MGMT 494 FINAL EXAM PART 1 (CH 1-6)

What is differentiation? Discuss why brand loyalty and research & development frequently go hand-in-hand with differentiation.

developing products and services that are unique from those competitors brand-loyal consumers are less sensitive to price increases, which enables companies to invest in research and development initiatives to further differentiate themselves from competing companies

How do discretionary benefits differ from legally required benefits?

discretionary benefits include any variety of programs that provide paid time off, employee services, and protection programs

Is incentive pay used alone or can it be used with traditional base pay?

incentive pay appears as a one time payment. employees usually receive a combo of recurring base pay and incentive pay with base pay representing the greater portion of core compensation.

Explain disparate treatment.

intentional discrimination, occurring whenever employers intentionally treat some workers less favorably than others because of their race, color, sex, national origin, or religion

Market competitiveness in compensation: How is it achieved? Why does it matter?

it is achieved through compensation surveys, these enable compensation professionals to obtain realistic views of competitors pay practices, eliminates the guesswork in building market-competitive compensation systems

What seems to be the attitude of U.S. companies toward merit pay?

it's one of the most commonly used compensation methods in the US occurs most often in the private for-profit sector of the economy rather than in such public sector orgs. as local and state gov'ts

What are KSAs? How do they affect pay?

knowledge, skills, and abilities they define jobs and jobs with less specialized or complex KSAs are typically paid much less (who gets paid more...doctors or baristas?)

What is the spillover effect and why does it occur?

many nonunion companies offer higher compensation than they would if unions were nonexistent because management of nonunion firms want to reduce the chance of their employees seeking union representation

Explain core compensation and employee benefits. Give examples of each.

monetary compensation, such as an hourly wage or salary, represents core compensation while non-monetary rewards such as insurance, vacation days, and services make up employee benefits.

Why might satisfying various stakeholders be a challenge for HR departments?

multiple stakeholders often compete directly or indirectly for the attention and priority of the personnel department

Explain why performance appraisals are important to effective merit pay systems.

nondiscriminatory performance appraisal systems are key to effective merit pay systems because they accurately measure job performance

Explain "reasonable accommodation" and "essential functions"

part of the ADA, requires that employers must make reasonable accommodation for disabled employees also states that a qualified individual with a disability must be able to perform "essential functions", or job duties that are critical to the job.

Explain Skill-based pay... What type of workers are likely to receive this type of pay?

pay gets increased as workers learn new skills used mostly for employees who perform physical work

Explain profit sharing - What are advantages (2) and disadvantages (2) of it?

profit sharing plans pay a portion of company profits to employees, separate from base pay, COLAs, or permanent merit pay increases advantages: 1) as employees benefit from profit sharing plans, they will be more likely to work productively to promote profits 2) companies that use these plans gain greater financial flexibility. payout levels depend on profits, not digging into cash reserves at all (these reserves can be saved for things like R&D) ____________________________________ disadvantages: 1) may undermine the economic security of employees, particularly if profit sharing represents a sizable portion of direct compensation 2) may fail to motivate employees because they do not see a direct link between their efforts and corporate profits

What is the Equal Pay Act (1963)? -How is it related to compensable factors?

prohibits sex discrimination in pay for employees performing equal work related to compensable factors because companies need to assign pay rates to jobs according to the skill, effort, responsibility, and working conditions required (not sex) which are all compensable factors

What is the ADEA (1967, '78, '86, '90) -What demographic shifts are important?

protects workers age 40 or older from illegal discrimination a large segment of the population will continue to work past the age of retirement (67) and the amount of people that age will increase by 8% by 2050

Why was Civil Rights Act of 1991 written?

to overturn several Supreme Court rulings, address seniority systems, and the geographic scope of job discrimination

What was the purpose of the National Labor Relations Act (NLRA)?

to remove barriers to free commerce and restore equality of bargaining power between employees and employers

Explain disparate impact

unintentional discrimination, usually when a rule or regulation happens to cause unequal treatment.

What industries pay the highest and lowest wages?

utilities and mining generally pay the highest wages ($16/hour) while retail trade/hospitality generally pay the lowest wages ($12.85/hr)

What are Vertical, Horizontal and Depth of Skills/Knowledge?

vertical: those skills traditionally considered supervisory (scheduling, coordinating, training, and leading others) horizontal: similar skills or knowledge (ex: maintaining attendance records, scheduling, and monitoring office supply levels are all record keeping skills) depth of skills: the level of specification or expertise an employee brings to a particular job

What is Base Pay? What is it also called?

wages/salary Fixed Pay

Name and describe the two processes to achieve internal consistency.

1) job analysis: systematic process for gathering, documenting, and analyzing info in order to describe jobs 2) job evaluation: recognize differences in the relative worth among a set of jobs and to establish pay differentials accordingly

Describe the following errors in the performance appraisal process: Bias: 1) First impression effect 2) Positive halo effect 3) Negative halo effect (horn) 4) Similar-to-me effect

1) might make an initial favorable or unfavorable judgement about an employee and then ignore or distort the employees actual performance based on this impression. 2)/3) when a rater generalizes an employee's good or bad behavior on one aspect of the job to all aspects of the job 4) the tendency on the part of the raters to judge favorably employees whom they perceive as similar to themselves

What is gainsharing?

a group of employees, generally a department or work unit, is rewarded for productivity gains. (increased customer satisfaction, lower costs, or better safety records) 3 components: -leadership philosophy -employee involvement systems -bonus

What is an occupation? Give some HR examples in addition to the definition.

a group of jobs, found at more than one company, in which a common set of tasks are performed or are related in terms of similar objectives, methodologies, materials, products, worker actions, or worker characteristics. HR examples: -compensation analyst -training and development specialist -recruiter -benefits counselor

What is a collective bargaining agreement? Give examples of topics it includes.

a written document that describes the terms of employment approved by management and employees during negotiations. It includes -pay and pay adjustments -hours of work -other working conditions of employees usually these agreements are put in place for multiple (3 to 4) years

Explain how a forced distribution approach works. What is potentially problematic with this approach?

assigns employes to groups that represent the entire range of performance rater must place a specific # of employees into each performance group Problems: can distort ratings because employee performance may not fall into the predetermined distributions, actual distribution may be substantially different from this forced distribution

Explain Management incentive plans

awards bonuses to managers when they meet or exceed objectives based on sales, profit, production or other measures for their division, department, or unit often require multiple complex objectives

In order for merit pay programs to succeed, employees must know their effort ____________________.

in meeting production quotas or quality standards will lead to pay raises

What stakeholders must a compensation system satisfy?

-employees -line managers -executives -unions -u.s. gov't

What are the six categories of exemption from the FLSA (see table 2-3)?

-executive -administrative -learned professionals -creative professionals -computer workers -outside sales employees

What is the FLSA and what three broad issues did it address?

-minimum wage -overtime pay -child labor provisions

What are some categories of Indirect Compensation?

-pay for time not worked (vacation, breaks, holidays, sick days) -insurance plans (medical, dental, life) -security plans (pension, social security, disability insurance) -employee services (educational assistance, rec programs, food services)

Making merit pay work (four steps)

1) Conduct job analysis 2) Create rating instrument that use info from job analysis 3) Train supervisors to use rating instrument 4) Have an appeals process (justice theory)

What are advantages (3) and disadvantages (3) of individual incentives?

1) can promote the relationship between pay and performance 2) promote an equitable distribution of compensation within companies 3) their compatibility with such individualistic cultures as the United States _________________________________________ 1) possess the potential to promote inflexibility. workers may become dependent on supervisors for setting work goals. 2) difficult for companies to determine equitable incentive awards, which may lead to employees' resistance to the new methods 3) may encourage undesirable workplace behavior (when these plans reward only one or a subset of dimensions that constitute employees' total job performance)

What are advantages (2) and disadvantages (1) of group incentives?

1) companies can more easily develop performance measures for group incentive plans than they can for individual incentive plans 2) greater cohesion. promotes working collaboratively ______________________________________ 1) employee turnover. members who make the greatest contributions are likely to leave if they feel inequality of effort/contributions from other members that are getting the same incentive

1) What is cost leadership? 2) How do Ryanair's HR/Operations practices help it achieve its strategy?

1) focuses on gaining competitive advantage by being the lowest-cost producer of a product or service within the marketplace, while selling the product or service at a price advantage relative to the industry average 2) they cut out nonessential features on their plane that cost more

Upon what three assumptions is incentive pay based?

1) individual employees and work teams differ in how much they contribute to the company, both in what they do as well as in how well they do it 2) the company's overall performance depends to a large degree on the performance of individuals and groups within the company. 3) to attract, retain, and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance

What are advantages of seniority pay to employers? (2)

1) seniority pay facilitates the administration of pay programs. pay increase amounts are set in advance and employers award raises according to a pay schedule (much like the federal gov't's GS) 2) employers are less likely to offend some employees by showing favoritism to others because seniority is an objective basis for making awards. this should enable supervisors and managers to motivate employees to perform their jobs even in the absence of a formal performance appraisal system

Describe the following errors in the performance appraisal process: 1) Contrast errors 2) Central tendency error 3) Leniency error 4) Strictness error

1) supervisors make contrast errors when they compare an employee with other employees rather than to specific, explicit performance standards 2) when supervisors rate all employees as average or close to average 3) managers tend to appraise employees' performance more highly than they really rate compared with objective criteria *could lead to employees expecting higher-than-deserved pay rates 4) when a supervisor rates an employee's performance lower than it would be if compared against objective criteria *could lead to employees receiving smaller pay raises than deserved, lower their effort, and perform more poorly.

1) what is a competitive business strategy? 2) what is a human resource strategy? 3) what is strategic compensation? 4) How are these three related?

1) the planned use of company resources- financial, equipment, and human capital to promote and sustain competitive advantage 2) specifies the use of multiple HR practices to reinforce competitive business strategy 3) the design and implementation of compensation systems to reinforce the objectives of both HR strategies and competitive business strategies

explain Individual incentive plans - When are these most appropriate (necessary conditions for success)?:

1) when empoyee's performance can be measured objectively a) # of units produced ex: an automobile parts production worker's completion of a turn signal lighting assembly b) sales amount ex: a Mary Kay cosmetic sales professional's monthly sales revenue c) reduction in error rate ex: a word processor's reduction in typing errors 2) when employees have sufficient control over work outcomes 3) when they do not create a level of unhealthy competition among workers that ultimately leads to poor quality

Explain Piecework plans (see table 4-3)

2 kinds: 1) typically found in manufacturing settings, rewards employees based on their individual hourly production against an objective output standard and are determined by the pace at which manufacturing equipment operates. 2)established individual performance standards that include both objective and subjective criteria ex: units produced = ojective work quality = subjective

Direct compensation is a mix of...

Base Pay + Incentives

What are some examples of Incentive Pay? What is it also referred to as?

Commission, Bonuses, Stock Options, Profit Sharing Variable Pay

pay structures - represent pay rate ____________ for jobs of ___________ worth & the framework for recognizing differences in employee ______________.

DIFFERENCES UNEQUAL CONTRIBUTIONS

Total compensation is a mix of...

Direct & Indirect Compensation

Explain exempt and non-exempt categories.

Exempt from overtime provisions: -executive -administrative -learned professionals -creative professionals -computer workers -outside sales employees Most other jobs are Nonexempt and subject to FLSA overtime pay provision *not always clear cut

why do merit pay systems work? (theory)

Expectancy Theory effort x performance x reward = motivation

Compare and contrast intrinsic and extrinsic compensation.

INTRINSIC compensation is employees' psychological mind-sets that result from performing their jobs (ex: experiencing a great feeling from the belief that one's work matters) EXTRINSIC compensation includes both monetary and non-monetary rewards. organizational development professionals promote intrinsic compensation through effective job design while compensation professionals are responsible for extrinsic compensation

Why would a company use group incentives?

to emphasize cooperation and reward its members for the additional responsibilities they must take on, as well as the skills and knowledge they must acquire.

Look at General Schedule -Explain pay steps and within-grade increases (WGI).

The General Schedule has 15 grades--GS-1 (lowest) to GS-15 (highest). Agencies establish (classify) the grade of each job based on the level of difficulty, responsibility, and qualifications required (compensable factors) Each grade has 10 step rates (steps 1-10) that are each worth approximately 3 percent of the employee's salary. Within-grade step increases are based on an acceptable level of performance and longevity (waiting periods of 1 year at steps 1-3, 2 years at steps 4-6, and 3 years at steps 7-9). It normally takes 18 years to advance from step 1 to step 10 within a single GS grade if an employee remains in that single grade. However, employees with outstanding (or equivalent) performance ratings may be considered for additional, quality step increases (maximum of one per year).

For compensation purposes, which part of the Civil Rights Act (1964) is pertinent?

Title VII of the Civil Rights Act, which promotes equal employment opportunities for underrated minorities, is the most pertinent to compensation.

Explain the Pregnancy Discrimination Act (1978)

an amendment to Title VII which prohibits disparate impact discrimination against pregnant women for all employment practices. employers must treat pregnancy and childbirth the same way they treat other causes of disability.

What are behaviorally anchored rating scales (BARS) and what makes them so unique?

based on/similar to the CIT but the designer of the BARS write the incidents as expectations to emphasize the fact that the employee does not have to demonstrate the exact behavior that is used as an anchor in order to be rated at that level it is based on actual observable job behaviors

What is compensation?

both intrinsic and extrinsic rewards that employees receive for performing their jobs and for their membership as employees

Today, seniority pay is common in what types of organizations?

both private and public sector orgs. members of union-bargaining units whose contracts include seniority pay provisions in the public sector, most administrative, professional, and even mangerial employees receive automatic pay raises

What are potential problems with merit pay for: -sales professionals? -production workers?

both these jobs have little control on outside conditions that affect performance. ex: -recessionary economic spells -equipment breakdowns merit pay is most appropriate when employees have control over their performance and when conditions outside of their control do not affect their performance.

explain pay ranges

build upon pay grades, they include minimum, maximum, and midpoint pay rates

What is capital intensity? How does it influence wages (i.e., are they higher if it is more capital intensive?)

capital intensity refers to the extent to which companies operations are based on the use of large-scale equipment. on average, capital-intensive industries (manufacturing) pay more than industries that are less capital intensive (retail) because they require highly capable employees who have the aptitude to learn how to use complex physical equipment

What effect does unionization tend to have on pay?

companies in highly unionized industries tend to pay higher wages, on average, than do companies in lesser unionized industries. this could be because the bargaining power of a collective group in regards to employment terms is greater than the negotiating power of a single individual

How do product markets influence wages?

companies that operate in product markets where there is relatively little competition from other companies tend to pay higher wages because these companies generally exhibit substantial profits.

what are COLAs?

cost-of-living adjustments. which represent periodic base pay increases that are founded on changes in prices as recorded by the Consumer Price Index (CPI)

Explain management by objectives (MBO).

could be the most effective performance appraisal technique because supervisors and employees determine objectives for employees to meet during the rating period and employees appraise how well they have achieved their objectives. can promote effective communication between employees and their supervisors

In your opinion, does seniority pay fit with competitive strategies? Why or why not?

doesn't necessarily fit with competitive strategies because employees can count on receiving the same pay raises for average and exemplary performance (this is the greatest disadvantage of seniority pay) also, employees receive pay raises without regard to whether companies are meeting their competitive objectives growing costs of this pay system can become a burden to employees

What does it mean for compensation systems to be internally consistent?

each job amongst all jobs within a company are clearly defined. employees in jobs that require greater qualifications, more responsibilities, and more complex job duties should be paid more

explain Referral plans

employees may receive monetary bonuses for referring new customers or recruiting successful job applicants

explain Behavioral encouragement plans (see table 4-4)

employees receive payments for specific behavioral accomplishments (good attendance/safety records)

Explain the rationale behind seniority pay (human capital theory).

employees' knowledge and skills generate productive capital known as human capital, over time these get refined, enabling employees to work more productively

How does a comparison system evaluate employee performance?

evaluates a given employee's performance against that of other employees ranked best to worst performer

How does compensation fit with human resource practices such as: - Recruitment? - Selection? - Training/development? - Engagement?

recruitment: may pay a recruitment incentive to a newly appointed person selection:

explain spot bonuses

relatively small monetary gifts provided to employees for outstanding work or effort during a reasonably short period of time

Explain employee stock option plans

represent a long-term company-wide incentive plan that provide employees with stock options. under these plans, companies grant employees the right to purchase shares of company stock

Explain interindustry wage differentials .

represents the pattern of pay and benefits associated with characteristics of industries. they can be attributed to a number of factors such as industry's product market, profitability, and unionization of the workforce.

Explain the critical incident technique (see table 3-7)

requires job incumbents and their supervisors to identify performance incidents that distinguish successful performance from unsuccessful ones, the supervisor then observes the employees and records their performance on these critical job aspects.

explain Group incentive plans - When are these most appropriate (necessary conditions for success)?:

reward employees for their collective performance, rather than for each employee's individual performance. most effective when all group members have some impact on achieving the goal well-designed group incentive plans ultimately reinforce teamwork, cultivate loyalty to the company, and increase productivity.

explain Companywide incentive plans - When are these most appropriate (necessary conditions for success)?:

reward employees when the company exceeds minimum acceptable performance standards (profits or the overall value of the company based on its stock price) may use these plans to motivate employees to work harder for increased profits. belief that these plans make workers' and owners' goals more compatible as workers strive toward increasing company profits or value

Describe seniority pay and longevity pay -What do these plans assume?

reward employees with periodic additions to base pay according to employees' length of service in performing their jobs. these pay plans assume that employees become more valuable to companies with time and that valued employees will leave if they do not have a clear idea that their salaries will progress over time

What is person-focused pay?

rewards employees for acquiring job-related knowledge, skills, or competencies rather than for demonstrating successful job performance. rewards employees for the promise of performance in the future (merit/incentive reward for promises fulfilled)

Explain Incentive pay (variable pay)

rewards employees for partially or completely attaining a predetermined work objective. it is compensation that fluctuates according to employees' attainment of some standard based on a pre-established formula, individual or group goals, or company earnings.

What is incentive pay (variable pay)? How does it differ from merit pay?

rewards employees for partially or completely attaining a predetermined work objective. it is defined as compensation, other than base wages or salaries that fluctuate according to employees, attainment of some standard, individual or group goals, or company earnings

Explain Pay-for-knowledge... What type of workers are likely to receive this type of pay?

rewards managerial, service, or professional workers for successfully learning specific curricula

Explain right to work laws and how they have impacted union membership.

right-to-work laws prohibit mgmt and unions from entering into agreements requiring union membership as a condition of employment in states with right-to-work laws in place, union influence is a lot less potent. many manufacturing businesses are relocating to right-to-work states where employment costs are low, further weakening unions' influence

Explain Senority Pay. On what theory is seniority pay based?

seniority pay systems reward employees with periodic additions to base pay according to employees' length of service in performing their jobs. These plans assume that employees become more valuable to companies with time. Human Capital Theory, which states that employees' knowledge and skills (human capital) add value

Explain Stair Step & Skill Block... -What's the difference (Figures 5-3 & 5-4)?

stair-step model: steps represent jobs from a particular job family that differ in terms of complexity. jobs that require more skills (higher steps) are more complex than jobs with fewer skills (lower steps). skills blocks model: also applies to jobs from within the same job family yet the difference with this method from stair-step is that skills do not necessarily build on each other. emphasizes both horizontal and vertical skills

What determines if an employee will receive a merit increase?

subjective appraisal of past/current performance by supervisors

Explain how paired comparisons work (see table 3-6).

supervisors compare each employee to every other employee, identifying the better performer in each pair best suited for small groups of employees who perform the same or similar jobs

What is the basic assumption of merit pay programs?

that employees' compensation over time should be determined, at least in part, by differences in job performance

What major event in history led, in part, to the passage of income continuity, safety, and work hours legislation?

the Great Depression, where many businesses failed and the gov't enacted key legislation designed to stabilize the income of an individual who became unemployed because of poor business conditions or work place injuries * SS Act of 1935 (Title XI)

Why is the level of risk important to consider when designing incentive pay plans?

the level of risk increases as incentive pay represents a greater proportion of total core compensation. level of risk chosen should depend on the extent to which employees control the attainment of the desired goal

What is a just-meaningful pay increase?

the minimum pay increase that employees will see as making a meaningful change in compensation

What does the Portal-to-Portal Act define?

the term "hours worked" that appears in the FLSA and lists compensable work activities such as waiting time, on-call time, rest and meal periods, meetings/training programs, travel time, etc.

Explain Merit Pay Programs

they assume that employees' compensation over time should be determined, at least in part, by differences in job performance as judged by supervisors or managers. merit pay rewards excellent effort or results, motivates future performance, and helps employers retain valued employees.

explain pay grades

they group jobs for pay policy application (usually based on similar compensable factors and value)