaller work groups; these bonuses reward the members of a group for attaining a specific goal, usually measured in terms of physical output

What is the difference between bonuses and team awards?

Bonuses reward attainment of a specific goal, whereas team awards reward performance measured more broadly.

A multi-national organization uses a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard. This incentive plan is referred to as the: A. group bonus. B. merit pay plan. C. Scanlon plan. D. piecework rate. E. team award.

C. Scanlon plan.

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as: A. commission. B. a Scanlon plan. C. merit pay. D. gain sharing. E. profit sharing.

C. merit pay. Merit pay is a system of linking pay increases to ratings on performance appraisals.

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

What can contribute to the belief that the organizations pay structure is fair?

Communication and employee participation

Straight commission plans are plans which: A. provide a straight salary to employees. B. are useful when the organization wants salespeople to concentrate on listening to customers. C. help to attract risk-averse employees. D. are common among insurance and real estate agents. E. are uncommon among car salespeople.

D. are common among insurance and real estate agents.

Isaiah, an HR manager, conducted a survey to learn which benefits employees value the most. He discovers that the survey results will be difficult to apply. What is the most likely reason?

Employees have very different opinions about what they value.

ESOP does not give employees the right to participate in votes by shareholders even if the stock is registered on a national exchange.

FALSE Employees have a right to participate in votes by shareholders if the stock is registered on a national exchange, such as the New York Stock Exchange.

Incentive pay for executives lays the groundwork for significant ethical issues.

FALSE Incentive pay for executives lays the groundwork for significant ethical issues. When an organization links pay to its stock performance, executives need the ethical backbone to be honest about their company's performance even when dishonesty or clever shading of the truth offers the tempting potential for large earnings

Group bonuses typically reward the performance of all employees in an organization.

False

Developed in the 1930s, the Scanlon plan is a variation of the:

Gainsharing plans

What are some common group incentives?

Gainsharing, bonuses, and team awards

How does the balanced scorecard help organizations deal with unethical behaviors of executives?

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

Risks involved will directly affect employees' retirement income.

Jupiter Systems, an information technology company, determines a particular time to complete a particular task. Even if an employee completes the allotted task before the time of completion, the employee receives an amount of pay equal to the wage for the designated time. Which of the following payment methods is exemplified in this scenario?

Standard hour plan

upiter Systems, an information technology company, determines a particular time to complete a particular task. Even if an employee completes the allotted task before the time of completion, the employee receives an amount of pay equal to the wage for the designated time. Which of the following payment methods is exemplified in this scenario?

Standard hour plan

Which of the following statements is true of using stock options as incentive pay?

Stock options are rewarding for employees who exercise their option when the company's stock value has risen.

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

Which of the following is an advantage of group incentives?

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

What should employees typically do to earn bonuses under the Scanlon plan?

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

Three types of expense plans that can be used include: a. unlimited, limited, per diem. b. restricted, unrestricted, per diem. c. restricted, unrestricted, partial. d. full, partial, per diem. e. none of the above: there are only 2 types.

a. unlimited, limited, per diem.

In the process of designing incentives, managers should make sure that

all the employees are paid the same amount.

Open-door policy, peer review, and mediation are methods of

alternative dispute resolution.

employee stock ownership plan (esop)

an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust -may be sold when they leave the organization -most common form of employee ownership

standard hour plan

an incentive plan that pays workers extra for work done in less than a preset "standard time" -similar to piece work; encourage employees to work fast but not care about quality

All of the following are possible benefits to salespeople except: a. automobile. b. food allowance. c. lodging. d. bail money for salespeople at conferences, "just in case". e. tickets to theaters and sporting events.

d. bail money for salespeople at conferences, "just in case".

As a sales manager, you liked the advantages that salary plus bonus plans offer yet you were very concerned about some of the following serious problems associated with it: a. the size of individual payments are set arbitrarily. b. bonus payments are too small to have any impact on the activities of salespeople. c. payments are received so long after goals are achieved they provide little incentive. d. both a and c of the above. e. all of the above.

d. both a and c of the above.

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

false

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

false

Which type of incentive plans are used to reward individual performance?

merit pay

Although labor and product markets limit organizations' choices about pay levels, there is a range within which organizations can make decisions. The size of this range depends on the

organization's competitive environment.

In a company's merit pay program, individuals' compa-ratio represents their:

pay relative to average pay.

A complete plan for motivating and compensating employees includes

pay, work design, and management development

The way organizations pay employees is strongly associated with their level of

profitability

Profit and stock price as incentives can have a lot of _________

uncertainty

Salary Plus Commission Plus Bonus Advantages

- Allow sales manager to reward virtually every activity performed by salespeople - reward using more comprehensive set of behaviors, rather than rewarding solely on revenue - Gives managers max flexibility for aligning compensation with these diverse activities - Salary, commission, and bonus provide the possibility of designing a variety of different plans to appeal to different salesperson's needs

Salary Plus Commission Plus Bonus

- Combine stability of salary, incentives of a commission, and special rewards of a bonus

Salary Plus Commission Advantages

- Commission rates can be adjusted to promote the sale of individual products or to intensify efforts among specific market segments - Commissions paid monthly- so immediate reinforcement for efforts

Salary Plus Commission Plus Bonus Disadvantages

- Complexity: 1) Adminstration of plan becomes more expensive, more personnel needed for reporting and managing the different components 2) Complexity of plan can be confusing to sales rep (might focus on activities that are less difficult to achieve)

The Commission Plus Bonus Plan Advantages

- Easy to understand - Fairly simple to administer - bonus feature provides some additional control over salesperson's activities - added recruiting feature of the bonus package

Salary Plus Commission

- Industrial sales rep- to give them the push they needed to sell complex products - Commission thresholds - Progressive commission rates

Salary Plus Commission Plus Bonus Applications

- Office equipment, instruments, electronics, and business services

Straight Commission Disadvantages

- Sales managers have little control over commission salespeople - nonselling activities are likely to be neglected - Commission salespeople are tempted to sell themselves rather than the company - tempted to service only the best accounts for their territories - since their wages directed related to sales to particular accounts, reluctant to have their territoires changed - Excessive turnover when business conditions are bad because they have little company loyalty - poor morale among lower paid - higher paid--> reluctant to move into supervisory or managerial positions

Salary Plus Bonus Disadvantages

- Size of bonus has been arbitrary - managers who fail to communicate how bonuses are determined can lose some of their effectiveness as motivational devices - Performance and rewards--> since bonuses are paid annually, salesperson instrumentality perception may be reduced- reducing motivation

benefits of gainsharing

-addresses the challenge of identifying appropriate performance measures for complex jobs -allows employees to determine how to improve their own and their group's performance -broadens employees' focus beyond their individual interests -keeps performance measures within a range that employees believe they can influence

disadvantages of merit pay

-conditions can shrink the available range of increases -can quickly become expensive -makes assumptions that can be misleading; performance may depend on forces outside the employee's control -discourages teamwork

Organization's select incentives based on

-cost -influence on performance -fit with the organization's policies and goals

disadvantages of profit sharing

-differences in payout raise questions about the effectiveness and equity -employees may find it unfair because they have little control over profits

disadvantages of stock options

-employees may lost sight of other goals, including ethical behavior -investors may be tricked into thinking the organization is more valuable than it is

Disadvantages of piece rate pay

-employees may manufacture subpar components -lack of learning new skills or cooperating with others -not helpful in organizations with complex jobs, employee empowerment, and team-based problem solving

benefits of profit sharing

-encourages employees to think more like owners; taking a broad view of what they need to do to make the organization more effective -more like to cooperate -less likely to focus on self-interest -costs less when the organization is experiencing financial difficulties

ethical issues regarding incentive pay for executives

-executives may be dishonest about earning -executives may inflate stock price -insider trading

Merit pay is based on two factors

-individual's performance rating -individual's compa-ratio -biggest pay increases are given to the best performers whose pay is relatively low for their job

Long-term incentives

-stock options -stock purchase plans

3 types of compensation methods

1) Straight Salary 2) Straight Commission 3) Incentive pay Most: combines a base salary with some type of incentives - Useful guide: make sure incentive component is between 15~30% of total compensation

Piecework Rate

A wage based on the amount workers produce; advantage is the direct link between how much work the employee does and the amount the employee earns; disadvantages include: requires measurable performance, not well suited for complex/multi faceted responsibilities, and does not incentivize learning, teamwork or intangibles

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

A. ESOPs provide tax advantages to employers.

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 must be able to understand the requirements of the incentive pay plan. B. Equal incentives should be offered to all the employees of the organization. C. Employees must be the key decision makers when creating incentive pay plans. D. The company should not inform the employees about incentive plan changes. E. Employees should make decisions that are only in favor of their interests.

A. Employees must be able to understand the requirements of the incentive pay plan.

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 will make decisions that are in their best interests at the expense of the organization's interests. B. It is difficult to monitor an employee's work output when decisions are made by the employee. C. When employees become more involved in pay decisions, they neglect the work assigned to them. D. Employees should be a part of the human resource department to be involved in pay-related decisions. E. It will have a negative impact on the top-level management of the company.

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

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

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

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

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

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

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

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

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 oversimplifies the responsibilities involved in teamwork and motivates employees to work hard. B. It creates a competitive environment among the employees working in a team. C. It offers less incentives because the incentives are distributed equally among team members. D. It encourages employees to learn new skills from other team members. E. It encourages teams to take pay-related decisions.

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

Token Inc. is an envelope manufacturer based in Dallas. The employees of the organization receive incentive pay based on the amount of work produced. If the output of an employee is more than the average production volume, then the organization pays an incentive in addition to wages and salaries. In this case, which of the following incentives is offered by Token Inc.? A. Piecework rate B. Minimum wage C. Employee labor D. Training stipend E. Group bonus

A. Piecework rate

Which of the following is a short-term incentive? A. Return on investment B. Straight salary C. Stock options D. Stock purchase plans E. Company shares

A. Return on investment

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. Straight piecework plan B. Skill-based pay system C. Merit pay system D. Quality-based pay system E. Straight commission plan

A. Straight piecework plan

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

A. The goals of an incentive plan may interfere with other management goals.

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

A. The goals of an incentive plan may interfere with other management goals. An incentive pay designed support to a management goal may interfere with other management goals. The employees may provide more importance to those goals that are supported by the incentive plan.

The decisions about merit pay are based on two factors: the individual's performance rating and the individual's: A. compa-ratio. B. seniority. C. pay grade. D. longevity. E. emotional quotient.

A. compa-ratio. The decisions about merit pay are based on two factors: the individual's performance rating and the individual's compa-ratio.

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program. A. gainsharing B. standard hour C. bonus D. commission E. piece rate pay

A. gainsharing

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

A company provides wages to its employees based on the amount workers produce. The more employees produce, the more they earn. This type of plan is called: A. piecework rate plan. B. merit pay plan. C. Scanlon plan. D. profit sharing plan. E. standard hour plan.

A. piecework rate plan. As an incentive to work efficiently, some organizations pay production workers a piecework rate, a wage based on the amount they produce.

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

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

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

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. differential piecework plan. C. merit pay plan. D. straight piecework plan. E. Scanlon plan.

A. standard hour plan.

Martin owns and manages a small auto-parts shop. He determines the time required to complete each task in his shop. When an employee completes the repair in less time, he/she receives an amount of pay equal to the rate determined by Martin for . Martin is using a: A. standard hour plan. B. differential piecework plan. C. merit pay plan. D. straight piecework plan. E. Scanlon plan.

A. standard hour plan. An incentive plan that pays workers extra for work done in less than a preset "standard time" is referred to as a standard hour plan.

Job Programmability

As jobs become less programmable (less routine), outcome oriented systems become more likely because monitoring becomes more difficult

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 balanced scorecard C. A dashboard D. An employee stock ownership plan E. A differential piece rate system

B. A balanced scorecard

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

35. _____ refers to an incentive pay in which the wage paid is higher when a greater amount is produced. A. Profit sharing B. Differential piece rate C. Gain sharing D. Scanlon pay E. Merit pay Differential piece rate refers to an incentive pay in which the piece rate is higher when a greater amount is produced.

B. Differential piece rate Differential piece rate refers to an incentive pay in which the piece rate is higher when a greater amount is produced.

Which of the following is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust? A. Stock options B. Employee stock ownership plan C. Scanlon plan D. Collective stock options E. Profit sharing plan

B. Employee stock ownership plan

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

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. Profit rate B. Gainsharing C. Commission sharing D. Merit gain E. Group bonus

B. Gainsharing

Which of the following incentive plans are specifically designed to promote group performance? A. Performance bonuses B. Gainsharing C. Standard hour plans D. Merit pay E. Commissions

B. Gainsharing

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

B. Gainsharing

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

How does the balanced scorecard help organizations deal with unethical behaviors of executives? A. It allows companies to deduct executive pay that exceeds $1 million. B. 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. C. It encourages executives to hold on to their stock options when the company is undergoing financial problems. D. It forces executives to focus on the company's long-term success because ESOP funds are guaranteed by the Pension Benefit Guarantee Corporation. E. It mandates that an ESOP invest at least 51% of its assets in the company's own stock.

B. 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 statements is true of a performance bonus? A. It is designed to reward group performance. B. It should be re-earned by employees during each performance period. C. It is rolled into base pay and provided yearly or monthly. D. It lacks flexibility and hence it is less popular. E. It is exclusively linked to subjective ratings, rather than objective performance measures.

B. It should be re-earned by employees during each performance period.

Which of the following is true of a performance bonus? A. It is designed to reward group performance. B. It should be re-earned by employees during each performance period. C. It is rolled into base pay and provided yearly or monthly. D. It lacks flexibility and hence it is less popular. E. It is not a one time reward in most of the cases.

B. It should be re-earned by employees during each performance period. Like merit pay, performance bonuses reward individual performance, but bonuses are not rolled into base pay. The employee must re-earn them during each performance period.

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. Merit pay C. Standard hour plan D. Differential plan E. Skill-based plan

B. Merit pay

Which of the following types of incentive plans are used to reward individual performance? A. Gainsharing B. Merit pay C. Scanlon plan D. Profit sharing E. Stock ownership

B. Merit pay

Which of the following types of incentive pay plans are used to reward individual performance? A. Gainsharing B. Merit pay C. Scanlon plan D. Profit sharing E. Stock ownership

B. Merit pay Organizations may reward individual performance with a variety of incentives such as merit pay. All other options provided in the question are designed to promote group/organizational performance.

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

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

B. individual's performance ratings.

In merit pay programs, an individual's compa-ratio represents his/her: A. pay relative to performance of other workers in the industry. B. pay relative to average pay. C. comparable worth versus others. D. ratio of pay to benefits. E. the average worth of the skills possessed by the individual.

B. pay relative to average pay. Compa-ratio refers to the pay relative to average pay of the individual.

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

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

Johan, 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

C. Long-term incentive

_____ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system. A. Differential piece rate B. Standard hour plan C. Merit pay D. Piece rate E. Commission

C. Merit pay

C. Merit pay An advantage of merit pay is that it provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system. If that system is appropriately designed to measure all the important job behaviors, then the merit pay is linked to the behaviors the organization desires.

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

C. Standard hour plan

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

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as _____. A. commission B. the Scanlon plan C. merit pay D. gain sharing E. profit sharing

C. merit pay

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

A piecework rate plan is best suited for: A. HR professionals. B. executives. C. production workers. D. managers. E. knowledge workers.

C. production workers.

A piecework rate plan is best suited for: A. HR professionals. B. executives. C. production workers. D. managers. E. knowledge workers.

C. production workers. As an incentive to work efficiently, some organizations pay production workers a piecework rate, a wage based on the amount they produce. This pay plan may not be suited for the other categories of jobs given.

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

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

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

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

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

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. Scanlon plan B. Balanced scorecard C. Piecework stock plan D. Employee stock ownership plan E. Differential piece stock plan

D. Employee stock ownership plan

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

As an incentive to work efficiently, some organizations pay production workers a ____, a wage based on the amount they produce. A. merit pay B. commission C. standard hour pay D. piecework rate E. special bonus

D. piecework rate As an incentive to work efficiently, some organizations pay production workers a piecework rate, a wage based on the amount they produce.

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

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

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

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. It helps create job opportunities. B. It helps avoid competition among employees. C. Employees spend long hours working. 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

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

E. It can quickly become expensive for the company.

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

E. It can quickly become expensive for the company. A drawback of merit pay, from the employer's standpoint, is that it can quickly become expensive. Managers at a majority of organizations rate most employees' performance in the top two categories (out of four or five). Therefore, the majority of employees are eligible for the biggest merit increases, and their pay rises rapidly.

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

Which of the following is an advantage of using balanced scorecard? A. It eliminates the need to communicate the details of the plan to the employees. 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 reduces employee stress because it does not focus on financial targets. E. It helps employees understand the organization's goals.

E. It helps employees understand the organization's 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

Which of the following incentive plans would enable its employees to think like owners, taking a broad view of what they need to do in order to make the organization more effective? A. Merit pay B. Gain sharing C. The Scanlon plan D. Performance bonuses E. Profit sharing

E. Profit sharing

Identify the disadvantage of using profit sharing plans. A. They cannot be used to improve the organization's performance as a whole. B. The employees may develop a narrow view of their roles in the organization. C. They cost more when the organization experiences financial difficulties. D. Sharing profit with the employees ultimately reduces the organization's profitability. E. Profit sharing is not directly linked to individual behavior.

E. Profit sharing is not directly linked to individual behavior.

Employee stock ownership plans (ESOPs) are attractive to employers. Along with tax and financing advantages, ESOPs give employers a way to build pride in and commitment to the organization. Which of the following statements weakens this argument? A. Employees are not allowed to participate in general body meetings as shareholders. B. The stocks within the trust are too widely diversified to earn high returns. C. The stock earnings are taxed at high rates. D. Employees are forced to return the stock profits to the organization. E. Risks involved will directly affect employees' retirement income.

E. Risks involved will directly affect employees' retirement income.

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

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

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. Stock options are not profitable to employees. 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. Offering stock options discourages employees from thinking like owners. E. Stock prices in the market may fall below their purchased value.

E. Stock prices in the market may fall below their purchased value.

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

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 performance appraisals of each employee were performed by two supervisors to avoid bias. B. The performance measures used to evaluate employees had been communicated to the employees before the start of the review period. C. The spot bonuses have been increased by ten percent from the previous financial year. D. The organization had decided to reward teams that worked on new types of projects. E. The organization believes that merit pay is for exceptional and not regular work.

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

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

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

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

E. They encourage employees to work as fast as they can. Standard hour plans encourage employees to work as fast as they can, but not necessarily to care about quality or customer service.

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

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

E. have performance measures linked to the organization's goals.

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

E. have performance measures linked to the organization's goals. An effective incentive pay plan should have performance measures that are linked to the organization's goals.

_______ 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

Piecework rate plans are most suited for _____. A. innovative tasks B. non-standard jobs C. managerial jobs D. jobs with difficult-to-measure output E. routine, standardized jobs

E. routine, standardized jobs Most jobs, including those of managers, have no physical output, so it is hard to develop an appropriate performance measure. So piecework rates are most suited for very routine, standardized jobs with output that is easy to measure.

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

E. straight piecework plan. Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces is referred to as straight piecework plan.

If employee participation in making pay-related decisions is encouraged in an organization, then: A. administering the plans become simple. B. the organization's interests can be best protected. C. the cost borne by the organization decreases. D. monitoring performance becomes difficult. E. the incentive plan has more chances of being successful.

E. the incentive plan has more chances of being successful.

Which of the following is a reason for ESOPs' popularity

ESOPs provide bak advantages to employers.

Inputs

Effort, skills, experience (seniority), and education

Employee participation in pay-related decisions can be part of a general move toward:

Employee empowerment

Participation in Decisions

Employee participation in pay related decisions can be part of a general move toward employee empowerment; employee participation can contribute to the incentive plans success

Employee stock owernship plan.

Which of the following is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust?

Employee stock ownership 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?

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

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?

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

As Ray Inc., a shoe manufacturer, grows more profitable, it wants to become more competitive as an employer in the labor market. Tanya, the human resource manager, urges the company to develop a more attractive package of benefits, rather than simply raising salaries. Which of the following statements best supports Tanya's argument?

Employees do not pay income taxes on most benefits they receive.

Employees must able to understand the requirements of the incentive pay plan.

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

A standard hour incentive plan is likely to be successful if:

Employees want the extra money more than they want to work at a pace that feels comfortable.

Which of the following is a common condition for gainsharing to be a success in an organization?

Employees who value working in groups.

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

For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. Which of the following statements would strengthen this argument?

Employees will value the rewards for incentives that are being offered.

Mario, a production worker, complains to a human resource professional at his company that when he asked his supervisor for a week off to care for his son after surgery, the supervisor replied, "Can't your wife do that instead?" Which of the following statements best summarizes what the HR professional should explain to the supervisor?

Equal employment opportunity requires that access to benefits not be limited by sex.

How does linking executive pay to stock performance lead to unethical behavior?

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

From employers' perspective, an advantage of merit pay is that it is cheap.

FALSE A drawback of merit pay, from the employer's standpoint, is that it can quickly become expensive.

Group bonuses typically reward the performance of all employees in an organization.

FALSE Bonuses for group performance tend to be for smaller work groups. These bonuses reward the members of a group for attaining a specific goal, usually measured in terms of physical

Successful gainsharing plans include employee stock ownership plans.

FALSE Employee stock ownership plan (ESOP) is an example organizational performance incentive plan.

Like merit pay, performance bonuses for individual performance are rolled into an employee's base pay.

FALSE Like merit pay, performance bonuses reward individual performance, but bonuses are not rolled into base pay.

Merit pay incentive system is usually used to attract employees who are more team-oriented

FALSE Organizations with team-based rewards will tend to attract employees who are more team-oriented, while rewards tied to individual performance make an organization more attractive to those who think and act independently, as individuals. Merit pay incentive system is used to reward individual performance.

Profit sharing costs more when the organization experiences financial difficulties.

FALSE Profit sharing has the practical advantage of costing less when the organization is experiencing financial difficulties.

Stock options are best suited to motivate day-to-day effort or to attract and retain top individual performers.

FALSE Relying heavily on profit sharing or stock ownership may increase cooperation but do little to motivate day-to-day effort or to attract and retain top individual performers.

Standard hour plans are quality-oriented incentives for professional employees.

FALSE Standard hour plans are quantity-oriented incentives for production workers.

The balanced-scorecard approach is not particularly useful in designing executive pay.

FALSE The balanced-scorecard approach is useful in designing executive pay.

Employees should exercise the stock options even if the stock price has decreased.

FALSE The employees would not bother to exercise the options if the stock price decreases.

Under profit sharing, payments are a percentage of the organization's profits and become part of the employees' base salary.

FALSE Under profit sharing, payments are a percentage of the organization's profits and do not become part of the employees' base salary.

Mercia, a healthcare company, provides a lower training rate to its employees belonging to the age group of 18 to 19 years. The rate is applicable for a period of 90 days. In this case, which law justifies the organization's decision to pay the lower pay?

Fair Labor Standards Act (FLSA) provisions for minimum wage

Two management students, Frank and Neil, discuss the pros and cons of employee benefits. Frank states that unemployment insurance is more advantageous to employees than it is to employers, while Neil argues that employers receive more rewards from it. Which of the following weakens Neil's argument?

Federal and state taxes paid by employers fund most of unemployment insurance.

What is the drawback of stock ownership as a form of incentive pay?

Financial benefit mostly come when the employee leaves the organization.

What are the four categories of a balanced scorecard?

Financial, customer, internal, and learning & growth

Incentive Pay

Forms of pay linked to an employees performance as an individual, group member, or organization member; pay specifically designed to energize, direct, or control employees behavior

Gainsharing

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program.

Gainsharing

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?

Gainsharing

Which of the following incentive programs measures improvements in productivity and effectiveness and distributes a portion of the earnings to all employees?

Gainsharing

_____ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.

Gainsharing

Deepak, a trainee at NextGen Corp., is known among his colleagues for his arrogance, rude behavior, and short-tempered nature. His supervisor, Garin, does not feel like Deepak is performing well and wants to fire him. However, Marissa, the manager of the HR department, advises Garin to rethink his decision in order to avoid the possibility of Deepak reacting violently or filing a lawsuit when he receives the news. In this scenario, which situation is most likely to result in an amicable discharge of Deepak from NextGen Corp.?

Garin encourages Deepak to think about whether he is a good fit for the job and whether he might want help finding another.

In what two ways can agency costs can arise?

Goal incongruence and information asymmetry

Gainsharing

Group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each to employees

A feature of an effective incentive pay plan is that it should:

Have performance measures linked to the organization's goals.

Ravi is the CEO of a magazine publishing company. He wants to provide benefits for his employees, but would still like to control his company's costs. Jess, the head of the HR department, suggests implementing a cafeteria-style plan. What would be the most likely benefit of Ravi doing so?

He will avoid the cost of providing employees with benefits they don't value.

Which of the following statements is true about a standard hour plan of incentive pay?

If a mechanic completes work in less than the standard time, he receives payment for the full standard time.

Incentive Pay

A pay structure specifically designed to energize, direct, or control employees' behavior is known as:

Incentive pay

Profit Sharing

Incentive pay in which payments are a percentage of the organizations profits and do not become part of the employees' base salary (instead, issued as a bonus or one time bump); Advantages include: tied to overall org goals, increase commitment to org goal, and encourage employees to think like owners; Disadvantage is that it minimizes link between performance and outcomes for some (marginal or team based) jobs (instrumentality)

Equity Theory purports that people are most motivated when?

Inputs equal outcomes and when outcomes are equitable to those of relevant others

How does the balanced scorecard help organizations deal with unethical behaviors of executives?

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 statements is true about a piecework rate plan?

It has a direct link between the work done by the employee and the amount earned,

Which of the following is an advantage of using balanced scorecard?

It helps employees understand the organization's goals.

What is an advantage of a two-tier wage system?

It helps reduce labor costs without cutting employees' existing salaries.

Gabriela, an HR manager, and her staff devote long hours to planning and running a "benefits fair," where employees can view displays and ask questions about the various parts of the company's benefits package. The following week, the marketing manager asks if the effort was worthwhile. Gabriela says it was. What is the most likely reason for Gabriela's opinion?

It increased employees' commitment and satisfaction, so they contribute more to the company.

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

Which of the following statements is true of a performance bonus?

It should be re-earned by employees during each performance period.

The primary function of a merit increase grid is to:

Make the increases consistent

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

Two important ways organizations measure their performance are in terms of what?

Profits and stock price

Keegan, the human resource manager at R&S Inc., is advising the company's business executives that paying more for labor than competitors can support the company's strategy. Under what conditions might Keegan's idea be most valid?

R&S pays more to attract top talent, applying employees' knowledge to be more innovative than competitors.

Piecework rate plans are most suited for _____.

Routine jobs

Stock prices in the market may fall below their purchased level.

Straight Piecework Plan

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

In stock ownership plans, employees may not see a strong link between their actions and the company's stock price.

TRUE The drawback of stock ownership as a form of incentive pay is that employees may not see a strong link between their actions and the company's stock price, especially in larger organizations.

Expectancy

The belief that one's efforts will positively influence one's performance

Customer Satisfaction and Sales Force Compensation

The concept of total quality management focuses on delivering high- quality products to clients and making sure customers are satisfied Growing trend toward typing compensation to customer satisfaction Even though cust satisfaction is hard to measure

If employee participation in making pay-related decisions is encouraged in an organization, then:

The incentive plan has more chances of being successful.

Decisions about merit pay are based on what two factors?

The individuals performance rating and the individuals comp-ratio (pay relative to average pay; it gives the biggest pay increases to the best performers and to those whose pay is relatively low for their job)

What is a disadvantage of broad bands?

They reduce the opportunities for promoting employees.

What groups compensation warrants special attention?

Top managers and executives

An employee stock ownership plan is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.

True

In larger organizations that have stock ownership plans, the employees may not see a strong link between their actions and the company's stock price.

True

Incentive pay for executives lays the groundwork for significant ethical issues.

True

Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk.

True

Merit pay is a system of linking pay increases to ratings on performance appraisals.

True

The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.

True

Salary Plus Bonus

Used to provide reps with income security while the bonus gives added incentives to meet company objectives Bonuses: discretionary payments for reaching specified goals and usually paid annually Bonus portion is to foster teamwork by using customer satisfaction and cost to serve its customer as its performance metrics instead of sales volume

If employers covered by the __________ do not notify the employees (and their union, if applicable) of layoffs, they may have to offer back pay and fringe benefits and pay penalties as well.

Workers' Adjustment Retraining and Notification Act

An organization wants to provide its employee's 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 balanced scorecard

Which of the following best describes a balanced scorecard?

a combination of performance measures directed toward the company's long and short-term goals and used as the basis for awarding incentive pay

You have decided to change your commission structure to enhance market penetration. You now require the sales force to sell $35,000 worth of product each month to make a commission. Those who sell below $35,000 will not receive commissions. This $35,000 level is called: a. commission threshold. b. wage cap. c. progressive incentive plan. d. fringe benefit stage. e. none of the above.

a. commission threshold.

" tends to overpay the least productive member of a sales team; it allows maximum control over salespeople's activities; and although it makes it easier for the sales manager to reassign salespeople to new areas, salespeople usually require much closer supervision." Given: a = straight salary b = salary plus commission c = straight commission d = salary plus bonus e = none of the above a. salespeople selling complex aerospace products to the airlines b. detail people for pharmaceutical companies c. wholesale salespeople selling building materials d. all of the above e. both a and b of the above

a. salespeople selling complex aerospace products to the airlines

A good starting point for developing a sales force compensation plan is to: a. understand the company's strategic goals. b. choose methods. c. determine job specifications. d. set pay levels. e. assemble the plan.

a. understand the company's strategic goals.

You are deciding on an expense reimbursement plan for your salespeople. You work at a small firm and don't have the staff to adequately monitor expense accounts. However, you also work in an industry where entertaining is routine. According to the text, which of the following plans is typically used by these companies? a. unlimited plan b. per diem plan c. limited repayment plan d. payroll withholding plan e. tax incentive plan

a. unlimited plan

Which of the following statements about straight commission compensation plan is true? a. Straight commission compensation plans are inherently unfair. b. Straight commission compensation plans are especially advantageous for companies that are short of working capital. c. Top executives and other financial executives know that commission compensation plans are anxiety producing and often try to avoid from implementing such a plan. d. Salespeople on a straight commission plan make more numbers of cold calls than salespeople on a straight salary plan. e. Straight commission compensation is most appropriate for companies that require its sales force to engage in missionary selling.

b. Straight commission compensation plans are especially advantageous for companies that are short of working capital.

Changing from a straight salary plan to a combination salary plus commission plan provides a number of benefits. Which of the following is not an advantage of the salary plus commission plan: a. They are flexible. b. They are simpler and cheaper to administer. c. Commissions can be adjusted to reflect the profitability of products. d. Commissions provide a fairly immediate reinforcement for the salesperson's efforts. e. This type of plan is good for relatively complex products or services.

b. They are simpler and cheaper to administer.

Benefits are often preferred by salespeople because: a. they are more liquid than cash. b. they offer tax benefits to the salesperson. c. they provide more discretionary income. d. they are especially made for overseas use. e. none of the above.

b. they offer tax benefits to the salesperson.

What is the 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?

balanced scorecard

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

What is the result of combining more assignments into a single layer, thus giving managers more flexibility in making assignments and awarding pay increases?

broad bands

Beyond Space Aeronautics is developing a profit-sharing plan. Ben, the human resource manager, assumes the employees are excited to participate in this start-up company's success. However, a supervisor tells Ben about anxiety surrounding a rumor that employees will lose money if the company has a bad year. How should Ben address this problem with employee morale?

by conducting meetings to teach about profit sharing and how employees will benefit

As a sales consultant specializing in designing compensation plans, you advise your clients that the most influential factor is: a. To develop as many goals as possible with the plan. b. Drive multiple, specific salesperson behaviors. c. Align your pay plan with company strategy d. That the most expensive plan is typically the most motivating one. e. Design a plan to minimize salesperson compensation.

c. Align your pay plan with company strategy

Which of the following accurately describe per diem expense plans? a. a floating rate of reimbursement is used depending on the situation. b. expenses come from commissions. c. a fixed dollar amount is paid for each day or week in the field. d. a ceiling amount is set for payment in all circumstances. e. none of the above.

c. a fixed dollar amount is paid for each day or week in the field.

If a salesperson receives a set amount of money for mileage, meals, and hotel, what type of expense plan is she receiving? a. an unlimited plan b. a per diem plan c. a limited plan d. a bonus plan e. none of the above

c. a limited plan

You are leaning towards implementing a salary plus commission plan for your sales force. You recognize that this plan is popular because it provides: a. fixed income security. b. incentive to increase sales. c. both fixed income security and incentive to increase sales. d. stock options in all cases. e. none of the above.

c. both fixed income security and incentive to increase sales.

As the Vice President of Sales for a new startup company, you decide to hire and train your own field sales force. You also decide to pay your salespeople with the most common type of compensation plan among companies. This pay plan is the: a. salary plan. b. incentive plan. c. combination plan. d. straight commission plan. e. none of the above.

c. combination plan.

Your customer's buying cycle is approximately 2 years and your reps need to invest significant amounts of time understanding their customers. Your ultimate goal is to control selling expense and provide extra rewards for added results. Based on this information, which salesperson compensation plan would work best? a. salary only b. salary plus monthly commission c. salary plus year-end bonus d. commission only e. commission plus bonus

c. salary plus year-end bonus

" tends to attract the most highly skilled salespeople; it fosters independence of action and is easy to understand; it may lead to poor morale among the lower-paid personnel; and under this plan salespeople are tempted to sell themselves rather than the company." Given: a = straight salary b = salary plus commission c = straight commission d = salary plus bonus e = none of the above a. salespeople selling complex aerospace products to the airlines b. detail people for pharmaceutical companies c. wholesale salespeople selling building materials d. all of the above e. both a and b of the above

c. wholesale salespeople selling building materials

When an employee's pay is calculated as a percentage of sales, it is referred to as:

commission.

When an employee's pay is calculated as a percentage of sales, it is referred to as

commissions

____________ is the easiest plan to administer and budget for. a. Salary plus commission b. Salary plus bonus c. Straight commission d. Straight salary e. Salary plus commission plus bonus

d. Straight salary

You have just been promoted to the position of sales manager. One of your first tasks is to evaluate the level of compensation for your sales force. Which, if any, of the following sources available will help you in your task? a. Conference Board reports on pay levels b. trade association reports on pay levels c. Dartnell Corporation reports on pay levels d. all of the above e. none of the above, you would use instinct.

d. all of the above

You have read a "want ad" in the latest edition of Marketing News. The firm is looking for a Vice President for sales and promotion. The company uses a combination of brokers and independent sales reps. What kind of a compensation program would they most likely to use for their salespeople? a. straight salary b. straight commission c. salary plus bonus d. commission plus bonus e. salary plus commission plus bonus

d. commission plus bonus

Many small firms use _______________ plans to get started and then shift to ________________ plans when revenues grow. a. combination, straight commission b. salary, combination c. salary, commission d. commission, salary e. none of the above

d. commission, salary

The advantages of straight salary compensation include which of the following? a. salaries are a fixed cost to the firm and thus tend to decrease proportionally as sales increase. b. it allows maximum control over salespeople's activities. c. it makes the division of territories an easier task. d. tends to generate more loyalty from salespeople. e. all of the above.

e. all of the above.

When establishing goals for the compensation plan, a sales manager must consider: a. competitive compensation packages in the marketplace. b. the needs of firm and customers. c. motivation considerations of the sales force. d. costs of the plan. e. all of the above.

e. all of the above.

Your boss thinks you should implement a salary plus commission plan. You have a meeting with her to outline the drawback(s) of this type of plan. Among the drawback(s) you will discuss include: a. more complicated to explain to salespeople. b. more costly to administer. c. sales managers lose control in direct proportion to the amount of commissions paid. d. If an incentive ceiling is put in place, it could dampen some salespeople's motivation. e. all of the above.

e. all of the above.

Although quite popular, salary compensation plans have some disadvantages. For example, since the pay of salaried salespeople is not directly related to performance, some of them may not make all of their calls or give the firm "a full day's work for a day's pay." Nevertheless, salary compensation plans are appropriate in a number of situations. Which of the following is/are most likely to be among them? a. salespeople selling complex aerospace products to the airlines b. detail people for pharmaceutical companies c. wholesale salespeople selling building materials d. all of the above e. both a and b of the above Use the information below to answer the following two questions: Given: a = straight salary b = salary plus commission c = straight commission d = salary plus bonus e = none of the above Answer the series of questions. Recalling the text's discussion of the different compensation plans, which of the above best fits the following descriptions?

e. both a and b of the above

Advantages of commission includes all of the following except: a. fostering independent action. b. providing the maximum possible incentive. c. often paying relatively high wages. d. making selling costs proportional to the amount of goods sold. e. making possible greater control by sales managers.

e. making possible greater control by sales managers

Which of the following is a disadvantage of an organization with a high-paying incentive scheme?

employees may focus on only the performance measures that are rewarded

__________ can uncover reasons why employees leave and perhaps set the stage for some of them to return.

exit interviews

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

false

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

false

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

false

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

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 approach should be avoided while designing executive pay

false

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a ________ program.

gainsharing

group incentive program that measures improvements in productivity and effectiveness objectives and distributes a portion of each gain to employees

Marshall finds that he meets the eligibility requirements for Social Security. He elects to receive retirement benefits at 62. In this case, which of the following is true?

he will receive benefits at a permanently reduced level

implement a profit-sharing incentive plan.

straight piecework plan

incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces -ex: $.80 per component

differential piece rates

incentive pay in which the piece rate is higher when a greater amount is produced -also called rising and falling differentials -ex. price raises to $1 per component after exceeding 12 components/hour

Organizations customize their balanced scorecards according to their

markets, products, and objectives

Julie, the HR manager at Forge Corp., wants to ensure that incentive pay rewards the individuals who contribute the most to the organization and whose contributions have grown since their pay rates were originally set. She determines that she can best accomplish these goals by paying an incentive amount based on individuals' performance ratings and compa-ratios. In this scenario, Julie would be applying the system of

merit pay

In 2017, a company employee received an option to purchase the company's stock at $45 per share. If the stock is trading at $40 a share in 2019, the employee will most likely

not bother to exercise the options.

In 2018, a company employee received an option to purchase the company's stock at $45 per share. If the stock is trading at $40 a share in 2020, the employee will most likely

not bother to exercise the options.

Ricky reprimanded five of his employees for coming to work drunk after a lunch outing. The next week, Ricky fired another employee for being drunk at work. The employees under Ricky can conclude a lack of __________ in dealing with employees being drunk at work.

outcome fairness

After an organization downsizes, it may expect much of its remaining employees. This high expectation and demand occur in a state of role __________ for the employees.

overload

Dodd-Frank Wall Street Reform and Consumer Protection Act

requires public companies report the ratio of median compensation of all its employees to the CEO's total compensation

Executive pay at Ashance Inc., a manufacturing company, includes bonuses based on the year's profits or other measures related to the organization's goals. Sometimes, to gain tax advantages, the bonus is made part of executives' retirement plans. Which of the following is being exemplified in this scenario?

short-term incentives

Wayan Inc., a health insurance company, pays clerks an incentive based on the average amount of work completed per hour. Wayan pays $10 for processing 20 invoices per hour. An employee who processes 30 invoices would earn $15 per hour. Hence, Wayan pays the same rate per invoice no matter how many invoices an employee processes per hour. Which type of incentive pay does this scenario illustrate?

straight piecework plan

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

straight piecework plan.

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

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

true

In which condition is it an advantage when group incentives encourage competition between groups of employees?

when groups try to outdo one another in satisfying customers

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

_____ refers to an incentive pay in which the wage paid is higher when a greater amount is produced.

Differential Piece Rate

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

Organizations may reward individual performance with a variety of what incentives?

Piecework rates, standard hour plans, merit pay, individual bonuses, and sales commissions

The human resource, accounting, and legal departments of Glorious Software, a company with locations in seven states plus Europe, are working together on developing a profit-sharing plan. Which option for communicating with employees about the plan would be the most practical and effective?

Post descriptions and videos on the company's intranet.

The human resource, accounting, and legal departments of GloryB Software, a company with locations in seven states plus Australia, are working together on developing a profit-sharing plan. Of the following options for communicating with employees about the plan, which would be the most practical and effective?

Post descriptions and videos on the company's intranet.

Outcomes

Praise, recognition, pay, benefits, promotions, and increased status

Goal Incongruence

Principals and agents may have different goals

Information Asymmetry

Principals may have less than perfect information on the degree to which the agent is pursuing and achieving the principals goals

A piecework rate plan is best suited for:

Production Workers

Which of the following incentive plans would enable its employees to think like owners, taking a broad view of what they need to do in order to make the organization more effective?

Profit Sharing

_____ is a type of incentive pay in which payments are a percentage of an organization's profits and do not become part of its employees' base salary.

Profit Sharing

Danielle, an HR manager, has been assigned the task of giving out incentives to small groups of employees in appreciation for accomplishing specific goals in reducing energy consumption. Danielle should give out the incentives in the form of

Scanlon plans.

The _____ has required companies to more clearly report executive compensation levels and the company's performance relative to that of competitors.

Securities and Exchange Commission

The _____ has required companies to more clearly report executive compensation levels and the company's performance relative to that of competitors.

Securities and Exchange Commission

Short-term incentive

Team Awards

Similar to group bonuses, but more likely to use a broad range of performance measures; cost savings, successful completion of a project, and meeting deadlines

Ryan was working as an engineer at a paint manufacturing company. A chemical spill at the factory caused an accident that left him permanently disabled. Which of the following programs is specifically designed to help employees like Ryan?

Social Security

Which of the following is a long-term incentive?

Stock option

Gainsharing addresses the challenge of identifying appropriate performance measures for complex jobs.

TRUE Gainsharing addresses the challenge of identifying appropriate performance measures for complex jobs.

Straight salary compensation is typically used in industries where: a. Missionary selling is the most common type of sales process used. b. Team selling is seldom, if ever, used. c. Personal selling is more important to the overall marketing program than other push strategies such as advertising. d. A great deal of selling skill is required to close sales. e. Few, if any, trade promotions are used.

a. Missionary selling is the most common type of sales process used.

According to your text, which benefit is offered by the greatest percentage of companies? a. hospital b. dental insurance c. pension plan d. profit sharing e. educational assistance

a. hospital

The expense plan that is cheapest to administer is: a. unlimited. b. per diem. c. limited. d. fringe benefit. e. none of the above.

a. unlimited.

Building an effective sales force compensation plan boils down to: a. Providing the highest level of wages possible. b. Finding the right combination of salary and incentive pay. c. Designing the plan around the seniority of the workers d. All of the above e. both a and b of the above

b. Finding the right combination of salary and incentive pay.

A major objective of a well-designed compensation package is to: a. provide equal pay to all employees at the same level. b. Increase sales and revenues. c. provide extensive benefits. d. encourage a "hard sell" attitude among the sales force. e. micromanage salesperson behaviors.

b. Increase sales and revenues.

Commission programs tend to be more common: a. when a minimum of after-sale service is needed. b. when team selling is important. c. when a strong incentive is needed. d. when products are presold through advertising. e. both a and c of the above.

e. both a and c of the above.

employee stock ownership plan

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

false

Which of the following would be a reason for organizations to implement profit sharing?

It cots less when the organization is experiencing financial difficulties.

In the process of designing incentives, managers should make sure that:

All the employees are paid the same amount.

ESOPs

An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust; most common form of employee ownership; drawback is that it can be costly if stock price falls

Which of the following best describes profit sharing?

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

What is a reason for the popularity of employee stock ownership plans (ESOPs)?

ESOPs provide tax advantages to employers.

Which situation is an example of involuntary turnover?

Gisele, an employee at Innovative Tech, is fired because of theft.

Scanlon Plan

Gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard

Which of the following is an advantage of the merit pay incentive system?

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

Target Ratio

Labor costs divided by sales value of production

In a company's merit pay program, individuals' compa-ratio represents their:

Pay relative to average pay

Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk.

TRUE Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk.

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

East Bay Hospital was concerned about rising costs for patients who have surgery for joint replacement. It tried rewarding staff in any quarter they met targets for lower use of supplies, but costs continued to rise. An investigation showed that one source of costs was the readmission of patients who experienced infections after surgery. The human resource department proposed setting up a gainsharing program with an effectiveness measure related to reducing infections. Which statement about gainsharing best supports this recommendation?

With gainsharing, employees are freed to collaborate on how to improve performance.

West End Hospital was concerned about rising costs for patients who have surgery for joint replacement. It tried rewarding staff in any quarter they met targets for lower use of supplies, but costs continued to rise. An investigation showed that one source of costs was the readmission of patients who experienced infections after surgery. The human resource department proposed setting up a gainsharing program with an effectiveness measure related to reducing infections. Which statement about gainsharing best supports this recommendation?

With gainsharing, employees are freed to collaborate on how to improve performance.

Which of the following statements about a straight salary compensation plan is true: a. Straight salary compensation plans are more complex to administer than straight commission compensation plans. b. A major limitation of straight salary compensation plans is that financial rewards are not directly tied to any specific aspect of job performance. c. Straight salary compensation is more commonly used with experienced salespeople than with newly hired sales recruits. d. Straight salary compensation plans are most useful when sales managers want to motivate its sales force to achieve short-run sales volume increases. e. It is inappropriate to use straight salary compensation for industries where missionary selling is commonplace.

b. A major limitation of straight salary compensation plans is that financial rewards are not directly tied to any specific aspect of job performance.

Which of the following plans allows the salesperson and company to share the same pool of money so that both are interested in maximizing the pool? a. combination plans b. gross margin commissions c. group bonus plans d. expense accounts e. social security plans

b. gross margin commissions

You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. You think you have finally selected a compensation method and wage level that meets your boss's requirements. According to your text, what would you do next? a. Implement the plan immediately because it fits the requirement of lowering overall salesperson compensation. b. Get salesperson feedback about your ideas. c. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation. d. Make sure that the accounting department can implement the new plan. e. Tell the salespeople that they have been overpaid and now you are bringing them back to reality.

c. Check to see how the salespeople would fare under the new plan by using sales figures from the previous year and calculating expecting compensation.

Salary plans are not popular with salespeople because: a. salaries are predictable. b. salaries are stable. c. they run the risk of having little or no income. d. they do not provide strong incentives for extra effort. e. none of the above - salary plans are always popular with salespeople.

d. they do not provide strong incentives for extra effort.

Steve, the vice president of Ocher Inc., plans to introduce a retirement plan for all employees. George, the operations director, disagrees because the proposed plan would increase the company's costs. Which of the following, if true, strengthens Steve's argument?

Some benefits have become so common that today's employees expect them.

Standard hour plan

Which statement is true of using stock options as incentive pay?

Stock options are rewarding for employees who exercise their option when the company's stock value has risen.

What is the difference between stock options and an employee stock ownership plan (ESOP)?

Stock options are usually granted to company executives whereas ESOP's are provided to all employees.

The link between employees' performance and pay is harder to establish in:

Stock ownership plans.

Maria, the financial officer at Boone & Borowitz, encourages the human resource manager to consider using stock options as incentive pay for all employees. The human resource manager cautions that employees could become upset if the options don't turn out to be as valuable as cash. Which of the following statements supports this concern?

Stock prices in the market may fall below the exercise price of the options

$1.5 million

$1.5 million.

Ty earns a base rate of $12 an hour and receives a weekly attendance award of $20. He works 40 hours this week. What would be his total compensation for the week?

$500

Salary Plus Commission Disadvantages

- Expensive and costly to administer - Imposing earning ceiling --> could dampen enthusiasm

A balanced scorecard

Which of the following best describes a balanced scorecard?

A combination of performance measures directed toward the company's long and short term goals and used as the basis for awarding incentive pay.

Balanced Scorecard

A combination of performance measures directed toward the company's long and short term goals; used as the basis for awarding incentive pay and draws employee attention to priorities

A higher pay range results in a lower comps-ratios causing bigger merit raise.

Which of the following is most likely a consequence of paying most or all of a salesperson's compensation in the form of commissions? A. It encourages the salesperson to focus on closing the sale. B. It frees the salesperson to focus on developing customer goodwill. C. It encourages teamwork over individual performance. D. It makes the employee appreciate the reward as the reward relates to economic conditions. E. It will quickly become expensive for the employer.

A. It encourages the salesperson to focus on closing the sale.

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. Group bonus E. Scanlon plan

A. Profit sharing

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

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

A. To make the merit increases consistent To make the merit increases consistent, so they will be seen as fair, many merit pay programs use a merit increase grid.

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

When an employee's pay is calculated as a percentage of sales, it is referred to as: A. commission. B. gain sharing. C. merit plan. D. variable wage plan. E. profit sharing.

A. commission.

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

A. compa-ratio.

Employee participation in pay-related decisions can be part of a general move toward: A. employee empowerment. B. centralized decision making. C. self ownership. D. high power distance. E. federalism.

A. employee empowerment.

An advantage of merit pay is that: A. it makes the reward more valuable by relating it to economic conditions. B. it promotes group performance instead of promoting individual behavior. C. it provides merit increases to employees only on the basis of performance. D. it would never become costly for the employers. E. it results in a bigger short-term reward for the best performers.

A. it makes the reward more valuable by relating it to economic conditions. An advantage of merit pay is that it makes the reward more valuable by relating it to economic conditions.

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

A. make the increases consistent.

Julianna, the HR manager at Hudson Corp., is facing criticism from the company's high-performing employees for the lack of an effective incentive scheme that rewards them with the necessary pay. The company has avoided paying out incentives in addition to employees' monthly salary in an attempt to minimize costs. But, after the last annual meeting, it has been decided to pay employees an incentive amount based on their performance ratings and their compa-ratio. In this scenario, Julianna would be applying the system of: A. merit pay. B. piecework pay. C. standard hour pay. D. commission. E. attendance bonus.

A. merit pay.

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

Jules & Co., a smartphone manufacturing company, provides wages to its employees based on the number of smartphones the workers assemble. The more the employees assemble, the more they earn. This type of plan is called: A. piecework rate plan. B. merit pay plan. C. Scanlon plan. D. profit sharing plan. E. standard hour plan.

A. piecework rate plan.

In the context of stock options, _____ is called exercising the option. A. purchasing stock B. selling stock C. retaining stock D. distributing stock E. liquidating stock

A. purchasing stock

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. In a profit-sharing plan, employees are the owners of the organization. B. Profit sharing helps employees to cooperate and to focus on organizational interests. C. Profit sharing makes employees workaholics. D. In profit sharing, employees contribute their base salary for the development of the organization. E. Profit sharing benefits employees even if the organization makes less profit or no profit.

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

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. Stock options are usually granted to company executives whereas ESOPs are provided to all employees. C. In stock options, stocks are placed into a trust whereas ESOPs give employees the right to buy 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. Earnings from stock options are exempt from income taxes whereas earnings from ESOPs are taxable.

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

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. Most of the employees had exercised their stock options before this change. B. The employees were unaware of the impact of their actions on the company's finances. C. The move was a response to problems that arose out of a poorly constructed bonus plan. D. The organization was divided into departments whose managers were rewarded as one group. E. The employees in the company are required to work in teams in order to accomplish their goals.

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

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

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

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. merit pay E. an attendance bonus

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

In order to control compensation costs, administrators of merit pay programs must closely monitor the compa-ratio and the: A. number of pay grades in the pay structure. B. an individual's performance ratings. C. number of new hires in the company. D. company's stock price in the financial year. E. average pay of the area where the organization is functioning.

B. an individual's performance ratings. The decisions about merit pay are based on two factors: the individual's performance rating and the individual's compa-ratio.

B. gainsharing

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

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

B. pay relative to average pay.

For incentive pay to motivate employees to contribute to the organization's success, the pay plans must be well designed. Which of the following statements would strengthen this argument? A. Performance measures are to be linked to the individual's goals. B. Employees are given unattainable performance standards. C. Employees will value the rewards or incentives that are being offered. D. Employees are given limited resources to meet their goals. E. The pay plan takes into account that employees will accept all goals irrespective of their rewards.

C. Employees will value the rewards or incentives that are being offered.

C. Incentive pay

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

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

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

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

C. Stock options are rewarding for employees who exercise their option when the company's stock value has risen.

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

The differential piece rates system refers to: A. an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees. B. a system that gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard. C. an incentive pay in which the piece rate is higher when a greater amount is produced. D. a system of linking pay increases to ratings on performance appraisals. E. an incentive pay plan where every employee is paid different wages based on the skills they possess.

C. an incentive pay in which the piece rate is higher when a greater amount is produced.

Differential piece rates system refers to: A. an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees. B. a wage system designed for salespeople who earn a differential pay for every piece sold. C. an incentive pay in which the piece rate is higher when a greater amount is produced. D. a system of linking pay increases to ratings on performance appraisals. E. an incentive pay plan where every employee is paid different wages based on the skills they possess.

C. an incentive pay in which the piece rate is higher when a greater amount is produced. Differential piece rates refers to an incentive pay in which the piece rate is higher when a greater amount is produced.

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

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

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

C. incentive pay.

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

C. incentive pay. Along with wages and salaries, many organizations offer incentive pay—that is, pay specifically designed to energize, direct, or control employees' behavior.

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. 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

In the context of stock ownership, what is meant by backdating a stock option?

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

Relevant Others

Co workers or others outside the organization in comparable circumstances

When an employee's pay is calculated as a percentage of sales, it is referred to as:

Commission

Gross Margin Commission Plan

Commission are a % of the gross margin realzied by the person - (Gross Margin= Sales Price - COGS) -Adv: Company and salesperson share the same pool of money (realized gross margin) - Disadv: sales force would work on lower gross margin orders, instead of smaller more profitable sales

Merit pay system decisions are based on two factors: an individual's performance rating and their:

Compa-ratio.

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

Alex, a researcher, claims that an exceptional employee with low pay will benefit more than his or her co-workers, who receive significantly better pay but perform below expectations, in a merit pay system. Which of the following statements strengthens Alex's claim? A. An employee receiving high pay performs better than other employees. B. The quality of the output produced by employees with high pay is better than that of other employees. C. Employees with high pay complete their work before the standard time. D. A higher pay range results in lower compa-ratios causing a bigger merit raise. E. The average pay in a merit pay system can only rise by a maximum of 2% each year.

D. A higher pay range results in lower compa-ratios causing a bigger merit raise.

Which of the following is a 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. Profit sharing C. Gainsharing D. Balanced scorecard E. Scanlon plan

D. Balanced scorecard

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

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

Which of the following is a disadvantage of using group bonuses? A. Physical outputs are not rewarded. B. It reduces the level of cooperation between the members of the group. C. The performance measures used are narrow. D. It could result in competition among groups. E. It cannot be used to promote specific goals.

D. It could result in competition among groups.

Which of the following is true about a piece rate plan? A. It can be used for all types of jobs and in all types of industries. B. It is best suited for complex jobs and tasks. C. It can be used to encourage team work and collaboration. D. It has a direct link between the work and how much the employee earns. E. It encourages peers to perform as well as the co-workers and reduce conflicts.

D. It has a direct link between the work and how much the employee earns. An obvious advantage of piece rates is the direct link between how much work the employee does and the amount the employee earns.

Which of the following statements is true about a piecework rate plan? A. It can be used for all types of jobs and in all types of industries. B. It is best suited for complex jobs and tasks. C. It can be used to encourage team work and collaboration. D. It has a direct link between the work done by the employee and the amount earned. E. It encourages the employee's peers to perform as well and reduces conflicts.

D. It has a direct link between the work done by the employee and the amount earned.

_____ is a type of incentive pay in which payments are a percentage of an organization's profits and do not become part of its employees' base salary. A. Merit pay B. Gainsharing C. Group bonus D. Profit sharing E. Commission

D. Profit sharing

Which of the following is a long-term incentive? A. Sales commission B. Group bonus C. Merit pay D. Stock option E. Piece rate

D. Stock option

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

When designing incentives, managers should make sure that: A. all the employees are paid equal amounts. B. even the lowest performing employees get some rewards. C. employees focus only completing the task quickly. D. employees think that the pay plan is fair. E. they focus on hiring employees for whom earning money is the only reason to do a good job.

D. employees think that the pay plan is fair. Attitudes that influence the success of incentive pay include whether employees value the rewards and think the pay plan is fair.

A standard hour incentive plan is likely to be successful if: A. most or all of a salesperson's compensation is in the form of commissions. B. employers keep labor costs to a minimum. C. the pay increase is linked to ratings on performance appraisals. D. employees want the extra money more than they want to work at a pace that feels comfortable. E. the organization values employee satisfaction, product quality, and customer service more than profits.

D. employees want the extra money more than they want to work at a pace that feels comfortable.

Standard hour plans are likely to succeed if: A. most or all of a salesperson's compensation is in the form of commissions. B. employers keep labor costs to a minimum. C. the pay increase is linked to ratings on performance appraisals. D. employees want the extra money more than they want to work at a pace that feels comfortable. E. the organization values employee satisfaction and motivation more than profits.

D. employees want the extra money more than they want to work at a pace that feels comfortable. A standard hour plan is an incentive plan that pays workers extra for work done in less than a preset "standard time." This plan can only succeed if employees want the extra money more than they want to work at a pace that feels comfortable.

D. long-term incentive

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

D. stock ownership plans.

_____ refers to incentive pay in which the wage paid is higher when a greater amount is produced.

Differential piece rate

________ refers to an incentive pay in which the wage paid is higher when a greater amount is produced.

Differential piece rate

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. A piecework rate system C. A merit pay system D. The Scanlon plan E. A balanced scorecard

E. A balanced scorecard

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

Piecework rate plans are most suited for _____. A. innovative tasks B. non-standard jobs C. managerial jobs D. jobs with difficult-to-measure output E. routine jobs

E. routine jobs

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as _____.

Merit Pay

In a meeting to discuss pension plans, management decides to offer retirement plans exclusively to the organization's owners and top managers. Steven, one of the top managers, disagrees with this decision because he believes the company can benefit more by providing pensions to a broad range of employees. Which of the following strengthens Steven's belief?

Nondiscrimination rules provide tax benefits to plans that do not favor the organization's highly compensated employees.

Ability to Pay

Outcome oriented contracts contribute to higher compensation costs because organization can pay a high risk premium

Commissions

Pay calculated as a percentage of sales

What six requirements are there to effective plans have?

Performance measures are linked to the organization's goals, Employees believe they can meet performance standards, Organization gives employees the resources they need to meet their goals, Employees value the rewards given, Employees believe the reward system is fair, Pay plan takes into account that employees may ignore any goals that are not rewarded.

Piecework Pay

As an incentive to work efficiently, some organizations pay production workers a _____, a wage based on the amount they produce.

Piecework Rate

Piecework Rate Plan

Retention Bonus

Intermittent Fixed Reward Schedules

Rewards are given after a certain number of desired behaviors (fixed ratio schedule) or after a certain amount of time following desired behavior (fixed interval schedule) - like a performance-based bonus or paycheck

Intermittent Variable Reward Schedules

Rewards are given after a varying number of desired behaviors (variable ratio) or after a varying amount of time following desired behavior (variable interval)

Continuous Reward Schedules

Rewards are given after each desired behavior

Straight Commission

Rewards people for their accomplishments, rather than time and effort - On the principle that a salesperson will add value above his or her cost - straight commission plans are used by relatively small # of firms

Roger is the head of the insurance claims department. Roger works for longer hours than his subordinates, however, he is not paid overtime for working more than 40 hours per week. Under the FLSA, which statement justifies the organization's decision not to give Roger's overtime pay?

Roger is considered as an exempt employee.

Scanlon Plan

Merit increase grids display an organization's policies for linking the size and frequency of pay increases to an individual's performance rating and position within the pay range.

TRUE Almost all organizations have established some program of merit pay—a system of linking pay increases to ratings on performance appraisals. To make the merit increases consistent, so they will be seen as fair, many merit pay programs use a merit increase grid. Merit pay is dependent on compa-ratio, the pay relative to average pay in a pay range.

An organization should always communicate with employees when changing an incentive plan.

TRUE Along with empowerment, communicating with employees is important. It demonstrates to employees that the pay plan is fair. It is particularly important to communicate with employees when changing the plan. Employees tend to feel concerned about changes.

Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes.

TRUE Along with wages and salaries, many organizations offer incentive pay—that is, pay specifically designed to energize, direct, or control employees' behavior. Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes.

Employee stock ownership plan is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.

TRUE Employee stock ownership plan refers to an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.

Piecework rates are most suited for routine, standardized jobs with output that is easy to measure.

TRUE Most jobs, including those of managers, have no physical output, so it is hard to develop an appropriate performance measure. So piecework rates are most suited for very routine, standardized jobs with output that is easy to measure

The compensation plan in which virtually every type of sales activity is rewarded, is a: a. progressive incentive rate plan. b. salary plus commission plus bonus plan. c. straight commission. d. fringe benefit plan. e. none of the above.

b. salary plus commission plus bonus plan.

Straight commission is a(an): a. fixed cost. b. variable cost. c. semi-fixed cost. d. intermediate cost. e. material cost.

b. variable cost.

According to the Customer-Product Matrix, sales positions which focus primarily on New Business Development require a greater proportion of __________ in the compensation plan than those sales jobs in the lower left-hand quadrant (Account Management). Sales jobs consisting primarily of Account Management involve a greater account servicing component and are therefore better suited to a primarily __________ form of compensation. a. salary, commission b. salary, bonus c. commission, salary d. commission, commission e. none of the above

c. commission, salary

You are the sales manager of a large, multi-product company. Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). Your salespeople are paid on commission. The economy has entered a period of recession, and even the Administration's economists predict that it will remain so for at least three more quarters. In order to "weather the storm," the best course of action among those presented below is to: a. withdraw from the Mid-Atlantic region in order to reduce fixed costs. b. shift from commission to salary in all regions in order to cut expenses. c. raise commission rates on higher margin products in all regions in order to boost sales. d. all of the above. e. none of the above.

c. raise commission rates on higher margin products in all regions in order to boost sales.

Industrial sales reps are often paid with a compensation plan that can be tailored to the incentive needs of a particular firm but also has a fixed salary component. This type of plan is called: a. gross margin plan. b. straight salary. c. salary plus commission. d. fringe benefit design.

c. salary plus commission.

As a branch manager of an office products company, you notice a large disparity between your top salespeople and your mid- to low-performing salespeople. The current culture is for each salesperson to work independently of each other, but you want to change the culture to more of a team atmosphere where the top salespeople help train the lower producers. However, you don't want to lower the motivation level either. Which of the following compensation plans would you implement to help you accomplish this? a. straight salary b. salary plus year-end bonus c. straight commission d. salary plus commission plus year-end branch bonus e. salary plus commission

d. salary plus commission plus year-end branch bonus

MTX Co., a manufacturing company, has a pay structure based on job descriptions. As the company moves toward customizing production to meet customers' specific needs, it finds that managers are lacking flexibility in both job assignments as well as awarding pay increases to their employees. In this case, which alternative to job-based pay structures would best help the organization to respond to this problem?

delayering

Which of the following would not be a part of a well-designed compensation package? a. travel expenses b. salary c. bonuses d. commissions e. all of the above could be part of a compensation package.

e. all of the above could be part of a compensation package

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