Deck 10: Pay-For-Performance: Incentive Rewards

Question 1

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

Answer 1

True

Question 2

Fixed pay is more flexible than variable pay.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

Generally,a bonus plan does NOT become part of base pay.

Question 6

Under a differential piece rate plan,employees whose performance (i.e. ,production)exceeds the standard amount of output receive a higher rate for all of their work than the rate paid to those who have not exceeded the standard amount.

Question 7

Organizational goals can impact choice of incentive plans.

Question 8

Incentive plans based on productivity can reduce labor costs.

Question 9

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

Question 10

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

Question 11

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

Question 12

For incentive plans to be successful,one of the most critical requirements is that managers be willing to grant incentives based on differences in individuals,teams,or organizational criteria.

Question 13

Differential piece rate plans guarantee employees at least a base pay.

Question 14

Employees receive a specified payment for each unit produced under a straight piecework program.

Question 15

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

Question 16

The performance "threshold" in incentive plans is the name given to the amount of the award.

Question 17

Piecework may be inappropriate where technology changes are frequent.

Question 18

Meshing compensation and organizational objectives helps employees assume ownership of their jobs,improve effort,and improve performance.

Question 19

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

Question 20

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

Question 21

Generally,ESOPs are more likely to serve their intended purposes in privately held
companies than in publicly held ones.

Question 22

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

Question 23

Standard hour plans are popular in service departments in automobile dealerships.

Question 24

Under an employee stock ownership plan,employees do not actually buy shares in an ESOP.

Question 25

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

Question 26

Spot bonuses are usually provided for some employee effort that is not directly tied to an established performance standard.

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

Under a straight commission plan,compensation is based entirely on a percentage of sales.

Question 32

Research clearly shows that noncash incentive awards are most effective as motivators when the award is combined with a meaningful employee recognition program.

Question 33

Employees may not believe that their compensation is tied to effort and performance and may not be able to differentiate between merit pay and other types of pay increases.

Question 34

Under a straight commission plan sales people may be allowed a salary draw.

Question 35

Straight commission plans may induce salespeople to grant price concessions.

Question 36

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

Question 37

Sales incentives can be affected by external factors beyond the salespersons control.

Question 38

Merit raises may be perpetuated year after year even if performance declines.

Question 39

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

Question 40

A bonus is supplemental to base wages.

Question 41

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

Question 42

Improshare plans promote interaction and support between management and employees.

Question 43

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

Question 44

Gainsharing plans are designed to increase employee job satisfaction and improve customer awareness.

Question 45

Compensation committees justify large executive salaries and bonuses in part because good executive talent is in high demand.

Question 46

Because profit-sharing plans often fail to pay off for several years in a row,they can have limited motivational value.

Question 47

The idea behind the Scanlon Plan is that employees should not only offer ideas to improve productivity,but should also be rewarded for those ideas.

Question 48

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

Question 49

By using ESOPs,employers can provide retirement benefits for their employees at a relatively low cost.

Question 50

Perquisites are special benefits given to executive employees.

Question 51

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

Question 52

Stock options have become popular in service organizations,but have lost favor in manufacturing firms.

Question 53

A major criticism of short-term incentives for executives is that they place too much emphasis on short-term performance,which may lead to neglect of longer-term considerations such as research and development.

Question 54

Team bonuses may be paid out equally to each team member,in proportion to their base pay,or in proportion to their relative contribution to the team.

Question 55

Because of failing popularity and media scandal,most experts advocate abolition of stock options.

Question 56

The incentive payout under the Scanlon Plan is based upon increases in the sales volume of the organization's products.

Question 57

Employers use stock ownership incentive plans to increase employee "ownership" in the company.

Question 58

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

Question 59

Enterprise incentive plans allow all organizational members to participate in the plan's payout.

Question 60

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

Question 61

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 62

Employees are comfortable with ESOPs because the federally established Pension Benefit Guaranty Corporation guarantees them.

Question 63

The performance threshold in incentive pay programs is:

A) piecework
B) a minimum level an employee must reach in order to qualify for variable pay
C) an organizational objective that signifies profitability
D) an entitlement program

Question 64

Enterprise incentive plans include:

A) Scanlon Plan
B) Rucker Plan
C) Stock options
D) Sales incentives

Question 65

The standard time for producing one unit of work in a job paying $12.75 per hour was set at twelve minutes.The piece rate would be ____ per unit

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

Question 66

A study on bonus vs.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

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) Incentive payouts are fixed costs linked to the achievement of results.
D) Incentives are a means to reward or attract top performers when salary budgets are low.

Question 68

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

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

Question 69

Enterprise incentive plans include:

A) Scanlon plans
B) stock options
C) executive incentive plans
D) bonuses

Question 70

When employees receive a higher rate of pay for all of their work if production exceeds a standard level of output,they are working under which incentive plan?

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

Question 71

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

Question 72

Rate busting refers to:

A) increased productivity
B) an increase in output that results in the disapproval of fellow employees
C) setting incentive performance standards
D) decreased productivity

Question 73

A study of 20,000 employees found that ____ of "high potential" employees planned to leave their company by the end of 2010 due to perceived pay inequity.

A) 27 percent
B) 38 percent
C) 47 percent
D) 58 percent

Question 74

One word,_____,describes the design of individual incentive plans

A) motivation
B) comprehensiveness
C) flexibility
D) consistency

Question 75

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.Incentive programs should seem fair to employees.
C) Payout formulas should be technically detailed,quantitative and extremely thorough to prove that management took significant effort to create the plan
D) Establish a clear link between performance and payout.

Question 76

Studies have shown that variable pay plans may not achieve their proposed objectives or lead to organizational improvements due to each of the following,EXCEPT:

A) incentive plans sometimes fail to satisfy employee expectations for pay gains
B) taxes are often a demotivator
C) management may have failed to give adequate attention to the design and implementation of the plan
D) employees may have little ability to affect performance standards

Question 77

More than _____ of companies globally are offering variable pay programs.

A) 20 percent
B) 40 percent
C) 60 percent
D) 80 percent

Question 78

When employees receive a certain rate for each unit produced,they are working under which incentive plan?

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

Question 79

Contemporary reasons given by organizations for implementing incentive plans are:

A) to improve or maintain high levels of productivity.
B) to focus employee efforts on specific performance targets.
C) to link compensation rewards to the achievement of results.
D) all of the above.

Question 80

Group incentive plans include:

A) Standard hour plan
B) Improshare
C) Stock options
D) Sales incentives