Chapter 13: Recognizing Employee Contributions with Pay

Incentive pay sometimes presents executives with significant ethical issues. Incentives linked to stock performance can lead to which of the following ethical issues? (Select all that apply.)

-scandal that damages the company's reputation -executives dishonestly raising the price of stock and thereby obtaining a bonus and stock option

Quiz

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__________ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.

Gainsharing

What is the difference between performance bonuses and merit pay?

Performance bonuses are not built into base pay.

__________ is a type of incentive pay in which payments are a percentage of an organization's profits and do not become part of its employees' base salary.

Profit sharing

Identify a disadvantage of using profit-sharing plans.

Profit sharing is not directly linked to individual behavior.

Employee participation in pay-related decisions can contribute to the success of an incentive pay plan under what conditions? (Select all that apply.)

-When the organization fosters trust and cooperation. -When the incentives encourage employees to monitor their performance.

Stock ownership plans usually take the form of ______. (Select all that apply)

-employee stock ownership plans -stock options

Which statement is accurate regarding performance bonuses?

They must be re-earned by employees during each performance period.

Why do organizations pay workers a piecework rate?

To motivate them to work efficiently

What is using a standard hour plan as incentive for production workers?

Workers may not worry about quality or customer service.

Jensen Supply Inc., a plumbing supply company, wants to combine the advantages of different incentive-pay plans and help employees understand the organization's goals. Which plan will help the company accomplish this goal?

a balanced scorecard

Incentive pay based on a percentage of sales is called _____.

a commission

Janine works as a seamstress at a tailor shop and sews buttons on clothing. She earns $2 for each item she completes. Her pay is an example of ____.

a piecework rate

In the process of designing incentives, managers should make sure that

all the employees are paid the same amount. Incorrect

Incentive pay is typically based on _____.

an employee's performance

Some companies adopt a set of performance measures that focus on the company's long and short term goals. This system of awarding incentive pay is called a _____.

balanced scorecard

Which of the following is a useful approach in designing executive pay?

balanced scorecard

A balanced scorecard is a(n)

combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay

Lori is a realtor and earns 5% on the sale of each house. Her pay is an example of a _____.

commission

Incentive plans often work best when ______.

employees are involved in crafting the plan itself.

For which type of job is a gainsharing plan most useful?

for a complex job

A group incentive program that measures improvements in productivity and distributes a portion of the profits to each employee is called _____.

gainsharing

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a __________ program.

gainsharing

Forms of pay that are linked to an employee's performance as an individual, group member or organization member are called _____ pay.

incentive

Jake's sales team earned a 5% bonus for meeting its goals last quarter. This bonus is an example of _____.

incentive pay

Most pay-related communications come through

individual discussions between employees and their supervisors.

When executive pay includes stock or stock options, companies need to be aware of the possibility of _____.

insider trading

What is the disadvantage of offering bonuses for group performance?

may prevent cooperation among groups within the organization

An incentive system that gives a raise to employees who rank high on performance appraisals is called _____ pay.

merit

At her last performance review, Marlo received a 4% pay increase because she had met all of the goals her manager had set for her the previous year. Her pay increase is an example of _____ pay.

merit

Which type of incentive plans are used to reward individual performance?

merit pay

Under a profit sharing system, payments are ______.

not part of base salary

Stock ownership plans make employees ______.

part owner's of the organization

Which type of pay rewards individual performance and is not rolled into base pay?

performance bonuses

Under a ______ plan, an employer pays an employee a specific amount of money for every unit produced by the employee.

piece rate plan

The compensation plan known as ______ involves payments being based on some measure of organizational performance, and the payments do not become part of the base salary.

profit sharing

A standard hour plan is a ______-oriented plan.

quantity

A balanced ______ approach is useful in designing executive pay.

scorecard

Tyrone is the chief financial officer for a bank holding company and received a bonus last year based on the company's profits. He is not sure if he will get a bonus this year as the company is not doing as well financially. His bonus is an example of _____ incentive pay.

short-term

Executive pay at Schiller Inc., a manufacturing company, includes bonuses based on the year's profits or other measures related to the organization's goals. Sometimes, to gain tax advantages, the bonus is made part of executives' retirement plans. What is being exemplified in this scenario?

short-term incentives

Compared to gainsharing plans, group bonuses are typically designed for _____.

smaller work groups

An incentive plan that pays workers more if they finish their work in less than the normal amount of time is called a(n) _____.

standard hour plan

In one study, employees said that in addition to being paid more money, the most important factor that prompted them to participate in the company's incentive plan was ______.

the ability to affect the way their work was done

Since there are advantages and disadvantages for all types of incentive pay, organizations offset the disadvantages by ______.

using a balanced scorecard approach

When is it most important to communicate with employees about a pay plan?

when the plan changes

What are some risks associated with involving employees in pay-related decisions? (Select all that apply.)

-Employees may make decisions that benefit them but not the organization. -The process of creating and administering incentive plans can become more complex.

Why is it important to communicate with employees about their pay plan? (Select all that apply.)

-It increases the chances that incentives will influence employee behavior as desired. -It demonstrates that the pay plan is fair.

Which of the following are examples of short-term incentives used for executives?

-Return on investment -Bonus based on profits

It is important that incentive pay plan meet which of the following requirements? (Select all that apply.)

-The organization can provide resources employees need to achieve their goals. -The performance measures will help achieve the company's goals. -Employees value the reward offered.