Deck 5: Performance Pay Choices

Question 1

All things being equal,goal-sharing programs are thought to be less motivational than gain-sharing programs.

Answer 1

False

Question 2

John's employer decides to provide him with regular advances against his future commissions as a way to smooth out John's income.Which term best describes the pay plan used by John's employer?

A) sales stipend system
B) draw system
C) pay advance system
D) security income

Answer 2

B

Question 3

John works for an aerospace company selling satellites to communication companies.He receives a set percentage of the overall sale price of the satellite in the form of compensation.He does not receive a fixed salary or benefits.Which term best describes John's compensation plan?

A) hybrid commission plan
B) leverage commission plan
C) percentage commission plan
D) straight commission plan

Answer 3

D

Question 4

As a human resource specialist,you have been asked by your organization to lead a discussion on the merits of using internal promotions as a main reward mechanism.Which point would you most likely NOT raise?

A) They are an expensive process,as promotions are typically associated with pay increases.
B) They often carry both intrinsic and extrinsic rewards.
C) They recognize contributions made by strong performers.
D) They are often seen as a key motivation tool for employees.

Question 5

Employee stock plans are often used by companies using a classical management strategy

Question 6

Profit-sharing plans can reduce the need for employee supervision.

Question 7

As the owner of a real estate firm with multi-office operations,you provide a bonus to all sales personnel in the highest-producing office each month.What type of performance pay plan are you using?

A) goal-sharing
B) competitive bonus
C) pooled performance
D) group commissions

Question 8

The three main types of employee stock plans are: stock bonus plans,stock purchase plans,and stock option plans.

Question 9

Unions generally oppose profit-sharing plans on the basis of potential manipulation of profits by management and the uncertainty associated with profit sharing when compared with base pay.

Question 10

In the public sector,what is one factor that should be considered when designing merit pay?

A) role of consultants
B) role of unions
C) pay mix with profit sharing
D) pay mix with stock options

Question 11

Piece rates have experienced high discontinuation rates.

Question 12

Which statement best explains why,despite their motivational potential,piece rate systems often do not motivate maximum effort?

A) Work group norms define acceptable rates of production.
B) Piece rates are used in conjunction with base pay.
C) Workers may be tempted to cut corners on quality.
D) Workers are more concerned with production than safety.

Question 13

Which of the following is NOT a suitable condition for merit pay?

A) Individual performance varies.
B) Performance is not controllable by the individual.
C) Individual performance can be separated out.
D) Undesirable side effects are readily manageable.

Question 14

Sales commissions are usually appropriate in situations where individual sales people exercise significant independence.

Question 15

Which of the following is an organizational-level pay performance plan?

A) goal-sharing plans
B) merit-pay plans
C) special-purpose incentive pay plans
D) profit-sharing plans

Question 16

The central issue associated with attendance incentives is the notion that these programs treat only the symptoms while ignoring the underlying issues that cause absenteeism in the first place.

Question 17

One of the problems with gain-sharing plans is that they do not encourage employee participation.

Question 18

The current distribution profit-sharing plan is sometimes called a "cash plan."

Question 19

From an employer's point of view,what is the most attractive feature of properly designed gain-sharing plans?

A) The plans are self-funding.
B) Positive work group norms develop.
C) The need for supervisory control is reduced.
D) Employees monitor each other's performance.

Question 20

What do employees receive under an employee stock bonus plan?

A) shares at no cost to themselves
B) cash value of phantom shares
C) a bonus equivalent to the increase in their share value
D) free financial advice on stocks

Question 21

Your employer is considering tying the bonus pool to the firm's profitability and then allocating this amount to employees based on individual merit.With reference to expectancy theory,which component of the merit system will be weakened and thus make it less motivational for you as an employee?

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

Question 22

What is a key difference between gain-sharing and organizational performance pay plans?

A) Unlike organizational level plans,gain sharing can be applied to not-for-profit and government organizations.
B) Gain sharing results in more pay for employees.
C) Unions support organizational level pay plans but not gain sharing.
D) There are more free riders in gain-sharing plans.

Question 23

What is a key advantage of piece rate pay systems?

A) They reduce the need for external control of employees through supervision.
B) They create team work.
C) They link pay to group effort.
D) They encourage "rate busters."

Question 24

Your CEO is concerned that employees are not saving enough for their retirement.At the same,the CEO wants to have some of the company's profits shared with all employees.To address these issues,your CEO asks you,a human resource compensation specialist,to recommend the most appropriate profit-sharing plan to address this retirement issue.Which profit-sharing plan would you recommend?

A) deferred
B) combination
C) current distribution
D) cash plan

Question 25

Which of the following is normally seen as an advantage associated with long-term incentives plans?

A) They may encourage a better understanding of the business.
B) They tie rewards to the company's ability to pay.
C) They usually dilute shareholder equity for existing shareholders.
D) Goals are easy to determine,particularly in dynamic industries.

Question 26

What is the most common form of performance pay used by medium to large Canadian firms?

A) merit raises
B) profit sharing
C) merit bonuses
D) commissions

Question 27

Which characteristic of profit-sharing plans may be viewed as negative from the perspective of an employer?

A) They align employee and employer interests.
B) They eliminate the "free rider" principle by holding everyone accountable.
C) They are more complex than gain-sharing plans.
D) They require the sharing of potentially confidential information with employees.

Question 28

Which plans are set up so that a payout is contingent on the achievement of three- to five-year performance goals?

A) pension plans
B) long-term incentives
C) deferred profit-sharing plans
D) goal-sharing plans

Question 29

One of the problems with merit raises is the risk of providing a long-term future reward for a short-term past performance.What is one way to address this problem while maintaining the performance appraisal system?

A) Replace merit raises with merit bonuses.
B) Use stock options instead of merit raises.
C) Use a team to assess performance.
D) Outsource merit systems.

Question 30

Which of the following is a group level organizational pay performance system?

A) gain sharing
B) piece rates
C) merit raises
D) commissions

Question 31

Martin,the HR Manager,bought 1000 shares in his company at a price that was a little less than market prices.What type of stock plan is this?

A) stock option
B) stock bonus
C) share purchase
D) market share

Question 32

Which are the main types of profit sharing plans?

A) current assessment plan,deferred plan,and blended plan
B) deferred plan,cash plan,and group plan
C) combination plan,deferred plan,and current distribution plan
D) current distribution plan,combination plan,and employee plan

Question 33

An automotive shop wants to reward employees for demonstrating creative customer service that leads to repeat business.A particular employee received a 10 percent bonus for suggesting that the company contact customers 24 hours after repairs to ensure customers are satisfied.What type of incentive would be the most appropriate in this scenario?

A) merit-raise plans
B) goal-sharing plans
C) gain-sharing plans
D) special-purpose plans

Question 34

According to the textbook,what is the main drawback associated with attendance plans?

A) There are costs associated with administering the program.
B) Both intended and unintended behaviours are not easy to observe.
C) It is difficult to deal with the so-called "legitimate" absences.
D) They do not deal with the underlying cause of the issue.

Question 35

Which statement best describes how North American employees view merit raises?

A) They are viewed as not promoting employee-employer relationships.
B) They are viewed with significant scepticism by employees.
C) They are not viewed in a positive light because of the objective nature of performance reviews.
D) They are viewed in a positive light by unionized employees.

Question 36

In what way are piece rates and commissions similar to each other?

A) Employees don't have to worry about working themselves out of a job.
B) They reduce the need for external control of employees through supervision.
C) Both types are commonly used in conjunction with base pay.
D) Both are popular systems widely used in the service sector.

Question 37

Which type of selling requires the most initiative on the part of the sales representative?

A) maintenance
B) conversion
C) leverage
D) new market

Question 38

A publicly traded Canadian corporation provides employees with one year of continuous service and the opportunity to place 6% of their pre-tax income in a plan that may be invested in the company's stock.Furthermore,the company matches the shares by 50% up to a limit of 4% of the employees' pre-tax income.From the perspective of the employee,what are the potential drawbacks of participating in this program?

A) Administrative costs associated with these plans are normally very high.
B) It is extremely difficult for an employee to determine the performance of their stock.
C) They pose too much of a tax burden.
D) If the company does poorly,your job and savings may be at risk.

Question 39

Which of the following would NOT be an ideal scenario in which to consider using a piece rate plan?

A) Quality standards can be monitored effectively.
B) Significant teamwork is needed to complete a particular task.
C) Each unit of production can be easily measured.
D) Tasks tend to be fairly static over time.

Question 40

You work for a company that assembles plastic toys.Generally speaking,employees working at similar assembly plants receive $15.00 per hour.Internal corporate data indicate that the average worker should be able to assemble 20 toys per hour.Your organization has made a strategic decision to pay assembly line workers on the basis of their output.What is the piece rate you are contemplating paying your assembly line workers?

A) $300.00 per day
B) $1.33 per toy
C) $0.75 per toy
D) $150.00 per day

Question 41

What is the rationale that makes employee stock plans such a "natural fit" with organizations using a high-involvement management strategy?

Question 42

Explain the difference between goal-sharing and gain-sharing plans.

Question 43

There are three types of profit-sharing plans discussed in the textbook.Identify and briefly explain each of them.

Question 44

Identify and briefly explain the nature of individual performance pay plans.

Question 45

Identify and briefly define each of the three types of employee stock plans.

Question 46

Discuss the nature of suggestion systems and some of the problems you need to be aware of.