Deck 12: Pay for Performance and Financial Incentives

Question 1

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

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

Answer 1

A
Explanation: A)Instrumentality is the perceived connection (if any)between successful performance and actually obtaining the rewards.

Question 2

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

A)intrinsic needs
B)internalization
C)instrumentality
D)incentives

Answer 2

C
Explanation: C)In Vroom's theory, motivation is thus a product of three things: ?Motivation = (E × I × V), where, of course, E represents expectancy, I instrumentality, ?and V valence. If E or I or V is zero or inconsequential, there will be no motivation.

Question 3

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

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

Answer 3

B
Explanation: B)Frederick Taylor spearheaded the scientific management movement, a management approach that emphasized improving work methods through observation and analysis. Taylor also popularized the use of incentive pay as a way to reward employees who produced over standard.

Question 4

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

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

Question 5

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)provide training and support to employees
D)boost the confidence level of employees

Question 6

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)work shifting
D)group logrolling

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

Question 8

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

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

Question 9

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

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

Question 10

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

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

Question 11

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.

Question 12

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

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

Question 13

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

Question 14

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

A)existence
B)expectancy
C)esteem
D)energy

Question 15

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 allowances
D)financial incentives

Question 16

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)Rebecca's bonus will satisfy her higher-level needs and increase her motivation.
D)Rebecca will feel inadequate because the bonus fails to address hygiene factors.

Question 17

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

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

Question 18

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

A)Behavior that leads to rewards tends to be repeated.
B)Properly scheduled rewards can be used to encourage some behaviors.
C)Properly scheduled punishments can be used to minimize some behaviors.
D)Employees must understand the link between rewards, punishments, and behavior.

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

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

Question 26

Briefly describe Vroom's theory and its three components. How can managers use Vroom's theory as they develop effective incentive plans?

Question 27

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

Question 28

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

Question 29

According to Herzberg's theory, a manager would be able to motivate an employee with challenging tasks.

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

Question 31

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

Question 32

If an employee earns an incentive in the form of a prize or cash award, the value of the award is not included when calculating the employee's overtime pay.

Question 33

Behavior modification principles can be useful to managers who seek to change employee behavior through rewards or punishments linked to performance.

Question 34

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

Question 35

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.

Question 36

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

Question 37

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

Question 38

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

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

Question 39

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 40

Herzberg's Hygiene-Motivator theory is based on a needs theory.

Question 41

All merit raises become part of an employee's base salary.

Question 42

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 types of merit raises are effective for high-performing managers?
C)What organization-wide incentive plans are used by other manufacturing firms?
D)What is the connection between merit pay increases and employee productivity?

Question 43

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)Ryobi recently began using an enterprise incentive management system to automate compensation.
D)The commission percentage for Ryobi salespeople is based on the ability to meet monthly quotas.

Question 44

The complicated nature of piecework makes it an unpopular individual incentive plan among employers.

Question 45

Employers may award merit pay as traditional merit increases that increase an employee's base pay or as a lump sum merit raise. Explain the pros and cons of these two choices.

Question 46

________ is a program where informal manager-employee exchanges such as praise, approval, or expressions of appreciation are given for a job well done.

A)Merit pay
B)A social recognition program
C)Performance feedback
D)Variable pay

Question 47

The standard hour plan is like the piece rate plan except instead of getting a rate per piece, the employee gets a premium equal to the percent by which his or her performance exceeds the standard.

Question 48

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

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

Question 49

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 managers have not received significant training about conducting performance appraisals.
C)Ryobi managers have noticed significant productivity improvements among employees who receive merit raises.
D)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 50

Dual-career ladders are effective tools for managing the professional pay of working mothers who desire a work-life balance.

Question 51

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

Question 52

Which of the following was shown by the Harvard Business School to have the greatest impact on employee engagement?

A)feedback
B)job design
C)responsibility
D)challenging work

Question 53

Employers are shifting away from piecework in many industries due to the incentive plan's poor reputation.

Question 54

In order for a firm to have an effective incentive plan, there should be a clear relationship between employee effort and quantity or quality of output.

Question 55

Sometimes managers need to reinforce positive behavior but cannot turn to a cash incentive to do so. Identify some positive reinforcement rewards that a manager could use on a day-to-day basis to reward employees.

Question 56

According to the FLSA, merit pay can only be given to exempt, nonmanagement employees at a company.

Question 57

Explain the advantages and disadvantages of using piecework as a pay plan.

Question 58

With a standard hour plan, employers do not need to recalculate piece rates when changes are made to the hourly pay rate.

Question 59

Lump sum merit increases can be a more significant motivator than traditional merit pay because the amount seems greater when received all at once.

Question 60

Enterprise incentive management systems enable firms to ________.

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

Question 61

What is the Sarbanes-Oxley Act? How does it affect incentive plans? Do you support the legislation? Why or why not?

Question 62

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)stock option

Question 63

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

Question 64

You are the CEO of Blue Bay Motor Boat Company, a mid-size firm that manufactures speed boats. What incentive plan would you implement for the firm's engineers? What incentive plan would you implement for the firm's managers? Explain why.

Question 65

What percentage of employers track sales performance using spreadsheets?

A)15%
B)35%
C)60%
D)85%

Question 66

Experts assert that stock options encourage executives to take dangerous risks and are to blame for many corporate scandals.

Question 67

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

Question 68

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)allows freedom to choose own work activities
C)completely links to performance
D)offers simple administration

Question 69

Cash, stock, stock options, stock appreciation rights, and phantom stock are known as "golden handcuffs" because they are long-term incentives for executives.

Question 70

The most common eligibility determinant for bonuses is:

A)salary grade
B)job title
C)officer status
D)base salary

Question 71

You are the manager of large used car retailer, and sales are sluggish. What incentive plan would be best for motivating your sales team?

Question 72

Golden parachutes are large payments companies make to executives in connection with a change in company ownership or control.

Question 73

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)phantom stock plan
D)restricted stock plan

Question 74

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 a sales force that has a significant desire for a floor to their earnings.
C)Each Wilson Auto Mart salesperson 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.

Question 75

Annual bonus plans are long-term incentives, and stock options are short-term incentives.

Question 76

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

Question 77

Straight commission plans are attractive to high-performing salespeople.

Question 78

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

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

Question 79

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 hard to switch territories
D)depends on annual corporate profits

Question 80

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