MGMT 365 Chapter 12 Connect Test Questions
By law, what percentage of assets must an employee stock ownership plan (ESOP) invest in its company's stock?
51 percent
_____ focuses on the link between rewards and behaviors and emphasizes anticipated rewards.
expectancy theory
Agency costs are likely to arise when _____.
principals and agents have different goals
In the _____ dimension, employees base their fairness assessments on the processes that were used to decide the amount of compensation.
procedural
The _____ requires companies to report compensation levels for the five highest paid executives and the company's performance relative to that of competitors over a five-year period.
Securities and Exchange Commission
Which of the following is most likely to provide intrinsic motivation?
an interesting work assignment
_____ can be described as a function of ability and motivation.
behaviors
Gainsharing programs offer a means of sharing productivity gains with employees based on organization-level performance.
false
In incentive pay programs, annual pay increases are usually linked to performance appraisal ratings.
false
Individual incentives are rolled into the base pay of employees.
false
Merit pay systems rely on 360-degree performance feedback.
false
The flow of feedback tends to be multi-directional in merit pay programs.
false
The performance motivation of stock option plans is particularly high from a reinforcement theory standpoint.
false
Valence of pay outcomes should change according to different pay systems.
false
With respect to employee participation in decision-making, the more agents there are, the lower the monitoring cost.
false
Which of the following is a design feature according to which employee contribution programs differ?
frequency of payout
A(n) _____ program is based on group or plant performance that does not become part of the employee's base salary.
gainsharing
The Scanlon plan is an example of a(n) _____ plan.
gainsharing
Which of the following is a compensation program that would best support an organizational culture of cooperation and problem solving?
gainsharing
Which of the following compensation programs uses a management style that gives importance to control?
incentive pay
Which of the following pay programs has the highest frequency of payout?
incentive pay
In a(n) _____ plan, performance is usually measured as physical output and the payment is not rolled into the base pay.
individual incentive
In incentive pay, performance measures are primarily based on _____.
individual productivity
According to a merit increase grid, one of the factors that determine the size and frequency of pay increases is the _____.
individual's performance rating
Culture based on _____ is most likely to prevail in companies that use a profit-sharing compensation program.
knowledge of business
In _____ programs, annual compensation increases are usually linked to performance appraisal ratings.
merit pay
Which of the following is an example of a behavior-oriented contract?
merit pay
A(n) _____ is suitable for an organization with a culture that promotes individual competition.
merit pay plan
Expectancy theory implies that linking an increased amount of rewards to performance will increase motivation and performance. Followers of cognitive evaluation theory are likely to question this assumption, arguing that
monetary rewards may decrease intrinsic motivation
Agents prefer a behavior-based contract when _____.
outcome uncertainty is high
Group incentives tend to measure performance in terms of _____.
physical output
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires shareholders to have a "say on pay," meaning that they have the right to a (nonbinding) vote on executive pay plans.
true
The Securities and Exchange Commission (SEC) requires companies to report compensation levels for the five highest paid executives.
true
When an organization has a growth strategy, the short-run pay level and benefit level tend to be below market level.
true
Gainsharing can motivate employees as much as individual plans do because
it allows more control over the performance measure and the frequency of payouts
Which of the following is a drawback of using profit sharing?
it runs the risk of contributing to employee dissatisfaction
Which of the following makes employee stock ownership plans (ESOPs) less attractive?
less diversification of investment risk
When an organization is using concentration strategy, it will _____.
make centralized pay decisions
Which of the following is true of how managers may differ from shareholders?
managers diversify investments more easily
______ are decisions about whether to join or remain with an organization.
membership behaviors
Overtime pays better performers more in _____ programs.
merit pay
Which of the following is a compensation program that relates costs to the ability to pay?
profit sharing
From a(n) _____ standpoint, the effect on performance motivation may be limited in ownership programs because of the less obvious link between pay and performance.
reinforcement theory
Which of the following theories suggests that high employee performance not followed by a monetary reward will make future high performance less likely?
reinforcement theory
Which of the following makes outcome-oriented contracts less likely to occur?
risk aversion among agents
Agency theory is of particular value in compensation management because of its emphasis on the _____ trade-off.
risk-reward
Employee stock ownership plans (ESOPs) give employees the right to vote their securities if registered on a national exchange.
true
Gainsharing plans encompass more than just a monetary component.
true
In a merit increase grid, the _____ determines the size and frequency of pay increases.
compa-ratio of employees
Which of the following is likely to occur when pay for performance with stronger incentive intensity is replaced with one having a weaker incentive pay?
competitors possibly winning over high performers with stronger incentive intensity
Separating the functions of principals and agents is likely to result in
diversification of investment risk
In merit pay programs, an individual's compa-ratio represents his or her _____.
position in the pay range
Which of the following is true of how the agency theory views monitoring?
Employees understand fellow employees better than managers do
According to the agency theory, the principals are the _____.
owners
Which of the following pay strategy dimensions best fits with a business strategy of concentration?
above-market benefits levels
Which of the following is true of how agents may differ from principals?
agents are more averse to risk
Which of the following must a principal do to reduce agency costs?
align the agent's interests with the principal's interests
Which of the following statements about outcome-oriented or behavior-oriented contracts is true?
behavior-oriented contracts do not transfer risk to the agent
Which of the following is a criticism of traditional merit pay programs?
employees are encouraged to focus on personal gains rather than what is good for the organization
Merit pay has the ability to define and reward a broad range of performance dimensions.
true
As jobs become less programmable,
behavior-oriented contracts become less likely
Employees assess fairness along the distributive dimension when their assessment is based on _____.
how much they receive
Which type of compensation program is most likely to attract learning-oriented employees?
skill-based pay
Which of the following is a difference between profit-sharing plans and employee ownership plans?
the link between pay performance is less obvious under ownership than under profit sharing
Which of the following is true about outcome-oriented contracts?
they are typically a major component of executive compensation
Which of the following is true of individual incentives?
they must be continuously earned and re-earned
According to E. L. Thorndike's Law of Effect, high performance followed by a reward will motivate employees to repeat the performance and make it recur more often in the future.
true
Employee stock ownership plans (ESOPs) carry significant investment risks for employees.
true
In merit pay systems, performance is measured based on a supervisor's rating.
true
E. L. Thorndike's Law of Effect states that _____.
a response followed by a reward is more likely to recur in the future
Pay plans are typically used to energize, direct, or control employee behavior.
true
Which of the following is an example of the sorting effect?
Bevlink's full match for employee retirement plan contributions encourages Tina to apply for a job there.
Which of the following is a tool that allows companies to track financial results while monitoring progress in building the capabilities and acquiring the intangible assets they would need for future growth?
balanced scorecard
In skill-based pay systems, performance measures are primarily based on _____.
employees' competency acquisition
_____ perception is the perceived link between effort and performance.
expectancy
A pay plan's ability to draw highly qualified applicants for jobs at a particular organization is known as the incentive effect.
false
An employee's assessment of the fairness of his or her compensation based on how much pay the employee receives is referred to as procedural fairness.
false
Deferred profit-sharing plans increase employee motivation.
false
Gainsharing plans differ from profit-sharing plans in that
gainsharing plans distribute payouts more frequently
When an organization is using growth strategy, it will _____.
have pay levels that are below market levels in the short run
Allan works as a typesetter in a publishing company. If the organization uses merit pay programs, Allan's salary is based primarily on information collected from _____.
his immediate supervisor
According to expectancy theory, compensation systems differ according to their impact on the components of motivation; the main influence of compensation is on _____.
instrumentality
According to expectancy theory, motivation is hypothesized to be a function of _____.
instrumentality
Which of the following components is a perceived link between behavior and pay?
instrumentality
A _____ plan gives employees the opportunity to buy the company's shares at a previously fixed price.
stock option
Which of the following is an example of an ownership plan used in compensation systems?
stock option
Relying exclusively on merit pay or individual incentives may result in high levels of work motivation but unacceptable levels of individualistic and competitive behavior.
true
An example of the sorting effect is a social media firm offering employee stock options to attract a higher caliber of applicants for positions in the organization.
true
One solution to profit sharing during a downturn is to design plans that have upside but not downside risk.
true
One way of achieving employee ownership is through stock options, which give employees the opportunity to buy stock at a fixed price.
true