Comp Exam 2
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
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
Mark and Steve work as crane operators in a construction company called Asai Corp. Asai uses a skill-based plan that establishes single flat rates for each skill level. Mark performs better than Steve even though Steve has more seniority. Which of the following statements is most likely to be true in this scenario?
Both Mark and Steve will be paid the same amount.
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
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
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 theories states that people choose the behavior that leads to the greatest reward?
Expectancy theory
Which of the following is an example of a bourse market?
Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods
For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the _____ plan.
Gantt
Gramhold Inc., a pharmaceutical company, reduces its 10 salary grades to just three broad bands. Which of the following statements is most likely to be true in this case?
Gramhold will experience career moves within bands more than career moves between bands.
_____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating.
Herzberg's two-factor
Which of the following is NOT a long-term incentive plan?
Improshares
_____ 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 changes in its average costs to an all-industry average.
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.
Which of the following does NOT provide for incentives based on standards that are expressed in terms of time period per unit of production?
Merrick system
Which of the following is an example of a quoted-price market?
Nile, a website that allows sellers to sell their products for a fixed price
Which of the following is often used to set pay ranges?
Quartiles and percentiles
If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result?
The labor costs for Company A will increase, but it will be unable to hire additional workers.
_____ is the additional output associated with the employment of one additional person, with other production factors held constant.
The marginal product of labor
Which of the following jobs would most likely fall into a fuzzy market?
The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience
_____ puts a lid on the maximum pay level an employer can set.
The product market
A small lawn care company has two mowers and four employees. If it hires another employee and the factors of production remain the same, how will the productivity of the fifth employee compare to that of the current four employees?
The productivity will reduce
_____ is an example of a bourse.
The total compensation for a top athlete
Which of the following statements is true of individual spot awards?
They are given to employees for exceptional performance as an add-on bonus.
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
A survey conducted in January 2013 found that the median pay effective January 1, 2013, for a clerk was $22,000 and that the forecast rate of wage increases in the market for 2013 was 5 percent and another 5 percent for 2014. An employer choosing to follow a lead strategy of 4 percent above the market for the plan year will need to _____.
multiply the salary by 105 percent and then by 109 percent
Available evidence indicates managers believe the most important factor for pay increases is _____.
performance
The market pay rate is the:
point at which supply and demand lines cross.
When pay is based on individual performance, turnover tends to be highest among _____.
poor performers
Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level.
productivity
Pay ranges:
reflect the differences in performance 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
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.
Surveys show the most popular type of variable pay plans are _____.
special recognition plans
The first step in setting competitive pay and designing a pay structure is to _____.
specify a 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.
If you had repair work done on your car, the shop most likely used the _____ plan to pay the mechanic.
standard hour
TreeDen Corp. experiences an increase in employee turnover rate. Upon investigating, it discovers that employees are dissatisfied with the company's pay. Employees cannot see a direct link between their performance and their pay. They are also unhappy about having to pay out of their pockets to obtain grants. In this case, TreeDen is most likely using a _____.
stock ownership plan
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.
Size of pay differentials between grades should _____.
support career movement through the pay structure
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
Which of the following is NOT true of merit bonuses?
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.
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.
Which of the following is NOT a reason a company might pay base wages above market?
To increase turnover rates
_____ measures reveal competitors' use of performance-based cash payments.
Total cash
_____ 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
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
Components identified as vital to the success of both Scanlon and Rucker plans are:
a productivity norm and effective worker committees.
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
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 awards beyond just money
The most obvious sorting factor is _____.
ability
Because employers are raising employee pay at various times during the year, survey data must be updated using a process called _____ or _____.
aging; trending
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.
Employers continue to hire until the marginal revenue of the last hire equals his or her wage rate. This is based on the first labor market theory assumption that:
employers seek to maximize profits.
According to the _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.
equity
The trend in recent variable-pay design is to combine the best of _____ and _____ plans.
gain-sharing; profit-sharing
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
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
All of the following are advantages of a lead pay-level policy EXCEPT _____.
higher turnover rates
The _____ theory is the most influential in explaining pay-level differences.
human capital
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.
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 policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy.
lag
The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____.
lead policy
Aging the market data to a point halfway through a plan year is called _____.
lead/lag
A market pay line _____.
links a company's benchmark jobs with market rates paid by competitors
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
For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is _____.
low-high approach
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
The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.
market pricing
The most common pay policy is a(n) _____.
match policy
The _____ minimizes the distortion of the central tendency caused by outliers.
median
All of the following are important factors in defining a market for compensation purposes EXCEPT:
the ability to pay.
In most organizations, the responsibility for managing a pay survey lies with _____.
the compensation manager
All of the following support the use of individual incentives EXCEPT:
the presence of a union.
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
The authors argue that for merit pay to live up to its potential, all of the following should be done EXCEPT _____.
using more peer raters than supervisor raters
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
In the regression equation, y = a + bx, job evaluation points are denoted by _____.
x
Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?
Standard deviation
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
_____ have the disadvantage of requiring employees to spend money to obtain their incentive.
Stock options plans
Which of the following is an example of a company that uses broad banding?
A company in which there is more lateral movement with no pay adjustment than promotions
Which of the following is NOT true about individual spot awards?
A majority of companies do not feel that these awards are effective.
_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.
Agency
Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants to introduce a variable-pay plan that is easy to understand and does not cost much to administer. Which of the following variable-pay plans is Maxwell most likely to introduce?
Cash profit sharing plan
Menthorp Inc. wants to design a variable-pay plan that fosters teamwork and business knowledge of its employees. In order to ensure maximum motivation, Menthorp wants its variable-pay plan to show a clear performance-reward link. Which of the following plans is most suitable for Menthorp?
Cash profit sharing plan stock ownership plan
Which of the following is NOT true?
Companies are moving back to entitlement-oriented pay to reduce turnover.
Which of the following is the most commonly used team incentive performance standard?
Customer satisfaction measures
Druk Inc. is a consulting firm with 10 employees. Each new client generates $10,000 in revenue. If the company hires another employee who brings in five new clients and all other factors of production are constant, which of the following statements is true?
Druk needs to pay $50,000 as wage to the eleventh employee to break even.
Which of the following is NOT an advantage of team incentives?
Easy to set equitable targets for all teams
Wages tend to be the lowest in which of the following industries?
Education and health care
When identifying what is important to employees, which theory would be most useful?
Maslow's need theory
_____ is an individual level form of performance pay.
Merit bonus
An incentive system with three piecework rates is the _____ plan.
Merrick
_____ refers to the average of the array of rates inside an organization.
Pay level
Which of the following statements is true of pay level?
Pay level is directly proportional to labor costs.
Which of the following is an example of the demand side of labor?
Pay level offered by an employer
Which of the following is a disadvantage of gain-sharing plans?
Payouts can occur even if a company's financial performance is poor.
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 price changes.
Which of the following statements about merit pay is NOT true?
Removal of merit pay lowers satisfaction but not performance.
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.
According to research, which of the following is NOT one of the most important factors for employees influencing their pay systems?
Team-based pay
A common first step in interpreting survey data is to _____.
check for the accuracy of job matches
All of the following EXCEPT _____ require periodically re-earning the added pay.
cost-of-living increases
The motivation triangle includes _____.
culture
The second major decision in pay-level determination is to _____.
define the purpose of a survey
The final major decision in pay-level determination is to _____.
design grades and ranges or bands
The amount of fairness given to employees refers to _____.
distributive justice