Chapter 12 HRM

36) In a profit-sharing plan, each participant gets a bonus based on the companyʹs results: A) regardless of the participantʹs actual effort. B) adjusted for their departmentʹs results. C) factored together with the participantʹs actual effort. D) combined with no other hard-and-fast rules. E) combined with the individual effort and performance of each manager.

A) regardless of the participant's actual effort

28) To determine eligibility in a short-term incentive program, a job-by-job review is conducted to identify the key jobs (typically only line jobs) that have measurable impact on profitability, which is called the criterion of: A) salary grade. B) key position. C) industry requirements for piece rate production. D) salary level. E) position level.

B) key position

44) Executive compensation is more likely to be effective if it is appropriately linked to: A) external issues. B) a cost-reduction strategy. C) corporate strategy. D) internal issues. E) job evaluation.

C) corporate strategy

57) Employees whose work involves the application of learned knowledge to the solution of the employerʹs problems are referred to as: A) hourly employees. B) managerial employees. C) professional employees. D) executives. E) supervisory employees.

C) professional employees

48) The most prevalent approach to compensating salespeople is to use a combination of: A) commissions and profit sharing. B) salary, commission, stock options, and profit sharing. C) salary and commissions. D) salary and stock options. E) commission and stock options.

C) salary and commissions

14) Under this pay system, each worker receives a set payment for each piece produced or processed in a factory or shop. It is known as a: A) process plan. B) piecework plan. C) gainsharing plan. D) straight piecework plan. E) guaranteed piecework plan.

D) straight piecework plan

75) Recognition is important for ________, who are driven by internal motivation. A) management B) high performers C) new employees D) low performers E) none of the above

B) high performers

6) Accurate ________ are a precondition for effective variable pay plans. A) job evaluation B) performance appraisals C) salary curves D) job specifications E) job descriptions

B) performance appraisals

1) Popularized by Frederick Taylor in the late 1800s, financial rewards paid to workers whose production exceeds some predetermined standard came into use. These financial rewards are commonly referred to as: A) financial incentives. B) perquisites. C) group incentive plans. D) Taylor bonuses. E) piecework plans.

A) financial incentives.

37) In a true individual incentive bonus plan each individual person gets a bonus based on: A) individual effort and performance. B) no hard-and-fast rules. C) group effort and performance. D) department productivity. E) the same amount, from year to year.

A) individual effort and performance

60) Non-salary items that professional employees need in order to do their best work include the following EXCEPT: A) support for professional journal publications. B) supportive management. C) modern equipment. D) up-to-date facilities. E) bonuses.

E) bonuses

71) There are several specific common-sense considerations in establishing any incentive plan. Of primary importance is: A) line of sight. B) goal setting. C) superior business results. D) pay-for-performance plans. E) relationship building.

A) line of sight

30) Revlex Inc. has implemented a refinement of the salary cutoff approach to short -term incentive eligibility, which assumes that all managers should be eligible for short-term incentives. This is known as: A) performance appraisals. B) salary grade. C) key position. D) gainsharing. E) profit-sharing plans.

B) salary grade

74) Employees favour recognition from their ________ by a majority of two -to-one over recognition from other sources. A) subordinates B) supervisor/manager C) customers D) mentor E) peers

B) supervisor/manager

34) A plan that offers each person a bonus based on the companyʹs results, regardless of the personʹs actual effort, is called: A) gainsharing. B) a lump-sum bonus. C) financial incentives. D) profit sharing. E) piece-rate production.

D) profit sharing

45) Compensation experts suggest defining the strategic context for the executive compensation plan before creating the package itself by: A) checking for compliance with all legal requirements. B) checking for tax effectiveness. C) installing a process for review and evaluation whenever a major business change occurs. D) defining external issues that face the company and its business objectives. E) all of the above

E) all of the above

59) Studies in industries like pharmaceuticals and aerospace consistently show that firms with the most productive research and development groups have incentive pay plans for their professionals, usually in the form of: A) merit pay. B) hourly wages. C) retirement income. D) piece-rate incentives. E) bonuses.

E) bonuses

67) One feature of the Scanlon plan is a focus on employee involvement, which means the companyʹs mission or purpose must be clearly articulated and employees must fundamentally understand how the business operates in terms of customers, prices, and costs. This is referred to as: A) involvement system. B) evaluation of the system. C) entitlement. D) competence. E) identity.

E) identity

18) When a worker is rewarded by a percent premium that equals the percent by which his/her performance is above standard, this is known as: A) gainsharing. B) the percent incentive plan. C) the bonus hour plan. D) the standard hour plan. E) the premium plan.

D) the standard hour plan

58) Professional employees almost always reach their positions through prolonged periods of: A) reference groups. B) political influence. C) work experience. D) formal study. E) informal networking.

D)formal study

17) The following are disadvantages of a piecework incentive plan EXCEPT: A) new job evaluation produces a new wage rate; thus piece rates need to be revised. B) piece-rate plans appear equitable in principle. C) employers arbitrarily increase the standard because of workers earning ʺexcessiveʺ wages. D) in workersʹ minds production standards become tied inseparably to the amount of money earned. E) workers resist attempts to raise production standards.

B) piece-rate plans appear equitable in principle

39) Long-term incentives most often reserved for senior executives are called: A) performance achievement plans. B) capital accumulation programs. C) stock option programs. D) book value plans. E) stock appreciation rights programs.

B) capital accumulation programs

50) Paying salespeople according to a plan that compensates them in direct proportion to their sales is called a: A) commission plan. B) proportional compensation plan. C) direct compensation plan. D) combination plan. E) straight salary plan.

A) commission plan

12) A type of incentive plan that is an organization-wide pay plan designed to reward employees for improvements in organizational productivity is: A) a group incentive program. B) a gain-sharing program. C) a profit-sharing plan. D) variable pay. E) a spot bonus.

B) a gain-sharing program

33) When a target bonus is set for each eligible position, and adjustments are then made for greater - or less-than-targeted performance, this is called: A) retirement income. B) an individual award. C) an annual bonus. D) a lump-sum bonus. E) gainsharing.

B) an individual award

43) Long-term incentive plans whose payment or value is contingent on financial performance measured against objectives set at the start of a multi-year period are called: A) multi-year plans. B) performance plans. C) contingent plans. D) financial plans. E) book value plans.

B) performance plans

61) Many employers have incentive plans in which virtually all employees can participate. They include the following EXCEPT: A) Scanlon plans. B) salary and fringe benefit programs. C) profit-sharing plans. D) deferred profit sharing plans. E) employee stock ownership.

B) salary and fringe benefit programs

68) The Scanlon plan has been quite successful at reducing costs and fostering a sense of sharing and cooperation among: A) employer associations. B) industrial associations. C) employees. D) global environment associations. E) stakeholders.

C) employees

53) Amy received a salary increase based on her individual performance over the past year. Amy received the following type of compensation: A) individual increases. B) individual incentives. C) individual bonuses. D) merit pay. E) special awards.

D) Merit pay

25) A short-term incentive plan that is designed to motivate the short-term performance of managers and is tied to company profitability is called a(n): A) commission plan. B) eligibility plan. C) gainsharing. D) annual bonus. E) capital accumulation program.

D) annual bonus

66) The following are basic features of the Scanlon plan EXCEPT: A) a formula for sharing of benefits. B) a philosophy of cooperation. C) competence required from all employees. D) guaranteed minimum payouts. E) an identity around which to focus employee involvement.

D) guaranteed minimum payouts

32) A non-deductible formula is: A) when all employees are earning over the threshold amount. B) a straight percentage used to create a short-term incentive fund. C) job-by-job review to identify the key formula. D) a short-term incentive fund that begins to accumulate only after the firm has met a specified level of earnings. E) none of the above

E) none of the above

13) The most commonly used and oldest type of incentive plan is this system of pay based on the number of items processed by each individual worker in a unit of time. It is known as a(n): A) process plan. B) gainsharing plan. C) item plan. D) standard hour plan. E) piecework plan.

E) piecework plan

22) The following are reasons to use team incentive plans EXCEPT: A) helping ensure collaboration. B) facilitating on-the-job training. C) reinforcing problem solving. D) reinforcing group planning. E) reinforcing individual incentives.

E) reinforcing individual incentives

47) Compensation plans for salespeople have typically relied heavily on incentives in the form of: A) stock appreciation rights. B) stock options. C) gainsharing. D) profit sharing. E) sales commissions.

E) sales commissions

41) The right to purchase a specific number of shares of company stock at a specific price during a specified period of time is called a: A) stock appreciation right. B) restricted stock plan. C) phantom stock plan. D) book value plan. E) stock option

E) stock option

7) The following are types of incentive plans EXCEPT: A) individual incentive programs. B) group incentive programs. C) spot bonuses. D) profit-sharing plans. E) straight salary and commission.

E) straight salary and commission.

21) The following are ways that employers use team or group incentive plans EXCEPT: A) setting a production standard based on the final output of the group as a whole. B) setting work standards for each member of the group and maintaining a count of the output of each member. C) setting a standard that all members receive payment equal to the 75th percentile of the group as a whole. D) broad criteria such as total labour-hours per final product. E) choosing a measurable definition of group performance or productivity that the group can control.

C) setting a standard that all members receive payment equal to the 75th percentile of the group as a whole

26) Aziz is the human resources professional at a consulting engineering company. He has been asked by the executive team to implement a short term incentive plan for senior managers. The following are basic issues he should consider, with the exception of: A) fund-size determination. B) salary grade. C) individual awards. D) eligibility. E) how much to pay out.

B) salary grade

35) With a true individual incentive, it is the managerʹs individual effort and performance that are rewarded with a(n): A) individual wage. B) salary. C) bonus. D) cost-of-living adjustment. E) perquisite.

C) bonus

56) Traditional merit pay plans have the following characteristics: A) a merit raise is usually based on individual performance, although the overall level of company profits may affect the total sum for merit raises. B) a merit raise is based on overall level of company profits. C) a merit raise is usually based on individual performance only. D) a merit raise is usually based exclusively on group performance. E) a merit raise is usually based on corporate performance.

A) a merit raise is usually based on individual performance, although the overall level of company profits may affect the total sum of merit raises

4) Aziz is the human resources professional at a consulting engineering company. He has been asked by the executive team to suggest incentives that would most likely motivate the senior engineers who have worked in their professional capacity for at least 20 years and are generally in their early 50ʹs. Which of the following should Aziz suggest? A) a recognition program and adventure travel B) a luxury cruise C) on-site day care D) paid time off to volunteer for charitable organizations E) adventure travel

A) a recognition program and adventure travel

65) Research suggests that employee stock ownership plans encourage employees to develop: A) a sense of ownership in and commitment to the firm. B) an interest in gainsharing. C) a lack of interest in their job. D) little interest in unions. E) concern about their retirement plan.

A) a sense of ownership in and commitment to the firm

8) A type of incentive plan that gives income over and above base salary to individual employees who meet a specific individual performance standard is a(n): A) individual incentive program. B) straight commission. C) spot bonuses. D) cash bonus system. E) profit-sharing plan.

A) individual incentive program.

54) The following are reasons why merit pay plans can backfire EXCEPT: A) only pay (or other rewards) tied directly to performance can motivate improved performance. B) supervisors often tend to minimize differences in employee performance when computing merit raises. C) almost every employee thinks that he or she is an above-average performer, thus being paid a below-average merit increase can be demoralizing. D) supervisors often tend to minimize differences in employee performance when computing merit raises, to ensure that everyone gets a raise of at least the cost of living. E) the usefulness of the merit pay plan depends on the validity of the performance appraisal system-if performance appraisals are viewed as unfair, so too will the merit pay that is based on them.

A) only pay (or other rewards) tied directly to performance can motivate improved performance

3) Aziz is the human resources professional at a consulting engineering company. He has been asked by the executive team to suggest incentives that would most likely motivate the junior engineers who have recently graduated from university and are generally in their mid to late 20ʹs. Which of the following should Aziz suggest? A) paid time off to volunteer for charitable organizations B) a luxury cruise C) on-site elder care D) high-end fitness equipment E) on-site day care

A) paid time off to volunteer for charitable organizations

5) A term plan that refers to any plan that ties pay to productivity or to some other measure of the firmʹs profitability is called: A) variable pay. B) a quality circle. C) a profit-sharing plan. D) a fringe benefit. E) a supplemental pay benefit.

A) variable pay.

63) When a predetermined portion of profits is placed in each employeeʹs account under the supervision of a trustee, this is called a(n): A) cash profit-sharing plan. B) deferred profit-sharing plan. C) employee trust fund plan. D) employee trust fund. E) predetermined account plan.

B) Deferred profit-sharing plan

51) There has been a definite movement away from the extremes of straight commission or fixed salary for salespeople to: A) pay-for-performance. B) combination plans. C) incentive plans. D) merit pay. E) variable pay.

B) combination plans

49) Future Shop, an electronics retailer, is considering removing commission for its sales staff from their compensation plan, and compensating them on a straight salary basis. The following is an advantage of this approach EXCEPT: A) a long-term perspective is encouraged. B) straight salaries make it difficult to switch territories or quotas or to reassign salespeople. C) the employer has fixed, predictable sales force expenses. D) straight salaries develop a high degree of loyalty among the sales staff. E) salespeople know in advance what their income will be.

B) straight salaries make it difficult to switch territories or quotas or to reassign salespeople

2) Today, any plan that ties pay to productivity or profitability is called: A) competency-based pay. B) variable pay. C) pay-for-performance. D) profit-sharing. E) job-based pay.

B) variable pay.

52) The term ʺmerit payʺ can apply to incentive raises given to any employees, but is most often used with respect to: A) blue-collar employees. B) white-collar employees. C) hourly workers. D) salespeople. E) executives.

B) white-collar employees

15) Under this pay system, each worker receives the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour. It is known as a: A) gainsharing plan. B) minimum hourly wage plan. C) guaranteed piecework plan. D) piecework plan. E) straight piecework plan.

C) Gauranteed piecework plan

11) A type of incentive plan that generally is organization-wide and that provides employees with a share of the organizationʹs profits in a specified period is a(n): A) gainsharing plan. B) individual incentive plan. C) profit-sharing plan. D) semi-variable incentive plan. E) group incentive plan.

C) Profit-sharing plan

24) Because of the role managers play in determining divisional and corporate profitability, most employers pay their managers and executives some type of: A) gainsharing. B) hourly wage. C) bonus or incentive. D) salary. E) commission.

C) bonus or incentive

23) The chief disadvantage of group plans is that: A) each worker sees his/her effort leading to the desired reward. B) a group incentive plan may not prove as effective as an individual incentive plan in improving performance. C) each workerʹs rewards are no longer based just on his/her own efforts. D) a group incentive plan does not facilitate on-the-job training. E) a group incentive plan is problematic when conflict arises between group members.

C) each worker's rewards are no longer based just on his/her own efforts

69) A type of organization-wide incentive plan that engages many or all employees in a common effort to achieve a companyʹs productivity objectives by sharing the resulting cost savings among employees and the company is referred to as a: A) profit-sharing plan. B) productivity plan. C) gainsharing plan. D) cost savings plan. E) common incentive plan.

C) gainsharing plan

10) Amy is part of a team of 4 software developers. Upon completion of a major client project she and each of her team members received a set amount in addition to their base salary. All received the same additional amount. Amy received this payment as part of a: A) gain-sharing program. B) individual incentive plan. C) group incentive program. D) spot bonus plan. E) profit-sharing plan.

C) group incentive program

62) Untac Inc., a consulting engineering firm, has recently implemented a type of organization -wide incentive plan whereby all full time employees share in the companyʹs profits. Untac Inc. has implemented a: A) salary and commission plan. B) gainsharing plan. C) profit-sharing plan. D) piece-rate incentive plan. E) profit-loss plan.

C) profit-sharing plan

29) When all employees earning over a threshold amount are automatically eligible for consideration for short-term incentives, this is called the criterion of: A) key position. B) job evaluation. C) salary-level cutoff point. D) job clusters. E) salary grade.

C) salary level cutoff point

16) Ira, the manager of a woodworking business, is considering implementing a piecework incentive plan for the word workers reporting to him. You are an HR consultant he has asked for advice as to the benefits of implementing such a plan. You advise him of all of the following EXCEPT: A) the incentive value of piece-rate plans can be powerful since rewards are directly tied to performance. B) piece-rate plans appear equitable in principle. C) since the piece rate is quoted on a per-piece basis, in workersʹ minds, production standards become tied inseparably to the amount of money earned. D) piecework plans are simple and easily understood. E) they are easily understood by employees.

C) since the piece rate is quoted on a per-piece basis, in workers' minds, production standards become tied inseparably to the amount of money earned

9) Amy received $2000 from her employer last week in order to recognize the extra hours. beyond normal work hours, that she had worked in the past month. Which of the following did Amy receive? A) retirement income plan B) profit-sharing plan C) spot bonus D) variable pay plan E) individual incentive program

C) spot bonus

20) A plan in which a production standard is set for a specific work group, and its members are paid incentives if the group exceeds the production standard, is known as a(n): A) standard hour plan. B) excess production plan. C) team or group incentive plan. D) work group plan. E) gainsharing.

C) team or group incentive plan

31) For short term incentives, the term ʺfund sizeʺ means: A) the companyʹs net income. B) the amount each employee will receive. C) the total amount of bonus money that will be available to be paid out. D) average capital invested in the business. E) the incentive bonus formula.

C) the total amount of bonus money that will be avaiilable to be paid out

46) Sales compensation plans have typically relied heavily on incentives (sales commissions), although this varies by: A) geographic location. B) domestic policy. C) human resource plan. D) industry. E) labour contract.

D) industry

73) Amish is the human resources professional at a software development company that has experienced high employee turnover over the past year. The CEO has asked him to explain what the most likely primary cause of this is. Amish reports that recent research indicates that the number-one reason that employees leave an organization is: A) conflict with supervisor. B) poor leadership. C) low pay. D) lack of recognition and praise. E) unattractive benefits.

D) lack of recognition and praise

72) Sue, the Compensation Analyst, found recent research that indicates that there are seven principles that support effective implementation of incentive plans. They include: A) group incentives must be complex. B) firms get what they pay for. C) rewards may undermine responsiveness. D) link incentives to measurable competencies. E) none of the above

D) link incentives to measurable competencies

55) One adaptation of merit pay plans is merit raises that are: A) linked to group performance. B) paid in quarterly installments. C) linked to profit sharing. D) paid in one lump sum once a year. E) linked to annual performance appraisals.

D) paid in one lump sum once a year

42) In these long-term incentive plans, shares are usually awarded without cost to the executive, but with certain restrictions that are imposed by the employer. These plans are called: A) book value plans. B) stock appreciation rights. C) stock options. D) restricted stock plans. E) phantom stock plans.

D) restricted stock plans

40) The following are long-term incentive plans extended to employees EXCEPT: A) stock options. B) phantom stock plans. C) restricted stock plans. D) retained earnings plans. E) stock appreciation rights.

D) retained earnings plans

38) One drawback to the split-award approach is that it pays too much to the marginal performer, who, even if his or her own performance is mediocre, at least gets the second, company -based bonus. One way to get around this would be to use the: A) lump-sum bonus method. B) group incentive plan. C) individual award system. D) multiplier method. E) individual bonus method.

D)multiplier method

19) The piecework plan is expressed in monetary terms whereas the standard hour plan is expressed in: A) dollars per standard. B) cents per hour. C) profits. D) cents per unit of output. E) a premium that equals the percent by which his or her performance exceeds standard.

E) a premium that equals the percent by which his or her performance exceeds standard

64) A type of organization-wide incentive plan which usually involves having a corporation contribute shares of its own stock to a trust, and distributes the stock to employees on retirement or separation from service, is referred to as a(n): A) employee trusteeship plan. B) individual retirement plan. C) gainsharing plan. D) profit-sharing plan. E) employee stock ownership plan.

E) employee stock ownership plan

70) Reasons why incentive plans do not work include the following EXCEPT: A) performance pay cannot replace good management. B) rewards may undermine responsiveness. C) rewards rupture relationships. D) pay is not a motivator. E) firms do not get what they pay for.

E) firms do not get what they pay for

27) The following are criteria to become eligible for a short-term incentive program: A) key position; salary grade only. B) industry requirements for piece rate production. C) length of service. D) position level. E) key position; salary level; salary grade.

E) key position; salary; salary grade