ch9

_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.

Agency

Which of the following is NOT true?

Companies are moving back to entitlement-oriented pay to reduce turnover.

Agency theory argues that employees prefer risky pay as rewards can be greater than a salary.

False

Flexible compensation is based on the idea that the organization knows what package of rewards would best suit an individual employee's needs.

False

Gain sharing poses greater risk to individual employees than profit sharing.

False

Goal-setting theory argues that employees' performance is maximized when performance targets are unchallenging and unspecific.

False

Group pay is always more effective than individual pay.

False

In the formula "Behavior = f (M, A, E)," M denotes monetary incentives.

False

_____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating.

Herzberg's two-factor

_____ is employees' beliefs that requisite job performance will be rewarded by the organization.

Instrumentality

When identifying what is important to employees, which theory would be most useful?

Maslow's hierarchy of needs

When pay is based on individual performance, turnover tends to be highest among _____.

Poor Performers

Droppiece Inc. is a company that provides more performance-based pay and less base pay than its competitors. Who among the following is most likely to join Droppiece?

Stella, a recent college graduate who loves to take on a challenge

A problem with incentive pay plans is workers may end up focusing exclusively on behaviors that are rewarded.

True

According to the agency theory, because employees prefer a salary, they will demand a wage premium in exchange for accepting performance-based pay.

True

Evidence suggests that skill-based pay may not increase productivity.

True

Evidence suggests that talented people are motivated to join organizations with strong links between performance and pay.

True

Group incentive pay increases turnover of better performers, while individual incentive increases turnover of poorer performers.

True

Maslow's theory suggests that performance-based pay can be demotivating if it impinges upon employees' capacity to meet daily living needs.

True

Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when an organization meets performance objectives.

True

The trend today is toward less stable and less secure compensation packages.

True

Workload and work variety are both components of a total reward system.

True

_____ is the value employees attach to the organization rewards offered for satisfactory job performance.

Valence

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

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

A person with low self-esteem is likely to seek _____.

a large, decentralized organization with little performance-based pay

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

Grabhouse Inc. is experiencing an increase in turnover rates of its top employees. Upon consulting with its managers for the reasons for this increase, Grabhouse finds that employees are uneasy with the current pay mix as it involves too many risky elements. In order to make its pay mix less risky, Grabhouse needs to:

increase the base pay component of its pay mix.

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

The ability triangle includes _____.

selection

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.