Compensation exam 1
False
The content of a job refers to the worth of the job and its relative contribution to the organization's objectives
incentive effect
The degree to which pay influences individual and aggregate motivation among employees at any point in time.
True
The difference between exchange value and use value surfaces when one firm acquires another
sorting effect
The effect that pay can have on the composition of the workforce. Different types of pay strategies may cause different types of people to apply to and stay with an organization; the effect that pay can have on the composition of the workforce.; How an organization pays can result in sorting effects.
False
The institutional model states that it is best to wait for other organizations to adopt innovative practices and then copy those practices
work content and its value
The most common bases for determining internal structures are:
True
A layered pay structure is more hierarchical than a delayed pay structure and less egalitarian in terms of number of levels
individual needs and preferences.
A major challenge in the design of future pay systems is how to better satisfy ____
True
A potential problem in egalitarian pay structures is that high performing employees may feel underpaid and quit
The relative contribution of skills
A structure based on value typically ranks jobs on __________.
True
Commissions are an example of incentives.
values
Compensation strategy should reflect the organization's ___
False
Greater pay dispersion is related to lower turnover among executives
True
If the objective is to increase customer satisfaction, then incentive programs and merit pay might be used to pay for performance.
Legal examples: Paying on the basis of the nature of jobs; paying on the basis of pay comparisons with competitors; and, Paying on the basis of one's skill level.; Illegal example: Paying on the basis of one's age, gender, religion, natural origin, and disability
In the context of pay relationships, which of the following is illegal in the United States?
differences between merit adjustments and an incentive payment:
Incentives also tie pay increases to performance but differ from merit adjustments.; Incentive programs use objective measures of performance.; Incentives do not increase base wage and must be re-earned.; Incentive payment is known beforehand - such as a commission.; Incentives try to influence future behavior and merit rewards past behavior - a matter of timing.; Because incentives are a one-time payment, they are frequently referred to as variable pay.; Incentives may be short- or long-term.; Long-term incentives are in the form of stock ownership or options. is the
They are one-time payments
Incentives do not permanently increase labor costs because
True
Internal alignment is sometimes called internal equity
management
Issues of transparency, technology, and choice are most closely associated with the _____ aspect of mapping a total compensation strategy.
cost and innovation.
Most firms do not have generic strategies but use a blend of ______
FALSE
Since HR research contains information useful to managers, most managers read research in HR, management and compensation journals.
False
Since unions represent such a small fraction of the labor force their influence on pay decisions is relatively minor.
FALSE
Since unions represent such a small fraction of the labor force, their influence on pay decisions isinsignificant. T/F
monetary incentives
What has the greatest instrumental value according to the text?
incentive
Which form of pay does NOT permanently increase labor costs?
Internal alignment
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?
Prominence
_____ is the measure of how important total compensation is in the overall HR strategy.
A major reason is that the great majority of people who are under the age of 65 and not below the poverty line obtain health insurance through their employers, but small employers, which account for a substantial share of employment, are much less likely than larger employers to offer health insurance to their employees.
reasons why the great majority of the uninsured in the United States are from working families
Human Capital
refers to the education, experience, knowledge, abilities and skills required to perform work
Procedural justice
refers to the process by which a decision is reached: the right to an attorney, the right to an impartial judge, and the right to receive a copy of the arresting officer's statement
Management
A book listing the previous year's pay of all employees is part of Whole Foods "No-secrets" philosophy. This is an example of which strategic compensation choice?
Cost-cutter
A compensation system that focuses on competitor's labor costs is most closely associated with a(n) _____ strategy.
Innovator Strategy
A compensation system using market-based pay is most likely to be part of a(n) _____ strategy.; Flexible-generic job descriptions would most likely be used with a(n) _____ strategy.
pay system management
A policy regarding management of the pay system is the last building block in our model. Management means ensuring that the right people get the right pay for achieving the right objectives in the right way. The greatest system design in the world is useless without competent management.
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. Merit programs are commonly designed to pay different amounts (often at different times) depending on the level of performance
more money
According to the Hudson survey, _____ is the single thing that would make 41 percent of the U.S. workers happier.
External competitiveness and employee contribution decisions
According to the text, which of the following decisions should be made jointly?
it may not be stated or written.
All organizations that pay their employees have a compensation strategy even though ____
Troubled Asset Relief Program
Also known as TARP, it includes restrictions on executive pay and discouraged executives from taking "unnecessary and excessive risks"
by the tradeoffs in choices of what to do and what not to do.
An organization defines its strategy through?
larger
An organization whose profits or market share is increasing is able to pay ____ bonuses and stock awards,
a more flexible work schedule
Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select __________.
True
Both external and organization factors shape internal pay structures
False
CEOs of organizations with egalitarian pay structures usually have higher salaries than CEOs in organizations with hierarchal pay structures
Internal alignment
Career growth, hierarchy, and flexible design are most closely associated with the _____ aspect of mapping a total compensation strategy.
the extent External competitiveness and equity
Common bases for modern pay structures include all but which of the following?
employee contributions
Comparisons among individuals doing the same job for the same organization.; Incentives and merit guidelines are techniques of the _____ policy of the pay model.
external competitiveness
Comparisons on the forms of compensation used by other companies are part of _____.
largest
Compensation is often a company's ___ controllable expense.
decrease costs or increase revenues
Compensation strategy, HR strategy, and business strategy ultimately __________________________, relative to competitors
cost-cutter
Compensation systems focusing on competitor labor costs typically follow a _______ strategy.
procedural fairness
Concept concerned with the process used to make and implement decisions about pay. It suggests that the way pay decisions are made and implemented may be as important to employees as the results of the decisions.
Work performed in a job and how it gets done
Content refers to the:
False
Contributions refers to employees' perceptions of the fairness of pay differences among different jobs with their organization (Pg. 22)
FALSE
Customer-focused pay strategies are very likely to use market-based pay.
preference for individual performance over team performance
Egalitarian pay structures have all but which of the following characteristics?
False
Egalitarian pay structures send the message that an organization values differences in work content, individual skills, and contributions to the organization.
results
Embedding compensation strategy within the broader HR strategy affects _________.
False
Exchange value is always higher than use value
Efficiency (Performance, Quality, Customer and Stockholder, Cost), Fairness, Compliance, Ethics
Fundamental Objectives
relationship between unemployment and the proportion of the population covered by health insurance
Given that those who do have insurance typically have it through an employer, it also follows that whenever the unemployment rate increases, health care coverage declines further.
external competitiveness
How an organization positions its total compensation against competitors is part of _____ strategic choices.
companies, the concept of teate is consistent with family, housing, and commuting allowances.
In Japanese companies, the concept of teate
False
In a high-performance system pay strategy plays a lead as opposed to support role.
True
In additon to supply and demand for labor, supply and demand for products and services also affect internal structures
egalitarian
In firefighting and rescue squads and global software design teams, a(n) ________ structure is most closely associated with higher performance
objectives
In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of _____.
it sends the message that all employees are valued equally
In the context of internal structures, which of the following is true of a delayered structure?
M
In the formula for predicting performance, the component most closely related to compensation is _________
Second
In the strategic approach to pay, internal alignment is the _____ issue to be decided.
A closely tailored pay structure
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?
procedural justice
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?
Egalitarian pay structure
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)?
False
Management and HR research has conclusively shown that goal setting and job enrichment produce the largest and most reliable increases in job performance
false
Management of the pay system focuses on cost control and employee perceptions of fairness since they are most important to management
use value
Marginal productivity theory argues that employers pay:
customer-focused strategy
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:
True
Monetary incentives produce the biggest increases in job performance.
both person- and job-based structures.
Most job structures are best described as:
Small pay differences among jobs and seniority based promotions
Most unions prefer which of the following?
A company that uses a hierarchical pay structure to pay its employees based on performance
Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her?
FALSE
One of Whole Foods' employee contributions strategic compensation choices is to seek and engage employees who are going to help the company make money.
True
Organizations design their pay structures around jobs and job levels
egalitarian
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
True
Pay differences among levels in an organization are called differentials
the internal structure of their home employer
Pay for temporary workers is based upon
False
Pay structure refers to the array of pay rates for different work or skills between competing companies
commission
Payment tied directly to achievement of performance standards. Commissions are directly tied to a profit index (sales, production level) and employee costs; thus, they rise and fall in line with revenues; Commissions: Payment tied directly to achievement of performance standards. Commissions are directly tied to a profit index (sales, production level) and employee costs; thus, they rise and fall in line with revenues.
True
Pension and health benefits are a very large component of total compensation for many large companies such as American Airlines and GM
company taking efforts work/life balance
Programs that help employees integrate their work and life responsibilities include: time away from work (vacations, jury duty, referrals for child and elder care); access to services to meet specific needs (drug counseling, financial planning); and flexible work arrangements (telecommuting, nontraditional schedules, nonpaid time off).; book example: Medtronic, for example, touts its Total Well-Being Program that seeks to provide "resources for growth—mind, body, heart, and spirit" for each employee. Health and wellness, financial rewards and security, individual and family well-being, and a fulfilling work environment are part of this "total well-being." Medtronic believes that this program permits employees to be "fully present" at work and less distracted by conflicts between their work and nonwork responsibilities. Shows that....
disapproval
Providing unlimited compensation choices to employees would meet with _____ from the U.S. Internal Revenue Service.
output of regression analysis; correlation that tells you the percentage of the variation of a change in one variable accounts for change in another variable.
R2
A relational return
Recognition and status, employment security, challenging work, learning opportunities, personal satisfaction from successfully facing new challenges, teaming with great coworkers, receiving new uniforms; organization;The non-quantifiable returns employees get from employment, such as social satisfaction, friendship, feeling of belonging, or accomplishment are all examples of
Improves attitudes and behaviors
Research investigating high-performance workplaces found that performance-based pay ________ when combined with other high-performance practices.
it is unclear what compensation practices
Research shows that ________ will effectively shift an organization in a downward performance spiral into an upward one
the fundamental direction that an organization chooses.
Strategy refers to
True
Teachers will feel pay structures are fair even when they are relatively low in the internal structure if they work in a high paying school district.
True
Technology used in producing goods and services influences the organizational design, the work to be performed, and the skills/knowledge required to perform the work
base wage
The basic cash compensation that an employer pays for the work performed. Tends to reflect the value of the work itself and ignore differences in individual contributions.
causation
The best way to establish _____ is to account for competing explanations, either statistically or through control groups.
either statistically or through control groups (Pg. 27)
The best way to establish causation is to account for competing explanations
internal alignment
The pay relationships among jobs or skill levels within a single organization; focuses attention on employee and management acceptance of those relationships. It involves establishing equal pay for jobs of equal worth and acceptable pay differentials for jobs of unequal worth.; refers to comparisons among jobs or skills inside a single organization.
the difficulty in external recruitment.
The problem that is most likely to be faced by organizations using an egalitarian pay structure is
ownership
The role non-HR managers play in making pay decisions is called _____.
Closely tailored
The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) ________ internal pay structure
people are "human capital," similar to other factors of production
Trying to measure an ROI for any compensation strategy implies that _________
assessing
Union preferences are a major factor in _____ a total compensation strategy.
C
Union preferences are a major factor in _____ a total compensation strategy.A. implementingB. reassessingC. assessingD. mapping
True
Wage legislation affects wage structure at both the minimum and the maximum pay level
An egalitarian pay structure
When cooperation is important for successful organization performance, which of the following pay structures is most suitable?
More egalitarian structures are related to greater performance when close collaboration and sharing of knowledge are required
When cooperation is important for successful organization performance, which of the following pay structures is most suitable?
performance-based pay plans do not pay off.
When organization performance declines:
True
When unemployment increases, the proportion of the population covered by health insurance decreases.
Correct MH Corp. increases the number of paid holidays given to its senior employees.
Which of the following companies is taking efforts to improve the work/life balance of its employees?
What products and services should the firm offer; What business should we be in?
Which of the following is a fundamental corporate-level strategic decision
They are designed to increase the turnover rate
Which of the following is not a characteristic of aligned pay structures
Equal experience
Which of the following is not a factor in defining equal work according to the equal pay act
Assess total compensation strategy, map a total compensation strategy, implement strategy, reassess
Which of the following is the correct order of the steps in formulating a total compensation strategy?
it addresses relationships inside an organization
Which of the following is true of internal alignment?
it addresses how design and administration decisions are made
Which of the following is true of procedural justice?
employee contributions
Which of the following policy decisions directly affects employees' attitudes and work behaviors?
Alignment test
Which of the following tests of competitive advantage is probably the easiest test to pass?
Tournament Theory
Which of the following theories predicts that individual performance will be maximized when the pay differentials between job levels are large?
Objectives
Whole Foods' decision to seek and engage employees who are going to help the company make money is an example of which strategic pay decisions?
Internal alignment
Whole Foods' policy of holding executive salaries to no more than 14 times average pay of full-time employees is an example of which strategic pay decision?
Transparency
_____ refers to openness and communication about pay.
More hierarchical structures
________ are related to greater performance when the work flow depends on individual contributors
A difference between incentives and merit increases is that incentives are temporary.
differences between incentives and merit increases:
Managers seek internal alignment within their organization by paying on the basis of similarities among jobs.
how do managers seek internal alignment within their organizations?:
increasing incentive pay and decreasing base pay.
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?
incentive programs and merit pay (techniques)
if the objective is to increase customer satisfaction what forms of pay might you use?:
Policies (Pay Model)
internal Alignment Competitiveness Contributions and Management are
correlation coefficient
is a common measure of association and indicates how changes in one variable are related to changes in another; A measure of how changes in one variable are related to changes in another variable
Compensation (through incentive and sorting effects)
is the key to attracting, retaining, and motivating employee with the abilities necessary to execute the business strategy and handle greater decision-making responsibilities.
True
labor unions support small pay differentials
false
t/f in a high performance pay system pay, strategy pay strategy always plays a lead role
Incentives
variable pay may also be called?
the design of the pay system
what do objectives guide?
Stock options
which of the following is often the largest component in an executive pay package?
Cost cutter
· A compensation system focusing on operational excellence is most closely associated with a(n) ________ strategy
external competitiveness
· Compensation policy choices that affect the pay level relative to other companies are most closely associated with the external competitiveness aspect of the pay model.
increases
· Declining organization performance __________ the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs
hiring graduates
External factors are dominant influences on jobs filled via?
cost-cutter
A compensation system focusing on system control and work specifications is most closely associated with a(n) _____ strategy.
false
Customer-focused pay strategies are very likely to use market-based pay.
Incentives also tie pay increases to performance but differ from merit adjustments.; Incentive programs use objective measures of performance.; Incentives do not increase base wage and must be re-earned; Incentive payment is known beforehand - such as a commission.; Incentives try to influence future behavior and merit rewards past behavior - a matter of timing.; Because incentives are a one-time payment, they are frequently referred to as variable pay.; Incentives may be short- or long-term.; Long-term incentives are in the form of stock ownership or options.
Know which of a number of statements is true of incentives:
False
Pay structures are immune to changes in external factors such as skill shortages
Merit increases are given as performance-based increments to the base pay.,;Merit bonuses are also based on performance rating but are paid in one lump sum rather than a permanent change to base pay.
differences between merit increases and merit bonuses:
