Deck 10: Pay-For-Performance: Incentive Rewards

Question 1

Robix wants to be known as a leader in first-to-market for new technology, so employees are rewarded for the speed by which they develop new products. Their incentive plan is tied to an organizational goal.

Answer 1

True

Question 2

Major advantages of piecework systems are that the wage payment is simple to compute, and an organization can predict labor costs with reasonable accuracy.

Answer 2

True

Question 3

Generally, a bonus plan does not become part of an employee's base pay.

Answer 3

True

Question 4

Incentive plans may fail because employees have little ability to affect performance standards.

Question 5

Incentive plans can create an organizational environment of shared commitment since individuals contribute to organizational success.

Question 6

Standard hour plans are based on specific production standards set for individual jobs.

Question 7

In order to make sure that the pay they give their executives is similar to that of similar companies, Robix can use competitive benchmarking.

Question 8

More than 80 percent of companies globally are offering variable pay programs.

Question 9

Historically, incentive plans have not been a major element of strategic compensation management.

Question 10

Meshing compensation and organizational objectives help employees assume ownership of their jobs, which can, in turn, improve their effort and overall job performance.

Question 11

For incentive plans to work effectively, employees must see a clear connection between the incentive payments they receive and their performance.

Question 12

The standard hour plan provides bonus payment for completing work in less than the specified time.

Question 13

Piecework may be inappropriate where technology changes are frequent.

Question 14

Fixed pay is more flexible than variable pay.

Question 15

Incentive plans based on productivity can reduce labor costs.

Question 16

The performance threshold in incentive plans is the name given to the amount awarded to an employer.

Question 17

Employees on the production line at Robix are paid based on the number of units that roll off their line each day. Because they receive a specified payment for each unit, they are paid under a straight piecework program.

Question 18

Under a straight piecework plan, if five minutes is the standard time to produce one unit and the employee's hourly rate is $7.50. The piece rate is $1.50 per unit.

Question 19

Management must be careful to ensure that incentive payments are viewed as both a reward and an entitlement.

Question 20

Under a differential piece rate, employees whose production performance 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.

Question 21

Robix has established rewards based on group contributions. In order to do this effectively, they should measure performance without considering the contributions of other teams and they should use this system when work is organizationally interdependent.

Question 22

Under the Scanlon plan or Improshare program, psychological ownership can play a stronger role than financial ownership in employee performance.

Question 23

Noncash incentive awards are most effective as motivators when the award is tied to performance and supports the firm's goals

Question 24

Twice a year, Robix pays all of its regular employees a bonus that is based on the firm's profits in the previous six months. This is an example of a profit sharing plan.

Question 25

A spot bonus is usually given for some employee effort that is not directly tied to an established performance standard.

Question 26

Annual bonuses represent the main element of executive short-term incentives.

Question 27

The percentage of cash compensation paid out in commissions is called a draw.

Question 28

The compensation of salespeople at Robix fluctuates each pay period, as the amount each person receives is determined solely as a percentage of his or her sales. They are paid according to a straight commission plan.

Question 29

One drawback to straight commission plans is that they may induce salespeople to grant price concessions.

Question 30

Generally, an employee stock ownership plan is more likely to serve its intended purposes in privately held companies than in publicly held ones.

Question 31

An analysis of executive salaries shows that the largest portion of executive pay is received in long-term incentive rewards and bonuses.

Question 32

Robix has an employee stock ownership plan. In this plan, the employees own shares of stock, but they do not actually buy them.

Question 33

The salespeople at Robix are compensated under a straight commission plan. Because their compensation rate is not fixed, one way to help them avoid any personal cash flow problems is to allow them a salary draw.

Question 34

The principal reason behind executive stock options as an incentive is for senior managers to have a significant stake in the success of a business.

Question 35

The operation of a merit pay plan depends on the effectiveness of the performance appraisal system.

Question 36

Executive base salaries represent between 10 and 20 percent of total annual compensation.

Question 37

A problem often encountered with merit raises is that employees may not believe that their compensation is tied to effort and performance, and they may not be able to differentiate between merit pay and other types of pay increases.

Question 38

Unlike a bonus, a merit raise may be perpetuated year after year even when performance declines.

Question 39

An advantage of using a straight salary plan to compensate sales employees is that employees are paid for performing only sales effort.

Question 40

Merit pay plans have been criticized because the merit increase may not be sufficient to raise all employees' base pay.

Question 41

Profit-sharing plans have limited motivational value as payments are only made once a year or deferred until retirement.

Question 42

Robix wants to increase employee job satisfaction and improve customer awareness. One way they could accomplish this is by instituting a gainsharing plan.

Question 43

Stock options are rights attached to the achievement of specific organizational objectives.

Question 44

Employees are comfortable with the employee stock ownership plan because the federally established Pension Benefit Guaranty Corporation guarantees them their contribution to the plan.

Question 45

When the team developing the XLR at Robix brought it in under budget, team members received a bonus. The amount each individual received varied based on salary level. In this situation, the team bonus was paid out in proportion to their relative contribution to the team.

Question 46

ESOPs have been criticized because a pensioner can become dependent on the stock price.

Question 47

Robix senior management wants to use an incentive plan that will allow all Robix employees to benefit from the plan's payout. This means they should be looking at enterprise incentive plans.

Question 48

Robix uses an incentive payout that is based upon increases in sales volume. Robix is using a Scanlon plan.

Question 49

When the team developing the XLR at Robix brought it in under budget, team members received a bonus. The amount each individual received varied based on their role in cutting development costs. In this situation, the team bonus was paid out in proportion to their relative contribution to the team.

Question 50

The idea behind the Scanlon plan is that employees should offer ideas to improve productivity and, in turn, be rewarded for those ideas.

Question 51

In most profit-sharing plans, about 20 to 25 percent of net profits are shared with employees.

Question 52

Employers use stock ownership incentive plans to give employees a share in the company's success.

Question 53

By using employee stock ownership plans, employers can provide retirement benefits for their employees at a relatively low cost.

Question 54

In an effort to increase employee productivity, Robix has initiated a stock option program. This means that for a limited period of time, employees will be able to purchase some shares of stock in Robix as a set price.

Question 55

Perquisites are special nonmonetary benefits given to executive employees.

Question 56

Robix senior management has as one of its goals to promote interaction and support between management and employees, as they feel that this would improve productivity and, ultimately, company profitability. Robix should consider an Improshare plan.

Question 57

A major criticism of short-term incentives for executives is that they place too much emphasis on monthly or quarterly performance, which may lead to negligence of long-term survival and growth objectives.

Question 58

The performance threshold in incentive pay programs is

A)the minimum level an employee must reach in order to qualify for fixed pay.
B)the minimum level an employee must reach in order to qualify for variable pay.
C)an organizational objective that signifies profitability.
D)a customized incentive plan which measures employee output and rewards exceptional employee performance.

Question 59

A weakness of profit-sharing plans is that employees do not have total control over the profitability of an organization.

Question 60

Robix has a stock option program, which means that it rewards employees' performance by giving them shares of stock.

Question 61

In 2011, a study by the American Psychological Association found that __________ of employees feel they receive inadequate nonmonetary awards and recognition for their contributions at work.

A)16 percent
B)25 percent
C)34 percent
D)43 percent

Question 62

Enterprise incentive plans include

A)the Scanlon plan.
B)improshare.
C)stock options.
D)sales incentives.

Question 63

Employees on the XL27 production line at Robix whose work exceeds a standard level of output receive a higher rate of pay than those whose work meets the standard. They are working under the __________ incentive plan.

A)differential piece rate
B)standard piece rate
C)exception bonus rate
D)individual rate pay

Question 64

Employees on the T13 production line at Robix are paid a set rate for each unit produced. They are working under the __________ incentive plan.

A)differential piece rate
B)standard piece rate
C)straight piecework
D)individual rate pay

Question 65

Rate busting refers to

A)an increase in productivity due to external competition.
B)an increase in output that results in the disapproval of fellow employees.
C)setting incentive performance standards for employees.
D)a decrease in productivity due to lack of motivation.

Question 66

A study on bonus versus actual pay raises showed that improving one's pay through merit increases by 1 percent would increase future performance by __________ percent.

A)2
B)5
C)8
D)10

Question 67

Raj likes to give small rewards to employees "caught in the act" of doing something good, even if that effort is not directly tied to a performance standard. When he does this, Raj is making use of a

A)piece rate plan.
B)differential piece rate.
C)merit pay.
D)spot bonus.

Question 68

Piecework is appropriate when

A)technology changes are frequent.
B)quality is more important than quantity.
C)productivity standards are difficult to develop.
D)a job is fairly standardized.

Question 69

__________ is the single word that best describes the design of individual incentive plans.

A)Motivation
B)Comprehensiveness
C)Flexibility
D)Consistency

Question 70

Research shows that a merit increase in the range of __________ is necessary to serve as a pay motivator.

A)3 to 5 percent
B)7 to 9 percent
C)11 to 13 percent
D)15 to 17 percent

Question 71

The pay for employees on the KRX line at Robix is not based on the actual amount of time it takes them to complete a job. Rather, they are paid based on a predetermined amount of time for completing the job. These employees are working under the

A)piece rate plan.
B)standard hour plan.
C)time division plan.
D)completion pay system.

Question 72

Which of the following is NOT one of the reasons why variable pay plans may not achieve their proposed objectives or lead to organizational improvements?

A)Failure of incentive plans to satisfy employee expectations for pay gains
B)Employment of employee and management committees to gain cost-reduction improvements
C)Failure of management in giving adequate attention to the design and implementation of a plan
D)Limited ability of employees to affect performance standards

Question 73

Group incentive plans include

A)straight salary plan.
B)improshare.
C)straight commission plan.
D)profit sharing.

Question 74

A reward given to a consumer service representative who put in extra effort to fill a new customer's large order, even though this was not specifically tied to the employee's performance standards, is a

A)piece rate.
B)differential piece rate.
C)merit pay.
D)spot bonus.

Question 75

Which of the following is NOT an advantage of an incentive pay program?

A)Incentives focus employee efforts on specific performance targets.
B)Incentives are a way to increase equity and justice in an organization.
C)Incentives are a way to distribute success among those not responsible for producing that success.
D)Incentives are a means to reward or attract top performers when salary budgets are low.

Question 76

Contemporary reasons given by organizations for implementing incentive plans are

A)improving or maintaining high levels of productivity.
B)focusing employee efforts on specific performance targets.
C)linking compensation rewards to the achievement of results.
D)all of the above.

Question 77

When setting performance measures for incentive systems, we can say that the best measures are those that

A)are quantitative, simple to understand, and show a clear relationship to improved performance.
B)are qualitative, flexible, and create competition between employees.
C)allow employers to "ratchet up" standards and base rewards on qualitative standards.
D)reduce administrative costs, determine rewards based only on quantity, and reward only exceptional employees.

Question 78

According to Sammer, which of the following is NOT a characteristic of a successful incentive plan?

A)Identify important organizational metrics that encourage employee behavior.
B)Involve employees and have incentive programs that seem fair to employees.
C)Find technically detailed, quantitative, and extremely thorough payout formulas.
D)Establish a clear link between performance and payout.

Question 79

Robix Industries has announced the rollout of a new incentive program for its production team. A baseline of performance has been established based upon actual production numbers from the last six quarters. If productivity exceeds that deadline in a quarter, 80 percent of the money that is saved will be given to the employees. What type of plan is this?

A)Profit sharing
B)Stock option
C)Perquisite
D)Gain sharing

Question 80

A worker at Robix paid under a straight piecework rate made $12.75 an hour this week. If each unit took the employee twelve minutes to produce, the piece rate is __________ per unit.

A)$1.95
B)$2.55
C)$2.95
D)$3.15