chapter 11 and 12

_____ is the relative pay of different jobs and how much one is paid.

Pay structure

Which of the following is part of the cash compensation offered to employees?

Stock options

Which of the following is part of the benefits offered to employees?

Unemployment compensation

Which of the following statements about outcome-oriented or behavior-oriented contracts is true?

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

Which of the following is a procedure in which an organization compares its own practices against those of the competition?

Benchmarking

Which of the following is an example of the sorting effect?

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

Which of the following is true about pay?

Employees attach great importance to pay decisions when they evaluate their relationship with the organization.

_____ perception is the perceived link between effort and performance

Expectancy

A pay plan's ability to draw highly qualified applicants for jobs at a particular organization is known as the incentive effect.

FALSE

Actual market rates are used for key jobs in the pay policy line approach rather than in the market survey data approach.

FALSE

An employee's assessment of the fairness of his or her compensation based on how much pay the employee receives is referred to as procedural fairness.

FALSE

Benchmarking is a procedure in which a company compares its different practices with the standard set by the management.

FALSE

In incentive pay programs, annual pay increases are usually linked to performance appraisal ratings.

FALSE

Nonkey jobs are those that are common to many organizations.

FALSE

Pay level refers to the relative pay of jobs in an organization.

FALSE

Product market comparisons that focus on labor costs deserve greater weight when the product demand is inelastic.

FALSE

The equity theory suggests that people evaluate the fairness of their situations by comparing them with how they were treated in their previous organization.

FALSE

The flow of feedback tends to be multi-directional in merit pay programs.

FALSE

Valence of pay outcomes should change according to different pay systems.

FALSE

Which of the following observations is true about the equity theory?

It suggests that people evaluate the fairness of their situations by comparing them with those of other people.

As jobs become less programmable,

behavior-oriented contracts become less likely.

External equity pay comparisons focus on what

employees in other organizations are paid for doing the same general job

The average compensation—including wages, salaries, and bonuses—of jobs in an organization is called the _____.

pay level

Which of the following is true of how agents may differ from principals?

Agents are more averse to risk.

Which of the following must a principal do to reduce agency costs?

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

Which of the following is most likely to provide intrinsic motivation?

An interesting work assignment

Which of the following theories describes the conditions when the benefits of higher pay outweigh higher costs?

Efficiency wage theory

Which of the following theories states that pay influences worker productivity?

Efficiency wage theory

Which of the following components is a perceived link between behavior and pay?

Instrumentality

Which of the following is true of external equity pay comparison?

It influences employees' decisions regarding whether to stay or move to another organization.

Which of the following administrative tools is used by organizations to design job structures?

Job evaluation

Which of the following is a likely consequence of an internal equity perception?

Job rotation

Which of the following is true of labor market competition?

Labor market competition places a lower bound on pay levels

Which of the following is true of how managers may differ from shareholders?

Managers are likely to prefer more emphasis on uncertain incentives than base pay

Which of the following is an example of a behavior-oriented contract?

Merit pay

Which of the following is a likely consequence of external equity perception?

Retention

Which of the following makes outcome-oriented contracts less likely to occur?

Risk aversion among agents

According to E. L. Thorndike's Law of Effect, high performance followed by a reward will motivate employees to repeat the performance and make it recur more often in the future.

TRUE

An example of the sorting effect is a social media firm offering employee stock options to attract a higher caliber of applicants for positions in the organization.

TRUE

In merit pay systems, performance is measured based on a supervisor's rating.

TRUE

Internal job worth can be measured using the administrative tool of job evaluation.

TRUE

Job evaluation is a more appropriate tool for internal equity pay comparisons than market pay surveys.

TRUE

According to the _____, a person (p) compares her own ratio of perceived outcomes to perceived inputs to the ratio of a comparison other (o).

equity theory

Internal equity pay comparison is

focused on what employees within the same organization but in different jobs are paid

Organizations use benchmarking primarily to compete

for talent

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

monetary rewards may decrease intrinsic motivation

Agency theory is of particular value in compensation management because of its emphasis on the _____ trade-off.

risk-reward

_____ is the relative pay of jobs in an organization.

Job structure

A firm that has a manufacturing unit in China considers shifting production to Cambodia. Which of the following would be a possible reason for it to not shift the production base?

Less skilled labor in Cambodia

Merit pay has the ability to define and reward a broad range of performance dimensions.

TRUE

Organizations usually develop a market pay policy line based on the key jobs for which there are both job evaluation and market pay survey data available.

TRUE

Pay plans are typically used to energize, direct, or control employee behavior.

TRUE

The compa-ratio directly assesses the degree to which actual pay is consistent with the pay policy.

TRUE

Which of the following is true about outcome-oriented contracts?

They are typically a major component of executive compensation.

Separating the functions of principals and agents is likely to result in

diversification of investment risk

According to expectancy theory, compensation systems differ according to their impact on the components of motivation; the main influence of compensation is on _____.

instrumentality

According to expectancy theory, motivation is hypothesized to be a function of _____.

instrumentality

Agents prefer a behavior-based contract when _____.

outcome uncertainty is high

According to the agency theory, the principals are the _____.

owners

Agency costs are likely to arise when _____.

principals and agents have different goals