HRM Chapter 12—Incentive Plans and Executive Compensation

Which of the following statements is FALSE? a. Differential piece-rate is easily adapted for production processes or services where high quality is of paramount importance. b. Return on investment metrics can be applied to analyze pay-for-performance systems. c. In jobs where individual employees have little control over the outcomes of their work performance incentives would be dysfunctional. d. An assumption of variable pay systems is that some jobs contribute more to organizational success than do other jobs.

a. Differential piece-rate is easily adapted for production processes or services where high quality is of paramount importance.

Melanie has worked for 20 years for a manufacturer of specialized paint for the auto industry. Melanie stayed with the company rather than taking other job offers because of the generous ESOP, which has offset the somewhat lower than market pay. Which of the following statements is FALSE? a. ESOPs are a low-risk way for employees like Melanie to be "capitalists." b. The ESOP probably has made Melanie more focused on the company's performance than she would have been otherwise. c. If the company goes bankrupt, Melanie may lose some or all of her anticipated retirement. d. The ESOP was a successful retention tool in Melanie's situation.

a. ESOPs are a low-risk way for employees like Melanie to be "capitalists."

Max is studying the new pay-for-performance incentive plan. Max realizes that under the new standards if he continues his normal rate of production, which takes a steady effort over the work day with few "slack" times where he can rest, he can continue to earn what he earns now. But if he puts forward maximum effort all day long, which will leave him physically and mentally exhausted by the end of the day, he can earn an extra $10 a day before taxes. Max's current pay is about $30 an hour. Max is making enough money that he is saving for a home down payment.. Which of the statements is most likely to be TRUE? a. Max is likely to continue to exert his typical effort. b. No incentive pay system is likely to motivate higher effort from Max. c. If this incentive plan is not effective in motivating extra effort from Max, he is a low-motivation employee whose departure from the firm would be functional. d. Max is likely to exert maximum effort every day in order to earn this production incentive.

a. Max is likely to continue to exert his typical effort.

Which of the following statements is FALSE? a. Research has shown little relationship between CEO stock options and firm performance. b. The Sarbanes-Oxley Act was motivated by abuse of stock options by top executives. c. Even at the level of CEO, it is necessary to have formal, measurable performance targets in order for a discretionary bonus system to be effective. d. Perquisites are becoming less-widely used because most of them are now taxed as income to the executive.

a. Research has shown little relationship between CEO stock options and firm performance.

Which of the following is an assumption of variable-pay systems? a. Some jobs contribute more to organizational success than others. b. Cooperation and teamwork can be enhanced when individuals are rewarded for extra efforts. c. Equality in pay is a strong motivator of exceptional employee performance. d. Both good and poor performing employees will perceive a pay system that rewards high performance as satisfying and equitable.

a. Some jobs contribute more to organizational success than others.

In a TV interview, the CEO of Trevelyan, Inc., commented that the pay-for-performance system used by her company was effective because, "Now everyone is pulling in the same direction." What does the CEO mean by this observation? a. The pay-for-performance system is linking employee performance and the organization's strategic goals. b. Employees are being motivated to gain more competencies and skills.. c. Employees are receiving higher total compensation under the pay-for-performance system than under the former, traditional compensation system.. d. Important HR objectives have been achieved, such as reduction in turnover and better attendance.

a. The pay-for-performance system is linking employee performance and the organization's strategic goals.

What is a "draw?" a. an amount advanced to a sales employee and repaid from future commissions b. a system by which sales employees "draw down" their sales quotas c. a type of income equalization for tax purposes in which sales representatives can draw down their earnings from a high-income year and transfer them to a low-income year d. a lump-sum payment or bonus at the end of the month for sales staff who are performing adequately.

a. an amount advanced to a sales employee and repaid from future commissions

All of the following are typical performance measures in gainsharing plans EXCEPT a. fixed costs. b. labor costs. c. overtime hours. d. quality levels.

a. fixed costs.

All of the following are potential outcomes of a successful pay-for-performance plan EXCEPT a. greater predictability of employee pay. b. retention of high performers. c. improved safety records. d. aligning employee behavior with organizational business goals.

a. greater predictability of employee pay.

After working five years as a service coordinator at BlueBottle Enterprises, Mandy has developed some timesaving shortcuts that allow her to process a higher volume of work than the other service coordinators. If Mandy would train her co-workers in her techniques, the entire department could be more efficient. The performance incentive system that would be LEAST likely to encourage Mandy to share her expertise with her co-workers would be a/an a. individual-level incentive system. b. team-based incentive system. c. organization-level incentive system. d. gain-sharing plan.

a. individual-level incentive system.

In designing the company's new team incentive plan, the vice president of HR wishes to strongly link the team's efforts with its effective performance. The timing of incentive payouts should be a. monthly. b. quarterly. c. semiannually. d. annually.

a. monthly.

The purpose of organizational-level incentives is to a. reward each employee for the performance of the entire company. b. aid in recruiting individualistic and entrepreneurial employees. c. motivate functional competition among employees to increase total performance. d. create an organizational culture of ethical behavior.

a. reward each employee for the performance of the entire company.

The ____ type of pay-for-performance system is most likely to induce employees to behave unethically. a. sales commission b. ESOP c. differential piece-rate d. gainsharing

a. sales commission

A disadvantage of "employee of the month" type awards is that a. they can be seen as favoritism. b. they are typically awarded on the basis of objective criteria. c. it is difficult to link these awards with specific performance criteria. d. eventually all employees will have been employee of the month and the award will have lost its distinctiveness.

a. they can be seen as favoritism.

The primary objectives of organizational incentive systems includes all of the following EXCEPT a. to attract competitive employees. b. to retain productive employees. c. to increase organizational performance. d. to improve employee morale.

a. to attract competitive employees.

Bernard is very upset when he learns that the company is changing to a pay-for-performance system where lump-sum bonuses instead of raises will be used. The system will record the performance of each work team and reward everyone on the team equally. All of the following are likely reasons for Bernard to be upset EXCEPT a. Bernard's base pay will be essentially frozen. b. Bernard is a low to average performer on his work team. c. Bernard is the highest individual performer on his team. d. Bernard values team spirit and is concerned this system will induce competition among co-workers.

b. Bernard is a low to average performer on his work team.

You are a member of the compensation committee of the Board of Directors for a national, for-profit organization. When reviewing the compensation package for the current CEO, Jack Sprat, you must consider all the following questions EXCEPT a. Has Mr. Sprat's performance as a CEO been acceptable to the organization's investors? b. Is Mr. Sprat's compensation no more than ten times larger than the average annual pay of company employees? c. Would another company hire Mr. Sprat as a CEO? d. Is Mr. Sprat's annual compensation consistent with the compensation of executives at competing industry firms?

b. Is Mr. Sprat's compensation no more than ten times larger than the average annual pay of company employees?

All of the following situations would support successful use of group/team incentives EXCEPT a. A group of health-care professionals in different specialties works together to care for a particular patient. b. Sales representatives for veterinary pharmaceuticals are each assigned different geographic territories. c. The organizational culture in an engineering consulting firm promotes cooperation and mutual respect. d. A team of advertising and marketing specialists are working on the same campaign for a client.

b. Sales representatives for veterinary pharmaceuticals are each assigned different geographic territories.

What is the usual composition of the compensation committee? a. a subgroup of the Board of Directors including officers of the firm b. a subgroup of the Board of Directors who are not officers of the firm c. executives from other companies who serve on a committee that is separate from the Board of Directors, but which reports to it d. compensation consultants and the head of HR

b. a subgroup of the Board of Directors who are not officers of the firm

What are variable pay plans? a. methods of tying compensation to the Consumer Price Index (CPI) in order to keep up with inflation b. additional tangible rewards given to employees for performance beyond normal expectations c. compensation that increases as employees gain new job-related knowledge, skills, and abilities d. incentives to meet required performance standards

b. additional tangible rewards given to employees for performance beyond normal expectations

Potential useful metrics for analyzing variable pay plans include all of the following EXCEPT a. average productivity per employee. b. decrease in compensation per full-time employee. c. growth in numbers of new customers. d. return on investment.

b. decrease in compensation per full-time employee.

Robert is paid by the number of bicycle tires he attaches to wheel rims. If he attaches more than his daily quota of tires, he receives 75 cents extra per tire over the quota. Robert is paid under a ____ system. a. pro-rated bonus b. differential piece-rate c. straight piece-rate d. commission

b. differential piece-rate

The downside of bonuses is that a. they may cause low performing employees to quit. b. employees who are passed over may become jealous of the bonus recipient. c. a well-implemented bonus system may be more expensive to the firm than base pay raises for improved performance. d. employees tend to view bonuses as lucky windfalls rather than a consequence of personal effort.

b. employees who are passed over may become jealous of the bonus recipient.

At the heart of most executive performance-based incentive plans is the idea that a. at the executive level, status and image are as important as actual compensation. b. executives should be rewarded if the organization grows in profitability and value over a period of years. c. executive compensation should be based on the organization's current performance in the stock market. d. executives are more focused on their base compensation than they are on the variable pay.

b. executives should be rewarded if the organization grows in profitability and value over a period of years.

Lucretia Toys is investigating the use of team incentives in its production plant. Each work group is composed of about 25 individuals. As the manager of HR you a. recommend using equal payouts for each team member since it will simplify performance appraisal requirements. b. express concern about the dilution of individual efforts on such large teams. c. urge management to go forward with the plan because every job can benefit from increased teamwork. d. recommend that management wait to implement any team incentive plan because this may trigger a union organizing attempt in a manufacturing environment.

b. express concern about the dilution of individual efforts on such large teams.

Organizations offer deferred compensation to executives in order to a. emphasize long-term performance of the organization. b. help executives lower their tax liabilities. c. place "golden handcuffs" on key executives to prevent their leaving prematurely. d. hide excessive one-time bonuses earned by executives.

b. help executives lower their tax liabilities.

Imogene's Delectables has announced a competition to reward the store manager with the highest dollar sales in each state with a paid vacation to a luxury resort. Imogene's Delectables' pay-for-performance plan will probably a. encourage cooperation among hourly store employees. b. help retain the store managers who feel they have a chance to win the award in the upcoming year. c. encourage teamwork among the store managers. d. increase morale of store managers in historically low-performing locations.

b. help retain the store managers who feel they have a chance to win the award in the upcoming year.

To be effective in motivating plant-wide cooperation among employees, an organizational incentive program should a. publicly single out the highest-performing employees for extra rewards.. b. include everyone from non-exempt employees to managers and executives. c. pay out every year regardless of whether the organization is profitable. d. reward the shareholders for investing in the business.

b. include everyone from non-exempt employees to managers and executives.

An effect of variable pay plans is that ____ incentives increase the competition among individual employees. a. profit-sharing b. individual c. work team d. organizational

b. individual

A differential piece-rate system pays employees a. one piece-rate wage for standard production, with deductions for producing below quota. b. one piece-rate wage for units produced up to a standard output, and a higher piece-rate wage for units produced over the standard. c. a higher rate per piece for employees with more experience and seniority. d. differential wages depending on the differing responsibilities in the production of each unit.

b. one piece-rate wage for units produced up to a standard output, and a higher piece-rate wage for units produced over the standard.

Use of the company helicopter, country club memberships, first class air travel, and a chauffeured limousine are examples of a. executive mandates. b. perquisites. c. golden handcuffs. d. performance incentives.

b. perquisites.

Seeing other employees receive valuable service awards would be most likely to motivate employees to a. improve their performance. b. remain with the organization. c. work more cooperatively as team members. d. be more psychologically invested in the organization.

b. remain with the organization.

A ____ approach for compensating sales staff is useful when serving and retaining existing client accounts is significantly more important than generating new sales and accounts. a. straight commission b. salary-only c. salary plus commission d. salary draw

b. salary-only

All of the following are common measures of sales effectiveness EXCEPT a. sales relative to quota. b. sales staff satisfaction. c. increase in average sale. d. account retention.

b. sales staff satisfaction.

When Claudette found a flaw in a major outgoing order and corrected it before it was shipped, her boss immediately gave her a voucher to the best day spa in town. This type of incentive is called an a. immediate payout. b. spot bonus. c. golden handshake. d. perk

b. spot bonus.

If managers wish to motivate individual contributions to team performance, an equitable distribution of team incentives would mean that a. each team member gets the same amount of bonus. b. team members are paid incentives which vary according to individual performance. c. teams that are in competition with one another are paid incentives based on their relative performance. d. each team in the company receives the same amount of discretionary incentive dollars to distribute.

b. team members are paid incentives which vary according to individual performance.

The most common type of group/team incentive plan used by organizations is paying a. all team members the same base pay with equal bonuses based on team performance. b. team members different base pay, with equal bonuses based on team performance. c. all team members the same base pay with varying bonuses based on individual contribution to the team's performance. d. team members different base pay, with varying bonuses based on individual contribution to the team's performance.

b. team members different base pay, with equal bonuses based on team performance.

All of the following are drawbacks of profit-sharing plans EXCEPT a. profits of the organization are not entirely under employees' control. b. they are not self-funding. c. employees' rewards usually come a long time after their improved performance. d. management may resist disclosing financial and profit information.

b. they are not self-funding.

The CEO of a major corporation is being interviewed by a reporter from a TV news show. The CEO makes over $150 million a year. The reporter asks, "Are you really worth $150 million a year to your company, especially when your company has lost money the last three years? In fact, most of your employees make minimum wage which is not enough to support a family." All of the following are plausible responses by the executive to the reporter's question EXCEPT a. "I have to make major decisions, and I work endless hours under great pressure." b. "You will find that my compensation is in line with the CEOs of other firms in this industry." c. "This may seem like a lot of money to you, but in comparison to what top executives make in Europe and Asia, my compensation is quite moderate." d. "I have the responsibility for a major corporation. We would have lost even more money if I had not made the changes I did to our operations."

c. "This may seem like a lot of money to you, but in comparison to what top executives make in Europe and Asia, my compensation is quite moderate."

The CEO of MasterFiber Textiles attended a conference where he spoke with the CEO of Golden Fleece Manufacturing. Golden Fleece has had great success in implementing an individual pay-for-performance system. The CEO of MasterFiber has directed the vice president of HR to implement the Golden Fleece method at MasterFiber. The FIRST concern of the VP of HR should be a. Can current executive compensation be retained under this system? b. Is the plan simple or complex to administer? c. Does the plan fit with the business strategies and culture at MasterFiber? d. Can MasterFiber afford to pay higher compensation to its employees?

c. Does the plan fit with the business strategies and culture at MasterFiber?

The Board of Directors of Clementine Minerals and Mining has been challenged by shareholders about the total compensation of the CEO. In order to examine whether the CEO's pay is reasonable, the Board of Directors should be able to defend all of the following questions EXCEPT a. Would another company hire this CEO? b. How does the CEO's compensation compare with that of CEOs in other companies in the mining industry? c. Is the CEO's pay approximately 22 times the pay of the average employee at Clementine Minerals and Mining? d. What would an investor pay for the CEO's level of performance?

c. Is the CEO's pay approximately 22 times the pay of the average employee at Clementine Minerals and Mining?

You have been hired as the new director of compensation for a large organization. The existing pay-for-performance system consists of annual bonuses for managerial and professional employees. The system has not been reviewed for over five years. In your review, all of the following would be high-priority focuses of your review EXCEPT a. Do employees understand how their bonuses are calculated? b. Do the bonuses link individual performance with organizational objectives? c. Is the existing bonus system typical in the industry? d. Are performance measures realistic?

c. Is the existing bonus system typical in the industry?

Which of the following statements is FALSE about sales incentive plans? a. The Internet has made it easier for managers to track daily sales of sales staff scattered all over the world. b. If sales staff bonuses become viewed as deferred salary, then the bonuses lose their effectiveness in motivating discretionary effort from sales staff. c. It is difficult to motivate the range of behaviors needed of sales staff in a complex environment unless there are at least three sales performance measures in an incentive system. d. Sales incentives must be tied to the organization's broad strategic plans.

c. It is difficult to motivate the range of behaviors needed of sales staff in a complex environment unless there are at least three sales performance measures in an incentive system.

At Megatherium Holdings, the employees on work teams receive bonuses based on the extent to which the team reaches the team's goals. Each team member receives the same percentage of their base pay as their bonus. Base pay is a function of seniority with the organization. Which of the following statements is TRUE? a. This would be considered an "equal" bonus because it is an equal percentage of salary. b. This type of bonus is called gainsharing because each member of the team shares in the group bonus. c. This would be considered an "equitable" bonus if team members felt senior employees were more valuable. d. This type of bonus works only in teams with few (under seven) members.

c. This would be considered an "equitable" bonus if team members felt senior employees were more valuable.

Research shows that individual pay-for-performance compensation systems work best when they are accompanied by a. high levels of teamwork and cooperation among co-workers. b. directive supervision and strong central leadership. c. an entrepreneurial and individualistic organizational culture. d. employee psychological commitment to the goals of the organization.

c. an entrepreneurial and individualistic organizational culture.

For a profit-sharing plan to be effective, management must a. increase innovative solutions to technical problems. b. not have high expectations of performance impact in the first year of the program. c. be willing to disclose accurate financial and profit information to employees. d. stabilize profits so that the annual payout is consistent.

c. be willing to disclose accurate financial and profit information to employees.

Performance incentives include all the following EXCEPT a. plane tickets to a resort destination. b. commissions. c. cost-of-living increases. d. profit-sharing.

c. cost-of-living increases.

Gainsharing plans are designed to elicit ____ effort from employees. a. minimum acceptable b. sustainable c. discretionary d. absolute maximum possible

c. discretionary

HR-related performance measures for a variable pay plan include all the following EXCEPT a. absenteeism costs. b. workers compensation claims. c. increase in quantity of output per employee. d. accident rates.

c. increase in quantity of output per employee.

Caroline works on a design team that develops costumes for historically-based and fantasy movies. The team's designs are executed by professional seamstresses and tailors. Caroline's a. job would be suited for individual pay for performance because one can objectively judge the artistic merits of the costumes. b. individual performance can be isolated and measured separately from her team members' contributions. c. job would not be suited for pay for performance because the quality of the work product of the team is mostly based on subjective judgment. d. individual performance can be measured by the number of design drawings she produces, and her pay could effectively be tied to this number.

c. job would not be suited for pay for performance because the quality of the work product of the team is mostly based on subjective judgment.

In large for-profit organizations, the CEO's base salary is a. typically the largest part of his/her total compensation. b. often deferred until after the CEO retires. c. likely to be less than half of his/her total compensation. d. typically 20 times larger than the salary of the average worker in the organization.

c. likely to be less than half of his/her total compensation.

Financial measures that can be used to judge executive performance include all of the following EXCEPT a. earnings per share. b. net income before taxes. c. market share. d. return on equity.

c. market share.

Profit-sharing and ESOPs are _________ -level incentives a. individual b. group c. organizational d. industrial

c. organizational

It is important to make sure that what is being rewarded by the compensation system is strongly tied to organizational objectives, because people tend to a. guess what they think management wants done. b. produce what is convenient. c. produce what is measured and rewarded. d. avoid doing unpleasant tasks.

c. produce what is measured and rewarded.

The most frequently used form of sales compensation is the a. salary only. b. straight commission. c. salary plus commission. d. differential commission.

c. salary plus commission.

Which of the following is classified as an individual variable pay plan? a. Scanlon plan b. profit-sharing c. sales commission d. an ESOP

c. sales commission

At the annual awards banquet, all employees who have been with the company 30 years or more received their choice of a cruise or a week at a resort. This type of special incentive program rewards a. performance. b. organizational good citizenship. c. seniority. d. teamwork.

c. seniority.

Andrew is excited about the new program at work. He will be allowed to purchase 20 shares of stock at $45 per share for a limited period of time. Andrew is planning to take advantage of this ____ plan because he expects that the market price of the stock will far exceed $45 in a couple years. a. windfall incentive b. gainsharing c. stock option d. employee stock ownership (ESOP)

c. stock option

The most widely used long-term performance incentives for executives is/are a. generous perquisites. b. 401ks. c. stock options. d. annual cash incentives.

c. stock options.

Traditional compensation systems pay employees differently based on their job responsibilities and base employee increases mainly on a. meeting organizational objectives. b. growth in capabilities and competencies. c. years of seniority. d. changes in the Consumer Price Index.

c. years of seniority.

Jessica works for one of the largest corporations in the U.S.. She makes the average pay of workers in this organization, $30,000. It would be a good guess that the CEO of Jessica's company makes a. $300,000. b. $1,500,000 c. $3,000,000. d. $10,500,000.

d. $10,500,000.

In a true pay-for-performance system, which of the following employees would qualify for incentive reward? a. Jack has met his sales quota even though he was hospitalized for appendicitis during the year. b. Otto manages to meet the minimum required sales on his store location despite the fact that the business building next door, where he receives most of his customer traffic, has closed. c. Charlene performs up to expectations as a science teacher at a magnet high school. d. Chris brings in 20 percent more new clients for the branch bank than is required.

d. Chris brings in 20 percent more new clients for the branch bank than is required.

____ is an example of an organizational-level variable pay system. a. Sales compensation b. Cost reduction c. A piece-rate system d. Deferred compensation

d. Deferred compensation

Which of the following statements is TRUE? a. Organizations operating in China cannot use individual pay-for-performance because it violates cultural norms of equal treatment. b. Global firms can use pay-for-performance systems if the organization has the same competitive strategy in each country in which it operates. c. Variable pay systems are unpopular in Europe because the culture values stability and predictability in compensation systems. d. Global firms can use incentive systems if they are adapted to appropriate goals in different geographic regions.

d. Global firms can use incentive systems if they are adapted to appropriate goals in different geographic regions.

James is a sales representative for a large international import/export firm. For the past three years James has received an annual bonus, the maximum possible, between $75,000 and $90,000 because he met his sales targets. This year, James is planning on using his bonus to buy a new sports car, so he and his wife have been test driving cars. Which of the following statements is most likely to be TRUE? a. We can be fairly certain that James has exerted intense discretionary effort in the last four years. b. The actual dollar amount of the bonus is less important to James than its "prestige" effect. c. The bonuses paid out by this company are excessive. d. The company has created an entitlement culture and James will be upset if he does not get a large bonus..

d. The company has created an entitlement culture and James will be upset if he does not get a large bonus..

OnionDome Manufacturing has suffered major losses in the last few years. Last year the board of directors fired the CEO and hired Simon Simple from one of its major competitors. Simple has laid off 20 percent of the hourly employees and 15 percent of the managers and professional staff in the company. He has sold off two unprofitable subsidiaries, and for the first time in five years the company has posted a small profit. This year the board of directors has given Simple a multi-million dollar bonus. Which of the following statements is TRUE? a. It is unusual for a company that has experienced mass layoffs to give executives large bonuses. b. Simple should not receive a performance bonus this year because the profits are due to accounting manipulations. c. The Sarbanes-Oxley Act prohibits this type of bonus. d. The employees at OnionDome may feel that it is unethical for Simple to have received this bonus.

d. The employees at OnionDome may feel that it is unethical for Simple to have received this bonus.

What is the role of a compensation committee of the Board of Directors? a. To assist the HR unit in developing overall pay and benefit programs for the organization. b. To develop a compensation package that ties the organization's overall compensation system to the organization's goals and objectives.. c. To make recommendations to the shareholders on the compensation formula for members of the board of directors. d. To make recommendations to the Board of Directors on overall pay policies, salaries for top officers, stock options, and additional perks for executives.

d. To make recommendations to the Board of Directors on overall pay policies, salaries for top officers, stock options, and additional perks for executives.

As director of compensation for BlueBottle Enterprises, you have implemented a highly successful pay-for-performance system. This system has worked successfully for three years as measured by a number of financial and non-financial measures. Because of this success you are considering quitting BlueBottle and setting up your own consulting firm to promote this system. Which of the following statements is TRUE? a. This will be a successful undertaking because effective pay-for-performance systems are translatable across industries. b. You should target poor-performing firms as potential clients because most firms' performance will be enhanced by a pay-for-performance system. c. As long as most employees will experience an increase in pay with this system, they will be satisfied with it. d. You need to have a way to evaluate organizational cultures in order to select the organizations in which your pay-for-performance system will be effective.

d. You need to have a way to evaluate organizational cultures in order to select the organizations in which your pay-for-performance system will be effective.

An individual-level pay-for-performance system would be LEAST effective for which of the following employees? a. a dog groomer at a large pet store. b. a sales clerk at a fashionable women's shoe store. c. the CEO of a middle-sized builder of manufactured housing. d. a marketing specialist on a cross-functional product development team.

d. a marketing specialist on a cross-functional product development team.

Bonuses are less costly to the organization than general wage increases, because a. bonuses receive preferential tax treatment. b. the annual amount given as a bonus tends to be smaller than the annual amount given as a raise. c. bonuses are frequently given in the form of non-cash items. d. bonuses do not become part of employees' base wages.

d. bonuses do not become part of employees' base wages.

Poseidon Oceanic Supply has introduced a new sales compensation system that rewards sales staff based on a combination of individual goals and group sales goals. Previously, sales staff had been on individual salaries supplemented with subjective annual bonuses. In implementing this program, the management of Poseidon hopes to a. motivate sales staff on the basis of individual entrepreneurialism. b. increase the amount of service to existing Poseidon customers. c. reduce opportunities for unethical behavior by sales staff. d. encourage teamwork among the sales staff.

d. encourage teamwork among the sales staff.

The main advantage for an employer in setting up an employee stock ownership plan is a. increased protection against union organizing attempts. b. reduction of financial risk for employees and consequent reduction in employee turnover rate. c. increased employee productivity. d. favorable tax treatment on earnings earmarked for use in the ESOP.

d. favorable tax treatment on earnings earmarked for use in the ESOP.

One of the major differences between individual incentives and group incentives is that a. individual incentives are more likely to be monetary whereas group incentives are more likely to be non-monetary. b. group incentives carry high "trophy" value for the members who receive them. c. incentives for group members tend to be allocated equitably whereas individual incentives tend to be allocated equally among employees. d. group incentives place social pressure on group members whereas individual incentives do not.

d. group incentives place social pressure on group members whereas individual incentives do not.

A medium-sized law firm every year distributes a bonus to its employees, from clerks to partners, based on the fees it has earned on the cases it has won. Even though every employee has not worked on every case, the senior partners of the law firm feel that such a bonus motivates employees to cooperate with one another and assist each other in times of high workloads. This is a type of ____ incentive. a. group b. team c. individual d. organizational

d. organizational

A consultant presenting a plan for a group/team incentive plan stresses that the money to be used as incentive rewards will be generated by improved organizational performance. This aspect of the plan is called the ____ principle. a. liquidating b. zero-sum c. pay-as-you-go d. self-funding

d. self-funding

Arnold sells oil field equipment. He is paid 2 percent of the dollar amount of the sales he has completed each quarter. This is Arnold's only compensation, but he sells several million dollars' worth of equipment each year. He is on the ____ system. a. retainer b. pay-as-you-go c. deferred compensation d. straight commission

d. straight commission

As director of HR you need to calculate the return on investment of a new differential piece-rate system. To do this you need to calculate a. the ratio of the cost of the old incentive system to the cost of the new incentive system multiplied by the dollar value of the increase in production due to the new system. b. the dollar value of the increase in production divided by the cost of the new incentive system. c. the ratio of the cost savings of the new incentive system compared with the return on investment which the shareholders expect. d. the dollar value of the additional production minus the cost of the new incentive system divided by the cost of the new incentive system

d. the dollar value of the additional production minus the cost of the new incentive system divided by the cost of the new incentive system