Deck 12: Pay for Performance and Financial Incentives

Question 1

Which of the following terms refers to an incentive plan that ties a group's pay to the firm's profitability?

A) piecework
B) variable pay
C) pay-for-performance
D) merit pay
E) sales commissions

Answer 1

B

Question 2

A management approach based on improving work methods through observation and analysis is known as ________.

A) strategic management
B) scientific management
C) management process
D) management by objectives
E) performance management

Answer 2

B

Question 3

Rebecca's manager wants to acknowledge her outstanding service record for the past quarter.The manager decides to give Rebecca a bonus of $1000 as a reward.According to Edward Deci,which of the following will most likely occur as a result?

A) The bonus will encourage Rebecca to work harder than before.
B) The bonus will detract from Rebecca's inner desire to work hard.
C) The bonus will increase Rebecca's loyalty to her employer and her satisfaction.
D) Rebecca's bonus will satisfy her higher-level needs and increase her motivation.
E) Rebecca will feel inadequate because the bonus fails to address hygiene factors.

Answer 3

B

Question 4

Frederick Taylor referred to the tendency of employees to work at the slowest pace possible and to produce at the minimum acceptable level as ________.

A) social loafing
B) systematic soldiering
C) human nature
D) group shift
E) group norms

Question 5

Behavior modification is based upon the principles of rewards and punishments advanced by ________.

A) Frederick Taylor
B) Abraham Maslow
C) Frederick Herzberg
D) B.F. Skinner
E) Edward Deci

Question 6

According to Herzberg's Hygiene-Motivator theory,which of the following factors will most likely satisfy employees' higher-level needs?

A) working conditions
B) base salary
C) achievement
D) incentive pay
E) co-worker relationships

Question 7

Who proposed a two-factor theory that explains how motivator factors relate to satisfaction and hygiene factors relate to dissatisfaction?

A) Frederick Taylor
B) Abraham Maslow
C) Frederick Herzberg
D) David McClelland
E) Edward Deci

Question 8

Which of the following is a true statement about Herzberg's Hygiene-Motivator theory?

A) Highly motivated workers rely equally on lower-level and higher-level needs.
B) Assigning workers to teams can eliminate job-associated stress and frustration.
C) Providing employees with feedback and challenge satisfies their lower-level needs.
D) Managers can create a self-motivated workforce by providing feedback and recognition.
E) Managers can best motivate employees by adding more hygienes like incentives to the job.

Question 9

In Vroom's theory of motivation,motivation is equal to E * I * V,where E represents ________.

A) existence
B) extrinsic motivation
C) expectancy
D) esteem
E) energy

Question 10

Under the Fair Labor Standards Act,which of the following would NOT be included in overtime pay computations?

A) attendance bonus
B) bonus for new hires
C) Christmas bonus
D) efficiency bonus
E) union contract bonus

Question 11

Which of the following found that extrinsic rewards could detract from an employee's intrinsic motivation ?

A) Frederick Taylor
B) Abraham Maslow
C) Frederick Herzberg
D) David McClelland
E) Edward Deci

Question 12

According to Vroom's theory,when managers design incentive plans they should do all of the following EXCEPT ________.

A) focus on behavior modification methods
B) make incentive plans easy to understand
C) consider individual employee preferences
D) provide training and support to employees
E) boost the confidence level of employees

Question 13

Which of the following terms refers to changing behavior through rewards or punishments that are contingent on performance?

A) intermittent pay
B) behavior modification
C) personal development
D) instrumentality
E) internal motivation

Question 14

Which of the following terms refers to financial rewards paid to workers whose production exceeds some predetermined standard?

A) indirect financial payments
B) merit payments
C) hardship allowance
D) financial incentives
E) human capital

Question 15

What type of pay plan is being used when workers are paid a sum for each unit they produce?

A) base pay
B) competency-based pay
C) job-based pay
D) piecework
E) bonus

Question 16

The perceived relationship between successful performance and obtaining the reward is referred to by Vroom as ________.

A) instrumentality
B) probability
C) valence
D) expectancy
E) optimism

Question 17

Which of the following is NOT a basic tenet of behavior modification?

A) Behavior that leads to rewards tends to be repeated.
B) Behavior that appears to lead to punishment tends not to be repeated.
C) Properly scheduled rewards can be used to encourage some behaviors.
D) Properly scheduled punishments can be used to minimize some behaviors.
E) Employees must understand the link between rewards,punishments, and behavior.

Question 18

In Vroom's theory of motivation,motivation is equal to E * I * V,where I represents ________.

A) intrinsic needs
B) internalization
C) instrumentality
D) imperative action
E) incentives

Question 19

According to Victor Vroom,expectancy could also be referred to as the ________.

A) probability that effort will lead to success
B) relationship between performance and reward
C) perceived value a person attaches to a reward
D) employer's strategy for motivating employees
E) likely compensation for successful performance

Question 20

In Vroom's theory of motivation,which of the following terms refers to the perceived value a person attaches to a reward?

A) piecework
B) valence
C) instrumentality
D) expectancy
E) variable pay

Question 21

Which of the following terms refers to the right to purchase a stated number of shares of a company stock at today's price at some time in the future?

A) at-risk variable plan
B) multiplier method
C) stock option
D) gainsharing plan
E) split-award plan

Question 22

Enterprise incentive management systems enable firms to ________.

A) compare corporate incentive programs
B) accurately calculate sales commissions
C) manage performance appraisals for incentive purposes
D) efficiently administer employee incentive programs
E) create a matrix of merit awards and incentive options

Question 23

Ryobi is a large,international power tool manufacturer that develops affordable,high-quality products, such as drills,circular saws,and routers,for both homeowners and craftspeople.As the company continues to grow,its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective.Currently,the firm provides merit raises based on performance appraisals; however,executives are considering changing the current incentive plan.
Which of the following questions is most relevant to the decision by Ryobi executives to discontinue all merit raises?

A) What are the guidelines for implementing a gainsharing plan?
B) What is the link between merit pay and motivation according to Deci?
C) What type of merit raises are effective for high-performing managers?
D) What organization wide incentive plans are used by other manufacturing firms?
E) What is the connection between merit pay increases and employee productivity?

Question 24

Which of the following terms refers to an incentive plan in which a person is paid a sum for each item he or she makes or sells,with a strict proportionality between results and rewards?

A) merit pay
B) variable pay
C) straight piecework
D) straight hourly pay
E) standard hour plan

Question 25

All of the following are disadvantages associated with piecework plans EXCEPT that workers ________.

A) resist attempts to modify production standards
B) focus on production quantity instead of quality
C) view the plans as unfair and complicated
D) dislike new technology or processes
E) resist changing from job to job

Question 26

Which of the following is the most commonly used reward for motivating employees?

A) individual travel
B) recognition programs
C) training programs
D) variable pay
E) special events

Question 27

In which of the following do workers receive a basic hourly rate plus a premium equal to the percent by which their performance exceeds the standard?

A) piecework
B) variable pay
C) straight piecework
D) standard hour plan
E) standard piecework

Question 28

How does merit pay differ from a bonus?

A) Merit pay becomes part of an employee's base pay, but a bonus does not.
B) A bonus becomes part of an employee's base pay, but merit pay does not.
C) Merit pay is linked to individual performance, while a bonus is linked to profits.
D) A bonus is linked to individual performance, while merit pay is linked to profits.
E) Merit pay is limited to a single, lump payment, and a bonus is spread out over a year.

Question 29

Which of the following is the primary advantage of piecework plans?

A) powerful incentive to workers
B) encourages worker flexibility
C) workers earn efficiency bonuses
D) firms save on overtime wages
E) entices independent contractors

Question 30

Which of the following terms refers to any salary increase the firm awards to an individual employee based on his or her individual performance?

A) competency-based pay
B) variable pay
C) merit pay
D) base pay
E) piecework

Question 31

Using a straight salary to compensate salespeople is most likely ineffective because it ________.

A) discourages sales flexibility
B) lacks connection to performance
C) makes it too easy to switch territories
D) is not linked to product training
E) depends on company profits

Question 32

Craig is a line manager at a paper supply company.All of the following are methods that Craig should most likely implement to motivate his subordinates EXCEPT ________.

A) creating specific, challenging goals
B) recognizing an employee's contribution
C) encouraging workers to earn overtime pay
D) gaining agreement on goals with employees
E) using positive reinforcement on a daily basis

Question 33

Ryobi is a large,international power tool manufacturer that develops affordable,high-quality products,such as drills,circular saws,and routers,for both homeowners and craftspeople.As the company continues to grow,its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective.Currently,the firm provides merit raises based on performance appraisals; however,executives are considering changing the current incentive plan. Which of the following,if true,supports the argument that Ryobi should eliminate all merit raises?

A) Performance appraisals at Ryobi occur annually, and standards vary from manager to manager.
B) Ryobi employees have the option of accepting lump-sum raises or traditional merit raises.
C) Motivation among Ryobi engineers has been improved through social recognition programs.
D) Ryobi recently began using an enterprise incentive management system to automate compensation.
E) The commission percentage for Ryobi sales people is based on the ability to meet monthly quotas.

Question 34

All of the following are disadvantages of straight commission plans EXCEPT ________.

A) salespeople avoid pushing hard-to-sell items
B) salespeople fail to service small accounts
C) payments are complicated to calculate
D) significant variations in pay exist
E) pay depends on skill and economy

Question 35

Ryobi is a large,international power tool manufacturer that develops affordable,high-quality products, such as drills,circular saws,and routers,for both homeowners and craftspeople.As the company continues to grow,its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective.Currently,the firm provides merit raises based on performance appraisals; however,executives are considering changing the current incentive plan.
Which of the following,if true,undermines the argument that Ryobi should discontinue all merit raises?

A) Ryobi employees have expressed that they would prefer stock options to merit raises.
B) Ryobi's top competitor is considered a high-performance work system within the industry.
C) Ryobi managers have not received significant training about conducting performance appraisals.
D) Ryobi managers have noticed significant productivity improvements among employees who receive merit raises.
E) Ryobi's top executives receive a combination of base salary and stock options to encourage them to focus on the firm's strategic goals.

Question 36

Edward is the new sales manager at Wilson Auto Mart.The previous sales manager set commission rates informally without considering how much each sale covered expenses.As a result,Wilson Auto Mart barely breaks even on each car sale once commissions are paid.Edward wants to motivate his sales force but avoid having excessive commissions. All of the following questions are relevant to developing an effective sales compensation plan EXCEPT ________.

A) What percentage of Wilson's sales force achieves its sales quota each month?
B) How much time does each Wilson salesperson spend with qualified prospects?
C) What are the motivation and skill levels of Wilson sales team members?
D) What is the average annual bonus received by Wilson's CEO?
E) What is Wilson's desired profit for each car sale?

Question 37

A straight salary is most appropriate when a salesperson's primary duties involve ________.

A) servicing small accounts
B) finding new clients
C) meeting sales quotas
D) pushing hard-to-sell items
E) fostering relationships with customers

Question 38

Edward is the new sales manager at Wilson Auto Mart.The previous sales manager set commission rates informally without considering how much each sale covered expenses.As a result,Wilson Auto Mart barely breaks even on each car sale once commissions are paid.Edward wants to motivate his sales force but avoid having excessive commissions. Which of the following,if true,supports the argument that Edward should pay his sales team a combination of salary plus commission?

A) Wilson Auto Mart's sales team consists of high-performing, experienced salespeople.
B) Wilson Auto Mart has successfully implemented a "one price no hassle" pricing program.
C) Each Wilson Auto Mart sales person is encouraged to sell at least ten vehicles each month.
D) Wilson Auto Mart salespeople are primarily asked to find new clients and service current accounts.
E) Encouraging staff loyalty is the primary goal of Wilson Auto Mart, where turnover is very low.

Question 39

Studies indicate that in order for merit pay to be most effective,it should be linked to ________.

A) company profits
B) annual base salary
C) employee overtime
D) employee performance
E) awards and bonuses

Question 40

Which of the following is the primary advantage of using a combination of salary and commission as compensation for salespeople?

A) provides a guaranteed minimum salary
B) all freedom of work activities
C) facilitates territory rotation
D) completely links to performance
E) offers simple administration

Question 41

Which of the following is NOT a type of gainsharing plan?

A) Improshare
B) Lincoln
C) Scanlon
D) Rucker
E) Roth

Question 42

Tanner's employer puts a predetermined portion of profits into a trust account for Tanner's retirement.Which of the following is most likely the type of profit-sharing plan used by Tanner's employer?

A) deferred profit-sharing plan
B) Lincoln incentive system
C) Jefferson incentive system
D) cash plan
E) gainsharing plan

Question 43

The Scanlon plan includes all of the following features EXCEPT ________.

A) a philosophy of cooperation
B) competence
C) identity
D) an involvement system
E) a focus on individual achievement

Question 44

What type of profit-sharing plan involves the firm distributing total annual profits each year among employees based on their merit rating?

A) cash plan
B) Lincoln incentive system
C) Jefferson incentive system
D) deferred profit-sharing plan
E) employee stock ownership plan

Question 45

What type of profit-sharing plan involves the firm simply distributing a percentage of profits as profit shares to employees at regular intervals?

A) current profit-sharing
B) Lincoln incentive system
C) Jefferson incentive system
D) deferred profit-sharing plan
E) employee stock ownership plan

Question 46

The Scanlon plan is an early version of a ________ plan,an incentive plan that engages employees in a common effort to achieve productivity objectives.

A) performance achievement
B) golden parachute
C) gainsharing
D) restricted stock
E) variable pay

Question 47

Jack is in the process of implementing a gainsharing plan for his firm.He has already determined that the plan's objectives will be to lower labor costs.What is the next step that Jack needs to take?

A) choose specific performance measures
B) decide on a funding formula
C) decide how often to pay bonuses
D) select the form of payment
E) develop an involvement system

Question 48

Which incentive plan is based on a philosophy that managers and employees must cooperate together?

A) cash plan
B) Lincoln incentive system
C) Scanlon plan
D) deferred profit-sharing plan
E) employee stock ownership plan

Question 49

All of the following are advantages of team incentive plans EXCEPT that ________.

A) jealousy is reduced
B) wage equity is guaranteed
C) team planning is reinforced
D) problem solving is encouraged
E) collaboration is encouraged

Question 50

The first step in implementing a gainsharing plan is to ________.

A) choose specific performance measures
B) decide on a funding formula
C) decide how often to pay bonuses
D) establish general plan objectives
E) develop an involvement system

Question 51

Which profit-sharing plan provides tax advantages for employees by postponing income taxes,often until the employee retires?

A) cash plan
B) Lincoln incentive system
C) Jefferson incentive system
D) deferred profit-sharing plan
E) employee stock ownership plan

Question 52

With a ________,an executive receives units instead of shares of company stock.In the future,the executive receives cash equal to the appreciation of the units owned.

A) nonqualified stock option
B) premium priced option
C) performance achievement plan
D) phantom stock plan
E) restricted stock plan

Question 53

Heidi works for a computer firm that offers an incentive plan to its employees.Heidi's employer divides the value added for the period by total payroll expenses to determine employee bonuses.Which of the following incentive plans is most likely used by Heidi's employer?

A) employee stock ownership plan
B) Lincoln incentive system
C) Scanlon plan
D) Rucker plan
E) Improshare plan

Question 54

Which of the following best explains identity in regards to the Scanlon plan?

A) philosophy of cooperation among employees
B) clear articulation of the company mission
C) high level of competence from all employees
D) improvement suggestions from employees
E) corporate-wide benefits and savings

Question 55

With which of the following can an executive not profit until the stock makes significant gains?

A) performance share
B) indexed options
C) phantom stock
D) restricted stock
E) premium priced options

Question 56

The Lincoln incentive system is an incentive plan that ________.

A) uses a trust to hold stock in individual employee accounts and distributes it to employees upon retirement
B) engages many or all employees in a common effort to achieve a company's productivity objectives with any resulting cost-savings gains shared among employees and the company
C) contributes company shares of its own stock or cash to be used to purchase company stock to a trust established to purchase shares of the firm's stock for employees
D) provides tax advantages for employees by deferring income taxes, often until the employee retires
E) involves the firm distributing total annual profits each year among employees based on their merit rating

Question 57

Gainsharing is an incentive plan that ________.

A) uses a trust to hold stock in individual employee accounts and distributes it to employees upon retirement
B) engages employees in a common effort to achieve a company's productivity objectives with any resulting cost-savings gains shared among employees and the company
C) contributes company shares of its own stock or cash to be used to purchase company stock to a trust established to purchase shares of the firm's stock for employees
D) provides tax advantages for employees by deferring income taxes, often until the employee retires
E) involves the firm regularly distributing a percentage of profits as profit shares to employees

Question 58

Competence in the Scanlon plan refers to a focus on ________.

A) cooperation
B) corporate vision
C) employee competence
D) significant improvements
E) shared benefits

Question 59

Which of the following terms refers to plans that put some portion of the employee's weekly pay at risk,subject to the firm's meeting its financial goals?

A) at-risk variable pay plan
B) at-risk incentive plan
C) variable risk sharing plan
D) at-risk gainsharing plan
E) employee at-risk plan

Question 60

Which term refers to payments companies make in connection with a change in ownership or control of a company?

A) pension
B) golden parachute
C) retirement bonus
D) consulting fee
E) stock option

Question 61

In which of the following situations would it be LEAST appropriate to use an incentive plan?

A) Work flow is regular.
B) Delays rarely occur.
C) The job is standardized
D) Employees are unskilled but motivated.
E) A link exists between employee effort and output.

Question 62

With which type of gainsharing plan bases employee bonuses on the difference between the number of labor hours a firm should have used with the number of labor hours actually used during a specific period?

A) Lincoln
B) Rucker
C) Improshare
D) Scanlon
E) Vroom

Question 63

How often do most firms tend to compute financial performance measures used in gainsharing plans?

A) weekly
B) monthly
C) quarterly
D) bi-annually
E) annually

Question 64

What is the most common form of payment in gainsharing plans?

A) common stock
B) vacation time
C) preferred stock
D) promotions
E) cash

Question 65

Behavior modification is based on the idea that people will repeat behavior for which they are punished.

Question 66

When developing the involvement system for a gainsharing plan,which of the following is NOT a commonly used element?

A) steering committees
B) update meetings
C) employee mediations
D) suggestion systems
E) problem-solving teams

Question 67

Company-wide plans in which a corporation contributes shares of its own stock to a trust established to purchase shares of the firm's stocks for employees are known as ________.

A) cash plans
B) Lincoln incentive systems
C) Jefferson incentive systems
D) deferred profit-sharing plans
E) employee stock ownership plans

Question 68

According to Vroom's theory,if expectancy,instrumentality,or valence is equal to zero,there will be no employee motivation.

Question 69

What type of gainsharing plan determines employee bonuses by dividing payroll expenses by total sales?

A) Lincoln
B) Rucker
C) Improshare
D) Scanlon
E) Skinner

Question 70

According to Maslow's theory,a manager will not be able to motivate an employee with challenging tasks if the employee does not make enough money to pay for basic necessities.

Question 71

All of the following are essential in order for incentive plans to be effective EXCEPT ________.

A) incentives appear to be logical
B) incentives are linked to behaviors
C) rewards are attractive to employees
D) standards are clear and complete
E) employee motivation is an issue

Question 72

The work of Edward Deci suggests that managers should primarily rely on extrinsic rewards to motivate employees.

Question 73

According to Herzberg's motivation theory,good working conditions will prevent dissatisfaction but will not lead to feelings of satisfaction.

Question 74

Research indicates that employee stock ownership plans may ________.

A) encourage employees to retire too early
B) place firms at greater risk for employee lawsuits
C) increase employee commitment and motivation
D) encourage transparency within global organizations
E) improve communication between employees and employers

Question 75

Herzberg's Hygiene-Motivator theory is based on Maslow's hierarchy of needs.

Question 76

Robert Katz popularized the use of financial incentives for workers whose production exceeds some predetermined standard.

Question 77

Which of the following is the primary benefit of employee stock ownership plans?

A) Firms are able to implement the plans with minimal costs and complications.
B) Firms pay distribution taxes for employees prior to retirement.
C) Firms may borrow against employee stock held in trust.
D) Employees are able to diversify their investments.
E) Employees have voting rights in firm decisions.

Question 78

Vroom's expectancy theory observes that people will not pursue rewards that they find unattractive or where their chances of success are very low.

Question 79

In Herzberg's Hygiene-Motivator theory,working conditions are motivator factors,and challenging assignments are hygiene factors.

Question 80

Most firms link employees' pay to performance because financial incentives are extremely successful at motivating employees to perform above required standards.