comp and benefits ch 4
18) XYZ Manufacturing Co. uses a gain sharing plan that gives incentives to employees to finish products rather than to incentivize dollar savings. Therefore, this company measures productivity as the ratio of standard labor hours and actual labor hours. What kind of gain sharing program does XYZ Manufacturing Co. use?
A) Improshare
17) Which gain sharing plan focuses on lowering the percentage of labor costs using a value-added formula?
A) Rucker Plan
27) Which of the following is true of most general stock compensation plans?
A) The company stock shares represent equity segments of equal value.
13) This group incentive system was designed to provide employees with financial incentives for increasing customer satisfaction, increasing productivity, lowering costs, or improving safety.
A) gain sharing
10) This is another name for parallel teams.
A) task forces
9) On which teams is membership relatively permanent, with the members working full-time on the team?
A) work (process)
34) ________ teams consist of a group of people assigned to complete a one-time project.
Project
33) The ________ effect refers to a worker's willingness to work diligently to produce more quality output rather than simply attending work without putting in the effort.
incentive
36) The Improshare bonus is based on a ________ ratio formula.
labor hour
40) Stock ________ describe an employee's right to purchase company stock.
options
32) Individual incentive plans help to promote the relationship between pay and ________.
performance
35) The sales value of production (SVOP) is the sum of sales ________ plus the value of goods in inventory.
revenue
39) In a "pay at ________" profit sharing compensation package, base bay is set below the average for competing employers, and employees' pay can be very meager or very large compared to a similar position elsewhere.
risk
2) Which of the following is true of incentive pay?
B) The criteria for judging an award tends to be objective, such as quantity produced.
22) These profit sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.
B) current profit sharing plans
23) XYZ Company pays a portion of company profits to its employees. The management offers this incentive plan as one kind of retirement program. What kind of companywide incentive plan does XYZ Co. offer?
B) deferred profit sharing plan
14) Gunther Rohn was rewarded for making a suggestion that saved Ewe and Eye Electronics thousands of dollars. Which type of incentive compensation approach might have worked best?
B) gain sharing plan
3) Customer satisfaction, labor cost savings, materials cost savings, and reduction in accidents were listed as typical performance measures for which type of incentive plan?
B) group
26) With which profit sharing formula does the profit sharing pool become funded only after profits exceed a predetermined level but fall below some established maximum level?
B) profitability threshold
8) This type of individual incentive plan rewards employees who recruit new customers or new employees.
B) referral
1) Which of the following is true concerning incentive pay?
C) Awards are granted in one-time payouts.
19) This incentive plan has a buy-back provision.
C) Improshare
16) Which gain sharing plan bases incentives on the ratio between labor costs and sales value of production (SVOP)?
C) Scanlon Plan
29) Which of the following is true about the level of risk involved with incentive pay?
C) The level of risk depends on the extent to which employees control the attainment of a desired goal.
21) Profit sharing plans and employee stock option plans are incentives on what level?
C) companywide
12) This method reinforces cooperation among team members except when team members perceive differences in other members' performances.
C) equal incentives payment approach
25) This formula for calculating profit sharing awards gives the employees a higher percentage of the profits as the profits increase.
C) graduated first-dollar-of-profits
6) Which type of individual incentive plan requires the achievement of multiple, complex objectives without compromising the quality and quantity of output that is generated by employees?
C) management incentive plans
4) In addition to the guaranteed hourly pay rate, John receives incentives for every item produced over the designated production standard. What kind of incentive plan is used in this situation?
C) piecework plans
28) Which of the following performance measures corresponds to individual/ group/ companywide incentive plans respectively?
C) quality of work output/customer satisfaction/market share
5) The concept that a hard working employee is likely to stay at an incentive pay position is better known as this.
C) sorting effect
30) The general rule of thumb is that short-term company goals last less than how long?
D) 5 years
7) To have better safety records, XYZ Company gives monetary incentive awards to its workers for lower accident rates due to improper use of heavy equipment.
D) behavioral encouragement plans
24) This formula for determining the amount available for profit sharing uses a specific percentage of annual profits contingent upon the successful attainment of a specified profit goal.
D) fixed first-dollar-of-profits
20) Which of the following is true regarding group incentive plans as opposed to individual incentive plans?
D) it is easier to develop performance measures for group incentive plans than individual incentive plans
11) John is a design engineer working at an auto manufacturer research and development department. In addition to his normal duties, he is assigned to a team of other engineers developing a highly automated assembly line for the new model of a passenger car. What type of team is John assigned to?
D) parallel teams
15) What is the main objective of Scanlon plans?
D) to increase employee involvement
38) ________ profit sharing plans place cash awards in trust accounts for employees, and are set aside on employees' behalf as a source of retirement income.
Deferred
41) How can incentive pay systems, when properly applied, contribute to companies meeting the goals of lowest cost and differentiation strategies?
Incentive pay systems can meet the goals of both strategies. For companies pursuing a lowest cost strategy, a large concern is reducing output costs per employee. Piecework plans can tie compensation with employee output. Behavioral encouragement plans can lead to decreases in excessive absenteeism or improve safety. Group incentives also contribute to lower costs, particularly through increased employee involvement. Profit-sharing plans are probably the least likely form of incentive to support this plan. For companies pursuing a differentiation strategy, creativity is stressed, and rewards are more likely to be long-term in their delivery. Team-based incentives and gain-sharing programs can meet this imperative. They promote interaction among coworkers and autonomy in order to find a superior way to meet management objectives. But, one should use caution in making a blanket statement in support of all incentive plans to meet this strategy. Piecework plans and profit-sharing plans do little to support this approach.
42) Compare and contrast individual and group incentive plans.
Individual incentive plans reward employees whose work is performed independently. Employees are rewarded for meeting such work-related performance standards as quality, productivity, customer satisfaction, safety, or attendance. When designed and implemented well, employees are rewarded based on results for which they are directly responsible under this incentive plan. Paying better performances more money help companies to retain best performers. Group incentive plans reward employees for their collective performance and reinforce teamwork, cultivate loyalty to the company, and increase productivity. Group incentive programs may lead to turnover due to free-rider effect. It can be hard to keep the best performer under this plan.
43) In an effort to increase the productivity of its employees, a manufacturing company is considering adopting an incentive pay program. List and discuss the five factors the HR professionals should consider in the adoption of such a program.
The first factor to consider is whether the plan should be based on group or individual employee performance. Clearly, this is dependent on the structure of the company. If the nature of work performed is interdependent, for example, then group incentives would be appropriate. A second factor is the level of risk employees would be willing to accept in their overall compensation package. The level of risk increases as incentive pay becomes a greater part of total core compensation. The level of risk is also dependent on the amount of control employees may have toward the attainment of the desired performance goal. A third factor is whether incentive pay should replace or complement traditional pay. Some companies may choose to award incentive pay in addition to an employee's base pay and fringe compensation. Other companies may opt to reduce base pay by placing the reduced portion at risk in an incentive plan. A fourth factor is the criteria by which performance should be judged. Criteria should be quantifiable, be accessible, and reflect a company's competitive strategy. Further, the company may want to consider using more than one performance measure, particularly if it is relevant. A weighting scheme could be used to reflect the relative importance of each performance criterion. As with the level of risk, the criteria chosen should be under the control of the employee. A fifth factor is the time horizon of goals. Typically, incentives for lower-level employees tend to be based on short-term goals that are within the control of such employees. Longer-term incentives are used for professionals because of the length of time it takes for performance to be adequately measured.
37) The main disadvantage of group incentive compensation is employee ________.
turnover
31) Another name for incentive pay is ________ pay.
variable
