Managing Human Resources Chapter 10
*Which of these is NOT something an organization must provide in a successful professional incentive program?
A strict deadline for completion is NOT something an organization must provide in a successful professional incentive program
Which is an incentive plan that sets rates based on the completion of a job in a predetermined standard time?
Standard Hour Plan
Which plans are not guaranteed by the federal Pension Benefit Guaranty Corporation?
Employee Stock Ownership
What are the 3 steps of the approach to establish Team Incentive Payments organizations typically use after deciding on their Team Compensation Model?
1. Organizations set performance measures on which incentive payments are based. Improvements in efficiency or product quality and reductions in materials or labor costs are common benchmark criteria. 2. The size of the incentive bonus must be determined. 3. A payout formula is established and fully explained to employees.
*In 2019, the chief executives of American companies got a collective raise of 14 percent, which was ________times as much as a typical worker.
In 2019, the chief executives of American companies got a collective raise of 14 percent, which was 320 times as much as a typical worker.
*As a new board member for Personal Best, a home health care provider, Karen Thompson was interested when the CEO of the company was asked to leave the room during a board meeting. One of the more experienced members of the board then said, "We have to talk about executive compensation at Personal Best." Soon the room was in a bit of an uproar. One board member said, "I just read an article stating that the highest paid CEOs are the worst performers for companies." Another board member said, "But we have to pay the CEO enough to be competitive with other companies in our industry." Finally, a board member spoke up and said, "We have a lot of concerns around pay, but can we all agree that our most important objective is to make sure that our CEO's financial health rises and falls with the health of our organization?" Everyone in the room agreed that this was true. Based on the board's understanding of their most important objective, they should focus their conversation about CEO pay on which of these areas?
Based on the board's understanding of their most important objective, they should focus their conversation about CEO pay on long-term incentives or bonuses, as long-term incentives, such as stock options, are a good way to link a CEO's finances with the finances of the organization, because the value of stocks rises and falls with the value of the organization.
When measuring performance for group pay incentives, a manager should:
When measuring performance for group pay incentives, a manager should measure when work is group interdependent, consider the contributions of other teams, and only measure when teams have a mechanism for disciplining their slackers.
5 Basic components of Executive compensation plans:
1. Base salary 2. Short-term incentives or bonuses 3. Long-term incentives or stock plans 4. Benefits 5. Perks Each of these elements may receive different emphasis in the executive's compensation package depending on various organizational goals and executive needs.
*What are 3 of the problems associated with team compensation?
1. Individual team members may perceive that "their" efforts contribute little to team success or to the attainment of the incentive reward. 2. Team members may be afraid that one individual may make the others look bad, or that one individual may put in less effort than others but share equally in team rewards (the "free-rider" effect). 3. Complex payout formulas or insufficient payout rewards may diminish employees' motivation.
What are 4 types of group incentive plans?
1. Scanlon Plan, 2. Team Compensation, 3. Improshare Program, and 4. Gainsharing Plans (STIG)
Which of these accurately describes an important recommendation for administering incentive plans?
Annual salary budgets must be large enough to reward and reinforce exceptional performance. When administering incentive plans, allowing them to become pay guarantees defeats the motivational intent of the incentive —poor performance must go unrewarded. Further, annual salary budgets must be large enough to reward and reinforce exceptional performance, and overhead costs associated with plan implementation and administration must be determined.
*Devon is a newly hired manager of the finance division of a small organization. He is tasked with deciding how much of his payroll budget he will use for salary increases this year. He asks you, the director of HR, for advice. What is the best advice for Devon?
Be sure to consider the money needed for rewarding exceptional performance throughout the year. When administering an incentive plan, annual salary budgets must be large enough to reward and reinforce exceptional performance. Allowing incentive payments to become pay guarantees for all defeats the motivational intent of the incentive. Also, Devon would not be responsible for deciding overhead costs or his own reward.
*Dan Henry, chief human resources officer for Bright Horizons, says that they survey the market annually to make sure they are competitively priced. Given this comment, which of these would coincide with Bright Horizon's approach to executive compensation?
Bright Horizons uses a technique called competitive benchmarking for executive compensation. An organization that surveys the market is likely to participate in competitive benchmarking in order to remain competitive with its talent. Balanced scorecards may be used for determining compensation. Bright Horizons does not differentiate in its compensation approach.
Under which rate do employees whose production exceeds the standard output receive a higher rate for all of their work than the rate paid to those who do not exceed the standard?
Differential Piece Rate
*Which of these terms refers to an enterprise incentive plan in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its workers?
Employee Stock Ownership Plans (ESOPS) An ESOP is an enterprise incentive plan in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its workers.
The Scanlon plan and Improshare are both gainsharing plans. What is the basis for using each of these plans?
The basis of the Scanlon plan is that employees provided ideas and suggestions for improving productivity through participation in committees and then provide rewards for those efforts. Scanlon = suggestions through committee participation Improshare is based on providing bonuses based on overall productivity of the work team. Impro = Overall Productivity
*Carley supervises three people. Two of her employees are top performers and both have earned bonuses this year. Carley's third employee tries very hard but underperforms. Carley tells you she feels bad for this employee and is considering giving them a bonus for their hard, but unimpressive, work. What is your best response?
This employee's poor performance must go unrewarded. When administering an incentive plan, poor performance must go unrewarded or it will defeat the motivational intent of the incentive.
*When measuring performance for individual pay incentives, a manager should:
When measuring performance for individual pay incentives, a manager should measure things that are quantifiable and simple and measure work that is independent of other's contribution. A manager should not measure based on who he likes or dislikes or based on personalities.
Which of these is an individual incentive plan wherein employees receive a certain rate for each unit produced?
Straight Piecework
What are 8 types of individual incentive plans?
1. Standard hour plan 2. Incentive awards 3. Executive incentive plans 4. Professional employee incentive plans 5. Piecework 6. Bonus Merit Pay 7. Lump Sum Merit Pay 8. Sales incentives (SIEPPBLS)
*Which is a disadvantage of the straight commission plan?
A disadvantage of the straight commission plan is that salespeople are tempted to grant price concessions. The straight commission plan is easy to compute and understand, provides maximum incentive, and encourages aggressive selling.
*For several years, Elyse has managed five employees. Some have been more successful than others. Because she genuinely likes them all, Elyse has always rewarded each employee with the same bonus each year. Recently, Elyse has noticed that her star performers are starting to slack and don't seem concerned when she reminds them of their organizational goals. What mistake has Elyse most likely made?
By rewarding all employees equally, regardless of quality, Elyse has allowed incentive payments to become pay guarantees, which defeats the motivational intent of the incentive. Poor performance should go unrewarded.
*If an incentive plan is to be successful, managers must start by paying close attention to what aspect of performance?
If an incentive plan is to be successful, managers must start by paying close attention to measurement of performance. Measurement is the most important and most difficult part of an incentive plan. Before you can reward employees for performance, you have to determine how to measure employees' performance. For example, if the company is going to reward employees for customer service, will employees be measured on the basis of repeat business or customer satisfaction surveys?
Which of these is true of incentive plans?
Incentive payouts are a means to reward or attract top performers when salary budgets are low. Also, incentive payouts are variable costs linked to the achievement of results, incentive compensation is directly related to operating performance, and incentive plans sometimes fail to satisfy employee expectations for pay gains.
Which of these statements about incentives for professional employees is true?
Incentives for professional employees should be based on overall performance over time. Professional incentives should be based on overall performance over time and should not limit employees to a set of certain tasks. Further, professional employees value incentives as much as other employees. *Since their tasks typically are more complex, incentives should motivate them to be more creative.
Owen is a medical researcher who will receive bonus pay based on his ability to successfully advance the study of heart disease—a task Owen has undertaken for several decades. Owen's newly hired supervisor has asked that Owen meet at the beginning and end of each day to plan and discuss each step in the research process. Why might Owen be unable to earn his pay incentive at this time?
Owen might be unable to earn his pay incentive at this time because Owen does not have autonomy. Rewards for professionals should provide autonomy to the worker, the opportunity to master the skill, and purpose. In this scenario, Owen does not have the autonomy he needs in his job.
*The board of directors in a relatively new public relations firm wants to go through a formal process to piece together an effective executive pay package. They have contacted you, the vice president of HR, to obtain some guidance on how to structure the package. What would you say to the board of directors in this situation?
Provide annual bonuses as the main element of short-term executive incentives. The best practice, for short-term executive incentives is bonuses. Base salary should be 30-40 percent of total compensation. Including benefits and perquisites is common practice, so it would be problematic to exclude them in this case. Providing a generous severance package can potentially help to make the compensation package more appealing, but it depends on the situation.
Which of these terms refers to an enterprise incentive plan in which an organization grants to employees the right to purchase a specific number of company shares at a guaranteed price during a designated time period?
Stock Option Plans
Which is the most widely used sales incentive program?
The combined salary and commission plan is the most widely used sales incentive program.
*A large consumer product firm's goal is to deliver low-cost, high-quality products. Their pay-for-performance plan offers incentives to employees who meet their product launch dates. Unfortunately, though sale are high, the company is experiencing financial difficulties. What is the most likely reason for the financial woes?
The most likely reason for the financial woes is that the plan did not tie incentives to organizational objectives. Contemporary arguments for incentive plans focus on linking compensation rewards to organizational goals. By rewarding met deadlines, the company failed to incentivize employees to focus on delivering low-cost, high-quality products.
*To establish meaningful performance measures, the measures—at all organizational levels— must be consistent with the what type of goals of an organization?
To establish meaningful performance measures, the measures—at all organizational levels— must be consistent with the strategic goals of an organization. The strategic goals of an organization dictate what a company wants to achieve. Organizations are most likely to accomplish their goals if everyone in the company works together with one end in mind. Thus, it makes sense to measure people's performances based on their contributions to these goals. Administrative and operational goals may vary from department to department in a way that strategic goals will not.
Which are 2 advantages of the straight commission plan?
The straight commission plan is easy to compute and understand, provides maximum incentive, and encourages aggressive selling which might be needed in highly competitive industries.
*Jackson works for a logistics firm and is tasked with cold-calling potential clients. Jackson receives 50 percent base pay and 50 percent variable pay. This is an example of a:
This is an example of a combined salary and commission plan. The combined salary and commission plan is the most widely used sales incentive program. The most common pay mix for salespersons responsible for new accounts is 50 percent base pay and 50 percent variable pay.
Which are problems with merit pay plans recognized by compensation specialists?
Compensation specialists recognize the following problems with merit pay plans: (1) Money available for merit increases may be inadequate to satisfactorily raise all employee's base pay. (2) Managers may have no guidance in how to measure performance. (3) Employees may not believe pay is tied to effort. (4) Employees and managers view job success differently. (5) Merit pay plans may create feelings of pay inequity.
*Kellen works as part of a team and recently received a team-based incentive. Always a diligent worker in the past, Kellen seems to have begun slacking. What is the most likely reason for this new behavior?
Kellen believes the incentive payout was insufficient when compared to his input. This scenario presents a typical problem with team-based incentives: sometimes payout reward are insufficient to motivate employees further.
What 3 things should Professional incentives provide?
Professional incentives should provide: (1) autonomy to the worker, (2) opportunity to master a skill, and (3) purpose (for example, purposes are helping to build a better organization, curing cancer, and alleviating poverty).
In which plan is it that profits shared with employees may be due to factors outside of the control of the employee?
Profit Sharing
Which plans are criticized for being extravagant and creating suspicious corporate accounting procedures?
Stock Option Plans
*Adina supervises several exempt employees. Recently, one employee found themselves in the unique position of having to work long hours to bring a new product to market on time and on budget. What is the best way for Adina to reward this employee's recent behavior?
The best way for Adina to reward this employee's recent behavior is to offer the employee lump sum merit pay. Since the employee's actions were nonstandard, Adina should offer them lump sum merit pay, while keeping their base salary the same. Improshare is used for group incentives and there is no evidence that this employee's position is in sales.
The standard time for producing one unit of work in a job paying $11.50 per hour is 12 minutes. Given this information, what is the piece rate?
$2.30 is the piece rate given this information in this situation, as 1 hour (60 minutes) / 12 minutes = 5, and $11.50/5 = $2.30. Under straight piecework, employees receive a certain rate for each unit produced. The piece rate is calculated by dividing the payment received per hour by the number of units produced per hour.
Gwen, a sign maker, is paid $15.75 an hour to produce 100 signs per day. The standard time for producing one sign is 20 minutes. Given this information, what is the piece rate?
$5.25 Gwen will make 3 units per hour, and the amount paid to her per hour is $15.75. The piece rate will be calculated by dividing the payment received per hour by the number of units produced per hour. Under straight piecework, employees receive a certain rate for each unit produced.
What is 3 type of Enterprise Plans?
1. Stock Options 2. Employee Stock Ownership Plans (ESOPs) 3. Profit Sharing (SEP)
In what Enterprise Pay Plan is it that the pensioner is dependent upon the price of the company profit-sharing stock?
Employee Stock Ownership
*Organizations having a strategic goal of quality leadership often measure what as part of their pay-for-performance programs?
Organizations having a strategic goal of quality leadership often measure customer satisfaction as part of their pay-for-performance programs. Customer satisfaction can be a good measure of quality, because happy customers are a sign that the company is effectively delivering a valued product or service. Cost reduction and profit maximization are better measures of efficiency than effectiveness.
Which is any procedure by which an employer pays, or makes available to all regular employees, special current or deferred sums based on the organization's profits?
Profit sharing
*The board of directors for a relatively new book publisher wants to go through a formal process to piece together an effective executive pay package. They have contacted you, the vice president of HR, to obtain some guidance on how to structure the package. What would you say to the board of directors in this situation?
Provide stock options as the main element of long-term executive incentives. The best practice, is to provide stock options as the main element of long-term executive incentives. Base salary should be 30-40 percent of total compensation. Including benefits and perquisites is common practice, so it would be problematic to exclude them in this case. Providing a generous severance package can potentially help to make the compensation package more appealing, but it depends on the situation.
Which plans grant to employees the right to purchase a specific number of shares of the company's stock at a guaranteed price (the option price) during a designated time period?
Stock Option Plans
What Enterprise Pay Plan has been criticized for extravagance?
Stock Options
*Badu manages four exempt employees. The company's pay-for-performance plan offers $150 bonuses to those who bring projects in under budget. Three of Badu's employees have earned the bonus and received praise at company meetings, but one employee has not. What is the most likely reason for this?
The employee does not find the bonus motivating. Recent research has shown that some employees might not be as motivated by variable pay incentives as managers think. In this scenario, there is equity, awareness, and understanding.
*Hector, an experienced employee, spends several hours helping a new employee solve a challenging problem and meet an important deadline. Hector then has to work late into the evening to finish his own work. His supervisor acknowledges Hector's actions and gives him a $100 gift card the next morning. This is an example of a:
This is an example of a Spot Bonus. A Spot Bonus is given "on the spot," normally for some employee's effort not directly tied to an established performance standard.
*Better You consumer product company wants to create a "culture of ownership" among employees. To foster this culture, Better You is offering a plan in which it distributes a large percentage of its sales (minus costs) to employees in accordance with their salary level and merit ratings. This plan is referred to as:
This plan is referred to as Profit Sharing. Profit sharing is any procedure by which an employer pays, or makes available to all regular employees, special current or deferred sums based on the organization's profits.
*Fizzy Drinks Company wants to create a "culture of ownership" among employees. To foster this culture, Fizzy Drinks is offering a plan in which employees are able to purchase shares at a guaranteed price for a finite amount of time. This plan is referred to as:
This plan is referred to as a Stock Option. Stock option plans grant to employees the right to purchase a specific number of shares of the company's stock at a guaranteed price (the option price) during a designated time period.
*Phantom Stocks are part of executive incentive plans. True or False?
True
Organizations that create large gaps among their work population levels are subject to greater discontent in their overall work population. True or False
True
*Newly hired Marcus works as part of a team. He likes his job and coworkers. He wants the company to succeed and he wants the team to receive a bonus for its good work. But, as an important deadline looms and the team works overtime, Marcus's absence is noticed. What is the most likely reason for Marcus's absence?
Marcus doesn't believe his efforts will contribute much to the team's success. This scenario presents a typical problem with team-based incentives: Individual team members may perceive that "their" efforts contribute little to team success or to the attainment of the incentive reward.
*Deluxe Insurance Company wants to create a "culture of ownership" among employees. To foster this culture, Deluxe is offering a plan in which it contributes company shares to a trust so that employees can purchase those shares. This plan is referred to as:
This plan is referred to as an Employee Stock Ownership Plan (ESOP). ESOPs are stock plans in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its employees.
