Deck 1: A Road Map to Effective Compensation

Question 1

There is often one so-called best compensation system that applies to a broad spectrum of organizations.

Answer 1

False

Question 2

Evidence provided in the textbook appears to indicate a relationship between the level of stock options provided to executives and the risk those executives are prepared to undertake.

Answer 2

True

Question 3

Which statement best describes the difference between the terms "rewards" and "incentives"?

A) Rewards are given to satisfy basic human needs, while incentives are used to satisfy higher-order human needs.
B) Rewards serve to recognize valued behaviour, while incentives are intended to produce valued behaviour.
C) Rewards are job-context related, while incentives are job-content related.
D) Rewards are used to influence future performance, and incentives are given to recognize past work behaviour.

Answer 3

B

Question 4

Under a total rewards philosophy, companies should first develop an appropriate compensation strategy.

Question 5

A compensation system must be viewed in the context of the total reward system because it is the total pattern of financial and non-financial rewards that motivates employee behaviour.

Question 6

Which of the following statements is supported by evidence in the textbook?

A) Canadian firms spend 40 to 70 percent of their capital budgets on compensation.
B) Properly designed compensation systems usually promote unproductive behaviour.
C) Reward systems should be static and rarely reviewed.
D) Canadian firms spend 40 to 70 percent of their operating budgets on compensation.

Question 7

Which of the following items is considered part of a compensation system?

A) variable pay
B) flexible work schedules
C) positive organizational culture
D) work/life programs

Question 8

As a small business owner committed to the total rewards approach to compensation, what do you need to establish before you start to develop your compensation system?

A) a reward system
B) an incentive program
C) a compensation strategy
D) a reward strategy

Question 9

An effective compensation system is important to most organizations because it can mean the difference between company success and failure.

Question 10

Three of the key criteria for evaluating a compensation system are whether it promotes achievement of organizational goals, whether it is seen as equitable, and whether it promotes the full spectrum of task behaviour.

Question 11

Which of the following best explains intrinsic rewards?

A) Intrinsic rewards focus on increasing an employee's financial position.
B) Intrinsic rewards are provided by job content.
C) Intrinsic rewards provide security and employee services.
D) Intrinsic rewards relate to bonuses based on performance.

Question 12

The main similarity between extrinsic rewards and intrinsic rewards is that they both satisfy so-called higher order needs such as survival and security.

Question 13

According to the "Road Map to Effective Compensation," the first step is formulating your reward and compensation strategy.

Question 14

The main difference between a reward system and a compensation system is that a reward system rewards only good performance while a compensation system provides pay to all employees.

Question 15

An owner of an enterprise asks you to describe the major components of a compensation system. Which of the following would you exclude in your description?

A) base salary
B) performance pay linked to some organizational objectives
C) employee benefits, which may include: disability insurance, medical, and dental plans
D) flexible work schedules and some element of job autonomy

Question 16

Joe, a service manager, loves his job. He particularly appreciates the level of autonomy his job provides. From a rewards perspective, which kind of reward appears to be motivating Joe?

A) extrinsic
B) incentives
C) intrinsic
D) compensation

Question 17

The compensation system typically refers to which aspect of the reward system?

A) the mix of intrinsic and extrinsic rewards
B) the economic or monetary part
C) the entire spectrum of rewards
D) incentives

Question 18

A reward strategy is the plan for the mix of rewards to be provided to organization members along with the means through which they will be provided.

Question 19

Which of the following statements most accurately describes extrinsic rewards?

A) They focus on factors inherent in the work itself-the job content.
B) They satisfy higher-order human needs.
C) They include monetary and nonmonetary rewards and come from the job context.
D) They involve skill variety, task identity, task significance, autonomy, and feedback.

Question 20

Which statement best describes the term "reward strategy"?

A) the means through which performance bonuses are paid
B) the mix of rewards provided to organization members
C) the means for recognizing outstanding achievement
D) the means for identifying the key contextual variables for an organization

Question 21

According to the textbook, what is the primary reason for the increased usage of compensation consultants by organizations?

A) Corporations are contracting out most human resource functions.
B) Given greater standardization associated with compensation systems, it makes sense to use dedicated outside consultants.
C) The level of complexity of compensation systems has increased.
D) It is often cheaper to use to use consultants.

Question 22

You are a newly hired director of human resources for a new software company. Your CEO has asked you to provide the board of directors with recommendations relating to the company's yet-to-be-established reward system. What should you tell the board?

A) The various combinations of intrinsic and extrinsic rewards need to be considered.
B) The optimal strategy is the least expensive.
C) Like most companies in Canada, we should adopt a total compensation approach.
D) The plan for creating the compensation system is the most important aspect of the strategy.

Question 23

Which statement best describes current compensation practices and expectations related to the key criteria for evaluating the success of a compensation system?

A) It is realistic to expect that a reward system will achieve all eight of the effectiveness criteria.
B) Continuing evaluation of the effectiveness of the reward and compensation system is crucial for most organizations.
C) Successful organizations all have equitable reward systems.
D) Most firms have found the right answers to the compensation puzzle.

Question 24

What is the last step to effective compensation according to the "Road Map to Effective Compensation"?

A) developing new job descriptions and performance evaluation criteria
B) implementing, managing, and evaluating the compensation system as circumstances change
C) securing senior management approval and implementing the compensation system
D) determining the compensation mix to be used in the compensation system

Question 25

Which of the following is considered a goal of an effective reward and compensation system?

A) distributing rewards in an equal manner across the organization
B) reducing turnover to the lowest possible level
C) supporting the corporate strategy
D) decreasing overall salary levels

Question 26

Which of the following statements is most accurate regarding the reward strategy?

A) The reward system is the blueprint for creating the reward strategy.
B) Intrinsic awards alone will not motivate the needed behaviour.
C) Determining the mix of rewards to be provided is an easy process.
D) Various combinations of intrinsic and extrinsic rewards need to be considered for developing the optimal reward strategy.

Question 27

A group of unionized employees negotiating a new contract is holding out for a better indirect pay plan. What should management offer the group in order to reach an agreement?

A) better services and benefits
B) better training and development opportunities
C) pay for performance
D) a more competitive base pay

Question 28

Which of the following would be an example of an extrinsic reward?

A) interesting and meaningful work
B) pay for performance based on the number of units produced per hour
C) being able to see the company's product being used by a satisfied customer
D) work that allows for enhanced personal development

Question 29

Which of the following items is a component of the compensation strategy?

A) employee benefits
B) employment security
C) promotion criteria
D) compensation plan

Question 30

After graduation, you have been offered a position as a job analyst with a local bank. Which of the following would best describe your new job?

A) designing and implementing compensation policies
B) formulating compensation strategy and ensuring congruency with corporate objectives
C) evaluating market data from organizations of similar size and scope
D) developing job descriptions and conducting job evaluations

Question 31

You have been given the responsibility to develop an effective compensation system for your company. Which of the following should serve as your first focus?

A) understanding your organization and your people
B) formulating and determining budgets
C) designing your performance pay and indirect pay plans
D) implementing, managing, evaluating, and adapting the system

Question 32

Which of the following statements best describes the context of compensation management within a firm?

A) All organizations need a human resources department to deal with compensation issues.
B) The larger the firm, the greater the need for compensation specialists.
C) In smaller organizations, compensation consulting firms are responsible for compensation strategy.
D) Within a large firm, all managers require extensive knowledge of compensation.

Question 33

What does a firm's compensation strategy identify?

A) all of the financial and nonfinancial rewards of work
B) the total amount of cash compensation employees will receive
C) the mix of intrinsic rewards
D) the mix and total amount of base, performance, and indirect pay

Question 34

As head of the human resources department for a new company, you have been asked to formulate a compensation strategy. What do you need to determine first?

A) the role that compensation will play in the reward system
B) the correct mix of performance and base pay
C) the total amount of compensation to be provided
D) the role the reward system will play in the compensation strategy

Question 35

In large organizations, who is typically responsible for approving strategic changes to compensation strategy?

A) the head of human resources
B) the board of directors
C) the manager of compensation
D) compensation consultants

Question 36

What philosophy is the total rewards approach to compensation based on?

A) Proper incentives can change employee behaviour.
B) Intrinsic rewards are more important to people than other rewards.
C) There are many awards associated with the work environment that have value.
D) Pay is still what matters most.

Question 37

Your company is experiencing high turnover and poor work quality. Exit interviews indicate that a large percentage of employees indicate boredom as the primary cause for quitting your company. Almost 100 percent were satisfied with their compensation packages. Which of the following actions may reduce your high turnover rate?

A) providing a pension option and offering a retirement planning service
B) introducing pay-for-performance plans
C) trying to enrich the jobs to make them more interesting
D) offering dental and medical coverage

Question 38

Which of the following statements most accurately describes the optimal reward system?

A) It adds the most value to the organization after considering all its costs.
B) It maximizes opportunities for learning and development.
C) It identifies best practices.
D) It provides whatever will satisfy the employee's needs.

Question 39

Which of the following would be the best choice for a compensation system?

A) A competitive base pay and incentives are offered.
B) Employees share in the organization's profits.
C) Compensation is linked to knowledge.
D) The system is cost effective and achieves company goals.

Question 40

You have offered to your sales associate an all-expenses-paid trip for two to Australia if she doubles her annual sales volume from last year. What concept are you applying?

A) intrinsic rewards
B) extrinsic rewards
C) incentives
D) job enrichment

Question 41

Explain the difference between a "reward strategy" and a "compensation strategy."

Question 42

Explain the difference between "extrinsic" and "intrinsic" rewards. Provide examples for each type of reward.

Question 43

Explain the ways in which "direct" and "indirect" pay are similar and different to each other.

Question 44

Why would a large organization require approval by senior management and/or the board of directors for initiating strategic changes to an organization's compensation strategy?

Question 45

Identify the steps in developing an effective compensation strategy.

Question 46

What is the goal of an organization's reward and compensation system?