Deck 12: Recognizing Employee Contributions With Pay

Question 1

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

Answer 1

True

Question 2

An example of the sorting effect is a social media firm offering employee stock options to attract a higher caliber of applicants for positions in the organization.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

The performance motivation of stock option plans is particularly high from a reinforcement theory standpoint.

Question 5

Intellix gives annual pay increases linked to the employee performance ratings using an incentive pay program.

Question 6

Krispy Donut wants its employees to share in the ownership of the company.The company is ready to sell its stocks and offer the employees to be first to buy the stocks at a fixed price.

Question 7

Peers and subordinates provide feedback on manager performance in merit pay programs.

Question 8

Valence of pay outcomes should change according to different pay systems.

Question 9

Merit pay has the ability to define and reward a broad range of performance dimensions.

Question 10

According to E.L.Thorndike's Law of Effect,high performance followed by a reward will motivate employees to repeat the performance and make it recur more often in the future.

Question 11

A pay plan's ability to draw highly qualified applicants for jobs at a particular organization is known as the incentive effect.

Question 12

Palm Keys Inc.believes in using a supervisor's performance rating to award merit pay.

Question 13

Gainsharing programs offer a means of sharing productivity gains with employees based on organization-level performance.

Question 14

At the end a successful project launch,Cedar Creek gives its employees a financial incentive.George knows that it will be rolled into his base pay.

Question 15

Kendal assesses her pay compared to others doing the same job through procedural fairness.

Question 16

Deferred profit-sharing plans increase employee motivation.

Question 17

Employee stock ownership plans (ESOPs)carry significant investment risks for employees.

Question 18

Merit pay systems rely on 360-degree performance feedback.

Question 19

Employee stock ownership plans (ESOPs)give employees the right to vote their securities if registered on a national exchange.

Question 20

Gainsharing plans encompass more than just a monetary component.

Question 21

Why does E.L.Thorndike's Law of Effect work?

A)It states a response followed by a reward is more likely to recur in the future.
B)It states a behavior is a function of ability and knowledge.
C)It states valence of pay outcomes should vary under different pay systems.
D)It states monetary incentives increase intrinsic motivation.
E)It states principals have perfect information on the degree to which an agent is pursuing goals.

Question 22

How would you describe ability and motivation?

A)Attitudes
B)Behaviors
C)Values
D)Rewards
E)Goals

Question 23

According to expectancy theory,which of the following is the main influence of compensation?

A)Expectancy
B)Instrumentality
C)Reinforcement
D)Valence
E)Equity

Question 24

Which of the following is an example of the sorting effect?

A)A mid-year merit bonus encourages Lavar to keep improving his productivity at Star Industries.
B)Bevlink's full match for employee retirement plan contributions encourages Tina to apply for a job there.
C)Two years without a wage increase for employees at Fractal Castings has led to a decrease in product quality.
D)Implementation of profit sharing at RedCube Robotics inspires Zack's team to identify potential supply chain savings.
E)Freezing of year-end bonuses at Harvest Organics leads employees to question the organization's values.

Question 25

Separating the functions of principals and agents is likely to result in

A)immobility of financial capital.
B)diversification of investment risk.
C)reduction in agency costs.
D)better goal congruence.
E)information symmetry.

Question 26

The Securities and Exchange Commission (SEC)requires companies to report compensation levels for the five highest paid executives.

Question 27

According to expectancy theory,motivation is hypothesized to be a function of

A)cognitive capacity.
B)social structure.
C)genes.
D)instrumentality.
E)self-esteem.

Question 28

Which of the following is true of how agents may differ from principals?

A)Agents can diversify the risks more easily.
B)Agents are more likely to pursue projects with high potential payoffs.
C)Agents can diversify investments better.
D)Agents are more averse to risk.
E)Agents are likely to prefer more emphasis on uncertain incentives than base pay.

Question 29

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires shareholders to have a "say on pay," meaning that they have the right to a (nonbinding)vote on executive pay plans.

Question 30

Which of the following is most likely to provide intrinsic motivation?

A)A sponsored vacation to Europe
B)A monthly salary of $10,000
C)Medical insurance
D)Paid leave for three months
E)An interesting work assignment

Question 31

When high performance is not followed by a monetary reward,future high performance is less likely according to

A)Herzberg's two-factor theory.
B)Reinforcement theory.
C)Freud's psychoanalytical theory.
D)McGregor's theory X.
E)Theory Z.

Question 32

When an organization has a growth strategy,the short-run pay level and benefit level tend to be below market level.

Question 33

Agency costs are likely to arise when

A)principals and agents have different goals.
B)owners and managers are the same.
C)stockholders are involved in day-to-day operations of the company.
D)the stockholders are aware of the degree to which the agents are pursuing the principal's goals.
E)there is information symmetry between the agent and the principal.

Question 34

Which of the following components is a perceived link between behavior and pay?

A)Expectancy
B)Instrumentality
C)Reinforcement
D)Valence
E)Equity

Question 35

Expectancy theory implies that linking an increased amount of rewards to performance will increase motivation and performance.Followers of cognitive evaluation theory are likely to question this assumption,arguing that

A)monetary rewards may decrease extrinsic motivation.
B)intrinsic rewards do not affect job satisfaction.
C)monetary rewards may decrease intrinsic motivation.
D)extrinsic rewards are not effective for managers.
E)behaviors are determined by genes rather than reinforcement.

Question 36

________ perception is the perceived link between effort and performance.

A)Reinforcement
B)Actual
C)Expectancy
D)Agency
E)Equity

Question 37

________ focuses on the link between rewards and behaviors and emphasizes anticipated rewards.

A)Equity theory
B)Agency theory
C)Expectancy theory
D)Theory Z
E)McGregor's theory X

Question 38

According to the agency theory,who are the principals?

A)Managers
B)Customers
C)Owners
D)Vendors
E)Employees

Question 39

With respect to employee participation in decision-making,the more agents there are,the lower the monitoring cost.

Question 40

Relying exclusively on merit pay or individual incentives may result in high levels of work motivation but unacceptable levels of individualistic and competitive behavior.

Question 41

In incentive pay,performance measures are primarily based on

A)a supervisor's appraisal.
B)individual productivity.
C)company profits.
D)company stock returns.
E)production costs.

Question 42

Which of the following statements about outcome-oriented or behavior-oriented contracts is true?

A)Merit pay is an example of an outcome-based contract.
B)Behavior-oriented contracts do not transfer risk to the agent.
C)Outcome-oriented contracts do not require a compensating wage differential.
D)Outcome-oriented contracts decrease the agent's risks.
E)In behavior-based contracts,information asymmetry is not an important issue.

Question 43

Which of the following is true about outcome-oriented contracts?

A)They require more supervision than behavior-oriented contracts.
B)When profits drop,agents' compensation goes up in outcome-oriented contracts.
C)Agents do not demand compensating wage differentials in such contracts.
D)Agents face minimal risks in such contracts.
E)They are typically a major component of executive compensation.

Question 44

When profit-sharing takes a broad view of what needs to be done to make the organization more effective,it may encourage

A)individual competition.
B)a knowledge of business.
C)a sense of ownership.
D)problem-solving orientation.
E)learning and flexibility.

Question 45

A(n)________ is suitable for an organization with a culture that promotes individual competition.

A)gainsharing plan
B)profit-sharing plan
C)merit pay plan
D)ownership plan
E)skill-based plan

Question 46

Which of the following is a compensation program that would best support an organizational culture of cooperation and problem solving?

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

Question 47

During Benjamin's orientation he considers leaving the company because he saw a few people whispering and making fun of another colleague.Which of the following are influencing his decision?

A)Membership behaviors
B)Organizational behaviors
C)Group dynamics
D)Organizational structures
E)Organizational norms

Question 48

Which of the following trade-offs does a company need to consider with compensation management?

A)Performance-reward
B)Risk-reward
C)Motivation-reward
D)Ability-reward
E)Behavior-reward

Question 49

Which of the following must a principal do to reduce agency costs?

A)Encourage the agent to maximize his or her benefits
B)Provide complete autonomy to the agent
C)Discourage the agent from pursuing projects with high potential payoffs
D)Increase information asymmetry and goal congruence
E)Align the agent's interests with the principal's interests

Question 50

As jobs become less programmable,

A)outcome-oriented contracts become less likely.
B)monitoring becomes less difficult.
C)behavior-oriented contracts become less likely.
D)the agent's risk decreases.
E)the requirement for compensating wage deferential increases.

Question 51

Which of the following compensation programs uses a management style that gives importance to control?

A)Gainsharing plan
B)Incentive pay
C)Ownership
D)Merit pay
E)Profit sharing

Question 52

Scan Master Company has weak incentives and poor performance pay.what is most likely to happen to the employees?

A)Sales,executives,and stockbrokers will have greater motivation.
B)High performers will be motivated to stay with the organization and improve their efficiency.
C)There is a greater chance for unintended,undesirable behavior driven by pay-linked incentives.
D)Employees will take excessive risks for greater premium and compensation.
E)Competitors possibly will win over high performers with stronger incentive intensity.

Question 53

When there is goal setting,employment security,and management commitment,which compensation program are you describing?

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

Question 54

Which of the following is true of how managers may differ from shareholders?

A)Managers can diversify the risks more easily.
B)Managers are more likely to pursue projects with high potential payoffs.
C)Managers diversify investments more easily.
D)Managers are less averse to risk.
E)Managers are likely to prefer more emphasis on uncertain incentives than base pay.

Question 55

Compa-ratio controls compensation costs and maintains the integrity of the pay structure through the use of

A)merit pay.
B)profit-sharing.
C)gainsharing.
D)skill-based.
E)ownership.

Question 56

To align the interests of the agents with the principal's own interests,one option is to create a behavior-oriented contract that includes

A)stock options.
B)profit sharing.
C)commissions.
D)merit pay.
E)revenue sharing.

Question 57

In skill-based pay systems,pay is based on

A)a supervisor's appraisal.
B)individual productivity.
C)company profits.
D)company stock returns.
E)changes to base pay.

Question 58

Organizations may not need to rely on layoffs to reduce costs using which compensation program?

A)Skill-based program
B)Incentive pay
C)Fixed pay
D)Merit pay
E)Profit sharing

Question 59

Agents prefer a behavior-based contract when

A)they are inclined to take more risks.
B)job outcomes are more measurable.
C)they desire higher compensation.
D)outcome uncertainty is high.
E)jobs become less programmable.

Question 60

Which of the following makes outcome-oriented contracts less likely to occur?

A)Risk aversion among agents
B)High outcome uncertainty
C)More programmable jobs
D)Less measurability of outcomes
E)Low risk premium in compensations

Question 61

Which of the following makes employee stock ownership plans (ESOPs)less attractive?

A)Less diversification of investment risk
B)Lack of tax and financial advantages
C)High levels of liquidity
D)Inability to serve as a takeover defense
E)Giving employees the right to vote their securities

Question 62

Which of the following have tax and financing advantages and serve as a takeover defense?

A)Pay-for-performance plans
B)PSQs
C)ESOPs
D)Employee groups
E)Company's annual output

Question 63

According to a merit increase grid,one of the factors that determine the size and frequency of pay increases is the

A)company's annual output.
B)attrition rate in the company.
C)company's stock price.
D)recruitment ratio.
E)individual's performance rating.

Question 64

Employees assess fairness along the distributive dimension when their assessment is based on

A)organizational procedures.
B)the systems used to assess performance.
C)how much they receive.
D)supervisors' feedback.
E)their judgment of the management.

Question 65

By law,what percentage of assets must an employee stock ownership plan (ESOP)invest in its company's stock?

A)26 percent
B)51 percent
C)80 percent
D)75 percent
E)76 percent

Question 66

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

A)ability to multitask.
B)performance rating.
C)position in the pay range.
D)knowledge of business.
E)ratio of pay to benefits.

Question 67

From a(n)________ standpoint,the effect on performance motivation may be limited in ownership programs because of the less obvious link between pay and performance.

A)agency theory
B)equity theory
C)efficiency wage theory
D)reinforcement theory
E)contract theory

Question 68

Allan works as a typesetter in a publishing company.If the organization uses merit pay programs,Allan's salary is based primarily on information collected from

A)his colleagues.
B)the human resource manager.
C)his immediate supervisor.
D)Allan himself.
E)performance indicators.

Question 69

In a merit increase grid,the ________ determines the size and frequency of pay increases.

A)time spent in the current pay grade
B)overall profitability of the company
C)employees' seniority
D)compa-ratio of employees
E)the skill developed by the employee

Question 70

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

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

Question 71

In a(n)________ plan,performance is usually measured as physical output and the payment is not rolled into the base pay.

A)skill-based
B)profit-sharing
C)individual incentive
D)merit pay
E)gainsharing

Question 72

Which of the following is a drawback of using profit sharing?

A)It promotes individual goals rather than organizational goals.
B)It promotes competition between work groups.
C)It increases the probability of individual competition.
D)It fails to make labor costs more variable.
E)It runs the risk of contributing to employee dissatisfaction.

Question 73

Which of the following is a criticism of traditional merit pay programs?

A)Peer and subordinate ratings are frequent and they tend to receive more weight than supervisory ratings.
B)The feedback under this system tends to occur too frequently,which may cause average employees to feel more discouraged than appreciated.
C)These programs lack emphasis on individual performance and focus too much on teamwork.
D)These programs often involve gathering inappropriate feedback from external sources.
E)Employees are encouraged to focus on personal gains rather than what is good for the organization.

Question 74

Which of the following is an example of an ownership plan used in compensation systems?

A)Gainsharing plan
B)Profit-sharing program
C)Group incentive
D)Stock option
E)Individual incentive plan

Question 75

In the ________ dimension,employees base their fairness assessments on the processes that were used to decide the amount of compensation.

A)distributive
B)procedural
C)quantitative
D)ownership
E)outcome

Question 76

"Knowledge work" is a component part of which pay system?

A)Merit pay
B)Profit sharing
C)Skill-based program
D)Incentive pay
E)Gainsharing

Question 77

Which of the following is a difference between profit-sharing plans and employee ownership plans?

A)Unlike ownership plans,base pay is not reduced when profit-sharing plans are introduced.
B)Ownership plans focus on the success of the organization as a whole,unlike profit-sharing plans.
C)Profit-sharing plans promote individual competition,whereas ownership plans promote group competition.
D)The link between pay and performance is less obvious under ownership than under profit sharing.
E)Ownership plans promote individual competition,whereas profit-sharing plans promote group competition.

Question 78

If Jonah and Xiomara want to keep their individual incentives,then

A)they will need to contribute to a more disintegrated workforce.
B)they will be helpful in the pursuit of total quality management objectives.
C)they will encourage other employees to go beyond the call of duty.
D)they will reduce their motivation of acquiring multiple skills and proactive problem solving.
E)they must realize that they are continuously earned and re-earned.

Question 79

A ________ plan gives employees the opportunity to buy the company's shares at a previously fixed price.

A)mutual fund
B)gainsharing
C)group incentive
D)profit-sharing
E)stock option

Question 80

In ________ programs,annual compensation increases are usually linked to performance appraisal ratings.

A)skill-based pay
B)gainsharing
C)merit pay
D)incentive pay
E)cost-based pay