Chapter 2 Compensation

Which of the following tests of competitive advantage is the easiest test to pass?

Alignment

Which of the following is the correct order of the steps in formulating a total compensation strategy?

Assess total compensation strategy, map a total compensation strategy, implement strategy, reassess

Which of the following relationships within a pay system is accurate?

Compensation objectives shape pay policies.

Which of the following is not a test of whether a pay strategy is a source of competitive advantage?

Cost effectiveness

_______ is to increasing variable pay as innovator is to market based pay.

Cost-cutter

The issue of how much and what forms of pay are our competitors using is part of which objective of total compensation strategy?

External competitiveness

A compensation strategy map shows which strategy is best for an organization.

FALSE

Customer-focused pay strategies are very likely to use market-based pay.

FALSE

External competitiveness is one test of competitive advantage.

FALSE

In a high-performance system pay strategy plays a lead as opposed to support role.

FALSE

A strategy map contains strategies about all but which of the following?

HR alignment

Whole Foods' policy of holding executive salaries to no more than 14 times average pay of full-time employees is an example of which strategic pay decision?

Internal alignment

Whole Foods' decision to seek and engage employees who are going to help the company make money is an example of which strategic pay decisions?

Objectives

The social competitive and regulatory environment factors are most important for which type of strategy?

Strategic compensation

Labor market-based compensation practices in countries such as China Germany and France are likely to be less effective than in countries such as the U.S. Korea or Singapore because there is less movement from company to company

TRUE

Most firms do not have generic strategies but use a blend of cost and innovation.

TRUE

Pay systems should fit well with other HR systems.

TRUE

Strategy refers to the fundamental direction that an organization chooses.

TRUE

Unlimited compensation choices by employees would meet with disapproval from the U.S. Internal Revenue Service.

TRUE

When an organization uses pay for performance and performance is improving this is a virtuous circle.

TRUE

Work/life balance issues are part of competitiveness decisions in the pay model.

TRUE

Among unconventional benefits

U. S. workers in the Hudson's survey rated _____ as their most preferred, a more flexible work schedule

At the corporate level a strategic compensation perspective addresses the question:

What business should we be in?

According to the Hudson survey

__________ is the single thing that would make them happier., more money

Union preferences is a major factor in _____ of a total compensation strategy.

assessing implications

"Putting some skin in the game" refers to:

below market base pay with stock ownership

A compensation system focusing on system control and work specifications is most closely associated with _____ strategy.

cost-cutter

Decisions regarding what forms compensation should be are part of _____.

external competitiveness

The alignment test

helps ensure passing the differentiation test.

Research investigating high-performance workplaces found that performance-based pay _____ when combined with other high performance practices.

improves attitudes and behaviors

A compensation system using market-based pay is most likely to be part of a _____ strategy.

innovator

Issues of transparency technology and choice are examples of choices related to the _____ strategy choice of total compensation.

management

When organization performance declines

performance-based pay plans do not pay off.

In mapping a total compensation strategy

the question of how is compensation in the overall HR strategy is part of _____., objectives

Research shows that ____________can effectively shift an organization in a downward performance spiral to an upward one.

there are no compensation practices that

"To maintain good citizenship as a company" and "To make a fair profit on current operations" are examples of _____.

values

_____ is a "best practice".

Both smaller and larger internal pay differences

What level of strategy is the question "how do we gain competitive advantage"?

Business unit

Which of the following is not one of the tests to determine if a pay strategy is a source of competitive advantage?

External competitiveness of the pay system

In the proper sequence of strategic decisions HR strategies are made before business unit strategies.

FALSE

Internal alignment refers to how differently levels of skills and work are paid across different organizations.

FALSE

Most organizations rely upon the market to determine how to pay their employees since compensation strategy is uncertain and complex.

FALSE

Offering employees choice in their compensation mix provides firms a distinct competitive advantage.

FALSE

One of Whole Foods' employee contributions strategic compensation choices is to seek and engage employees who are going to help the company make money.

FALSE

Research on the effects of pay level showed that pay level affects financial performance while how employees are paid has no effect.

FALSE

Since unions represent such a small fraction of the labor force their influence on pay decisions is relatively minor.

FALSE

The major challenge in the design of future pay systems is reducing the pay gap between top executives and low-level employees.

FALSE

What business should a company be in and how does the company win are questions that are a part of mapping a total compensation strategy.

FALSE

When Microsoft replaced stock options with stock awards they were asking employees to put more "skin in the game".

FALSE

Which of the following statements is not true?

Focusing on employee contributions vs other objectives is a best practice

"Choosing techniques to fit strategy" is a part of which step in developing a total compensation system?

Implement strategy

"Everyone wears several hats" and "succeed by working together" are examples of which of the following?

Internal alignment

Which of the following statements regarding allowing employees choice in their pay mix is not true?

It provides an employer a clear competitive advantage

In the formula predicting performance the component most closely related to compensation is ___________

M

A book listing the previous year's pay of all employees is part of Whole Foods "No-secrets" philosophy. This is an example of which strategic compensation choice?

Management

______________ changed its compensation strategy as the company grew and matured?

Microsoft

_____________ is the measure of how important compensation is in the overall HR strategy.

Prominence

A major challenge in the design of future pay systems is how to better satisfy individual needs and preferences.

TRUE

All organizations that pay their employees have a compensation strategy even though it may not be stated or written.

TRUE

Although three separate compensation strategies may be identified many companies use a combination of all three.

TRUE

An organization's strategy is defined by the tradeoffs in choices of what to do and what not to do.

TRUE

Benchmarking and copying best practices does not lead to competitive advantage.

TRUE

Compensation strategy should reflect the organization's values.

TRUE

Compensation systems focusing on competitor labor costs typically follow a cost-cutter strategy.

TRUE

How an organization positions its total compensation against competitors is part of external competitiveness strategic choices.

TRUE

IBM was discussed as an example of an organization that changed it pay system and strategy to meet a different business strategy.

TRUE

A compensation system that pays employees such that "some skin is in the game" means that

a portion of employee pay is at risk

Examination of employee and union needs and the social and political context is a part of _____ step in formulating a total compensation strategy.

assess total compensation implications

A focus on competitor's costs is most closely associated with a _____ strategy.

cost-cutter

All of the following except __________ are compensation systems associated with an innovator strategy.

customer satisfaction incentives

Flexible-generic job descriptions would most likely be used with a _____ strategy.

innovator

Career growth hierarchy and flexible design are examples of choices related to the _____ strategy choice of total compensation.

internal alignment

The second step of developing a total compensation strategy is to:

map a total compensation strategy.

The role non-HR managers play in making pay decisions is called _____.

ownership

Trying to measure an ROI for any compensation strategy implies that

people are "human capital," similar to other factors of production.