Deck 11: Pay and Incentive Systems

Question 1

There is a current trend away from areas where organized labor is weak and pay rates are low.

Answer 1

False

Question 2

Under the Fair Labor Standards Act,overtime pay is required for exempt as well as nonexempt jobs.

Answer 2

False

Question 3

Skill-based plans are usually applied to "white-collar" work and competencies to "blue-collar" work.

Answer 3

False

Question 4

Whether a labor market is tight or loose has a major impact on wage structures and levels.

Question 5

Different job evaluation methods yield different rank-orders of jobs,and therefore different pay structures.

Question 6

The gap between a CEO's pay and the wages of employees has narrowed in the United States.

Question 7

Wage structures tend to vary across firms to the extent that managers view any given position as more or less critical in their firms.

Question 8

All organizations must make some allowance for the trust gap in their salary programs.

Question 9

Because sign-on bonuses do not increase base salaries,the structure of differences in pay between new hires and experienced employees does not change.

Question 10

Companies view skill-and competency-based pay plans as a way to develop the critical behaviors and abilities employees need to achieve specific business results.

Question 11

Rewards bridge the gap between organizational objectives and individual expectations and aspirations.

Question 12

The market-based pay system uses a premium-price options approach for all of a firm's jobs.

Question 13

One purpose of job evaluations is to identify important characteristics of each job so that the relative worth of jobs can be determined.

Question 14

Today there is a continuing move away from policies of salary entitlement,in which inflation or seniority are the driving forces behind pay increases.

Question 15

If competitors' pay decisions determine a company's pay structure,then the level of pay or the mix of pay forms is no longer a source of potential competitive advantage.

Question 16

Advantages to pay openness policies include that it forces managers to publicly defend their pay decisions.

Question 17

Sarbanes-Oxley states that executives cannot retain bonuses or profits from selling company stock if they mislead the public about the financial security of the company.

Question 18

Middle managers may actually benefit from pay inflation among non-management employees since companies generally maintain a differential between the managers' pay and that of their highest paid subordinate.

Question 19

Internal equity is the relative size of pay differentials among different segments of the workforce.

Question 20

Good corporate citizen awards include everything in a work environment that enhances a worker's sense of self-respect and esteem by others.

Question 21

At lower levels,_______ systems almost guarantee cost control.

A)contribution-based pay
B)competency-based pay
C)skill-based pay
D)variable pay

Question 22

Premium-price options are stock options granted at a higher-than-market price so that executives will profit only after the stock has risen substantially.

Question 23

If pay systems are to accomplish the objectives set for them,ultimately they must be perceived as:

A)adequate and equitable.
B)generous and timely.
C)immediate and fair.
D)relevant and competitive.

Question 24

One downside of team incentives is that most employees do not feel that their jobs have a direct impact on profits,or at least they cannot see the link.

Question 25

All of the following are major changes in company philosophies concerning pay EXCEPT:

A)movement toward "salary entitlement" philosophy.
B)increased willingness to control payroll costs.
C)more concern with what the company can afford to pay.
D)implementation of "pay-for-performance" systems.

Question 26

Pay compression is the narrowing of the ratios of pay between jobs or pay grades in a firm's pay structure,and is related to the general problem of inflation.

Question 27

There should be a balance in pay relationships between supervisors and the highest paid subordinates reporting to them.This differential typically varies from:

A)1 to 10 percent.
B)5 to 30 percent.
C)8 to 50 percent.
D)10 to 20 percent.

Question 28

Most commonly,merit systems are applied to exempt employees in the form of temporary adjustments to their base pay.

Question 29

To be effective,organizational reward systems should provide all of the following EXCEPT:

A)a sufficient level of rewards to fulfill basic needs.
B)equity with the external labor market.
C)treatment of members of the organization in terms of organizational needs.
D)equity within the organization.

Question 30

In the 50 years since the inception of gain sharing,it has been abandoned by firms about as often as it has been retained.

Question 31

Companies providing variable pay to their best workers are 68 percent more likely than other firms to report outstanding financial performance.

Question 32

Disadvantages of teams can include competition between teams,inability for workers to see their individual contributions,and top performers who have to carry those who don't carry their fair share of the load.

Question 33

In comparing the relative emphasis Chinese and American managers place on performance versus relationships,which of the following is true?

A)When making bonus decisions,Chinese managers tend to place less emphasis on employees' work performance than do American managers.
B)When making decisions about nonmonetary recognition of employees,American managers place more emphasis on employees' relationships with coworkers than do their Chinese counterparts.
C)American managers tend to give larger bonuses to employees with greater personal needs.
D)Chinese managers tend not to take personal needs into consideration when making bonus decisions.

Question 34

Incentives oriented toward individuals are becoming less popular as work increasingly becomes technical in nature.

Question 35

It is true of all incentive plans that none will work well except in a climate of trustworthy labor-management relations and sound human resource management practices.

Question 36

In the United States,about 90 percent of large and medium-sized companies now offer some kind of _____ such as profit-sharing and bonus awards.

A)fluctuating incentives
B)variable pay
C)corporate inducements
D)legal kickbacks

Question 37

Which of the following is NOT considered a permanent cutback?

A)Reducing the coverage of medical plans
B)Asking employees to shorten their vacations
C)Pay freezes
D)Offering executives early retirement

Question 38

Regardless of the exact form of rebalancing,stock options will continue to be the focal point of executive compensation.

Question 39

At a broad level,a(n)_____ includes anything an employee values and desires that an employer is able and willing to offer in exchange for employee contributions.

A)competency-based pay system
B)employee stock ownership plan
C)organizational reward system
D)merit-pay method

Question 40

A(n)___________ includes anything an employee values and desires that an employer is able and willing to offer in exchange for employee contributions.

A)nonfinancial system
B)corporate compensation system
C)on the spot award
D)organizational reward system.

Question 41

Common job characteristics that an organization is willing to pay for,such as skill,effort,responsibility,and working conditions are termed:

A)workload standards.
B)benchmark jobs.
C)compensable factors.
D)ESOPs.

Question 42

Alternatives to pay systems based on job evaluation include all of the following EXCEPT:

A)education-based pay.
B)skill-based pay.
C)market-based pay.
D)knowledge-based pay.

Question 43

Title VII of the _____________Act states that top executives in companies receiving government support can retract bonuses,retention awards,or incentives paid to the top five senior executive officers or the next 20 most highly compensated employees based on corporate information that is later found to be inaccurate.

A)Equal Pay
B)SOX
C)American Recovery and Reinvestment Act
D)Pay for Performance

Question 44

Which type of pay structure is feasible if all jobs are benchmark jobs and direct matches can be found in the market?

A)Skill-based pay system
B)Competency-based pay system
C)Market-based pay system
D)Gainsharing

Question 45

Open pay systems tend to work best when:

A)there is a union to negotiate pay increases.
B)business strategy matches the organizational development stage.
C)job performance can be measured objectively.
D)effort and performance are related closely over a long time span.

Question 46

Pay practices must be designed not only to attract and retain employees but also to ensure that _____ do not become excessive in relation to those of competing employers.

A)employee stock ownership plans
B)labor costs
C)merit-pay increases
D)flexible benefit packages

Question 47

The process of ranking jobs in terms of their relative worth to a firm is called:

A)job evaluation.
B)job analysis.
C)pay structure.
D)pay review.

Question 48

The broad objective in developing pay systems is to assign a monetary value to each job in the organization and an orderly procedure for _____ the base rate.

A)evaluating
B)maintaining
C)minimizing
D)increasing

Question 49

The efficiency wage hypothesis holds that:

A)there is payment of wage premiums by some employers to attract the best talent available and to enhance productivity in order to offset any increase in labor costs.
B)unless an employee can produce a value equal to the value received in wages,it will not be worthwhile to hire that worker.
C)there is increased willingness to reduce the size of the workforce,to outsource jobs overseas,and to restrict pay to control the costs of wages,salaries,and benefits.
D)there is less concern with pay position relative to that of competitors and more concern with what the company can afforD.

Question 50

Failure of organizations to address _____ may cause long-serving employees to rethink their commitment to a company they think does not value or reward loyalty.

A)dependability issues
B)annuity problems
C)productivity problems
D)compression issues

Question 51

The Equal Pay Act requires:

A)equal pay for men and women.
B)pay discrimination cases to be filed within 180 days.
C)equal pay for men and women doing substantially similar work.
D)employers involved in interstate commerce or in the production of goods for interstate commerce to pay men and women the same.

Question 52

Sarbanes-Oxley requires that

A)Companies can seek replayment for incentives paid that were later found to be materially inaccurate.
B)the Securities and Exchange Commission meet annually to discuss bonuses
C)the minimum wage change each year
D)executives cannot retain bonuses or profits from selling company stock if they mislead the public about the financial health of the company.

Question 53

In the United States,salary discussions among employees are protected under:

A)the Equal Pay Act.
B)the National Labor Relations Act.
C)Salary.com.
D)the Fair Labor Standards Act.

Question 54

_________revenue theory in labor economics holds that unless an employee can produce a value equal to the value of received wages,it will not be worthwhile to hire that worker.

A)Continuous
B)Variable
C)Marginal
D)Integrating

Question 55

Which act states executives cannot retain bonuses or profits from selling company stock if they mislead the public about the financial health of the company?

A)Sarbanes-Oxley Act
B)Defense Authorization Act
C)Administrative Procedure Act
D)Contract Work Hours and Safety Standards Act

Question 56

Which theory in labor economics holds that unless an employee can produce a value equal to the value received in wages,it will not be worthwhile to hire that worker?

A)Theory of value
B)Credibility theory
C)Tournament theory
D)Marginal revenue theory

Question 57

________must be designed not only to attract and retain employees but also to ensure labor costs do not become excessive in relation to those of competing employers.

A)Workload standards
B)Internal equity
C)Pay practices
D)Survey data

Question 58

Which of the following laws established the first national minimum wage?

A)Davis-Bacon Act
B)Fair Labor Standards Act
C)Walsh-Healy Act
D)McNamara-O'Hara Service Contract Act

Question 59

A narrowing of the ratios of pay between jobs or pay grades in a firm's pay structure is:

A)pay secrecy.
B)pay compression.
C)pay security.
D)pay inequality.

Question 60

The final step in attaching dollar values to jobs using the point method is to establish:

A)the relationship of points to a salary survey.
B)job descriptions.
C)the relative worth of jobs.
D)pay grades.

Question 61

Write a short note on the job-evaluation process.

Question 62

Which of the following is NOT another name for gain sharing?

A)The Scanlon plan
B)The Rucker plan
C)Control-based compensation
D)Improshare

Question 63

Merit pay systems often fail for all but which of the following reasons?

A)Interference from union contracts.
B)The annuity problem
C)Link between performance and rewards is too strong.
D)Incentive value of the reward offered is too low.

Question 64

Properly designed incentive programs work because they are based on what two well-accepted psychological principles?

Question 65

What are the three elements of the ARM concept?

Question 66

One solution to the problem of pay compression is to institute:

A)equity adjustments.
B)merit-pay increases.
C)compensation concentration.
D)salary caps.

Question 67

Name at least three of the four basic tools needed to develop a pay system.

Question 68

What are the two key factors in the product and services market that affect the ability of a firm to change the prices of its products or services?

Question 69

What is the biggest hurdle to overcome in pay-for-performance plans?

Question 70

What are some of the major changes that are occurring in terms of overall philosophy of compensation administration?

Question 71

ESOP satisfaction tends to be highest in companies where:

A)the company makes employees work harder.
B)the company makes relatively large annual contributions to the plan.
C)there is an increase day-to-day work satisfaction.
D)management does not share power or decision making.

Question 72

One way to classify performance incentives is according to the _____ targeted.

A)audience
B)level of performance
C)budget
D)benefit plan

Question 73

Gain sharing plans consist of all except which of the following elements?

A)An internal equity
B)A philosophy of cooperation
C)A financial bonus
D)An involvement system

Question 74

An employer awarding an employee's exceptional performance with a small,one-time bonus shortly after the noteworthy actions is a:

A)lump-sum bonus.
B)spot bonus.
C)surprise bonus.
D)competency-based bonus.

Question 75

Compare and contrast market-based pay and competency-based pay.

Question 76

What steps can companies take to sew corporate top and bottom back together?

Question 77

Team incentives provide an opportunity for each team member to receive a bonus based on the:

A)net profit of the corporation.
B)discretion of the team supervisor.
C)terms of the collective bargaining unit.
D)output of the team as a whole.

Question 78

The fact that past merit payments are incorporated into an individual's base salary allowing formerly productive employees to slack off is known as:

A)merit allowance.
B)a disincentive.
C)a union contract.
D)the annuity problem.

Question 79

________________ incentive plans encourage the efficient use ofexisting assets.

A)Annual or short term
B)Long term
C)Pre-tax dollars.
D)External equity.

Question 80

What steps must be taken to insure that merit pay plans will be effective?