Deck 9: Recognizing Employee Contributions With Pay

Question 1

One significant difference between gainsharing and profit-sharing plans is that gainsharing-plan payouts are generally distributed more frequently.

Answer 1

True

Question 2

The Canadian Securities Administrators (CSA)requires companies to report compensation levels for top-paid executives.

Answer 2

True

Question 3

The reinforcement theory to compensation management suggests that managers pay at-or below-market wages.

Answer 3

False

Question 4

Organizations that link pay to individual performance may be more likely to attract individualistic employees,whereas organizations relying more heavily on team rewards are more likely to attract team-oriented employees.

Question 5

Gainsharing plans,like the Scanlon plan,and other pay-for-performance plans include monetary awards only.

Question 6

One disadvantage of merit pay is its inability to define and reward a broad range of performance dimensions.

Question 7

Different pay systems appear to attract people with different personality traits and values.

Question 8

Individual incentive pay plans are more commonly found in organizations than are merit pay plans.

Question 9

From a reinforcement theory standpoint,the performance motivation of stock option plans is particularly high.

Question 10

One solution to profit-sharing during a downturn is to design plans that have downside risk but not upside risk.

Question 11

While the agency theory has value in the analysis and design of managerial compensation,it is not applicable to non-managerial compensation.

Question 12

Under merit pay,the flow of feedback tends to be multidirectional,from supervisor,peers,and subordinates to the employee.

Question 13

There is strong research evidence that profit-sharing plans contribute to organizational performance.

Question 14

The four performance measures of a balanced scorecard include financial measures,customer measures,internal measures,and learning and growth measures.

Question 15

The performance motivational effects of either profit sharing or gainsharing are likely to be greater in smaller firms or units than in larger organizations or units.

Question 16

Research suggests that the use of pay-for-performance plans among top-and middle-level managers result in increased levels of profitability.

Question 17

A criticism of merit pay programs is that the differential in pay between high performers and mediocre,or even poor performers is not significant enough to influence employee behaviour or attitudes.

Question 18

Group incentive pay plans tend to use a broader range of performance measures than do individual-oriented plans.

Question 19

Pay plans are typically used to energize,direct,or control employee behaviour.

Question 20

Incentive pay refers to linking annual pay increases to performance appraisal ratings.

Question 21

The pay-for-performance program that does not use a bonus payment as a payment method is

A)Employee Share Ownership Plan.
B)profit sharing.
C)a Scanlon plan.
D)incentive pay.

Question 22

According to agency theory,when a compensation system aligns the interests of the agent with the principal's own interests,the compensation system should

A)be behaviour oriented.
B)reduce agency costs.
C)be outcome oriented.
D)reduce risks.

Question 23

Which of the following pay strategy dimensions best fits with a business strategy of growth?

A)Low variable pay
B)Below-market short-term pay level
C)Above-market benefits level
D)Centralization of pay decisions

Question 24

Companies do not have to show how the compensation plan performed against the share index.

Question 25

The pay system that motivates performance by measuring physical output is

A)profit sharing.
B)a seniority system.
C)a merit system.
D)an individual incentive system.

Question 26

Individual incentive plans are relatively rare for all but one of the following reasons.Name the exception.

A)Because many jobs have no physical output measures.
B)Because there are many potential administrative problems.
C)Because such plans are inconsistent with the goals of acquiring multiple skills and proactive problem solving.
D)Because employees generally do not favour such plans due to their lack of distributive justice.

Question 27

Which of the following is not a feature of outcome-oriented principal-agent contracts?

A)When profits are high,compensation goes up.
B)The principal must invest in monitoring information.
C)Agents require a compensating wage differential.
D)Risk is increased for the agent.

Question 28

Employee involvement in the design and implementation of pay policies has been linked to higher pay satisfaction and job satisfaction.

Question 29

Organizations that link pay to individual performance are more likely to

A)attract team-oriented employees.
B)attract individualistic employees.
C)attract older workers.
D)result in none of the above,as different pay systems do not affect the nature or composition of an organization's workforce.

Question 30

Rumours and assumptions based on poor or incomplete information are always an issue in administering compensation.

Question 31

Many merit increase grids indicate both the size and frequency of pay increases as determined by the individual's performance rating and which one of the following?

A)An individual's compa-ratio
B)An individual's pay grade
C)An individual's seniority
D)An individual's time spent in the current pay grade

Question 32

Which of the following compensation systems would not be classified as an outcome-oriented contracting scheme (using agency theory terminology)?

A)Stock options
B)Profit sharing
C)Commissions
D)Merit pay

Question 33

Relying exclusively on merit pay or individual incentives may result in

A)high levels of work motivation but unacceptable levels of individualistic and competitive behaviour and too little concern for broader plant or organization goals.
B)low levels of work motivation but acceptable levels of individualistic and competitive behaviour and no regard for broader plant or organization goals.
C)a perfect balance of work motivation and acceptable levels of individualistic and competitive behaviour.
D)high levels of work motivation,acceptable levels of individualistic and competitive behaviour and high levels of concern for broader plant or organization goals.

Question 34

Which of the following pay strategy dimensions best fits with a business strategy of concentration?

A)Long-term time orientation
B)Below-market short-term pay level
C)Above-market benefits level
D)Decentralization of pay decisions

Question 35

In a concentration business strategy,pay decisions are centralized.

Question 36

Growth organizations are thought to benefit from a more bureaucratic orientation.

Question 37

The Scanlon plan is an example of

A)profit sharing.
B)gainsharing.
C)a merit pay plan.
D)an individual incentive plan.

Question 38

Which of the following theories emphasizes the importance and immediacy of a reward following a certain behaviour?

A)Reinforcement theory
B)Expectancy theory
C)Agency theory
D)Equity theory

Question 39

A(n)____________ pay level,with long-run potential,and _____________ pay decisions are pay strategy dimensions best suited for growth organizations.

A)below market;centralized
B)below market;decentralized
C)above market;centralized
D)above market;decentralized

Question 40

In merit pay programs,an individual's compa-ratio represents his or her

A)performance rating.
B)position in the pay range.
C)comparable worth versus others.
D)ratio of pay to benefits.

Question 41

Which of the following is not a recognized characteristic of profit sharing programs?

A)Employers are encouraged to think like owners.
B)Increased employee citizenship is expected.
C)Evidence clearly shows a link to better organization performance.
D)Payments do not become part of base pay.

Question 42

A change in any part of the compensation system is likely to give rise to employee concerns,thus it is critical in how to ________ reasons for the changes to employees.

A)prove
B)demonstrate
C)implement
D)communicate

Question 43

Which of the following is not true of individual incentive pay programs?

A)Payments are not rolled into base pay.
B)Performance is usually measured by physical output.
C)Individual incentives have the potential to significantly increase performance.
D)Individual incentive pay programs are quite common in organizations.

Question 44

Relying too heavily on profit-sharing and gainsharing plans may

A)decrease cooperation and concern for the welfare of the entire plant or organization,but it may increase individual work motivation to acceptable levels.
B)increase cooperation and concern for the welfare of the entire plant or organization and increase individual work motivation to acceptable levels.
C)decrease cooperation and concern for the welfare of the entire plant or organization,but it may reduce individual work motivation to unacceptable levels.
D)increase cooperation and concern for the welfare of the entire plant or organization,but it may reduce individual work motivation to unacceptable levels.

Question 45

Which one of the following is not a necessary organizational condition for successful gainsharing?

A)Management commitment
B)Mechanistic structure
C)Employment security
D)Information sharing on productivity and costs

Question 46

According to expectancy theory,motivation is a function of all of the following EXCEPT

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

Question 47

In a(n)_____ plan,payments are based on a measure of organizational performance and do not become part of the employees' base salary.

A)ESOP
B)profit sharing
C)individual incentive
D)merit pay

Question 48

Because of their significant ability to influence organization performance,_______ and _______ are a strategically important group whose compensation warrants special attention.

A)top managers;executives
B)top managers;board of directors
C)executives;supervisors
D)executives;union workers

Question 49

A(n)_____ plan is a based on a group or plant performance that does not become a part of the employee's base salary.

A)profit-sharing
B)stock option
C)gainsharing
D)individual incentive

Question 50

Which one of the following pay programs has the greatest frequency of payout?

A)Merit pay
B)Profit sharing
C)Incentive pay
D)Gainsharing

Question 51

Which type of compensation program attracts learning-oriented employees?

A)Skill-based pay
B)Merit pay
C)Incentive pay
D)Gainsharing

Question 52

Because most profit-sharing plans are of the deferred type,their motivational impact is reduced.This argument is most consistent with the

A)agency theory.
B)equity theory.
C)efficiency wage theory.
D)reinforcement theory.

Question 53

There is ample evidence that gainsharing programs that rely almost exclusively on the monetary component can have substantial effects on

A)productivity.
B)efficiency.
C)employee satisfaction.
D)employee development.

Question 54

We have seen how the Balanced Scorecard approach could be applied to applying manufacturing employees.It is also useful in designing and measuring

A)supervisor pay
B)board of directors pay
C)executive pay
D)temporary employee pay

Question 55

Share options have their greatest motivational potential during periods of

A)high unemployment.
B)downturns in the economy.
C)high economic and company growth.
D)low inflation.

Question 56

In an organization where there is a culture that supports cooperation and problem solving,the compensation program that would best reinforce that culture is

A)group incentive pay.
B)merit pay.
C)gainsharing.
D)individual incentive pay.

Question 57

It is possible that an organization that links pay to performance may attract more high performers than an organization that does not link the two.There may be a similar effect with respect to

A)job recruitment.
B)job enhancement.
C)job retention.
D)job sustainability.

Question 58

A(n)_____ plan gives employees the opportunity to buy the company's stock at a previously fixed price.

A)mutual fund
B)individual incentive
C)dividend disbursement
D)share options

Question 59

Researchers have suggested that the two factors critical to encouraging self-monitoring and peer monitoring are:

A)monetary incentives and an environment that fosters trust and cooperation.
B)intrinsic motivation and a competitive environment.
C)intrinsic motivation and a participatory management style.
D)empowerment and team-based work.

Question 60

There is significant pressure from regulators and shareholders to link pay and performance more effectively.As of December 31,2008,the _____________ now require disclosure of many types of compensation and benefits of top-paid executives.

A)Canada Labour Code (CLC)
B)Canadian Securities Administrators (CSA)
C)Employment Standards Acts (ESA)
D)Human Resources and Skills Development Canada (HRSDC)

Question 61

Research shows that owner-controlled and manager-controlled firms differ in which manner?

A)Owners like to change ownership more often than managers.
B)Managers are less likely to maximize short-run performance and pay.
C)Managers prefer relatively little risk in their pay.
D)Owners pursue more perquisites.

Question 62

Agency theory is of particular value in compensation management because of its emphasis on the _____ trade-off.

A)performance-reward
B)risk-reward
C)motivation-reward
D)ability-reward

Question 63

______ refer to decisions about whether to join or remain with the organization.

A)Membership behaviours
B)Identification behaviours
C)Organizational gregariousness
D)Associative habits

Question 64

Which of the following is not a type of agency cost that arises in managerial compensation?

A)Management's desire for perquisites
B)Management's risk aversion
C)Management's desire for outcome-based pay systems
D)Management's focus on short-term performance and pay

Question 65

A(n)_____ is suitable for an organization whose culture promotes knowledge of business and cooperation among its employees.

A)gainsharing plan
B)profit sharing plan
C)merit pay plan
D)incentive pay plan

Question 66

From an agency theory perspective,linking executive pay to organization performance may mean

A)more emphasis on non-contingent pay and less emphasis on outcome-oriented contracts.
B)less emphasis on non-contingent pay and more emphasis on outcome-oriented contracts.
C)more emphasis short term compensation and less emphasis on long term compensation.
D)more emphasis on base pay and less emphasis on stock performance.

Question 67

Deming's concerns about too much emphasis on "individual" performance in organizations are based on all of the following except

A)system factors (e.g. ,coworkers,materials,and equipment)can affect individual performance.
B)merit pay encourages individualistic behaviours.
C)performance ratings are essentially "the result of a lottery."
D)employees discuss and compare their performance ratings with those of other employees.

Question 68

Intertwined effects of pay and process refers to the idea that

A)the way workers are treated is just as important as the way they are paid.
B)changing the way workers are paid is more important than the way that they are treated.
C)productivity can only be boosted if employees in the same jobs are paid equally.
D)pay decisions have no effect on productivity.

Question 69

Gainsharing plans differ from profit-sharing plans in that they

A)distribute payouts more frequently.
B)encourage employee pursuit of organizational goals.
C)pay lump sum payments.
D)can be attached to all types of jobs in the organization.

Question 70

_____ can be described as a function of ability and motivation.

A)Attitude
B)Job performance
C)Leadership
D)Team work

Question 71

Today,share options are typically being granted to

A)all employees.
B)all exempt employees.
C)low-and middle-level managers.
D)executives.

Question 72

Which compensation program offers payouts on a monthly or quarterly basis?

A)Gainsharing.
B)Profit sharing.
C)Merit pay.
D)Incentive pay.

Question 73

In agency theory,the _____ seeks to direct the behaviour of the _____.

A)owner;principal
B)agent;principal
C)manager;agent
D)principal;agent

Question 74

A ____________ time orientation and _____________ benefit levels are pay strategy dimensions best suited for concentration-oriented organizations.

A)short-term;below market
B)short-term;above market
C)long-term;below market
D)long-term;above market

Question 75

Which among the following is an example of a group incentive measure?

A)Physical output
B)Cost savings
C)Meeting deadlines
D)Completion of product design

Question 76

The compensation program that least requires a participatory management style is

A)gainsharing plan.
B)incentive pay.
C)ownership.
D)profit sharing.

Question 77

Which of the following factors would support the use of a behaviour-based contract between principals and agents?

A)A tradition of using outcome-oriented contracts
B)R&D-oriented jobs
C)Outcome uncertainty
D)Employer has the ability to pay

Question 78

A characteristic of most merit pay programs is

A)frequent feedback.
B)feedback comes primarily from the supervisor.
C)linking of pay increases to group performance.
D)linking of pay increases to output.

Question 79

Group incentive pay programs differ from team awards pay programs in that they

A)typically are plant-wide programs.
B)encourage competition between employee groups.
C)measure performance in terms of physical output.
D)de-emphasize the standard-setting process.

Question 80

Of the following pay programs,the weakest link between employees' performance and their earnings is found in

A)individual incentive plans.
B)merit pay plans.
C)profit-sharing plans.
D)group incentive plans.