Deck 4: Incentive Pay

Question 1

Which of the following is true concerning incentive pay?

A)The award is earned only when the predetermined work objective is totally completed.
B)It motivates employees to be more productive, but does little to control payroll costs.
C)Awards are granted as one-time payments.
D)Incentive levels are generally subjective in nature.

Answer 1

C

Question 2

Under which three conditions are individual incentive plans most appropriate?

Answer 2

Individual incentive pay plans are most appropriate under three conditions.
First,employees' performance can be measured objectively.
Second,individual incentive plans are appropriate when employees have sufficient control over work outcomes.Factors such as frequent equipment breakdowns and delays in receipt of raw materials limit employees' ability to control their performance levels.Employees are not likely to be diligent when they encounter interference: Chances are good that employees who previously experienced interference will expect to encounter interference in the future.Employees' resistance threatens profits because companies will find it difficult to motivate people to work hard when problem factors are not present.
Third,individual incentive plans are appropriate when they do not create a level of unhealthy competition among workers that ultimately leads to poor quality.For example,a company may create unhealthy competition when it limits the number of incentive awards to only 10 percent of the employees who have demonstrated the highest levels of performance.If the company judges performance according to volume,then employees may sacrifice quality as they compete against each other to outmatch quantity.In addition,under an incentive plan that rewards quantity of output,those employees who meet or exceed the highest standard established by their employer may be subject to intimidation by workers whose work falls below the standard.Unions may use these intimidation tactics to prevent plan standards from being raised.

Question 3

Nowadays,most companies use a mix of which types of pay plans?

A)seniority pay plans and incentive pay plans
B)merit pay plans and merit bonus pay plans
C)traditional pay plans and incentive pay plans
D)traditional pay plans and person-focused pay plans

Answer 3

C

Question 4

Companies can control costs by replacing annual merit or seniority increases or fixed salaries with which type of plans?

A)incentive
B)longevity pay
C)pay-for-knowledge pay
D)base pay

Question 5

Which best describes incentive pay?

A)Incentive pay is considered part of an employee's fringe compensation.
B)The criteria for judging an award tend to be objective, such as quantity produced.
C)Award levels are subjective.
D)The amount of the award paid for attainment of goals is not communicated in advance.

Question 6

Briefly describe the three categories of incentive pay plans and give an example of each.

Question 7

The ________ effect refers to a worker's willingness to work diligently to produce more quality output rather than simply attending work without putting in the effort.

Question 8

Individual incentive plans help to promote the relationship between pay and ________.

Question 9

John is a design engineer in an auto manufacturer's research and development department.In addition to his normal duties,he is assigned to a team of other engineers developing a highly automated assembly line for the new model of a passenger car.To which type of team is John assigned?

A)incentive
B)project
C)work (process)
D)parallel

Question 10

Which of the following is NOT a financial measure?

A)operating efficiency
B)revenue
C)earnings per stock share
D)operating income

Question 11

How do traditional pay methods differ from incentive pay methods?

Question 12

Which of the following effects describe the concept that a hard working employee is likely to stay at an incentive pay position?

A)representative
B)structural
C)sorting
D)output

Question 13

Over the past 10 years,Lincoln's profit-sharing payments have been substantial.Maria's annual salary was $40,000 last year,and she earned a profit-sharing payment of $10,000.Maria's profit-sharing award represents approximately what percentage of her annual salary?

A)25 percent
B)40 percent
C)45 percent
D)55 percent

Question 14

This type of individual incentive plan rewards employees who recruit new customers or new employees.

A)behavior encouragement
B)referral
C)management incentive
D)piecework

Question 15

In addition to the guaranteed hourly pay rate,John receives incentives for every item produced over the designated production standard.Which kind of incentive plan is used in this situation?

A)management incentive
B)referral
C)piecework plans
D)behavioral encouragement

Question 16

Which of the following performance measures corresponds to individual-,group,and companywide incentive plans,respectively?

A)customer satisfaction, quantity of work, and quality of work
B)quantity of work, market share, and customer satisfaction
C)quality of work output, customer satisfaction, and revenue
D)customer satisfaction, market share, and quality of work

Question 17

Another name for incentive pay is ________ pay.

Question 18

To have better safety records,the XYZ Company gives monetary incentive awards to its workers for lower accident rates due to improper use of heavy equipment.Which of the following incentive plans describes this example?

A)management incentive
B)referral
C)piecework
D)behavioral encouragement

Question 19

Which of the following teams consists of a group of people who are assembled to complete a one-time assignment?

A)project teams
B)innovation teams
C)process teams
D)work teams

Question 20

Which individual incentive plans require the achievement of multiple,complex objectives without compromising the quality and quantity of output?

A)piecework
B)referral
C)management incentive
D)behavior encouragement

Question 21

The XYZ Manufacturing Co.uses a gain sharing plan that gives incentives to employees to finish products rather than to incentivize dollar savings.Therefore,this company measures productivity as the ratio of standard labor hours and actual labor hours.Which kind of gain sharing program does XYZ Manufacturing Co.use?

A)Improshare
B)Rucher
C)Scanlon
D)SVOP

Question 22

________ teams consist of a group of people assigned to complete a one-time task.

Question 23

This formula for determining the amount available for profit sharing uses a specific percentage of annual profits contingent upon the successful attainment of a specified profit goal.

A)fluctuating first-dollar-of-profits
B)differed first-dollar-of-profits
C)graduated first-dollar-of-profits
D)fixed first-dollar-of-profits

Question 24

This formula for calculating profit sharing awards gives the employees a higher percentage of the profits as the profits increase.

A)fluctuating first-dollar-of-profits
B)differed first-dollar-of-profits
C)graduated first-dollar-of-profits
D)fixed first-dollar-of-profits

Question 25

Gunther Rohn was rewarded for making a suggestion that saved Ewe and Eye Electronics thousands of dollars.Which type of incentive compensation approach might have worked best?

A)group incentive programs
B)gain sharing plan
C)management incentive plans
D)employee stock ownership plan

Question 26

In general,which of the following is an incentive plan design consideration?

A)profitability
B)the outcome of an employee election about willingness to participate in one or more incentive plans
C)the level of risk employees will accept in their overall compensation package
D)workforce unionization

Question 27

The Improshare bonus is based on a ________ ratio formula.

Question 28

Which arrangement represents a long-term company-wide incentive plan that provides employees with the option to purchase ownership in the company?

A)employee stock option plans
B)company equality awards
C)profit sharing plans
D)gain sharing plans

Question 29

With which profit sharing formula does the profit sharing pool become funded only after profits exceed a predetermined level,but fall below some established maximum level?

A)fixed first-dollar-of-profits
B)profitability threshold
C)graduated first-dollar-of-profit
D)equal payments

Question 30

What is the main objective of Scanlon plans?

A)to standardize the workforce
B)to encourage unionization
C)to increase workforce competitiveness
D)to increase employee involvement

Question 31

Which of the following is an operational measure used in company-wide incentive plans?

A)safety/occupational injury rates
B)revenue growth
C)earnings per share
D)operating income

Question 32

Which of the following is true regarding group incentive plans?

A)There are more groups in a company than individuals to measure.
B)Individual group members usually work more efficiently alone than in cohesive groups.
C)It is easier to develop performance measures for individual incentive plans than for group incentive plans.
D)It is easier to develop performance measures for group incentive plans than individual incentive plans.

Question 33

The XYZ Company pays a portion of company profits to its employees.The management offers this incentive plan as one kind of retirement program.Which kind of companywide incentive plan does XYZ Co.offer?

A)employee stock ownership
B)deferred profit sharing
C)current profit sharing
D)employee stock option

Question 34

Profit sharing plans and employee stock option plans are incentives on what level?

A)individual
B)group
C)companywide
D)executive

Question 35

The main disadvantage of group incentive compensation is employee ________.

Question 36

The sales value of production (SVOP)is the sum of sales ________ plus the value of goods in inventory.

Question 37

Stock ________ describe an employee's right to purchase equity in the company.

Question 38

________ profit sharing plans place cash awards in trust accounts for employees and are set aside on employees' behalf as a source of retirement income.

Question 39

These profit sharing plans award cash to employees on a quarterly or annual basis as part of their regular compensation.

A)common
B)current
C)deferred
D)anticipated

Question 40

Which gain sharing plan bases incentives on the ratio between labor costs and sales value of production (SVOP)?

A)Rucker Plan
B)referral plan
C)Scanlon Plan
D)Improshare

Question 41

Companies in such ________ industries as retail sales could benefit by including an incentive component in the core compensation programs they offer to employees.

Question 42

The general rule of thumb is that short-term company goals last less than how long?

A)1 month
B)6 months
C)1 year
D)5 years

Question 43

In an effort to increase the productivity of its employees,a manufacturing company is considering adopting an incentive pay program.List and discuss the five factors the HR professionals should consider in the adoption of an incentive program.

Question 44

Which of the following is true about the level of risk involved with incentive pay?

A)It decreases as incentive pay represents a greater proportion of total core compensation.
B)It is lower for higher-level employees than for lower-level employees.
C)It depends on the extent to which employees control the attainment of a desired goal.
D)It is dependent on subjective performance appraisals.