Compensation Exam 2
A person with low self-esteem is likely to seek _____.
A large, decentralized organization with little performance-based pay *Basically, person wants to be able to hide
A penalty for poor performance rather than reward for good is an example of:
A reverse incentive plan
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 _____.
A variety of rewards with significant incentive pay
Financial data in pay surveys are used to __________________.
group firms by size
When moving from an individual to a group incentive plan, you would expect ____________________.
high turnover among high performers
When a firm is _____ on business risk, and its outcomes are _____, its performance is more likely to be higher without any incentive plans.
high; uncertain
Which of the following is NOT a long-term incentive plan?
Long-term Incentive Plans: -Employee Stock Ownership Plans -Broad-Based Option Plans (BBOPs) -Performance Plans Not Long-term Incentive Plans: -Improshare
A company using a skill-based pay system prices the job of lead assembler between $10 and $22 per hour. Survey data showed that the job of assembler averaged $10 per hour and the job of assembly supervisor averaged $22 per hour. The company is using the _____ method of job matching.
Low-High Method of Job Matching. See pg. 275 of the text for a further discussion of this topic. The method works as follows: Identify the lowest and highest paid benchmark jobs for the relevant skills in the relevant market and to use the wages for those jobs as anchors for the skill-based structures.
The __________________ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.
Market Pricing
When identifying, what is important to employees, which theory would be most useful?
Maslow's Need Theory
In ___________________ theory, incentive pay is motivating if it helps an employee gain a sense of achievement, recognition or approval.
Maslow's Theory
The _____ minimizes the distortion of the central tendency caused by outliers.
Median
The ______________ minimizes distortion of the central tendency caused by outliers.
Median
_____ is an individual level form of performance pay.
Merit Bonus
What is the main difference between Scanlon and Rucker Plans?
Scanlon Plan focus on labor savings, Rucker Plans focus on a variety of savings.
Among pay-mix alternatives, base pay is largest in _______________.
Security or Commitment
The ability triangle includes _____.
Selection, Recruitment, Training
Compensation should reinforce all but which of the following behaviors?
Should reinforce attracting and hiring good employees Should reinforce encouraging skill development Should reinforce motivating high job performance *Doesn't try to keep turnover to nearly 0
Surveys show the most popular type of variable pay plans are _____.
Special Recognition Plans
If you had repair work done on your car, the shop most likely used the _____ plan to pay the mechanic.
Standard Hour Plan
In which of the individual incentive plans, is rate of determination based on units of production per time period, and wages vary directly as a function of production level?
Straight Piecework System
Paying a dime for every bottle collected and turned into a collection center is an example of a:
Straight Piecework System
The most frequently used incentive system is the:
Straight Piecework System
All the following support the use of individual incentives EXCEPT:
Support the use of individual incentives: -The independent nature of task accomplishment -The high commitment levels of workers to their profession -The readily apparent performance standards
Which of the following is NOT true of the relationship between employer size and its ability to pay?
Talented Individuals have a lower marginal value in a larger organization (This statement is NOT true. In fact, the opposite is correct)
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
Which plan varies the incentive level (two rates) as a function of the level of production relative to a standard? In this plan, a new rate is used once production expectations are met (e.g., 50/unit up to 7-10 units/hour and .70/unit of every unit over 11 and up units/hour).
Taylor Plan
_____ is the additional output associated with the employment of one additional person, with other production factors held constant.
The Marginal Product of Labor
_____ puts a lid on the maximum pay level an employer can set.
The Product Market
________________ sets a maximum pay level an employer can pay.
The Product Market
In which of the following standard hour plans does the employee's bonus increase as time required to complete the task decreases?
The Rowan Plan
In which of the following would data from labor market competitors be given more weight than product market competitors' data?
The Supply of Labor is responsive to changes in pay
Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level.
productivity
The two most commonly used team incentive performance standards are:
productivity and quality
Implication of the _______________ theory is that pay level affects in employer's ability to recruit.
reservation wage
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
The first step in setting competitive pay and designing a pay structure is to _____.
specify a pay level policy
The first step in setting competitive pay and designing a pay structure is _____________.
specify pay-level policy
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
Size of pay differentials between grades should _____.
support career movement through the pay structure *Attractive enough to make people want to move up and gain more responsibilities
The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____.
survey leveling
For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is _____.
the Low-High Approach
When your auto mechanic charges you his hourly rate times the estimated time for a particular repair, regardless of how long the job actually takes, this is an example of:
the Standard Hour Plan.
Output associated with hiring an additional person, holding constant other production factors, in referred to as:
the marginal product of labor
The most obvious sorting factor is _____.
ability
Applying the job evaluation process to pay survey jobs to assess the degree of match between survey jobs and benchmark jobs are called the _________________ approach.
benchmark conversion approach
The best way to establish _____ is to account for competing explanations, either statistically or through control groups.
causation
Which theory supports the idea that coal mining should be paid more than office clerical work?
compensating differentials
Which among the following components of a reward system is a dimension of empowerment?
control
According to expectancy theory, the valence of an outcome is the:
degree to which an outcome is desired
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 base pay with low incentives and a variety of rewards
The first step in interpreting survey data is ________________.
check for the accuracy of job matches
The most common pay policy is ___________.
match
The amount of fairness given to employees refers to _____.
distributive justice
A(n) ___________________ requires annually "re-earning" the added pay.
lump-sum bonus
In a hiring situation, considering that other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the ______________ of the last hire is equal to the _______________ for that hire.
marginal revenue; wage rate
In most organizations, the responsibility for managing a pay survey lies with _____.
the compensation manager
Most experts agree that employees do not begin to consider changing their behaviors unless payouts are at least _____ percent higher.
20%
Pay ranges for office and production work commonly range between _____ and _____ percent.
5; 15
Which of the following jobs would most likely fall into a fuzzy market?
A fuzzy market fuses together diverse knowledge and experience, so "relevant markets appear more "fuzzy". Example: The position of senior director of Future Vision Services that was filled by a Software Engineer with e-commerce, marketing and theatre experience.
The trend in recent variable-pay design is to combine the best of _____ and _____ plans.
Gain sharing; Profit sharing
For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the _____ plan.
Gantt Plan
When developing a flexible compensation system, which theory or theories would be most useful?
Maslow's Theory and Herzberg's Theory
What distinguishes individual incentive plans from individual merit plans?
Merit pay is typically added to base, while incentives generally do not.
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 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
All of the following are reasons to choose a group plan vs. an individual plan EXCEPT:
Reasons to choose a group plan vs. an individual plan: -Production methods and labor mix must adapt to meet changing resources -When work stoppages are regular and controllable -When the management information and cost accounting systems are relatively primitive -Performance standards for individuals change to meet environmental pressures
Which of the following focuses on increasing the frequency of desired behaviors and decreasing the frequency of undesired behaviors through environmental consequences?
Reinforcement Theory
Which of the following gain sharing plans is designed to lower labor costs without lowering the level of a firm's activity?
Scanlon Plan
_____ have the disadvantage of requiring employees to spend money to obtain their incentive.
Stock Option Plans
_____________ have (has) advantages of having minimal impact on the company's financial standards.
Stock Options
Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?
The Standard Deviation
Which of the following statements is true of individual spot awards?
True: There are given to employees for exceptional performance as an add-on bonus Not True: -They are an example of long-term incentives -They are more expensive than merit pay increases -They are given to all employees as a one-time cost-of-living adjustment
Which of the following statements about merit pay is NOT true?
Which of the following statements about merit pay is NOT true? True Comments: -Has a small, but significant effect on performance -Departments and units with merit pay show higher performance -Merit pay has a sorting effect Example of untrue comment: Removal of merit pay lowers satisfaction but not performance.
The second major decision in pay-level determination is to _____.
define the purpose of a survey Steps in order: Specify pay-level policy; Define purpose of survey; Specify relevant market; Design and conduct survey; Interpret and apply result; Design grades and ranges or bands.
The final major decision in pay-level determination is to _____.
design grades and ranges or bands
__________________ shows how competitors value work in similar jobs.
Base wage
A _____ plan 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
Which plan divides a task into actions and measures the time required to perform each action? In this same plan workers receive a wage incentive for completing a task in less than standard time. This incentive is a direct function of the time saved in completing the task.
Bedeaux Plan
_____ is an example of a bourse.
Bourse = a market that allows haggling over terms and conditions until an agreement is reached. Total Compensation for a Top Athlete
_________________ theory contends that we choose to do those things that we believe are most likely to lead to desired rewards.
Expectancy Theory
Which of the following is true regarding the Employment Cost Index (ECI)?
It allows comparison of changes in its average cost to an all-industry average
Aging the market data to a point halfway through a plan year is called _____.
Lead/lag approach
In which of the following would data from labor market competitors be given more weight than product market competitors' data?
The Supply of Labor is responsive to price changes
___________________ is an example of a bourse.
The total compensation for a top athlete
The answer to the question of how many firms to include in a pay survey is ______________.
There are no firm rules, No set amount. Enough to have a stable estimate of relevant companies.
Which of the following is NOT a reason a company might pay base wages above market?
These are actual reason a company might pay base wages above market: To Increase Employee Productivity To Increase Wage Satisfaction To Attract More Applicants
The key to designing a pay-for-performance system rests on standards. Specifically, managers need to be concerned about the:
objectives, measures, eligibility, and funding.
_____ refers to the average of the array of rates inside an organization.
pay level
Available evidence indicates managers believe the most important factor for pay increases is _____.
performance
When pay is based on individual performance, turnover tends to be highest among _____.
poor performers
Pay ranges:
reflect the differences of performances or experience that an employer wishes to recognize with pay
Among pay-mix alternatives, the percentage of base pay is highest in _____.
security or commitment policy
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
To multiply the survey data by some factor that corresponds to the analyst's judgement of the difference between the company and the survey job is called:
survey leveling
Which of the following is NOT true of merit bonuses?
They are viewed as less of an entitlement than merit pay Employees dislike them They are thought to be a substitute for merit pay. Example of a "Not True" Comment: They are more expensive than merit pay in the long run.
Which of the following statements is true about market pricers?
They assume that little value is added through internal alignment Sample False Statements: They align pay structures with the business strategy; Their pay structures are unique and difficult to imitate; They emphasize pay structures based on unique technologies or the way work is organized.
Which of the following is NOT true?
True Statements More companies are using pay based upon individual group and organizational performance Workers with higher security needs may accept lower pay for higher wage security Workers may need higher pay to stay and perform in an at-risk company
It is observed that __________________ is/are commanding a larger share of the total compensation for all employee groups.
Variable Pay
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
All of the following are examples of potential anomalies EXCEPT _____.
a large variation in average base pay for a job across companies
A person with low self-esteem is likely to seek ________________.
a large, decentralized organization with little performance-based pay
A pay policy MOST likely to reduce pay dissatisfaction is __________________.
a lead pay policy
The common feature to all types of incentive plans is:
a standard of performance to determine magnitude of incentive pay.
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.
The purpose of collecting data on the number of employees in a pay survey is to _____________.
estimate the organizations impact on the labor market
Pay level decisions have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the:
labor costs
In gain-sharing plan formulas, _____ are in the numerator and _____ are in the denominator.
labor inputs; productivity outcomes
The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.
market pricing pay strategy
The most common pay policy is a(n) _____.
match policy
According to expectancy theory, the instrumentality is:
the perceived probability that a specified level of behavior will receive a specific level of reward
The assumption of the upward sloping supply curve may NOT hold when ________________.
unemployment is low
The assumption of the upward sloping supply curve that offers of higher pay will increase supply will most likely NOT hold when _____.
unemployment is low. This is because there is a limited number of potential employees available to apply.
_____ is the value employees attach to the organization rewards offered for satisfactory job performance.
valence
A study of graduating college students found they sought jobs with all of the following pay characteristics EXCEPT _____.
variable Pay
The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as _____.
work/life balance policy
All of the following EXCEPT _____ require periodically re-earning the added pay.
*Do Require Success-sharing Merit Bonuses Profit-Sharing Plans Example of an "Except": cost-of-living increases
Which of the following statements is true of pay level?
*Four True statements Pay level is directly proportional to labor costs; the more you pay the more it costs. Pay level is not the same across all organizations for the same job. The higher the pay level to what competitors pay, the higher their relative cost to provide relative products or services. Pay level is not independent of the number of employees in an organization
The motivation triangle includes _____.
Culture, Compensation, Performance Management
Which of the following is the most commonly used team incentive performance standard?
Customer Satisfaction Measures
Segmented labor supply involves all of the following EXCEPT:
Does Involve: Hiring from different sources Paying workers differently who are performing the same work Employing regulars, part-times, and temps An example of an "except" is hiring from different sources and differential pay and benefits for the same work.
Which of the following does NOT provide for incentives based on standards that are expressed in terms of time period per unit of production?
Does Provide: The Gant Plan The Rowan Plan The Halsey 50-50 Method Not Provide: Merrick System
Which of the following does NOT support the use of an individual incentive plan?
Does Support the use of an individual incentive plan: -Stable Individual Performance Standards -Task Accomplishment not dependent on the performance of others -Commitment Strongest to Individual Profession Does not support the use of an individual incentive plan: -Unionized work force.
An incentive system with three piecework rates is the _____ plan.
Merrick
In the regression equation, y = a + bx, job evaluation points are denoted by _____.
*a is a constant, b is the regression lean and X is the number of points.
There is evidence that every 10 percent increase in the bonus paid to employees by a firm yields a _____ percent increase in ROA to the firm.
1.5%
Which of the following is NOT a reason a company might pay base wages above market competitors?
Actual Reasons: Employees are more productive Turnover will be lower To attract more job applicants Example of a "not a reason": competitor production costs are lower
Which of the following is NOT true of the relationship between employer size and its ability to pay?
Actual true statements: Talented Individuals have a higher marginal value in a larger organization. Talented people can influence more people with decisions. Talented people leads to more profits. Example of a "Not True" comment: talented people prefer to work in larger organizations.
Which of the following is NOT an advantage of team incentives?
Advantages of team incentives: -Stimulates problem solving -May better reflect how work is performed -Minimizes distinctions between team members Not an advantage: -Easy to set equitable targets for all teams
Which of the following is NOT an advantage of the all-salaried work force?
Advantages: -Increase in the quality of work life -Most employees prefer a salary plan -Produces more committed and loyal employees -Reduces Turnover Not an advantage: -Union support
All of the following are advantages of a lead pay-level policy EXCEPT _____.
Advantages: Reduce Vacancy Rates Reduced Absenteeism Better Quality Employees Example of an "except": higher turnover rates.
_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.
Agency
____________ theory argues that performance-based pay is best for complex jobs where monitoring employee performance is difficult.
Agency Theory
Because employers are raising employee pay at various times during the year, survey data must be updated using a process called _____ or _____.
Aging OR Trending (Updating)
Because employers are raising employee pay at various times during the year, survey data must be updated using a process called ________________ or _________________.
Aging; Trending (Updating)
Which of the following is an advantage of providing stock ownership options as variable pay to employees?
It defers a portion of taxes to employees
The _____ publishes extensive information on various occupations in different geographic areas. It is a major source of publicly available compensation data.
Bureau of Labor Statistics
Wages tend to be the lowest in which of the following industries?
Education and Healthcare
According to _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.
Equity Theory
When salary increases are based on inputs, or performance, companies are following:
Equity Theory
Which of the following is NOT true about individual spot awards?
Not True: A majority of companies do not feel that these awards are effective. True: -Smaller companies may be more casual about recognition for spot awards. -Someone in an organization alerts top management about performance deserving an award. -Smaller companies are more subjective about deciding the size of the award.
Which of the following is an example of the demand side of labor?
Pay Level Offered by an Employer Supply Side: Level of pay applicants will accept, qualifications of applicants, locations of potential employees
Which of the following is a disadvantage of gain-sharing plans?
Pay outs can occur even if a company's financial performance is poor
The market pay rate is the:
Point at which supply and demand lines cross
In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors?
Product demand is responsive to product price changes
Which of the following is often used to set pay ranges?
Quartiles and Percentiles *Standard Deviation is almost never used
All the following are important factors in defining a market for compensation purposes EXCEPT:
Real Reasons: The skill and knowledge required Geography Product Competitors and/or market Competitors
Which of the following statements is true regarding broad bands?
They foster cross-functional growth
Which of the following is an advantage of gain-sharing plans
They increase employees' knowledge of business
All of the following EXCEPT the ______________ shape external competitiveness.
Things that actually do shape external competitiveness Nature of the Demand Industry Strategy Level of Product Demand Example of an "Except": skill level of employees
The authors argue that for merit pay to live up to its potential, all of the following should be done EXCEPT _____.
Things that should be done: -Improving the accuracy of appraisal -Allocating enough money to truly reward performance Ensuring the size of the merit increase differentiates across performance levels Example of an "Except": They are more expensive than merit pay in the long run.
_____ measures reveal competitors' use of performance-based cash payments.
Total Cash
______________ measures competitors' use of performance-based pay.
Total Cash
This measure of compensation may overstate competitors' pay.
Total Cash Compensation
The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy.
lag
A pay policy MOST likely to reduce pay dissatisfaction is __________________.
lead
The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____.
lead policy
A market pay line __________________________.
links a company' benchmark jobs with market rates paid to competitors
The best variable pay plan for employees when company financial performance is poor is _______________.
Gain Sharing
Which of the following is an example of the sorting effect in action?
An employee leaving a high-paying job for one that provides more work-life balance. *Idea behind the sorting effect is the effect that pay can have on the composition of the workforce. *Different types of pay can cause different types of people to apply and stay with a corporation.
Which of the following is NOT a condition favoring gain-sharing plans?
Does support gain-sharing plans: -Small unit; usually less than 500 employees -Participative management style -Little Planned in terms of capital investment -Old enough so the learning curve has flattened and standards can be set based on performance history. Does not support gain-sharing plans: -Product costs not controllable by employees.
Which of the following theories states that people choose the behavior that leads to the greatest reward?
Expectancy Theory
__________________ theory contends that success-sharing will be motivating but at-risk plans will be de-motivating.
Herzberg's Two Factor theory
_____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating.
Herzberg's Two-Factor Theory
The _____ theory is the most influential in explaining pay-level differences.
Human Capital Theory
According to research, which of the following is NOT one of the most important factors for employees influencing their pay systems
Important Factors: Changes in cost of living Pay at market rate Seniority Example of "Not one of the most important factors: Team-based pay
A gain-sharing plan that has proven easy to administer and communicate, which identifies the expected hours required to produce an acceptable level of output is the:
Improshare Plan
_____ is employees' beliefs that requisite job performance will be rewarded by the organization.
Instrumentality
Which of the following is true regarding the Employment Cost Index (ECI)?
It allows comparison of labor costs to all-industry averages.
Aging the market data to a point halfway through the plan is called:
Lead/Lag updating
Components identified as vital to the success of both Scanlon and Rucker plans are:
a productivity norm and effective worker committees
Which of the following best supports a culture of flexibility and innovation?
a strong commitment to job security
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 _____.
a wide range of rewards beyond just money
A key factor in increasing trust in top management is ________________.
an acceptable appraisal system
An incentive payment can be BEST described as:
any form of pay tied directly to achievement of performance standards.
A common first step in interpreting survey data is to _____.
check for the accuracy of job matches
A market pay line _____.
links a company's benchmark jobs with market rates paid by competitors.
A complex pay guideline ties pay not only to performance but also to position in the:
pay range.
According to the text, the market rate is the:
point at which supply and demand line cross
The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _________________.
survey leveling