Deck 11: Designing Performance Pay Plans

Question 1

Based on the previous year's output,it typically takes 3 hours to produce one unit of product. Under which of the following gain-sharing plans are any productivity gains resulting in less than 3 hours of labour per unit shared between you and the company?

A) "family of measures"
B) Rucker
C) Improshare
D) Scanlon

Answer 1

C

Question 2

Which of the following plans does not make employee involvement an important part of the system?

A) Rucker
B) Scanlon
C) Improshare
D) "family of measures"

Answer 2

C

Question 3

Most firms typically use multi-goal sharing plans.

Answer 3

True

Question 4

Profit sharing and employee stock plans are geared to the performance of work groups.

Question 5

The first issue in designing a goal-sharing plan is to determine the levels necessary to trigger a bonus payout.

Question 6

With the Scanlon plan employees benefit from reductions in raw materials or any other purchased input.

Question 7

Improshare expresses labour costs as a percentage of value added.

Question 8

The Scanlon plan is an example of which type of plan?

A) executive pay
B) goal-sharing
C) gain-sharing
D) profit-sharing

Question 9

When should managers be left out of the gain-sharing plan?

A) When they receive other types of bonuses.
B) When the company is unionized.
C) When they do not play a significant role in gain achievement.
D) When approval of the plan is outside the jurisdiction of their department.

Question 10

Which of the following measures is used to constrain undesirable behaviour?

A) independent measures
B) performance measures
C) arbitrary measures
D) modifiers

Question 11

Gain-sharing is not a viable plan to use if no valid historical benchmark can be set.

Question 12

Which of the following is not one of the three criteria that must be considered in setting the "share"?

A) The more the base line increases, the higher the share needs to be.
B) The higher the capital intensity, the lower the share.
C) The broader the bonus formula, the lower the share.
D) The higher the salaries, the greater the share.

Question 13

Most firms allocate the profit-sharing bonus equally to all employees.

Question 14

A phantom stock plan ties an employee's bonus to the performance of company stock but that employee never actually receives any stock.

Question 15

In general,the more inexpensive the noncash recognition reward,the more judiciously it must be provided to be seen as having value.

Question 16

Which of the following gain-sharing plan measures is a example of a "modifier"?

A) cost of processing each customer order
B) results of customer satisfaction surveys
C) retention of customers
D) number of suggestions submitted

Question 17

Which of the following bonus allocation methods best supports the philosophy of gain-sharing?

A) Everyone receives an equal share after minor adjustments are made for time worked.
B) Higher performers receive a greater share.
C) Higher paid employees receive a greater share.
D) Part-time and newly hired employees receive nothing.

Question 18

Which of the following conditions makes a gain-sharing plan not viable and requires you to consider another option?

A) No valid historical benchmark can be set.
B) Employee involvement is not an integral part of the system.
C) The plan involves large expenditures to implement.
D) Employees receive only 50 percent of the share.

Question 19

A rolling baseline goes up each year there is a productivity gain,and last year's productivity becomes the new baseline.

Question 20

Which of the following plans motivates employees to find ways to reduce the costs of raw materials or any other purchased inputs?

A) Rucker
B) Scanlon
C) Improshare
D) combination profit-sharing

Question 21

What is the most common basis for allocating the profit-sharing bonus across employees in Canadian firms?

A) seniority
B) individual performance
C) salary level
D) salary level or individual performance

Question 22

Which of the following is an example of what is commonly known as a "stretch goal"?

A) This goal level exceeds current performance, but not by much.
B) Employees have less than a 50 percent likelihood of achieving this goal.
C) This goal level is seen as realistic but not a sure thing.
D) This goal level matches current performance.

Question 23

As a medium-sized company business owner,you believe that it is morally just that employees receive a portion of the profits they help generate and want to provide them with some form of pension plan. Which of the following types of plans should you consider using?

A) deferred profit sharing
B) share appreciation rights
C) registered retirement savings
D) current distribution

Question 24

Which of the following is not a valid criteria used for setting goals?

A) identified by employees
B) encompass the full range of desired behaviour
C) important to the organization.
D) controllable by the work group

Question 25

In regard to nonmonetary reward programs,which of the following statements is not true?

A) They serve as social reinforcers.
B) Group-based programs are the most common type.
C) The "Golden Banana Award" is a famous example.
D) They provide merchandise awards to recognize individual accomplishments.

Question 26

Which of the following statements is not true?

A) For motivational reasons, fixed formula profit-sharing plans are recommended
B) Stock bonus plans provide the right to purchase shares in the future at a fixed price
C) Deciding the split is an important issue in gain-sharing plans
D) A key issue in designing profit-sharing plans is the form of the bonus payout

Question 27

Which of the following is not a necessary component of goal-sharing plans?

A) employee participation
B) performance goals
C) bonus payouts
D) achievement levels

Question 28

Which of the following best explains a phantom stock plan?

A) Although their bonus is tied to the performance of company stock the employees never receive any stock.
B) Rewards are based on the stock performance of client firms.
C) Employees are awarded stock at no cost to themselves.
D) Employees can purchase stock at a fixed price within a set period of time.

Question 29

Which of the following is a major issue with employee stock plans?

A) government support for employee share ownership
B) taxation
C) decline in popularity
D) senior executive involvement

Question 30

Compared to your friend,who holds employee shares in a publicly traded corporation,which one of the following conditions is not a key difference you will experience as a minority shareholder in a private corporation?

A) owner reluctance to share ownership
B) little control over what goes on in the organization
C) no easy way to liquidate shares if you feel your interests are not being well represented
D) no external market to place a value on company shares

Question 31

Which of the following plans is geared to the performance of the organization as a whole?

A) Rucker
B) share appreciation rights
C) "family of measures"
D) Improshare

Question 32

According to research on Canadian firms,in the majority of cases,which employees are included in the profit-sharing plan?

A) all full-time and part-time employees
B) non-unionized employees only
C) designated employees only
D) all full-time employees

Question 33

What type of bonus determination formula are you using by declaring that 10 percent of pre-tax profit goes into the profit-sharing bonus pool at the end of the year?

A) discretionary
B) fixed threshold
C) fixed percentage
D) fixed step

Question 34

What is the advantage of distributing the bonus according to the salary levels of employees?

A) It discourages free-riding by some employees.
B) It is the most egalitarian distribution method.
C) It maintains the same portion of goal-sharing compensation in compensation mix for each employee.
D) It adjusts for actual time worked during bonus period.

Question 35

Which of the following is not an example of a nonmonetary award?

A) a day off for perfect attendance
B) a pat on the back for a job well done
C) a company picnic
D) an all expenses-paid-holiday

Question 36

Which of the following factors does not increase the effectiveness of employee share ownership?

A) The proportion of the employees who hold shares
B) The degree of employee consultation in share plan development
C) The proportion of the firm owned by employees
D) Whether the employer is a publicly traded or a privately held corporation

Question 37

Which of the following is,according to the author,the most important factor in the success of the goal-sharing plan?

A) identification of the goals to be rewarded
B) determination of levels for goal achievement
C) establishment of bonus amounts
D) determination of time frames for goal achievement

Question 38

Which of the following describes an employee stock bonus plan?

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

Question 39

Which of the following is not a condition needed for the success of gain-sharing plans?

A) trust between management and employees
B) a history of job security
C) a joint employee-management gain sharing committee
D) system seen as fair and equitable

Question 40

What do profit-sharing firms tend to have in common?

A) They are privately held corporations.
B) They are high-involvement firms.
C) They are industry-specific.
D) They are non-union firms.

Question 41

Identify and briefly comment on the key issues in designing profit-sharing plans.

Question 42

Identify how design issues differ for private corporations.

Question 43

Briefly describe the Scanlon Plan.

Question 44

Discuss the key issues in designing a nonmonetary reward plan.

Question 45

Identify the fundamental ways gain-sharing and goal-sharing plans differ.