Deck 12: Pay-For-Performance and Financial Incentives

Question 1

What percentage of total pay-related spending is on variable-pay related expenses?

A) 5
B) 9
C) 3
D) 11
E) 17

Answer 1

D

Question 2

What is the fundamental premise of variable pay plans?

A) Workers should only be paid for the work they complete.
B) Top performers must get top pay to secure their commitment.
C) Create incentive for commission paid workers to maximize their efforts.
D) Enable the organization to reduce labour costs when profits decline.
E) Accommodative the different needs of workers.

Answer 2

B

Question 3

What motivation is derived from the pleasure someone gets from doing the job or task?

A) Hygiene motivation
B) Intrinsic motivation
C) Extrinsic motivation
D) Psychological motivation
E) High-level motivation

Answer 3

B

Question 4

According to Frederick Herzberg what kind of factor is safety?

A) Hygiene
B) Motivating
C) High-level
D) Basic
E) Premium

Question 5

Accurate ________ are a precondition for effective variable pay plans.

A) job evaluation
B) job specifications
C) performance appraisals
D) salary curves
E) job descriptions

Question 6

Which psychologist warned that too much extrinsic rewards could result in demotivation?

A) Edward Deci
B) Frederick Herzberg
C) Frederick Taylor
D) Victor Vroom
E) Douglas McGregor

Question 7

Today, any plan that ties pay to productivity or profitability is called

A) competency-based pay.
B) piecework pay.
C) variable pay.
D) pay-for-performance.
E) fixed pay.

Question 8

What is Victor Vroom's term for the perceived value a person attaches to the reward?

A) Motivation
B) Valence
C) Hygiene
D) Expectancy
E) Instrumentality

Question 9

Amy received a salary increase based on her individual performance as a collections clerk over the past year. Which type of compensation did Amy receive?

A) Individual increases
B) Individual incentives
C) Special awards
D) Individual bonuses
E) Merit pay

Question 10

What does Frederick Herzberg call factors that satisfy lower level needs?

A) Hygienes
B) Satisfiers
C) Motivators
D) Basics
E) Incentives

Question 11

Which type of incentive plan is an organization-wide pay plan designed to reward employees for improvements in organizational productivity?

A) A group incentive program
B) Variable pay
C) A profit-sharing plan
D) Performance bonus plan
E) A gainsharing plan

Question 12

What is compensation that is independent of the performance level of the individual, group, or organization?

A) Competency-based pay
B) Piecework pay
C) Variable pay
D) Pay-for-performance
E) Fixed pay

Question 13

What is Victor Vroom's term for when a worker believes his or her effort will lead to performance?

A) Motivation
B) Valence
C) Hygiene
D) Expectancy
E) Instrumentality

Question 14

Amy is part of a team of four software developers. Upon completion of a major client project, she and each of her team members received a set amount in addition to their base salary. What is this an example of?

A) Group incentive program
B) Gain-sharing program
C) Individual incentive plan
D) Spot bonus plan
E) Profit-sharing plan

Question 15

What is Victor Vroom's term for the perceived relationship between successful performance and obtaining the reward?

A) Motivation
B) Valence
C) Hygiene
D) Expectancy
E) Instrumentality

Question 16

According to Frederick Herzberg what kind of factor is salary?

A) Hygiene
B) Motivating
C) High-level
D) Basic
E) Premium

Question 17

Traditional merit pay plans have which of the following characteristics?

A) A merit raise is usually based on individual performance.
B) A merit raise is usually based on corporate performance.
C) A merit raise is usually based exclusively on group performance.
D) A merit raise is based on overall level of company profits.
E) A merit raise is usually based on individual performance only.

Question 18

Paula reviews her company's financial reports to ensure revenues exceed expenses before authorizing additional pay beyond base salaries. What is this an example of?

A) Group incentive plan
B) Semi-variable incentive plan
C) Individual incentive plan
D) Profit-sharing plan
E) Gainsharing plan

Question 19

An important prerequisite for an effective variable pay plan is referred to as "line of sight." What does this refer to with respect to the employee?

A) Relate daily work to compensation for continual motivation.
B) Relate daily work to the achievement of personal needs.
C) Relate daily work to the achievement of overall corporate goals.
D) Relate daily work to how overall society is impacted.
E) Relate daily work to other employees efforts to ensure equity is achieved.

Question 20

The term merit pay can apply to incentive raises given to any employees, but which employees is it most often related to?

A) Salespeople
B) White-collar employees
C) Contract workers
D) Blue-collar employees
E) Part time employees

Question 21

Which plan rewards a worker by a premium that equals the percent by which his or her performance is above standard?

A) The differential piece-rate plan
B) Gainsharing plan
C) The percent incentive plan
D) The premium plan
E) The guaranteed piecework plan

Question 22

The chief disadvantage of group plans is that

A) each worker's rewards are no longer based just on his/her own efforts.
B) a group incentive is problematic when conflict arises between group members.
C) a group incentive may not improve importance.
D) some members let others take on the burden of work.
E) the group is as strong as its weakest worker.

Question 23

To determine eligibility in a short-term incentive program, a job-by-job review is conducted to identify the key jobs (typically of line jobs) that have measurable impact on profitability. This is called the criterion of

A) salary grade.
B) position level.
C) key position.
D) salary level.
E) professional membership.

Question 24

In some long-term incentive plans, shares are awarded without cost to the executive, but forfeited if the executive leaves before a vesting period. What are these plans are called?

A) Stock appreciation rights plans
B) Restricted share unit plans
C) Book value plans
D) Stock options
E) Phantom stock plans

Question 25

What is a non-deductible formula as it relates to incentives?

A) Compensation paid over a threshold amount
B) The key formula incorporating years of service and value to the company
C) The fund that begins to accumulate after a specified level of earnings
D) A straight percentage used to create a short-term incentive fund
E) A long-term incentive that pays out on a straight-line basis with no deductible

Question 26

One drawback to the split-award approach is that it pays too much to a marginal performer. What is one way to get around this problem?

A) Lump-sum bonus method
B) Individual award system
C) Group incentive plan
D) Individual bonus method
E) Multiplier method

Question 27

Under this pay system, each worker receives the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour. This system is known as a

A) process piecework plan.
B) straight piecework plan.
C) gainsharing piecework plan.
D) guaranteed piecework plan.
E) differential piecework plan.

Question 28

Which of the following are criteria to become eligible for a short-term incentive program?

A) Key position level, professional membership, salary grade
B) Length of service, key position, professional membership
C) Key position, salary grade, length of service
D) Salary grade, professional membership, and salary level
E) Key position, salary level, and salary grade

Question 29

For short term incentives, what does the term fund size refer to?

A) The amount each employee will receive from productivity gains
B) The total amount of bonus money that will be available to be paid out
C) The percentage of the company's net income to be paid out
D) The incentive bonus amount when targets are exceeded
E) The bonus money available for each level of management

Question 30

What compensation plan offers each person a bonus based on the company's results, regardless of the person's actual effort?

A) Profit sharing
B) A lump-sum bonus
C) Gainsharing
D) Financial incentives
E) Piece-rate production

Question 31

When all employees earning over a threshold amount are automatically eligible for consideration for short-term incentives, what is this called?

A) Key position
B) Job evaluation
C) Job clusters
D) Salary grade
E) Salary-level cutoff point

Question 32

Which is the most commonly used and oldest type of incentive plan system of pay based on the number of items processed by each individual worker in a unit of time?

A) Standard hour plan
B) Item plan
C) Piecework plan
D) Process plan
E) Gainsharing plan

Question 33

What is the cornerstone of executive compensation?

A) Benefits
B) Gainsharing
C) Salary
D) Profit-sharing
E) Incentives

Question 34

A plan in which a production standard is set for a specific work group and its members are paid extra if the group exceeds the production standard, is known as a(n)

A) team or group incentive plan.
B) team or group standard hour plan.
C) team or group gainsharing plan.
D) team or group compensation plan.
E) team or group bonus plan.

Question 35

Which piecework plan has the most advantages of all the piecework plans?

A) Process piecework plan
B) Straight piecework plan
C) Gainsharing piecework plan
D) Guaranteed piecework plan
E) Differential piece-rate plan

Question 36

Revlex Inc. has implemented a refinement of the salary cutoff approach to short-term incentive eligibility, which assumes that all managers should be eligible for short-term incentives. What is this called?

A) Salary grade
B) Performance appraisals
C) Gainsharing
D) Key position
E) Profit-sharing plans

Question 37

What long-term incentives are most often reserved for senior executives?

A) Performance achievement plans
B) Book value plans
C) Capital accumulation programs
D) Stock option programs
E) Stock appreciation rights programs

Question 38

The right to purchase a specific number of shares of company stock at a specific price during a specified period of time is called a

A) book value plan.
B) stock appreciation right.
C) phantom stock plan.
D) stock option plan.
E) restricted stock plan.

Question 39

What is the term related to a target bonus that is set for each eligible position and then adjustments are made for greater- or less-than-targeted performance?

A) A lump-sum bonus
B) Retirement income
C) An annual bonus
D) An individual award
E) Gainsharing

Question 40

Under which pay system does each worker receives a set payment for each item produced or processed in a factory or shop?

A) Process piecework plan
B) Straight piecework plan
C) Gainsharing piecework plan
D) Guaranteed piecework plan
E) Differential piecework plan

Question 41

A stock option is the right to purchase a specific number of shares of company stock at a specific price during a period of time.

Question 42

What has been the traditional role of employee recognition plans?

A) Set benchmarks for employee productivity
B) Foster loyalty in new workers
C) Ensure salespeople receive the greatest rewards
D) Reward employees for long service
E) Provide a reward in lieu of promotions or pay increases

Question 43

Most experts argue that in most organizations managerial- and executive-level bonuses should be tied to both organizational and individual performance.

Question 44

Sales compensation plans have typically relied heavily on incentives such as sales commissions. What does this vary by?

A) Strategic plan
B) Corporate policy
C) Labour contract
D) Industry
E) Geographic location

Question 45

Studies show that it takes a 5%-15% of pay to have an effect on behaviour when a cash reward is provided. What is the percentage when a non-cash reward such as recognition is used?

A) 7%-10%
B) 3%-5%
C) 5%-10%
D) 2%-7%
E) 8%-16%

Question 46

A recent study of extroverted salespeople found that extroverts only sold more than those less extroverted when what occurred?

A) Selling included a presentation in front of groups of buyers.
B) Their total compensation was in the form of commission.
C) Their compensation was all salary based.
D) Their rewards were contingent on their performance.
E) They were given a listing of highly potential buyers.

Question 47

Employers have put increasing emphasis on variable pay plans in order to maximize their return on human capital.

Question 48

What is the main disadvantage to salary plans for salespeople?

A) They tend to motivate new salespeople to the organization only.
B) They do not depend on results and can be demotivating.
C) They are hard to keep track of.
D) Salespeople tend to act like administrators as opposed to making calls.
E) Salespeople give in to customer demands more.

Question 49

One approach to using the team incentive plan is to set work standards for each member of the group and maintain a count of the output of each member.

Question 50

What is the most common form of incentive for salespeople?

A) Profit sharing
B) Stock appreciation rights
C) Gainsharing
D) Sales commissions
E) Stock options

Question 51

Under what terms can an executive buy stock in a stock option plan?

A) In future years at a fixed discount rate depending on performance
B) In future years with a guaranteed return
C) At a price equivalent to the company's book value
D) In future years at a price determined when the stock option was issued
E) At any date but must be approved by the company board of directors

Question 52

There has been a definite movement away from the extremes of straight commission or fixed salary for salespeople. What has there been a movement toward to compensate sales people?

A) Pay-for-performance
B) Combination plans
C) Variable pay
D) Incentive plans
E) Merit pay

Question 53

Piecework means basing compensation directly on the amount produced.

Question 54

Frederick Herzberg encourages the use of cash bonuses and pay increases to motivate workers most effectively to higher levels of performance.

Question 55

A group incentive plan's chief advantage is that each worker's rewards are no longer based solely on his or her own effort.

Question 56

Which combination is the most prevalent approach to compensating salespeople?

A) Salary and stock options
B) Commission and stock options
C) Salary and commissions
D) Commissions and profit sharing
E) Salary and profit sharing

Question 57

The oldest and most commonly used type of incentive plan is the standard hour plan.

Question 58

What form of compensation is most common for salespeople in the pharmaceutical industry?

A) Salary
B) Bonuses
C) Commission
D) Hourly wages
E) Merit pay

Question 59

Compensation plans for salespeople have typically relied heavily on incentives in the form of sales commissions.

Question 60

Victor Vroom says an employee must value the reward from higher performance to be motivated. If that does not occur then motivation will be zero.

Question 61

Describe five important points to consider when implementing an incentive plan.

Question 62

Describe how Frederick Herzberg defined motivation.

Question 63

Describe a piecework incentive plan using an example. Discuss at least two advantages and two disadvantages of piecework using your example.