Compensation Exam 2

3) Which of the following statements is true of employee benefits? A) Employers can substitute insurance benefits for job security. B) Group insurance has relatively easy qualification standards. C) Most employee benefits are taxable. D) Many group-based benefits are obtained at a higher rate than could be obtained by employees acting on their own.

B) Group insurance has relatively easy qualification standards.

6) The most common form of outcome-based appraisal is: A) the essay method. B) Management By Objectives. C) the performance standards review. D) Behaviorally Anchored Rating Scales.

B) Management By Objectives.

14) In situations where the nature of the task is so uncertain that it may be difficult to specify expected goals, the most appropriate rating format is A) a Management By Objectives format. B) a standard rating scale. C) a behaviorally anchored rating scale. D) an essay format.

B) a standard rating scale.

0) The most frequently implemented incentive system is: A) a standard hour plan. B) a straight piecework system. C) the Merrick system. D) the Taylor differential piece-rate plan.

B) a straight piecework system.

27) The most obvious sorting factor is A) seniority. B) ability. C) experience. D) educational qualification.

B) ability.

2) The second major decision in setting externally competitive pay and designing the corresponding pay structures is to A) specify relevant markets. B) define the purpose of the survey. C) specify the pay-level policy. D) design grades and ranges.

B) define the purpose of the survey.

13) DrenchFort Corp. is a small company that pays high wages. As its wages are high, it does not provide any benefits. Recently, it has noticed that its employee turnover has increased, so it decides to provide benefits to retain employees. Which of the following benefits is most likely to reduce turnover? A) Counseling services B) An early retirement plan C) Medical coverage D) A profit-sharing plan

C) Medical coverage

18) ________ is a nonpermanent (variable) payment (bonus or lump sum) form of variable pay granted to employee as function of some (typically primarily subjective) assessment of individual employee performance. A) Risk sharing B) Gain sharing C) Merit bonus D) Success sharing

C) Merit bonus

24) Which of the following benefits communication methods allows for personalized communication methods and requires current contact information? A) Face-to-face methods B) Virtual methods C) Use of materials D) Use of information portals

C) Use of materials

11) ________ is the value employees attach to the organization rewards received for job performance. A) Equity B) Instrumentality C) Valence D) Reinforcement

C) Valence

8) A benefit plan that allocates a set dollar amount to employees and allows them to select benefits is called a ________ plan. A) select choice B) no-deductible C) flexible benefit D) flat dollar benefit

C) flexible benefit

16) Among peer raters, the most objective evaluations are given by: A) workers who are friends of the ratees. B) workers who are not close friends with ratees. C) high-performing workers. D) low-performing workers.

C) high-performing workers.

27) The size of pay differentials between grades should A) be based upon differentials in market surveys. B) be approximately 20 percent. C) support career movement through the pay structure. D) be between 10 and 25 percent.

C) support career movement through the pay structure.

22) In the regression equation y = a + bx, job evaluation points are denoted by A) a. B) b. C) x. D) y.

C) x.

12) If a benefit forecast suggests future cost containment may be difficult, the benefit should: A) be completely paid for by employees. B) be offered on a noncontributory basis. C) not be used. D) be offered to employees only on a cost-sharing basis.

D) be offered to employees only on a cost-sharing basis.

30) The amount of fairness given to employees refers to A) total justice. B) quantitative justice. C) procedural justice. D) distributive justice.

D) distributive justice.

29) The ________ pay strategy emphasizes external competitiveness and deemphasizes internal alignment. A) job structure B) broad banding C) reference rate D) market pricing

D) market pricing

17) Various studies have found that only two specific benefits curtailed employee turnover, namely ________ and ________. A) vacation days; dental plans B) profit-sharing plans; life insurance C) retirement benefits; paid vacations D) pensions; medical coverage

D) pensions; medical coverage

25) Available evidence indicates that managers believe the most important factor for pay increases is A) experience. B) nature of the job. C) seniority. D) performance.

D) performance.

6) In most organizations, the responsibility for managing a pay survey lies with A) top management. B) the facility or plant manager. C) outside consultants. D) the compensation manager.

D) the compensation manager.

8) Which of the following motivational theories states that performance-based payments work best when they closely follow performance? A) Reinforcement theory B) Equity theory C) Expectancy theory D) Agency theory

A) Reinforcement theory

5) A major criticism of standard rating scales is that: A) raters have different definitions of scale levels. B) raters find them hard to use. C) they are expensive to develop. D) they encourage halo and horn errors.

A) raters have different definitions of scale levels.

6) A survey shows that most employers are responding to increased benefit costs by A) requiring employees to pay higher deductibles and copays. B) laying off employees. C) dropping health care plans. D) relying on the Patient Protection and Affordable Care Act.

A) requiring employees to pay higher deductibles and copays.

23) Which of the following is a disadvantage of gain-sharing plans? A) Payouts can occur even if a company's financial performance is poor. B) Pay-performance links are indirect. C) Employees are required to put up money to exercise grants. D) Mandatory stock ownership required by gain-sharing plans can increase turnover rates.

B) Pay-performance links are indirect.

26) A team leader with a free-rider problem in his team can most likely maximize the performance of his team by: A) instructing the team to do their best. B) specifying performance levels and due dates. C) assigning tasks only to the top performers in the team. D) punishing free riders who fail to meet standards.

B) specifying performance levels and due dates

14) Which of the following is an assumption held by the labor supply model about the behavior of potential employees? A) The number of job seekers is low. B) Job seekers are unaware of job openings. C) Job seekers do not face barriers to mobility. D) Job seekers often lie on their résumés.

C) Job seekers do not face barriers to mobility.

15) ________ minimizes the distortion of the central tendency caused by outliers. A) Weighted mean B) Mean C) Mode D) Median

D) Median

30) The trend in recent variable-pay design is to combine the best of A) individual and group incentive plans. B) gain-sharing and profit-sharing plans. C) the Halsey and Rowan plans. D) balanced scorecard and cash profit-sharing plans.

B) gain-sharing and profit-sharing plans.

7) ________ is an example of a bourse. A) The stated starting wage of a job in an ad B) The total compensation for a top athlete C) The price of a product on Amazon D) The price of a box of cereal at a grocery store

B) The total compensation for a top athlete

13) If you had repair work done on your car, the shop most likely used ________ to pay the mechanic. A) a Bedeaux plan B) a standard hour plan C) the Halsey 50-50 method D) a straight piecework plan

B) a standard hour plan

5) Which of the following statements is true of individual spot awards? A) They are an example of long-term incentives. B) They are more expensive than merit pay increases. C) They are given to employees for exceptional performance as an add-on bonus. D) They are given to all employees as a one-time cost-of-living adjustment.

C) They are given to employees for exceptional performance as an add-on bonus.

16) Which of the following statistical measures shows how similar or dissimilar the market rates are from each other? A) Weighted mean B) Mean C) Standard deviation D) Median

C) Standard deviation

5) Surveys show that the most highly valued employee benefit is: A) dental coverage. B) life insurance. C) paid vacation and holidays. D) medical insurance.

D) medical insurance.

2) Which of the following benefits is NOT mandated by either the state or federal government? A) Workers' compensation B) Work/life balance C) Social security D) Unemployment insurance

B) Work/life balance

29) Limiting the liability for an employee's extended hospital stay costs to $200,000 is a cost-containment measure known as: A) dual coverage. B) benefit ceiling. C) coinsurance. D) deductible.

B) benefit ceiling.

28) All of the following are advantages of a lead pay-level policy EXCEPT A) reduced vacancy rates. B) higher turnover rates. C) reduced absenteeism. D) better-quality employees

B) higher turnover rates.

2) Telling raters that sometimes the work environment and system affect job performance more than the individual employee's behavior: A) makes the ratings completely accurate. B) leads to higher ratings. C) has no effect on the ratings. D) leads to lower ratings.

B) leads to higher ratings.

9) For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is A) the benchmark job approach. B) the low-high approach. C) survey leveling. D) benchmark conversion.

B) the low-high approach.

15) Which of the following requires individuals to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship? A) The Maintenance Act (1973) B) The Fair Labor Standards Act (1938) C) The Consolidated Omnibus Budget Reconciliation Act (1984) D) The Patient Protection and Affordable Care Act (2010)

D) The Patient Protection and Affordable Care Act (2010)

28) Components identified as vital to the success of both Scanlon and Rucker plans are: A) top management support and primary focus on wage incentives. B) a flexible payout formula and low turnover rates. C) union and top management support. D) a productivity norm and effective worker committees.

D) a productivity norm and effective worker committees.

27) In gain-sharing plan formulas, A) productivity measures are in the numerator and revenues are in the denominator. B) productivity measures are in the numerator and labor inputs are in the denominator. C) costs are in the numerator and revenues are in the denominator. D) labor inputs are in the numerator and productivity outcomes are in the denominator.

D) labor inputs are in the numerator and productivity outcomes are in the denominator.

2) The ability triangle includes A) selection. B) performance management. C) compensation. D) organization development

A) selection.

16) The most widely used benefit survey is conducted by: A) the U.S. Chamber of Commerce. B) Watson Wyatt. C) the Society for Human Resource Management. D) the American Compensation Association.

A) the U.S. Chamber of Commerce.

30) In an attempt to reduce the employee benefits cost to the company, GrindStop Corp. restricts the number of visits to the dentists covered in the dental plan to two per year for each employee. Which of the following cost-containment strategies is being used by GrindStop? A) Copay B) Benefit limitations C) Administrative cost containment D) Wellness programs

B) Benefit limitations

14) Which of the following best describes the impact of the Maintenance Act (1973) on employee benefits? A) It ensured that benefits were administered in a manner that did not discriminate against protected groups. B) It created time-and-a-half overtime pay. C) It required employers to offer alternative health coverage options to employees. D) It mandated 12 weeks of leave for all workers at companies that employed 50 or more people.

C) It required employers to offer alternative health coverage options to employees.

3) In ________ ranking, raters look at a list of employees, decide who the best employee is, and cross that person's name off the list. From the remaining names, the manager decides who the worst employee is and crosses that name off the list—and so forth. A) paired-comparison B) straight C) alternation D) forced distribution

C) alternation

26) All of the following are categories of rater training EXCEPT ________ training. A) rater-error B) performance-standard C) behavior modeling D) performance-dimension

C) behavior modeling

1) The motivation triangle includes A) selection. B) organization design. C) culture D) organization development.

C) culture

23) Aging market data to a point halfway through a plan year is called A) leveling. B) updating. C) lead/lag. D) matching.

C) lead/lag.

15) Which of the following theories states that people choose the behavior that leads to the most satisfactory exchange? A) Maslow's need hierarchy B) Expectancy theory C) Herzberg's two-factor theory D) Goal-setting theory

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3) ________ focuses attention on the competitive positions reflected in the pay relationships among organizations. A) Labor demand B) External competitiveness C) Utility theory D) Pay satisfaction

B) External competitiveness

28) In the context of pay influencing turnovers, which of the following is a result of too little pay? A) Higher individual performance among employees B) Feelings of unfair treatment among employees C) More employees requesting for training D) Employees finding the company more attractive

B) Feelings of unfair treatment among employees

29) Which of the following are an example of a long-term incentive plan? A) Merit bonuses B) Performance plans C) Bedeaux plans D) Spot awards

B) Performance plans

13) In which of the following jobs is it most appropriate to use behaviorally anchored rating scales? A) The job of a trainer that involves training new employees every month B) The job of a web designer that involves designing websites according to client expectations C) An assembly line job that involves tightening nuts on an engine D) A client relations job that involves bringing in new clients to a firm

C) An assembly line job that involves tightening nuts on an engine

26) Pay ranges for office and production work commonly range between A) 5 and 15 percent. B) 15 and 30 percent. C) 30 and 40 percent. D) 40 and 60 percent.

A) 5 and 15 percent.

27) Teaching raters what constitutes good, average, and bad performance is ________ training. A) performance-standard B) rater-error C) performance-dimension D) Six Sigma

A) performance-standard

23) When pay is based on individual performance, turnover tends to be highest among A) poor performers. B) good performers. C) single women with children. D) ethnic minorities.

A) poor performers.

8) Which of the following is the best appraisal format in terms of legal defensibility? A) Behaviorally Anchored Rating Scales B) Management By Objectives C) An essay format D) Ranking

A) Behaviorally Anchored Rating Scales

13) According to ________ theory, relative pay is important as employees evaluate the adequacy of their pay via comparisons with other employees. A) equity B) expectancy C) agency D) reinforcement

A) equity

23) Jake's new car was dented by his employee, Steve. Ever since then, Jake has been consistently giving lower ratings to Steve during performance reviews to get back at him. Which of the following errors has been exhibited by Jake? A) Halo error B) Severity error C) Leniency error D) Clone error

B) Severity error

17) Because employers are raising employee pay at various times during the year, survey data must be updated using a process called A) aging. B) leading. C) matching. D) gaining.

A) aging or trending

1) All of the following factors are reasons for the growth of benefits EXCEPT: A) foreign lawsuits. B) unions. C) cost effectiveness of benefits. D) government impetus.

A) foreign lawsuits.

24) Which of the following is an advantage of team incentives? A) They are effective in stimulating ideas and problem solving. B) They are administratively easy to implement. C) They can easily set equitable targets for all teams. D) They are effective in isolating the impact of a team.

A) They are effective in stimulating ideas and problem solving.

4) Which of the following is true of merit bonuses? A) They are viewed as less of an entitlement than merit pay. B) They are more expensive than merit pay in the long run. C) Cost-conscious firms avoid using merit bonuses. D) Employees receive merit bonuses that build into base pay.

A) They are viewed as less of an entitlement than merit pay.

18) In the context of subordinates as raters, which of the following statements is true? A) Upward feedback has been historically viewed as countercultural. B) Subordinates prefer to reveal their identity while giving their feedback to managers. C) Upward feedback tends to be more reliable than those from other sources. D) If their identity is hidden, subordinates give artificially inflated ratings of their supervisors.

A) Upward feedback has been historically viewed as countercultural.

7) 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) a base pay with low incentives and a wide array of awards. B) monetary rewards with large incentives. C) a large base pay and low incentive pay. D) a wide range of rewards and significant incentives.

A) a base pay with low incentives and a wide array of awards.

7) The first issue in setting up a benefits package is: A) finding out who should be protected or benefited. B) figuring out how much choice should employees have among benefits. C) determining how benefits should be financed. D) choosing legally defensible benefits.

A) finding out who should be protected or benefited.

24) When a company moves from an individual incentive plan to a group incentive plan, the company is most likely to experience A) higher turnover among high performers. B) an increase in instrumentality. C) higher turnover among poor performers. D) an increase in perceived equity.

A) higher turnover among high performers.

22) One of the most preferred benefits is A) stock plans. B) profit sharing. C) shorter working hours. D) early retirement.

A) stock plans.

25) Which of the following is a disadvantage of team incentives? A) They fail to reflect how work is performed. B) They maximize distinctions between team members. C) They are ineffective in stimulating ideas and problem solving. D) They are administratively complex to implement.

B) They maximize distinctions between team members.

20) Which of the following is an example of a company that uses broad banding? A) A company in which there are more lateral movements with no pay adjustment than promotions B) A company that has pay guidelines and controls designed right into the pay system C) A company that has an unlimited total salary budget D) A company that pays all its employees the same salary

A) A company in which there are more lateral movements with no pay adjustment than promotions

21) Which of the following is an example of the sorting effect in action? A) An employee leaving a high-paying job for one that provides more work/life balance B) The provision of across-the-board pay increases by a company C) The provision of cost-of-living increases by a company D) An employee choosing fewer incentives in his flexible compensation plan

A) An employee leaving a high-paying job for one that provides more work/life balance

12) When a job involves very routine, mechanistic tasks, the most appropriate appraisal format is: A) Behaviorally Anchored Rating Scales. B) Management By Objectives. C) standard rating scales. D) alternation ranking.

A) Behaviorally Anchored Rating Scales.

20) Wages tend to be the lowest in which of the following industries? A) Education and health care B) Technology-intensive industries C) Professional services D) Pharmaceuticals

A) Education and health care

15) 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? A) The labor costs for Company A will increase, but it will be unable to hire additional workers. B) Company A will hire the needed workers at a higher wage rate. C) Competitors of Company A will lose employees to Company A. D) Company A will hire higher quality workers.

A) The labor costs for Company A will increase, but it will be unable to hire additional workers.

11) 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? A) The productivity will reduce. B) The productivity will increase. C) The productivity will remain the same. D) There is not enough information to determine productivity

A) The productivity will reduce.

25) Trumbrella Corp. is a pharmaceutical company. One of its employees reports that he has suffered an on-the-job injury caused by the slippery factory floor that resulted in severe damage to his backbone. When Trumbrella initiates its claims processing, it should first: A) determine whether the accident actually happened. B) determine if the employee is eligible for any benefit. C) calculate the payment required to be paid to the employee. D) contact the insurance companies to enquire about the possibility of a joint payment.

A) determine whether the accident actually happened.

26) The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) A) lead policy. B) employer of choice policy. C) lag policy. D) match policy.

A) lead policy.

1) The first major decision in setting externally competitive pay and designing the corresponding pay structures is to A) specify the employer's competitive pay policy. B) conduct a job evaluation. C) select relevant market competitors. D) construct a pay policy line that reflects external pay policy.

A) specify the employer's competitive pay policy.

24) In the context of performance appraisals, which of the following statements is true? A) Race has no effect on layoff decisions and performance ratings. B) All other things being equal, males are rated higher than females. C) Raters who have traditional views rate females more accurately than raters who do not have traditional views. D) The pattern of performance does not influence ratings when the overall level of performance is controlled.

B) All other things being equal, males are rated higher than females.

7) In the United States, the ________ is a major source of publicly available pay data, and it also calculates the consumer price index. A) Chamber of Commerce B) Bureau of Labor Statistics C) Compensation Association D) Department of Economics

B) Bureau of Labor Statistics

19) Horizon Inc. wants its employees to focus on organizational as well as individual goals. It also wants to motivate its employees to contribute toward increasing the company's shareholder value. It has implemented a variable pay plan that links incentive payouts to the company's financial targets. Horizon believes that this plan would help it clearly communicate its priorities to its employees. However, the downside of this plan is that the employees receive reduced payouts if the company's financial targets are not fulfilled. Which of the following variable pay plans is Horizon most likely using? A) The Rowan plan B) A balanced scorecard plan C) A stock ownership plan D) The Merrick plan

C) A stock ownership plan

14) ________ theory argues that pay should be based on outcomes if monitoring of behaviors is difficult or costly and if risk due to variability in outcomes is not large. A) Reinforcement B) Goal-setting C) Agency D) Expectancy

C) Agency

9) Which of the following is NOT a disadvantage of flexible benefit programs? A) Administrative burdens and expenses increase. B) Adverse selection of benefits by employees results in increase in costs. C) New benefits are highly difficult to introduce. D) Flexible benefits are subject to nondiscrimination requirements in Section 125 of the Internal Revenue Code.

C) New benefits are highly difficult to introduce.

4) Which of the following types of rankings would be least preferred by managers of more than 10-15 employees? A) Straight ranking B) Alternation ranking C) Paired-comparison ranking D) Forced ranking

C) Paired-comparison ranking

Which of the following statements is true of pay level? A) Pay level is the same across all organizations for the same job. B) The higher the pay level relative to what competitors pay, the lower the relative costs to provide similar products or services. C) Pay level is directly proportional to labor costs. D) Pay level is independent of the number of employees in an organization.

C) Pay level is directly proportional to labor costs.

14) Which of the following is often used to set pay ranges? A) Median B) Weighted mean C) Quartiles and percentiles D) Standard deviation

C) Quartiles and percentiles

25) Which of the following statements is NOT true? A) Workers who start out high in performance and then get worse are rated lower than workers who remain consistently low. B) Workers whose performance improves over time are seen as more motivated. C) Workers whose performance is consistently average are rated higher than those who perform better at the end of a rating cycle. D) Workers whose performance varies over time are seen as less motivated.

C) Workers whose performance is consistently average are rated higher than those who perform better at the end of a rating cycle.

4) 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) a base pay with low incentives and a variety of rewards. B) monetary rewards with large incentives. C) a large base pay and low incentive pay. D) a wide range of rewards and significant incentives.

C) a large base pay and low incentive pay.

3) 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) a large base pay and low incentive pay. B) an increase in base pay. C) a variety of rewards with significant incentive pay. D) monetary rewards with no benefits.

C) a variety of rewards with significant incentive pay.

9) According to the ________ theory of motivation, employees prefer certain or fixed income flows, such as wage or salary, to variable income flows, such as performance-based pay. A) reinforcement B) equity C) agency D) expectancy

C) agency

20) A person with low self-esteem is likely to seek A) a small, hierarchical organization with pay plans based upon individual performance. B) a flat organization with a significant amount of pay based upon performance. C) a small organization with large benefits based on group performance. D) a large, decentralized organization with little pay for performance.

D) a large, decentralized organization with little pay for performance.

17) 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? A) A balanced scorecard plan B) A gain-sharing plan C) A stock ownership plan D) A cash profit-sharing plan

D) A cash profit-sharing plan

8) Which of the following is an individual incentive plan? A) A balanced scorecard system B) A stock ownership plan C) A gain-sharing plan D) A straight piecework system

D) A straight piecework system

4) In the context of types of markets, which of the following statements is true? A) In both the bourse and the quoted market, employers are the sellers. B) Ads that list a job opening's starting wage are examples of bourse markets. C) Graduating students usually find themselves in a bourse market. D) Bourse markets allow haggling over terms and conditions until an agreement is reached

D) Bourse markets allow haggling over terms and conditions until an agreement is reached

22) During the performance review of her employees, Sarah gives higher ratings to employees from her hometown, Oklahoma, as she believes that people from Oklahoma are hardworking and trustworthy. Which of the following rating errors is Sarah exhibiting? A) Severity error B) Horn error C) Spillover error D) Clone error

D) Clone error

17) In the context of evaluation formats, which of the following is true of the alternation ranking method? A) It simplifies the ranking process by forcing raters to make ranking judgments about discrete pairs of people. B) It selects specific jobs based on certain predefined criteria and leaves out the rest. C) It requires raters to evaluate employees on some absolute standard rather than relative to other employees. D) It recognizes that raters are better at ranking people at extreme ends of a distribution

D) It recognizes that raters are better at ranking people at extreme ends of a distribution

1) Which of the following is a reward that recognizes outstanding past performance? A) Insurance B) An allowance C) A remittance D) Merit pay

D) Merit pay

2) Which of the following statements is true of merit pay? A) Merit pay differentials based on performance are usually large enough to motivate performance. B) Merit pay decreases fixed compensation costs over time. C) Merit pay is inexpensive even when too many high-performance ratings are awarded. D) Merit programs are commonly designed to pay different amounts depending on the level of performance.

D) Merit programs are commonly designed to pay different amounts depending on the level of performance.

12) An incentive system with three piecework rates is the A) Taylor plan. B) Gantt plan. C) Rowan plan. D) Merrick plan.

D) Merrick plan.

5) Which of the following is an example of a quoted-price market? A) Streetcash, a website that allows buyers to negotiate product prices with sellers B) Vidwom, a website that allows buyers to bid for items sold by other users C) Gramspot, a website where cars are auctioned by sellers for charity D) Nile, a website that allows sellers to sell their products for a fixed price

D) Nile, a website that allows sellers to sell their products for a fixed price

15) In the context of the performance evaluation process, which of the following ensures that raters are motivated to rate accurately? A) Focusing on the person rather than the behavior while evaluating performance and providing feedback B) Making sure that managers are graded on how well they utilize and develop human resources C) Ensuring that employees do not have to participate in developing performance dimensions D) Conducting informal discussions with employees about progress on an irregular basis

A) Focusing on the person rather than the behavior while evaluating performance and providing feedback

18) ________ theory is based on the premise that higher earnings flow to those who improve their potential productivity by investing in themselves. A) Human capital B) Labor market C) The efficiency-wage D) The compensating differentials

A) Human capital

3) Which of the following statements is true of the Halsey 50-50 method? A) It derives its name from the shared split between worker and employer of any savings in direct cost. B) In this method, a worker's bonus increases as the time required to complete a task decreases. C) In this method, the standard time for a task is purposely set at a level requiring high effort to complete. D) It is usually offered to top managers and professionals to get them to focus on long-term organization objectives.

A) It derives its name from the shared split between worker and employer of any savings in direct cost.

29) Which of the following statements is true of leniency error? A) It is the error of consistently rating someone higher than is deserved. B) It is the error of avoiding extremes in ratings across employees. C) It is the error of downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension. D) It is the error of giving better ratings to individuals who are like the rater in behavior and personality.

A) It is the error of consistently rating someone higher than is deserved.

11) A common first step in interpreting compensation survey data is to A) check for the accuracy of job matches. B) seek out nonresponders. C) check for anomalies. D) remove the top- and bottom-paying companies.

A) check for the accuracy of job matches.

13) Which of the following is true of weighted mean as a statistical measure to analyze survey data? A) It is frequently used to set pay ranges or zones. B) It captures the size of supply and demand in a market. C) It tells how similar or dissimilar market rates are from each other. D) It minimizes distortion caused by outliers

B) It captures the size of supply and demand in a market.

23) In the context of benefits communication methods, which of the following is mostly true about an information portal? A) It fosters open communication. B) It requires ongoing maintenance and an intuitive user interface. C) It primarily allows for personalized communication methods. D) It essentially requires coordination and planning.

B) It requires ongoing maintenance and an intuitive user interface.

27) In the context of cost containment, which of the following best describes the practice of "copay"? A) Controlling costs through policies such as seeking competitive bids for program delivery B) Requiring that employees pay a fixed or percentage amount for coverage C) Negotiating the lowest possible fees by providers D) Limiting disability income payments to some maximum percentage of income

B) Requiring that employees pay a fixed or percentage amount for coverage

10) ________ is the additional output associated with the employment of one additional human resource unit, with other production factors held constant. A) Productivity B) The marginal product of labor C) Incremental productivity D) The marginal revenue of labor

B) The marginal product of labor

19) How many weeks of leave does the Family Medical Leave Act (1993) mandate for all workers at companies that employ 50 or more people? A) 4 weeks B) 8 weeks C) 12 weeks D) 16 weeks

C) 12 weeks

29) Most experts agree that employees do not begin to consider changing their behavior unless payouts are at least ________ percent higher. A) 5 B) 8 C) 20 D) 10

C) 20

11) ________ requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action. A) A standard hour plan B) The Rowan plan C) A Bedeaux plan D) The Merrick plan

C) A Bedeaux plan

24) 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? A) Mark will be paid more than Steve as his performance is better. B) Steve will be paid more than Mark as he has more seniority. C) Both Mark and Steve will be paid the same amount. D) Steve will be given more incentives than Mark.

C) Both Mark and Steve will be paid the same amount.

12) ________ is employees' beliefs that higher job performance will be rewarded by the organization. A) Valence B) Expectancy C) Instrumentality D) Utility

C) Instrumentality

22) Which of the following is an advantage of gain-sharing plans? A) They are the simplest type of variable pay plan. B) They prevent payouts if a company's financial performance is poor. C) They are administratively easy to implement. D) They increase employees' knowledge of business.

C) They are administratively easy to implement.

6) Which of the following is an example of a bourse market? A) Neurofort, a website that sells surgical equipment in bulk at fixed prices B) Hardknox, a hardware store that sells all its products at 10 percent above the maximum retail price C) Needlefarm, a store that sells premium furniture at discounted rates D) Flatcake, a website that allows buyers to negotiate prices with the sellers of handmade goods

D) Flatcake, a website that allows buyers to negotiate prices with the sellers of handmade goods

6) 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 A) a large base pay and low incentive pay. B) a variety of rewards in addition to base pay. C) a variety of rewards with significant incentive pay. D) monetary rewards with large incentives.

D) monetary rewards with large incentives.

18) Which of the following is a difference between ranges and bands? A) Ranges give managers "freedom to manage" pay, whereas bands give managers "freedom with guidelines." B) Ranges offer recognition via titles or career progression, whereas bands offer cross-functional experience and lateral progression. C) Ranges are used by companies with global operations, whereas bands are used by companies with domestic operations. D) Ranges eliminate layers of managerial job, whereas bands emphasize the importance of several layers of managerial jobs.

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7) One common feature of all types of incentive plans is: A) an established standard of performance that is used to determine the magnitude of the incentive pay. B) a sharing contract between the employees and employers, which stipulates that the losses incurred by the companies will be shared by both employees and employers. C) an established formula that specifies the maximum percentage of base pay allocated as incentives. D) a risk-sharing plan that increases pay depending upon the turnover rate of a company.

A) an established standard of performance that is used to determine the magnitude of the incentive pay.

8) 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. A) benchmark job B) low-high C) survey leveling D) benchmark conversion

B) low-high

28) Which of the following statements is true regarding broad bands? A) They remove limits on total salary budgets. B) They support recognition via titles or career progression. C) They foster cross-functional growth. D) They increase the hierarchical nature of organizations.

C) They foster cross-functional growth.

16) ________ is a variable pay plan where payout depends not on company level performance such as profitability, but rather on performance at some subunit such as a plant or facility. A) Individual incentive B) Profit sharing C) Merit bonus D) Gain sharing

D) Gain sharing

10) Which of the following is an advantage of flexible benefit plans? A) They require no expenditure from the employers. B) They decrease the administrative burdens of employers. C) They ensure that employees pick only those benefits that they will use, thereby reducing costs. D) They increase the involvement of employees in choosing benefit plans.

D) They increase the involvement of employees in choosing benefit plans.

21) The ________ requires individuals to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship. A) Patient Protection and Affordable Care Act B) Family Medical Leave Act C) Maintenance Act D) Consolidated Omnibus Budget Reconciliation Act

A) Patient Protection and Affordable Care Act

21) Which of the following is NOT true of the relationship between employer size and its ability to pay? A) Talented individuals have a lower marginal value in a larger organization. B) Talented people can influence more people and decisions. C) The influence of talented people leads to more profits. D) Talented people prefer to work in larger organizations.

A) Talented individuals have a lower marginal value in a larger organization.

17) Grabhouse, Inc. is experiencing an increase in the turnover rates of its top employees. Upon consulting with its managers for the reasons for this increase, Grabhouse finds that employees are uneasy about the current pay mix as it involves too many risky elements. In order to make its pay mix less risky, Grabhouse needs to: A) increase the base pay component of its pay mix. B) introduce a profit-sharing plan to its pay mix. C) introduce a risk-sharing plan to its pay mix. D) increase the merit bonus component of its pay mix.

A) increase the base pay component of its pay mix.

16) TreeDen Corp. experiences an increase in its 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 A) stock ownership plan. B) cash profit-sharing plan. C) gain-sharing plan. D) team incentive plan.

A) stock ownership plan.

1) Deming's major argument regarding performance appraisals is that: A) the work situation is the major determinant of performance. B) performance appraisals reduce teamwork. C) peer ratings are better than supervisor ratings. D) lack of training makes performance appraisals redundant.

A) the work situation is the major determinant of performance.

18) In an extensive review of employee preference literature, Glueck traced patterns of group preferences for particular benefits. Identify the results of the study. A) Among the benefits available, profit sharing and early retirement are highly preferred benefits. B) Among the benefits available, health/medical and stock plans are highly preferred benefits. C) Contrary to expectations, families with no dependents have stronger preferences for health/medical coverage than families with dependents. D) Contrary to expectations, younger workers show stronger preferences than older workers for pension plans.

B) Among the benefits available, health/medical and stock plans are highly preferred benefits.

17) Which of the following labor demand theories states that work with negative characteristics requires higher pay to attract or retain workers? A) Job competition B) Compensating differentials C) Efficiency wage D) Sorting and signaling

B) Compensating differentials

26) Which of the following companies uses probationary periods as a cost-containment measure? A) Alpha Corp., which combines the benefits offered for couples who work within the organization B) DLG Corp., which excludes its new recruits from benefit coverage until they complete a year C) Kimberly Corp., which requires employees in the lowest salary quartile to pay for 20 percent of their benefits D) Amethyst Corp., which limits its employees to coverage for only two dentist visits every six months

B) DLG Corp., which excludes its new recruits from benefit coverage until they complete a year

22) 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? A) George, a recently married man who wants a stable income B) Stella, a recent college graduate who loves to take on a challenge C) Mark, a musician who wants to supplement his income D) Sara, a senior citizen who wants a job only to keep herself busy

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

4) The typical employee can recall ________ percent of the benefits he or she receives. A) almost 50 B) less than 15 C) over 30 D) 40

B) less than 15

22) Evidence shows that in manufacturing, ________ is positively correlated with hourly wage level. A) turnover B) productivity C) a job description D) total cost

B) productivity

29) Among pay-mix alternatives, the percentage of base pay is highest in a A) work/life balance policy. B) security or commitment policy. C) performance-driven policy. D) market match policy.

B) security or commitment policy.

9) Which of the following is an open-ended performance appraisal format that involves the use of descriptors ranging from comparisons with other employees to adjectives, behaviors, and goal accomplishment? A) Behaviorally Anchored Rating Scales B) Management By Objectives C) An essay format D) Ranking

C) An essay format

10) In the context of performance appraisal formats, which of the following criteria is concerned with whether the evaluation form initially requires a long time to be developed? A) Employee development B) Personnel research C) Cost D) Validity

C) Cost

18) Which of the following is the most commonly used team incentive performance standard? A) Quality of goods B) Productivity improvements C) Financial performance D) Quality of services

C) Financial performance

19) Gramhold, Inc., a pharmaceutical company, reduces its ten salary grades to just three broad bands. Which of the following statements is most likely to be true in this case? A) Gramhold will face difficulty in defining job responsibilities broadly with the new structure. B) Gramhold will find that the new structure hinders cross-functional growth. C) Gramhold will experience more career moves within bands than career moves between bands. D) Gramhold will offer recognition via titles rather than through cross-functional experience and lateral progression.

C) Gramhold will experience more career moves within bands than career moves between bands.

Which of the following is a negative outcome of the management by objectives method? A) Increased difficulty of the planning process B) Decrease in superior/subordinate communication C) Increase in performance pressure and stress D) Lack of direction for work units

C) Increase in performance pressure and stress

20) Which of the following is an advantage of providing stock ownership as variable pay to employees? A) It reinforces team identity. B) It is the simplest type of variable pay plan. C) It defers a portion of taxes to employees. D) It provides a direct pay-performance link.

C) It defers a portion of taxes to employees.

6) Which of the following statements is true of the Rowan plan? A) It is an individual incentive plan that motivates top managers and professionals to focus on long-term organization objectives. B) In this plan, the standard time for a task is purposely set at a level requiring high effort to complete. C) It is an individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production. D) In this plan, a worker's bonus remains constant irrespective of the time required to complete a task.

C) It is an individual incentive plan that provides for variable incentives as a function of a standard expressed as time period per unit of production.

11) Which of the following rating formats has the lowest rating errors? A) Standard rating scales B) Behaviorally Anchored Rating Scales C) Management By Objectives D) Ranking

C) Management By Objectives

24) In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors? A) Labor costs are a small share of total costs. B) Employee skills are generic across all product markets. C) Product demand is responsive to price changes. D) The supply of labor is not responsive to changes in pay.

C) Product demand is responsive to price changes. D) The supply of labor is not responsive to changes in pay.

5) Which of the following jobs would most likely fall into a fuzzy market? A) The position of English professor that was filled by a Ph.D. holder in English language and literature with five years of teaching experience B) The position of sound engineer that was filled by a graduate with a degree in audio engineering C) The position of senior director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience D) The position of vice president of a marketing firm that was filled by a marketing manager with 15 years of experience in the marketing field

C) The position of senior director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience

30) Which of the following statements is true of market pricers? A) They align pay structures with the business strategy. B) Their pay structures are unique and difficult to imitate. C) They assume that little value is added through internal alignment. D) They emphasize pay structures based on unique technology or the way work is organized.

C) They assume that little value is added through internal alignment

25) Which of the following statements is true of pay ranges? A) They are flexible enough to deal with differences in quality but not with the productivity or value of these quality variations. B) They usually lead to an increase in employee turnover. C) They reflect the differences in performance or experience that an employer wishes to recognize with pay. D) They cause employees to believe that their compensation cannot increase in the same job.

C) They reflect the differences in performance or experience that an employer wishes to recognize with pay.

10) ________ measures reveal competitors' use of performance-based cash payments. A) Base pay B) Short-term incentive pay C) Total cash D) Long-term incentive pay

C) Total cash

9) Paying a dime for every bottle collected and turned to a collection center is an example of: A) a standard hour plan. B) the Merrick system. C) a straight piecework system. D) the Rowan plan.

C) a straight piecework system.

20) A horn error occurs when an employee is: A) consistently rated higher than deserved. B) given a favorable rating on all job duties based on his or her impressive performance in just one job function. C) downgraded across all performance dimensions because of poor performance on one dimension. \]D) consistently rated lower than deserved.

C) downgraded across all performance dimensions because of poor performance on one dimension.

12) 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: A) markets are competitive. B) pay rates reflect all costs of employment. C) employers seek to maximize profits. D) workers are homogeneous and interchangeable.

C) employers seek to maximize profits.

23) The estimates of competitors' pay rates will be incorrect and the pay level and pay mix inappropriately established if: A) employees demand for an increase in wages. B) the marginal revenue generated is low. C) markets are incorrectly defined. D) the cost for procuring labor is high.

C) markets are incorrectly defined.

28) The biggest cost-containment strategy in recent years is the movement to: A) benefit limitations. B) HMOs. C) outsourcing. D) high deductibles.

C) outsourcing.

26) 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: A) design effect. B) compensation effect. C) sorting effect. D) incentive effect.

C) sorting effect.

19) In the context of a pay-for-performance plan, which of the following questions is related to equity? A) Does the plan help improve quality of service? B) How far down the organization will the plan run? C) Does the reward system maintain and enhance the reputation of the firm? D) Do employees view the amount of compensation received as fair?

D) Do employees view the amount of compensation received as fair?

25) Which of the following is linked to high pay levels? A) Increased absenteeism B) Poorly performing employees C) Reduced vacancy rates D) Higher training time

D) Higher training time

20) ________ allows employees who resign or are laid off through no fault of their own to continue receiving health coverage under their employer's plan at a cost borne by the employee. A) The Maintenance Act (1973) B) The Fair Labor Standards Act (1938) C) The Tax reforms of 1982 D) The Consolidated Omnibus Budget Reconciliation Act (1984)

D) The Consolidated Omnibus Budget Reconciliation Act (1984)

28) Which of the following statements is true regarding rater training? A) Training programs lasting over two hours are less successful than shorter ones. B) Rater-error training is more effective than performance-standard or performance-dimension training. C) Lectures to raters on how to improve ratings are always ineffective. D) Training to reduce halo errors and improve accuracy has been most successful.

D) Training to reduce halo errors and improve accuracy has been most successful.

5) 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) a high base pay with high incentives. B) monetary rewards alone. C) a large base pay and low incentive pay. D) a wide range of awards beyond just money.

D) a wide range of awards beyond just money

12) The process of matching survey jobs by applying an employer's plan to the external jobs and then comparing the worth of the external job with its internal "match" is called A) pay compression. B) collective bargaining. C) due diligence. D) benchmark conversion.

D) benchmark conversion.

19) Allowing nonperformance factors to affect performance scores is known as A) a horn error. B) affirmative action. C) straight ranking. D) criterion contamination.

D) criterion contamination.

11) All of the following are advantages of flexible benefits EXCEPT: A) containment of benefit costs. B) increased understanding of benefits by employees. C) reduced expense of introducing new benefits. D) decreased administrative expenses.

D) decreased administrative expenses.

13) 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. A) demand factor; supply factor B) marginal output; market price C) incremental output; marginal output D) marginal revenue; wage rate

D) marginal revenue; wage rate

30) The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as a A) work/life balance policy. B) security policy. C) performance-driven policy. D) market match policy.

A) work/life balance policy.

14) For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the A) Merrick plan. B) Gantt plan. C) Taylor plan. D) Rowan plan

B) Gantt plan.

19) ________ puts a lid on the maximum pay level an employer can set. A) Government legislation B) The product market C) The labor market D) Labor market competition

B) The product market

10) The ________ theory of motivation states that employee motivation is the product of instrumentality and valence. A) equity B) expectancy C) reinforcement D) agency

B) expectancy

21) A market pay line A) reflects an organization's pay scale based on the ratings given by its employees. B) links a company's benchmark jobs with market rates paid by competitors. C) provides an accurate prediction of an organization's entry level pay rates. D) compares an organization's minimum and maximum pay rates for each skill level.

B) links a company's benchmark jobs with market rates paid by competitors.

3) The final major decision in setting externally competitive pay and designing the corresponding pay structures is to A) interpret survey results and construct the market line. B) construct a pay policy line that reflects external pay policy. C) design grades and ranges or bands. D) select relevant market competitors.

C) design grades and ranges or bands.

16) 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? A) Druk will break even if it hires a 12th employee for a wage of $50,000. B) Druk needs to pay $10,000 as wage to the 11th employee to break even. C) Druk will break even if it hires a 13th employee for a wage of $10,000. D) Druk needs to pay $50,000 as wage to the 11th employee to break even.

D) Druk needs to pay $50,000 as wage to the 11th employee to break even.

21) ________ have indirect pay-performance links and require employees to put up money to exercise grants. A) Bedeaux plans B) Balanced scorecard plans C) Stock options plans D) Merit pay plans

C) Stock options plans

8) Which of the following is an example of the demand side of labor? A) The level of pay applicants will accept B) The qualifications of applicants C) The pay level offered by an employer D) The locations of potential employees

C) The pay level offered by an employer

4) Which of the following is true of the Employment Cost Index? A) It is one of three types of salary surveys published regularly by the Department of Commerce. B) It measures the rate of change in prices for goods and services in the product market, not wage changes in labor markets. C) It measures monthly changes in employer costs for compensation. D) It allows a firm to compare changes in its average costs to an all-industry or specific-industry average.

D) It allows a firm to compare changes in its average costs to an all-industry or specific-industry average.

9) Which of the following is true of the marginal revenue product model? A) It explains differences in workers' responses to offers. B) It helps separate the contributions of labor from those of other resources. C) It fails to tell managers how many people to hire. D) It oversimplifies business conditions in the real world.

D) It oversimplifies business conditions in the real world.

2) ________ refers to the average of the array of rates paid by an employer. A) Revenue margin B) Remuneration C) Compensation D) Pay level

D) Pay level

27) ________ is an external competitiveness policy that offers employees substantial options among their pay forms. A) A merit bonus B) A merit increase C) Total compensation D) Shared choice

D) Shared choice

21) Last year, your performance was not very good and your performance rating was below average; however, this year you have done very well by exceeding your performance goals. To your surprise, your boss gives you just an average performance rating. What error has your boss most likely committed? A) Horn error B) Halo error C) Severity error D) Spillover error

D) Spillover error