HRM Final Exam-- Chp 12

From a(n) _____ standpoint, the effect on performance motivation may be limited in ownership programs because of the less obvious link between pay and performance. A. agency theory B. equity theory C. efficiency wage theory D. reinforcement theory E. contract theory

D. reinforcement theory

Which of the following makes employee stock ownership plans (ESOPs) less attractive? A. Less diversification of investment risk B. Lack of tax and financial advantages C. High levels of liquidity D. Inability to serve as a takeover defense E. Giving employees the right to vote their securities

A. Less diversification of investment risk

______ are decisions about whether to join or remain with an organization. A. Membership behaviors B. Organizational behaviors C. Group dynamics D. Organizational structures E. Organizational norms

A. Membership behaviors

Which of the following makes outcome-oriented contracts less likely to occur? A. Risk aversion among agents B. High outcome uncertainty C. More programmable jobs D. Less measurability of outcomes E. Low risk premium in compensations

A. Risk aversion among agents

Which type of compensation program is most likely to attract learning-oriented employees? A. Skill-based pay B. Merit pay C. Incentive pay D. Gainsharing E. Profit sharing

A. Skill-based pay

E. L. Thorndike's Law of Effect states that _____. A. a response followed by a reward is more likely to recur in the future B. behavior is a function of ability and knowledge C. valence of pay outcomes should vary under different pay systems D. monetary incentives increase intrinsic motivation E. principals have perfect information on the degree to which an agent is pursuing goals

A. a response followed by a reward is more likely to recur in the future

When an organization is using growth strategy, it will _____. A. have pay levels that are below market levels in the short run B. have a time orientation that is short-term C. make centralized pay decisions D. not share risks with employees E. have benefit levels that are above market levels

A. have pay levels that are below market levels in the short run

Gainsharing can motivate employees as much as individual plans do because A. it allows more control over the performance measure and the frequency of payouts. B. it uses organization-level performance measures. C. it involves payouts that are deferred. D. it encourages individual-oriented plans rather than broader goals. E. it focuses more on the monetary component than on employee skills.

A. it allows more control over the performance measure and the frequency of payouts.

Overtime pays better performers more in _____ programs. A. merit pay B. profit-sharing C. gainsharing D. skill-based E. ownership

A. merit pay

Agency costs are likely to arise when _____. A. principals and agents have different goals B. owners and managers are the same C. stockholders are involved in day-to-day operations of the company D. the stockholders are aware of the degree to which the agents are pursuing the principal's goals E. there is information symmetry between the agent and the principal

A. principals and agents have different goals

Agents prefer a behavior-based contract when _____. A. they are inclined to take more risks B. job outcomes are more measurable C. they desire higher compensation D. outcome uncertainty is high E. jobs become less programmable

D. outcome uncertainty is high

By law, what percentage of assets must an employee stock ownership plan (ESOP) invest in its company's stock? A. 26 percent B. 51 percent C. 80 percent D. 75 percent E. 76 percent

B. 51 percent

Which of the following statements about outcome-oriented or behavior-oriented contracts is true? A. Merit pay is an example of an outcome-based contract. B. Behavior-oriented contracts do not transfer risk to the agent. C. Outcome-oriented contracts do not require a compensating wage differential. D. Outcome-oriented contracts decrease the agent's risks. E. In behavior-based contracts, information asymmetry is not an important issue.

B. Behavior-oriented contracts do not transfer risk to the agent.

_____ can be described as a function of ability and motivation. A. Attitudes B. Behaviors C. Values D. Rewards E. Goals

B. Behaviors

Group incentives tend to measure performance in terms of _____. A. employee retention B. individual motivation C. organizational environment D. physical output E. organizational profitability

D. physical output

Which of the following is an example of the sorting effect? A. A mid-year merit bonus encourages Lavar to keep improving his productivity at Star Industries. B. Bevlink's full match for employee retirement plan contributions encourages Tina to apply for a job there. C. Two years without a wage increase for employees at Fractal Castings has led to a decrease in product quality. D. Implementation of profit sharing at RedCube Robotics inspires Zack's team to identify potential supply chain savings. E. Freezing of year-end bonuses at Harvest Organics leads employees to question the organization's values.

B. Bevlink's full match for employee retirement plan contributions encourages Tina to apply for a job there.

Which of the following compensation programs uses a management style that gives importance to control? A. Gainsharing plan B. Incentive pay C. Ownership D. Merit pay E. Profit sharing

B. Incentive pay

Which of the following components is a perceived link between behavior and pay? A. Expectancy B. Instrumentality C. Reinforcement D. Valence E. Equity

B. Instrumentality

Which of the following theories suggests that high employee performance not followed by a monetary reward will make future high performance less likely? A. Herzberg's two-factor theory B. Reinforcement theory C. Freud's psychoanalytical theory D. McGregor's theory X E. Theory Z

B. Reinforcement theory

Separating the functions of principals and agents is likely to result in A. immobility of financial capital. B. diversification of investment risk. C. reduction in agency costs. D. better goal congruence. E. information symmetry.

B. diversification of investment risk.

Gainsharing plans differ from profit-sharing plans in that A. gainsharing plans use organization-wide performance parameters. B. gainsharing plans distribute payouts more frequently. C. gainsharing plans make lump sum payments. D. gainsharing plans can be attached to all types of jobs in the organization. E. gainsharing plans discourage pursuit of broader goals of the group.

B. gainsharing plans distribute payouts more frequently.

In incentive pay, performance measures are primarily based on _____. A. a supervisor's appraisal B. individual productivity C. company profits D. company stock returns E. production costs

B. individual productivity

According to expectancy theory, compensation systems differ according to their impact on the components of motivation; the main influence of compensation is on _____. A. expectancy B. instrumentality C. reinforcement D. valence E. equity

B. instrumentality

Culture based on _____ is most likely to prevail in companies that use a profit-sharing compensation program. A. individual competition B. knowledge of business C. sense of ownership D. problem-solving orientation E. learning and flexibility

B. knowledge of business

In the _____ dimension, employees base their fairness assessments on the processes that were used to decide the amount of compensation. A. distributive B. procedural C. quantitative D. ownership E. outcome

B. procedural

Agency theory is of particular value in compensation management because of its emphasis on the _____ trade-off. A. performance-reward B. risk-reward C. motivation-reward D. ability-reward E. behavior-reward

B. risk-reward

Which of the following is a tool that allows companies to track financial results while monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth? A. HR scorecard B. External employee grid C. Balanced scorecard D. ESOP plan E. Merit increase grid

C. Balanced scorecard

_____ perception is the perceived link between effort and performance. A. Reinforcement B. Actual C. Expectancy D. Agency E. Equity

C. Expectancy

_____ focuses on the link between rewards and behaviors and emphasizes anticipated rewards. A. Equity theory B. Agency theory C. Expectancy theory D. Theory Z E. McGregor's theory X

C. Expectancy theory

Which of the following is a design feature according to which employee contribution programs differ? A. Employees' skills B. Type of work C. Frequency of payout D. Number of employee groups E. Company's annual output

C. Frequency of payout

Which of the following is a compensation program that would best support an organizational culture of cooperation and problem solving? A. Fixed pay B. Merit pay C. Gainsharing D. Incentive pay E. Skill-based pay

C. Gainsharing

Which of the following is true of how managers may differ from shareholders? A. Managers can diversify the risks more easily. B. Managers are more likely to pursue projects with high potential payoffs. C. Managers diversify investments more easily. D. Managers are less averse to risk. E. Managers are likely to prefer more emphasis on uncertain incentives than base pay.

C. Managers diversify investments more easily.

As jobs become less programmable, A. outcome-oriented contracts become less likely. B. monitoring becomes less difficult. C. behavior-oriented contracts become less likely. D. the agent's risk decreases. E. the requirement for compensating wage deferential increases.

C. behavior-oriented contracts become less likely.

Allan works as a typesetter in a publishing company. If the organization uses merit pay programs, Allan's salary is based primarily on information collected from _____. A. his colleagues B. the human resource manager C. his immediate supervisor D. Allan himself E. performance indicators

C. his immediate supervisor

Employees assess fairness along the distributive dimension when their assessment is based on _____. A. organizational procedures B. the systems used to assess performance C. how much they receive D. supervisors' feedback E. their judgment of the management

C. how much they receive

In a(n) _____ plan, performance is usually measured as physical output and the payment is not rolled into the base pay. A. skill-based B. profit-sharing C. individual incentive D. merit pay E. gainsharing

C. individual incentive

When an organization is using concentration strategy, it will _____. A. have short-run pay levels below the market B. have a long-term orientation C. make centralized pay decisions D. maintain high variable pay levels E. have benefit levels below the market

C. make centralized pay decisions

In _____ programs, annual compensation increases are usually linked to performance appraisal ratings. A. skill-based pay B. gainsharing C. merit pay D. incentive pay E. cost-based pay

C. merit pay

A(n) _____ is suitable for an organization with a culture that promotes individual competition. A. gainsharing plan B. profit-sharing plan C. merit pay plan D. ownership plan E. skill-based plan

C. merit pay plan

Expectancy theory implies that linking an increased amount of rewards to performance will increase motivation and performance. Followers of cognitive evaluation theory are likely to question this assumption, arguing that A. monetary rewards may decrease extrinsic motivation. B. intrinsic rewards do not affect job satisfaction. C. monetary rewards may decrease intrinsic motivation. D. extrinsic rewards are not effective for managers. E. behaviors are determined by genes rather than reinforcement.

C. monetary rewards may decrease intrinsic motivation.

According to the agency theory, the principals are the _____. A. managers B. customers C. owners D. vendors E. employees

C. owners

In merit pay programs, an individual's compa-ratio represents his or her _____. A. ability to multitask B. performance rating C. position in the pay range D. knowledge of business E. ratio of pay to benefits

C. position in the pay range

Which of the following pay strategy dimensions best fits with a business strategy of concentration? A. Long-term time orientation B. Below-market short-run pay level C. High levels of variable pay D. Above-market benefits levels E. Decentralization of pay decisions

D. Above-market benefits levels

Which of the following is true of how agents may differ from principals? A. Agents can diversify the risks more easily. B. Agents are more likely to pursue projects with high potential payoffs. C. Agents can diversify investments better. D. Agents are more averse to risk. E. Agents are likely to prefer more emphasis on uncertain incentives than base pay.

D. Agents are more averse to risk.

Which of the following is true of how the agency theory views monitoring? A. Monitoring is more expensive when done by employees. B. Employees' knowledge of the workplace is not reliable. C. Monitoring is less effective when performed by employees. D. Employees understand fellow employees better than managers do. E. A compensation system does not influence peer monitoring.

D. Employees understand fellow employees better than managers do.

Which of the following pay programs has the highest frequency of payout? A. Merit pay B. Profit sharing C. Skill-based program D. Incentive pay E. Gainsharing

D. Incentive pay

Which of the following is an example of a behavior-oriented contract? A. Stock option B. Profit sharing C. Commission D. Merit pay E. Revenue sharing

D. Merit pay

The _____ requires companies to report compensation levels for the five highest paid executives and the company's performance relative to that of competitors over a five-year period. A. Bureau of Economic Analysis B. Federal Bureau of Investigation C. Federal Trade Commission D. Securities and Exchange Commission E. Bureau of Industry and Security

D. Securities and Exchange Commission

Which of the following is an example of an ownership plan used in compensation systems? A. Gainsharing plan B. Profit-sharing program C. Group incentive D. Stock option E. Individual incentive plan

D. Stock option

Which of the following is a difference between profit-sharing plans and employee ownership plans? A. Unlike ownership plans, base pay is not reduced when profit-sharing plans are introduced. B. Ownership plans focus on the success of the organization as a whole, unlike profit-sharing plans. C. Profit-sharing plans promote individual competition, whereas ownership plans promote group competition. D. The link between pay and performance is less obvious under ownership than under profit sharing. E. Ownership plans promote individual competition, whereas profit-sharing plans promote group competition.

D. The link between pay and performance is less obvious under ownership than under profit sharing.

In a merit increase grid, the _____ determines the size and frequency of pay increases. A. time spent in the current pay grade B. overall profitability of the company C. employees' seniority D. compa-ratio of employees E. the skill developed by the employee

D. compa-ratio of employees

A(n) _____ program is based on group or plant performance that does not become part of the employee's base salary. A. merit pay B. profit-sharing C. stock option D. gainsharing E. individual incentive

D. gainsharing

According to expectancy theory, motivation is hypothesized to be a function of _____. A. cognitive capacity B. social structure C. genes D. instrumentality E. self-esteem

D. instrumentality

Which of the following must a principal do to reduce agency costs? A. Encourage the agent to maximize his or her benefits B. Provide complete autonomy to the agent C. Discourage the agent from pursuing projects with high potential payoffs D. Increase information asymmetry and goal congruence E. Align the agent's interests with the principal's interests

E. Align the agent's interests with the principal's interests

Which of the following is most likely to provide intrinsic motivation? A. A sponsored vacation to Europe B. A monthly salary of $10,000 C. Medical insurance D. Paid leave for three months E. An interesting work assignment

E. An interesting work assignment

Which of the following is likely to occur when pay for performance with stronger incentive intensity is replaced with one having a weaker incentive pay? A. Greater motivation for employees in sales, executives, and stockbrokers B. Motivation for high performers to stay with the organization and improve their efficiency C. Greater chance for unintended, undesirable behavior driven by pay-linked incentives D. Excessive risk-taking for greater premium and compensation E. Competitors possibly winning over high performers with stronger incentive intensity

E. Competitors possibly winning over high performers with stronger incentive intensity

Which of the following is a criticism of traditional merit pay programs? A. Peer and subordinate ratings are frequent and they tend to receive more weight than supervisory ratings. B. The feedback under this system tends to occur too frequently, which may cause average employees to feel more discouraged than appreciated. C. These programs lack emphasis on individual performance and focus too much on teamwork. D. These programs often involve gathering inappropriate feedback from external sources. E. Employees are encouraged to focus on personal gains rather than what is good for the organization.

E. Employees are encouraged to focus on personal gains rather than what is good for the organization.

Which of the following is a drawback of using profit sharing? A. It promotes individual goals rather than organizational goals. B. It promotes competition between work groups. C. It increases the probability of individual competition. D. It fails to make labor costs more variable. E. It runs the risk of contributing to employee dissatisfaction.

E. It runs the risk of contributing to employee dissatisfaction.

Which of the following is true about outcome-oriented contracts? A. They require more supervision than behavior-oriented contracts. B. When profits drop, agents' compensation goes up in outcome-oriented contracts. C. Agents do not demand compensating wage differentials in such contracts. D. Agents face minimal risks in such contracts. E. They are typically a major component of executive compensation.

E. They are typically a major component of executive compensation.

Which of the following is true of individual incentives? A. They contribute to a more disintegrated workforce. B. They are helpful in the pursuit of total quality management objectives. C. They encourage employees to go beyond the call of duty. D. They reduce the motivation of acquiring multiple skills and proactive problem solving. E. They must be continuously earned and re-earned.

E. They must be continuously earned and re-earned.

In skill-based pay systems, performance measures are primarily based on _____. A. a supervisor's appraisal B. individual productivity C. company profits D. company stock returns E. employees' competency acquisition

E. employees' competency acquisition

The Scanlon plan is an example of a(n) _____ plan. A. profit-sharing B. skill-based C. merit pay D. individual incentive E. gainsharing

E. gainsharing

According to a merit increase grid, one of the factors that determine the size and frequency of pay increases is the _____. A. company's annual output B. attrition rate in the company C. company's stock price D. recruitment ratio E. individual's performance rating

E. individual's performance rating

A _____ plan gives employees the opportunity to buy the company's shares at a previously fixed price. A. mutual fund B. gainsharing C. group incentive D. profit-sharing E. stock option

E. stock option