Comp Exam #1
The Alignment Test
(1) alignment with the business strategy; (2) aligned externally with the economic and sociopolitical conditions; (3) aligned internally with the overall HR system
Egalitarian pay structures
-have fewer levels and / or smaller differentials -Structures can also vary from layered to de-layered
layered
-more hierarchical -less egalitarian in terms of number of levels
Marginal productivity theory argues that employers pay _____. A. use value B. exchange value C. surplus value D. differential value
A
correlation coefficient
A measure of how changes in one variable are related to changes in another variable is the ____.
merit pay
A reward that recognizes outstanding past performance. It can be given in the form of lump- sum payments or as increments to the base pay. These programs are commonly designed to pay different amounts (often at different times) depending on the level of performance.
In a study, causation can be best established by?
Accounting for competing explanations, either statistically or through control groups
Which of the following tests of competitive advantage is probably the easiest test to pass?
Alignment
When cooperation is important for successful organization performance, the best form of pay is _____. A. tournament B. egalitarian C. hierarchical D. institutional
B
Which form of pay does NOT permanently increase labor costs?
Cash Compensation Incentives
internal alignment
Comparisons among jobs or skill levels inside a single organization
external competitiveness
Compensation relationships external to the organization; comparison with competitors
Customer-focused pay strategies are most likely to use?
Customer Satisfaction Incentives
Basic fundamental objectives
Efficiency Fairness Compliance Ethics
Entitlement
Employee belief that returns and/or rewards are due regardless of individual or company performance
Which of the following is true of procedural justice?
Ethicality and information accuracy are two critical dimensions of procedural justice
employee contributions
Incentive plans and Performance-based pay increases
Pay system policies
Internal alignment External competitiveness Employee contributions Management
In the formula for predicting performance, the component most closely related to compensation is _________
M
do most managers read research in HR management and compensation journals?
No
When organization performance declines:
Performance-based pay plans do not pay off (example of a vicious cycle)
virtuous cycle
Performance-based pay that shares success with employees does improve employee attitudes, behaviors, and performance
pay system management
Policies related to managing the pay system
stock options
Pro - sense of ownership will improve performance Against - granting employees too much ownership dilutes stockholder wealth Executive pay
Factors used in defining equal work according to the Equal Pay Act
Skill Effort Working Conditions Responsibility
Most unions prefer which of the following?
Small pay differences between jobs and seniority-based promotions
Which of the following is often the largest component in an executive pay package?
Stock options
Are pension and health benefits a very large component of total compensation for many large companies?
True
Human capital
When skills and experience add value, more pay is commanded
Content refers to the:
Work performed in a job and how it gets done
Reinforcement Theory
a behavior which has a rewarding experience is likely to be repeated
Most firms do not have generic strategies but use ______________________.
a blend of cost and innovation
Marginal productivity theory
employers pay use value
How an organization positions its total compensation against its competitors is part of _____________________ strategic choices
external competitiveness
According to the text, which of the following decisions should be made jointly?
external competitiveness and employee contribution decisions
Comparisons based on the forms of compensation used by other companies are part of _________.
external competiveness
Declining organization performance __________ the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs
increases
If a company wants to restructure its pay plan without increasing labor costs in the long run and while retaining its top employees which of the following examples would be the best strategy?
increasing incentive pay and decreasing base pay
A major challenge in the design of future pay systems is how to better satisfy __________________________
individual needs and preferences
Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?
internal allignment
The difference between exchange value and use value surfaces when _______________________
one firm acquires another
Technology used in producing goods and services influences the _________________, the work to be performed, and the skills/knowledge required to perform the work
organization's design
The role non-HR managers play in making pay decisions is called _________.
ownership
delayered
several levels of jobs titles are removed
sorting effect
the effect that pay can have on the composition of the workforce
Procedural fairness
the process used to make decisions
Incentives do not permanently increase labor costs because?
they are a one-time payment
Which of the following is a fundamental strategic choice at the corporate level?
what products and services should the firm offer
The most common bases for determining internal structures are:
work content and its value
AMO Theory
•The theory states that performance (P) is a function of three factors: ability (A), motivation (M), and opportunity (O).
In a strategic approach to pay, internal alignment is the ________ issue to be decided (refers o order of issue to be decided according to the text)
2nd
Tournament
all players play better when the prize differentials are larger.
The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) ________ internal pay structure
closely tailored
Internal alignment is sometimes called ____________
internal equity
Egalitarian pay structures have all but which of the following characteristics? A. Few levels B. Small differentials C. Supports equal treatment D. Supports individual performers
D
In the context of the impact of internal structures, which of the following statements is true?
High performers quit under more hierarchal systems when pay is based on performance rather than seniority
factors that shape internal pay structures
Human Capital Work Design Overall HR policies
variable pay may also be called?
Incentives
merit bonuses
also based on performance rating but are paid in one lump sum rather than a permanent change to base pay
________ is the key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy and handle greater decision-making responsibilities
compensation
A compensation system focusing on operational excellence is most closely associated with a(n) ________ strategy
cost cutter
A compensation system focusing on system control and work specifications is most closely associated with a(n) ________ strategy
cost cutter
A compensation system that focuses on competitors' labor costs is most closely associated with a(n) ________ strategy
cost cutter
Compensation systems focusing on competitors' labor costs typically follow a ______________ strategy
cost cutter
Compensation strategy, HR strategy, and business strategy ultimately __________________________, relative to competitors
decrease costs or increase revenues
Joshua believes that treating employees equally will improve their job satisfaction, which in turn will increase their work productivity and performance. In accordance with his beliefs, he wants to reduce the number of job levels and the pay differentials between the levels. In this case, he is most likely to use a(n)?
egalitarian pay structure
Which of the following policy decisions directly affects employees' attitudes and work behaviors?
employee contributions
differentiated strategy
focus is on providing unique or innovative products at premium prices
cost-cutter strategy
focuses on efficiency, doing more with less, and minimizing costs. It encourages productivity increases, and specifying in greater detail exactly how jobs should be performed
Merit increases
given as performance-based increments to the base pay
Greater pay dispersion is related to __________ turnover among executives
higher
External factors are dominant influences on jobs filled via?
hiring graduates
Research investigating high-performance workplaces found that performance-based pay ________ when combined with other high-performance practices
improves attitudes and behaviors
if the objective is to increase customer satisfaction what forms of pay might you use?
incentive programs and merit pay might be used to pay for performance
differences between incentives and merit increases
incentives do not increase the base wage, whereas merit does increase the base wage
differences between merit adjustments and an incentive payment
incentives do not increase the base wage, whereas merit does increase the base wage
Troubled Asset Relief Program
includes restrictions on executive pay and discouraged executives from taking "unnecessary and excessive risks."
Career growth, hierarchy, and flexible design are most closely associated with the ________ aspect of mapping a total compensation strategy
internal alignment
R2
is a squared correlation that tells us what percentage of the variation is accounted for by the variables we are using to predict or explain
Research shows that ________ will effectively shift an organization in a downward performance spiral into an upward one
it is unclear what compensation practices
All organizations that pay their employees have a compensation strategy even though __________________________
it may not be shared or written
An organization whose profits or market share is increasing is able to pay ___________ bonuses and stock awards
larger
Compensation is often a company's _________ controllable expense
largest
Organizations in a turbulent and unpredictable environment requiring flexibility in jobs and work processes are likely to be more successful with a(n) ________ internal pay structure
loosely coupled
Issues of transparency, technology, and choice are most closely associated with the ________ aspect of mapping a total compensation strategy
management
What has the greatest instrumental value according to the text?
monetary/cash
Whole Foods' shared-fate philosophy
monthly team performance, in terms of revenue per hour worked, directly affects what the team is paid
According to the Hudson survey, which of the following is the single thing that would make 41 percent of U.S. workers happier?
more money
the relative proportion of U.S. firms using merit pay increases
most
In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of ____________.
objectives
In the context of pay relationships, which of the following is illegal in the United States?
paying on the base of one's age
how do managers seek internal alignment within their organizations?
paying on the basis of similarity among jobs
Trying to measure an ROI for any compensation strategy implies that _________
people are "human capital"
Most job structures are best described as:
person and job based
James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about?
procedural justice
you need to recognize an example of a relational return
psychological •Recognition and status, employment security, learning opportunities, challenging work, and so on.
Labor unions support _______ pay differentials.
small
customer-focused strategy
stresses delighting customers and bases employee pay/incentives on how well they do this
Equity Theory
suggests employees judge the equity (fairness) of their pay by making multiple comparisons
Base wage
the cash compensation an employer pays for work performed
Embedding compensation strategy within the broader HR strategy affects _________.
the compensation strategy
incentive effect
the degree to which pay influences individual and aggregate motivation
what do objectives guide?
the design of pay systems and provide the standards for evaluating their effectiveness.
A structure based on value typically ranks jobs on __________.
the relative contribution of: The skills, tasks, and responsibilities of a job to the organization's goals/objectives
An organization defines its strategy through?
through the tradeoffs it makes in choosing what to do and what not to do.
A compensation strategy should reflect an organization's ____________
values
pay model
Policies → Pay Techniques → Objectives
Pay differences among levels in an organization are called __________
differentials
potential problem(s) in egalitarian pay structures
•Equal treatment means high-performers feel underpaid. •They may quit or change their behavior.
Providing unlimited compensation choices to employees would meet with ____________________ from the U.S. Internal Revenue Service
dissaproval
innovator strategy
-stresses new products and short response time to market trends -compensation approach places less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations
Pay for temporary workers is based upon A. Small pay differences between jobs and seniority-based promotions B. Large pay differences between jobs and seniority-based promotions C. Small pay differences between jobs and performance-based promotions D. Equal pay raises for employees
A
Which of the following theories predicts that individual performance will be maximized when the pay differentials between job levels are large? A. Tournament theory B. Equity theory C.Marginal productivity theory D. Reinforcement theory
A
________ are related to greater performance when the work flow depends on individual contributors A. Egalitarian B. Hierarchical C. Tournament D. Institutional
B
Common bases for modern pay structures include all but which of the following? A. Content of the work B. Skills and knowledge required to perform the work C. External competitiveness and equity D. Relative value for achieving organizational objectives
C
In firefighting and rescue squads and global software design teams, a(n) ________ structure is most closely associated with higher performance A. hierarchical B. institutional C. egalitarian D. tournament
C
The problem that is most likely to be faced by organizations using an egalitarian pay structure is: Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her? A. A company that uses an egalitarian pay structure B. A company that pays its employees based on their seniority rather than their performance C. A company that uses a hierarchical pay structure to pay its employees based on performance D. A company that pays all its employees the same amount of money
C
Pay structure refers to the array of pay rates for different work or skills within a single organization.
True
how wage legislations affects wage structure
U.S. legislation forbids discrimination, and some legislation aims at differentials, producing a flatter wage rate structure
Characteristics of aligned pay structures
Undertake training Increase experience Reduce turnover Facilitate career progression Facilitate performance Reduced pay-regulated grievances Reduce pay-related work stoppages
Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select __________.
a more flexible work schedule
Union preferences are a major factor in ________ a total compensation strategy
assessing
Jacob works at PrimeClean Corp., a car wash company. He is asked to follow a set of instructions in a predetermined order to wash a car. All the details including the amount of washing liquid to use for each type of car are clearly specified. In this case, Jacob's company is most likely to use a?
closely tailored pay structure
Mich Inc., a hardware store, has a rating system in place that rates employees on their friendliness, usefulness, and product knowledge. Based on the ratings an employee receives, he or she gets an incentive. The compensation strategy followed by Mich is most closely described as a(n) _________ strategy
customer-focused
A compensation system using market-based pay is most likely to be part of a(n) ________ strategy
innovator
Flexible-generic job descriptions would most likely be used with a(n) ________ strategy
innovator
Organizations design their pay structures around _____
jobs and job level
