Compensation Exam 3

The ability triangle includes?

- Selection, Recruitment, and Training

Performance plans

- Typically feature corporate performance objectives for a time three years in the future. - They are driven by financial earnings or return measures, and they pay out for meeting and exceeding specific goals

A common first step in interpreting compensation survey data is to?

- A common first step is to check the accuracy of the job matches, and then check for anomalies

When an organization's performance has regular and large swings and individual performance is unclear and hard to measure, the most effective compensation mix is to offer?

- A high base pay with low incentives and a variety of rewards

When an organization's performance has frequent highs and lows, but individual performance is fairly stable and performance measures are clear, the most effective compensation mix is to offer?

- A large base pay and low incentive pay

A person with low self-esteem is likely to seek?

- A large, decentralized organization with little pay for performance

Components identified as vital to the success of both Scanlon and Rucker plans are?

- A productivity norm and effective worker committees

Advantage/disadvantage of team incentives?

- Adv: they are effective in stimulating ideas and problem solving - Dis: they maximize distinctions between team members

One common feature of all types of incentive plans is?

- An established standard of performance that is used to determine the magnitude of the incentive pay

Risk Sharing

- An incentive plan in which employees' base wages are set below a specified level and incentive earnings are used to raise wages above the base. In good years an employee's incentive pay will more than make up for the 20 percent shortfall, giving the employee a pay premium. Because employees assume some of the risk, risk-sharing plans pay more generously than success-sharing plans in good years.

Instrumentality

- Employee's beliefs that requisite job performance will be rewarded by the organization

Know how the low-high method of job matching and how it works - also, know the best approach for pricing jobs using a skill-competency-based pay system.

- If an organization is using skill-competency based structures, or generic job descriptions, it may not have benchmark jobs to match with. - The low-high method of job matching is identifying the lowest and highest paid benchmark jobs for the relevant skills in the relevant market and to use the wages for these jobs as anchors for the skill-based structures - Low-high approach

The Halsey 50-50 method

- Individual incentive method that provides for variable incentives as a function of a standard expressed as time per period per unit of production - Splits between worker and the organization any savings and direct costs. The savings results from completion of a task in less time than a time study suggests.

Valence

- Is the value employees attach to the organization rewards offered for satisfactory job performance

Halsey 50-50 method?

- It derives its name from the shared split between worker and employer of any savings in direct cost

The Taylor differential piece-rate plan/Taylor plan.

- It is an individual incentive plan that provides for variable incentives as a function of units of production per time period - Provides two piecework rates that are established for production above and below standard , and these rates are higher and lower than the regular wage incentive level

Gain-sharing plan formulas,

- Labor inputs are in the numerator and productivity outcomes are in the denominator

Which of the following statements is true of merit pay?

- Merit programs are commonly designed to pay different amounts depending on the level of performance

When employee performance is easily measured and the organization's performance is fairly stable over time, the most effective type of compensation is to offer?

- Monetary rewards with large incentives

When employee performance measures are ambiguous and vary from time to time, but the organization's performance is fairly stable over time, the most effective type of compensation is to offer?

- Monetary rewards with large incentives

Know what quartiles and percentiles are used

- More common measures in salary survey analysis - Quartiles are often used to set pay ranges and zones They order all data points from lowest to highest, then convert to

Employment Cost Index - need to recognize true and false comments about

- One of four types of salary surveys published regularly by the DOL on its website. The ECI measures quarterly changes in employer costs for compensation. Allows a firm to compare changes in its average costs to an all-industry or specific-industry average. Industry averages may not reflect relevant competitors.

Disadvantage to gain sharing plans

- Pay performance links are indirect

Straight piecework system

- Paying a dime for every bottle collected and turned to a collection center

Agency Theory

- Performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult

Equity Theory

- Relative pay is important as employees evaluate their pay-effort balance in comparison to other employees

What does aging the data mean?

- The process of taking different survey data, which can be accurate at different points in time, and adjusting the data to some common point in time.

Which of the following statements is true of pay ranges?

- They reflect the differences in performance or experience that an employer wishes to recognize with pay.

The corporate performance of Yellow Corp. is fairly stable. However, it is difficult to measure individual performance. In this case, the most effective compensation mix is to offer?

- Wide range of awards beyond just money

A market pay line does what according to the text?

- links a company's benchmark jobs with market rates paid by competitors.

Most experts agree that employees do not begin to consider changing their behavior unless payouts are at least ________ percent higher.

20

Pay ranges for office and production work commonly range between?

5-15%

The final major decision in setting externally competitive pay and designing the corresponding pay structures is to?

Balance competitiveness with internal alignment through the use of ranges, flat rates, and/or bands

- ______ requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action

Bedeaux plan

The process of matching survey jobs by applying an employer's plan to the external jobs and then comparing the worth of the external job with its internal "match" is called?

Benchmark conversion

Asai uses a skill-based plan that establishes single flat rates for each skill level. Mark performs better than Steve, even though Steve has more seniority. Which of the following statements is most likely to be true in this scenario?

Both Mark and Steve will be paid the same amount

In the United States, the ________ is a major source of publicly available pay data, and it also calculates the consumer price index.

Bureau of Labor Statistics

Which of the following is often used to set pay ranges? A) Median B) Weighted mean C) Quartiles and percentiles D) Standard deviation

C. Quartiles and percentiles

Who usually has responsibility for managing a pay survey?

Compensation Manager

The motivation triangle includes?

Culture, Compensation, Performance Management

Which of the following is true regarding the Employment Cost Index (ECI)? A. it is published by the department of commerce B. it is an excellent source of competitor labor costs C. it measures annual changes in employer compensation costs D. it allows comparison of labor costs to all-industry averages

D. it allows comparison of labor costs to all-industry averages

The second major decision in setting externally competitive pay and designing the corresponding pay structures is to?

Define the purpose of the survey

Which of the following is the most commonly used team incentive performance standard?

Financial performance

The trend in recent variable-pay design is to combine the best of?

Gain sharing and profit sharing plans

- For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the

Gantt plan

For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the?

Gantt plan

Which measure of central tendency minimizes distortion caused by outliers?

Median

- Which of the following is a reward that recognizes outstanding past performance

Merit pay

When pay is based on individual performance, turnover tends to be highest among?

Poor performers

A team leader with a free-rider problem in his team can most likely maximize the performance of his team by?

Specifying performance levels and due dates

Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?

Standard Deviation

- If you had repair work done on your car, the shop most likely used _____ to pay the mechanic

Standard hour plan

The size of pay differentials between grades should?

Support career movement through the pay structure

- An incentive system with three piecework rates is the

The merrick system/plan

________ measures reveal competitors' use of performance-based cash payments.

Total cash

In the regression equation y = a + bx, job evaluation points are denoted by?

X

The most frequently implemented incentive system is:

a straight piecework system

The most obvious sorting factor is?

ability

Merit Bonus

an individual level form of performance pay

Which of the following motivational theories states that performance-based payments work best when they closely follow performance?

expectancy theory

In the context of pay influencing turnovers, which of the following is a result of too little pay?

feelings of unfair treatment among employees

When a company moves from an individual incentive plan to a group incentive plan, the company is most likely to experience?

higher turnover among high performers

an advantage of providing stock ownership as variable pay to employees?

it defers a portion of taxes to employees

Aging market data to a point halfway through a plan year is called

lead/lag

The ________ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.

market pricing

Available evidence indicates that managers believe the most important factor for pay increases is?

performance

Which of the following are an example of a long-term incentive plan?

performance plans

Company X pays for performance. Allan, an employee of the company, is not in favor of this reward system and, therefore, leaves Company X in search of another company with different rules for getting rewards. This is an example of the?

sorting effect

- ______ have indirect pay-performance links and require employees to put up money to exercise grants

stock option plans

Which of the following is an individual incentive plan?

straight piecework system

Distributive justice.

the amount of fairness given to employees refers to

Which of the following statements is true of individual spot awards?

they are given to employees for exceptional performance as an add on bonus

Success Sharing

- Employee pay is constant, variable pay adds on during successful years

The first major decision in setting externally competitive pay and designing the corresponding pay structures;

Determining the external competitive pay policy

Which of the following statements is true of market pricers?

they assume that little value is added through internal alignment

Which of the following statements is true regarding broad bands?

they foster cross-functional growth

Gain Sharing

- A team-based compensation structure that rewards teams based on the achievement of certain metrics associated with productivity, efficiency, or quality

Difference(s) between ranges and bands?

- Broad banding: consolidates as many as four or five traditional grades into a single band with one minimum and one maximum - Ranges: A pay range exists whenever two or more rates are paid to employees in the same job.

Gramhold, Inc., a pharmaceutical company, reduces its ten salary grades to just three broad bands. Which of the following statements is most likely to be true in this case?

- C) Gramhold will experience more career moves within bands than career moves between bands.

What is a Fuzzy market and types of jobs that would most likely fall into them?

- Organizations with unique jobs and structures - Yahoo! Combines technology, media, and commerce in one company

Expectancy Theory

- People choose the behavior that leads to the greatest reward

Reinforcement Theory

- Theory that positive and negative reinforcers motivate a person to behave in certain ways

Advantage of gain sharing plans

- They are administratively easy to implement

Which of the following statements is true of individual spot awards?

- They are given to employees for exceptional performance as an add on bonus

Which of the following is true of merit bonuses?

- They are viewed as less of an entitlement than merit pay

Be able to recognize true or false comments about the weighted mean as a statistical measure to analyze survey data

- Weighted mean is calculated by adding the base wages for all the employees and then dividing by the number of the employees. A weighted mean gives equal weight to each individual employee's wage - Captures size and supply and demand in the market - If have only companywide measures rather than individual measures, the rate for each company is multiplied by the number of employees in that company. Total of all rates is divided by total number of employees

Which of the following jobs would most likely fall into a fuzzy market? A) The position of English professor that was filled by a Ph.D. holder in English language and literature with five years of teaching experience B) The position of sound engineer that was filled by a graduate with a degree in audio engineering C) The position of senior director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience D) The position of vice president of a marketing firm that was filled by a marketing manager with 15 years of experience in the marketing field

C. The position of senior director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience

In the context of a pay-for-performance plan, which of the following questions is related to equity?

- Do employees view the amount of compensation received as fair?

The Rowan plan

- Faster you row, larger piece of the savings is what you get. - Similar to the Halsey plan, but in this plan a worker's bonus increases as the time required to complete the task decreases - Individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production