Compensation Exam - Due Friday
variable pay may also be called
Incentive pay or commission
do most managers read research in HR management and compensation journals?
NO
Incentives do not permanently increase labor costs because
They are based on performance and have to be rewarded each period; not reoccuring
Which of the following policy decisions directly affects employees' attitudes and work behaviors
employee contributions
The difference between exchange value and use value surfaces when _______________________
one firm acquires another
The role non-HR managers play in making pay decisions is called _________.;
ownership.
When organization performance declines:; Research shows that ________ will effectively shift an organization in a downward performance spiral into an upward one
pay plans do not pay off
A compensation strategy should reflect an organization's ____________;
pay model; needs, trends in external market, competitors pay
Human capital
when skills and experience add value, more pay is commanded
Know the steps in developing a total compensation strategy and their correct order
Assess total compensation implications: HR, business strategies, culture/values, employee needs o Map a total compensation strategy: alignment, objectives, competitiveness, contributions, and management o Implement strategy o Reassess: realign as conditions and strategy changes
what do objectives guide
Efficiency, fairness, compliance, and ethics
Comparisons based on the forms of compensation used by other companies are part of _________.;
External Competitiveness
Work/life balance is most closely associated with the ________ aspect of mapping a total compensation strategy
HR allignment
if the objective is to increase customer satisfaction what forms of pay might you use
Incentives and merit pay
correlation coefficient
a common measure of association that indicates how changes in one variable are related to changes in another
________ is the key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy and handle greater decision-making responsibilities
compensation
Which form of pay does NOT permanently increase labor costs
incentives
An organization whose profits or market share is increasing is able to pay ___________
larger
factors that shape internal pay structures
produces flatter wage rate structure because legislation aims at differentials
A structure based on value typically ranks jobs on __________.;
value typically ranks jobs on skills required, complexity of tasks, problem-solving, and responsibility
Know which of a number of statements is true of incentives
Different people are motivated by different incentives
Pay structure refers to
array of pay rates for different work or skills within a single org
Internal alignment is sometimes called ____________
compensation strategy
content of a job refers to
the work performed and how it gets done
differences between merit increases and merit bonuses
A merit increase is different from a bonus because, while a merit pay increase is usually a permanent increase in someone's wages, a merit bonus is more often a one-time lump sum of money. Bonuses, while often based on merit, can also be offered company-wide based on company success during a certain period.
When cooperation is important for successful organization performance, which of the following pay structures is most suitable
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)?
Egalitarian structure
Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her?
Hierarchical structure
________ are related to greater performance when the work flow depends on individual contributors
Hierarchical structures
Japan and compensation
Japan and compensation have many allowances; monthly paid; start on lower end and rewarded by seniority
In the context of pay relationships, which of the following is illegal in the United States?
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
James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about,
Procedural justice
; Factors used in defining equal work according to the Equal Pay Act
Small pay differentials
In the context of the impact of internal structures, which of the following statements is true
Supports organization strategy, workflow. Motivates behavior, fair to employees
Which of the following is true of internal alignment? (will list three false statements and one true one);
Supports the orgs strategy o Supports the workflow o Motivates behavior toward organization objectives o Supports fairness
Tournament theory, Equity Theory, Marginal Productivity Theory; Reinforcement Theory
TT: says all players play better when the prize differentials are larger. ET: suggests that employees judge the fairness of their pay by making multiple comparisons (jobs similar to theirs, at other employers, against other external pay levels). MPT: employers pay use value
Which of the following is a fundamental strategic choice at the corporate level?
What business should we be in?
merit pay
a reward that recognizes outstanding past performance. it can be given in the form of lumpsum 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
Union preferences are a major factor in ________ a total compensation strategy; In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of ____________.;
assesing;mapping a total compensation strategy
which of the following is often the largest component in an executive pay package?
base pay
Strategy refers to?;
basic directional decisions to its purposes and missions.
Management and HR research findings discussed in the chapter
being unaware of key research costs the org lots of money, so it pays to do the research.
employee contributions
comparisons among individuals doing the same job for the same organization
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 implements may be as important to employees as the results of the decisions.
The most common bases for determining internal structures are
content and value of work
A compensation system that focuses on competitors' labor costs is most closely associated with a(n) ________ strategy
cost cutter
Mich Inc., a hardware store, has a rating system in place that rates employees on their friendliness, usefulness, and product knowledge. Based on the ratings an employee receives, he or she gets an incentive. The compensation strategy followed by Mich is most closely described as a(n) _________ strategy
customer focused strategy
customer-focused strategy
delighting customers; increase customer expectations. Incentives for customer satisfaction; puts customer at center of business strategy
; Pay differences among levels in an organization are called __________
differentials
Providing unlimited compensation choices to employees would meet with ____________________ from the U.S. Internal Revenue Service
disapproval
an example of a relational return
ecognition and status, employment security, challenging work, opportunities to learn, personal satisfaction from successfully facing new challenges, and teaming with great co- worker
In firefighting and rescue squads and global software design teams, a(n) ________ structure is most closely associated with higher performance
egalitarian structure
Marginal productivity theory
employers pay use value.
potential problem(s) in egalitarian pay structures
equal treatment means high performers feel underpaid & they may quit or change their behavior
fairness perceptions
equity; ensure fair treatment by recognizing employee contributions and employee needs
Relationship of exchange value to use value
exchange value- wage the employer and employee agree on. Use value- value of goods/services an employee produces in a job
cost-cutter strategy
focus on efficiency and minimize cost.
Entitlement
for being an employee, an incentive to decide to take/stay in a particular job and invest in you performing well in the job
Egalitarian pay structures
have fewer levels and/or smaller differntials
Egalitarian pay structures have all but which of the following characteristics?;
have the following characteristics: fewer levels, small differentials, support a loose fit, teams work org, cooperation, equal treatment
A high-performance system
help companies decentralize decision- making to increase profit and performance
Troubled Asset Relief Program:
helped prevent a second great depression, stabilize a collapsing financial system, and restart the markets that provide mortgage, auto, student and business loans. Restart economic growth and prevent avoidable foreclosures
The problem that is most likely to be faced by organizations using an egalitarian pay structure is
high performing employees may feel underpaid and quit
relationship of changes in federal compensation laws and changes to pay systems
if the federal law is above your wage, you have to increase your wage.
Research investigating high-performance workplaces found that performance-based pay ________ when combined with other high-performance practices
improves attitudes and behaviors
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?
increase incentive pay; decrease base pay
Declining organization performance __________ the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs; and, virtuous cycle.
increases
A major challenge in the design of future pay systems is how to better satisfy _________________________
individual needs and preferences
A compensation system using market-based pay is most likely to be part of a(n) ________ strategy
innovator
Flexible-generic job descriptions would most likely be used with a(n) ________ strategy
innovator
Career growth, hierarchy, and flexible design are most closely associated with the ________ aspect of mapping a total compensation strategy
internal allignment
Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?
internal allignment
All organizations that pay their employees have a compensation strategy even though __________________________;
it may or not be written
the work to be performed, and the skills/knowledge required to perform the work
job content
Compensation is often a company's _________ controllable expense;
largest
Organizations design their pay structures around _____________
levels, differentials, and criteria used to determine differences
Influence of unions on pay decisions
little impact
Organizations in a turbulent and unpredictable environment requiring flexibility in jobs and work processes are likely to be more successful with a(n) ________ internal pay structure
loosely coupled
; Greater pay dispersion is related to __________ turnover among executives
lower
Issues of transparency, technology, and choice are most closely associated with the ________ aspect of mapping a total compensation strategy
management
reasons why the great majority of the uninsured in the United States are from working families
many small employers are much less likely than larger employers to offer health insurance to their employees
Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select __________.;
more flexible work schedule.
According to the Hudson survey, which of the following is the single thing that would make 41 percent of U.S. workers happier?;
more money
innovator strategy
new product; short life cycle and increased product complexity. Less emphasis on evaluating skills; more on incentives
Common bases for modern pay structures include all but which of the following
number of levels, pay differentials between levels, content of work performed, value of the work, job.
Commissions
payment tied directly to achievement of performance standards. commissions are directly tied to a profit index and employee costs
Trying to measure an ROI for any compensation strategy implies that _________;
people are human capital like other factors of production.
Most job structures are best described as
person or job based structure
The institutional model
predicts that very few firms are first movers but instead copy innovative practices
differentiated strategy
providing innovative products at premium prices;
Transparency, prominence
refers to openness and communication about pay
R2
regression analysis; collecting, exploring of data to define underlying trends
Embedding compensation strategy within the broader HR strategy affects _________.;
results.
In a strategic approach to pay, internal alignment is the ________ issue to be decided (refers o order of issue to be decided according to the text)
second
?; Compensation strategy, HR strategy, and business strategy ultimately __________________________
seek to decrease costs and increase revenue
In the context of internal structures, which of the following is true of a delayered structure?
simplify the layers already there
Characteristics of aligned pay structures
support the way work gets done, fit the orgs business strategy, more likely to lead to success
The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) ________ internal pay structure
tailored
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
tailored pay structure
Whole Foods' shared-fate philosophy; How an organization positions its total compensation against its competitors is part of _____________________ strategic choices;
team members have the responsibility for their own successes and failures
Which of the following tests of competitive advantage is probably the easiest test to pass
the alignment test
Base wage
the basic cash compensation that a employers pay for the work performed. tends to reflect the value of the work itself and ignore differences in individual contributions
incentive effect
the degree to which pay influences individual and aggregate motivation among employees at any point in time
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
internal alignment
the pay relationships among jobs or skill levels within a single organization ;focuses attention on employee and managements acceptance of those relationships. it involves establishing equal pay for jobs of equal worth and acceptable pay
external competitiveness
the pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships
Which of the following theories predicts that individual performance will be maximized when the pay differentials between job levels are large?
tournament structure
An organization defines its strategy through?
trade-offs and choosing what and what not to do.
Technology used in producing goods and services influences the _________________,
work design,
Content refers to the:;
work performed in a job and how it gets done
