Question 1

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a ________ program.
A) gainsharing
B) standard hour
C) bonus
D) commission
E) piece rate pay

Accepted Answer

Gainsharing programs are specifically designed to incentivize group performance and efficiency, and are often used in manufacturing or other team-oriented work environments where production output can be easily measured. Standard hour, bonus, commission, and piece rate pay programs are more individually focused and may not provide the same level of group incentive.

Question 2

Paul, the HR manager at Carletta & Co., is trying to implement an effective group incentive plan that measures increases in productivity and effectiveness and distributes a portion of its earnings to all employees. In this case, Paul should apply the incentive scheme of
A) piecework rate.
B) gainsharing.
C) sales commission.
D) merit pay.
E) ESOPs.

Accepted Answer

Gainsharing is a type of group incentive plan that measures increases in productivity and distributes a portion of its earnings to all employees. This aligns with Paul's aim of implementing an effective group incentive plan.

Question 3

When Airborne Aircraft acquired Bell Airplanes, the executives of the two companies identified key employees they needed for the combined companies' success. One of them was Patrick, the vice president of engineering. The executives offered Patrick a one-time bonus of $25,000 if he stayed with the company for 12 months following the acquisition. In this scenario, Patrick's $25,000 represents
A) a commission.
B) a retention bonus.
C) stock options.
D) merit pay.
E) a differential piece rate.

Accepted Answer

Patrick's $25,000 represents a retention bonus, which is a type of bonus offered to key employees to encourage them to stay with the company during a time of transition or change.

Question 4

Retention bonuses refer to
A) the special reward programs used to satisfy the lower- and middle-level managers.
B) the bonuses provided to union members to withhold a strike.
C) the bonuses provided to employees who take long leaves without pay.
D) annual incentives paid to daily wage workers to remain in the organization.
E) one-time incentives paid in exchange for remaining with the company.

Accepted Answer

Retention bonuses are one-time incentives paid to employees in exchange for staying with the company for a specified period. These bonuses are given to employees who are critical to the organization's success or who are at risk of leaving the company.

Question 5

West End Hospital was concerned about rising costs for patients who have surgery for joint replacement. It tried rewarding staff in any quarter they met targets for lower use of supplies, but costs continued to rise. An investigation showed that one source of costs was the readmission of patients who experienced infections after surgery. The human resource department proposed setting up a gainsharing program with an effectiveness measure related to reducing infections. Which statement about gainsharing best supports this recommendation?
A) With gainsharing, employees are freed to collaborate on how to improve performance.
B) Gainsharing creates a competitive environment, so employees will try to outdo one another.
C) Gainsharing is appropriate because the jobs in this case are simple, and so are the performance standards.
D) Gainsharing will narrow employees' focus to the key aspects of their individual jobs and rewards.
E) The success of gainsharing requires management acceptance of employee input.

Accepted Answer

With gainsharing, employees are freed to collaborate on how to improve performance.

Question 6

________ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.
A) Differential piece rate
B) Standard hour plan
C) Merit pay
D) Piece rate
E) Commission

Accepted Answer

Merit pay is a compensation strategy that rewards employees based on their performance in all the dimensions of the organization's performance management system. This system encourages employees to give their best efforts and improve their performances. The merit pay system can be applied to both individual employees and teams. The reward amount is usually given in percentage form, and it may be permanent or temporary.

Question 7

Which statement is true of a performance bonus?
A) It is designed to reward group performance.
B) It should be re-earned by employees during each performance period.
C) It is rolled into base pay and provided yearly or monthly.
D) It lacks flexibility and hence it is less popular.
E) It is exclusively linked to subjective ratings, rather than objective performance measures.

Accepted Answer

A performance bonus is designed to reward individual performance and should be re-earned by employees during each performance period based on their individual achievements. The bonus is not rolled into base pay and is typically given as a lump sum payment. The bonus may be tied to both subjective and objective performance measures, and it can be flexible in structure and design.

Question 8

________ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.
A) Profit rate
B) Gainsharing
C) Commission sharing
D) Merit rate
E) Group bonus

Accepted Answer

Gainsharing is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees. None of the other options mentioned have similar characteristics to gainsharing.

Question 9

For five years, Mainstream Production Systems offered $500 bonuses to individuals who identified ways to reduce costs by at least $1,000 per year. In the first year of that incentive program, 23 employees earned the bonus, but last year, only 7 submitted ideas, and only two of the ideas would actually save more than a few dollars. The company's HR director suggests that the company is likely to see more improvement if it replaces individual incentives with a gainsharing plan. Which statement best supports this argument?
A) Gainsharing succeeds regardless of whether employees understand how performance is measured.
B) Gainsharing is likely to succeed under almost any organizational conditions.
C) Gainsharing broadens employees' horizons beyond the range of activities they can influence.
D) Gainsharing measures oversimplify the complex responsibilities of production work.
E) Gainsharing expands employees' thinking beyond their individual interests.

Accepted Answer

Gainsharing encourages a collective approach to problem-solving and cost-saving, which can lead to more comprehensive and innovative solutions than individual incentives, which focus on personal gain.

Question 10

What common condition is necessary for gainsharing to be successful in an organization?
A) employees who value working in groups
B) employers who do not set short-term goals for employees
C) work environment with minimum management commitment
D) employees who prefer minimum interaction and cooperation
E) low levels of cooperation and interaction

Accepted Answer

Gainsharing involves incentivizing employees to work together towards shared goals. Therefore, it is necessary for employees to value working in groups in order for gainsharing to be successful.

Question 11

To make merit increases consistent, administrators of merit pay programs must closely monitor the compa-ratio and the
A) number of grades in the pay structure.
B) individual's performance ratings.
C) number of new hires in the company.
D) company's stock price in the current financial year.
E) average pay of the area where the organization is based.

Accepted Answer

Merit increases should be tied to an individual's performance rating, so closely monitoring these ratings is crucial to ensure consistency. Comp-ratio may also be a helpful tool in ensuring consistency as it compares an employee's pay to the market rate for their position. However, the other options listed do not directly relate to consistency in merit increases.

Question 12

Straight commission plans are plans that
A) provide a straight salary to employees.
B) are useful when the organization wants salespeople to concentrate on listening to customers.
C) are used to attract risk-averse employees.
D) are common among insurance and real estate agents.
E) are uncommon among car salespeople.

Accepted Answer

Straight commission plans are common among insurance and real estate agents, where the pay is based solely on the sales made by the employee, without a fixed salary or hourly wage. This incentivizes employees to work harder and make more sales. It is not useful when the organization wants salespeople to concentrate on listening to customers, as they may focus more on making sales than meeting customer needs. It is also not typically used to attract risk-averse employees, as the pay is uncertain and can fluctuate based on sales performance. While straight commission plans may not be as common among car salespeople, they are not entirely uncommon.

Question 13

What is most likely a consequence of paying most or all of a salesperson's compensation in the form of commissions?
A) It encourages the salesperson to focus on closing the sale.
B) It frees the salesperson to focus on developing customer goodwill.
C) It encourages teamwork over individual performance.
D) It makes the employee appreciate the reward as the reward relates to economic conditions.
E) It will quickly become expensive for the employer.

Accepted Answer

When most or all of a salesperson's compensation is in the form of commissions, the salesperson is encouraged to focus on closing the sale and generating revenue for the company, as their income is directly tied to their performance. This may lead to more aggressive sales tactics or a focus on short-term goals rather than long-term customer relationships.

Question 14

Julie, the HR manager at Forge Corp., wants to ensure that incentive pay rewards the individuals who contribute the most to the organization and whose contributions have grown since their pay rates were originally set. She determines that she can best accomplish these goals by paying an incentive amount based on individuals' performance ratings and compa-ratios. In this scenario, Julie would be applying the system of
A) merit pay.
B) piecework pay.
C) standard hour pay.
D) commissions.
E) attendance bonus.

Accepted Answer

Julie is using the system of merit pay, which rewards individuals based on their performance and contribution to the organization. This is in contrast to piecework pay, which pays based on the quantity of work produced, standard hour pay, which pays based on the time worked, commissions, which pay based on sales, or attendance bonus, which rewards employees for showing up to work on time.

Question 15

In a company's merit pay program, an individual's compa-ratio represents
A) the individual's pay relative to the individual's performance rating.
B) the individual's pay relative to company's average pay for that position.
C) the individual's worth versus that of others in the organization.
D) the ratio of the individual's pay to benefits.
E) the average worth of the skills possessed by the individual.

Accepted Answer

Compa-ratio represents the ratio of an individual's pay to the company's average pay for that position.

Question 16

When an employee's pay is calculated as a percentage of sales, it is referred to as
A) commissions.
B) gainsharing.
C) a merit plan.
D) a variable wage plan.
E) profit sharing.

Accepted Answer

When an employee's pay is calculated as a percentage of sales, it is referred to as commissions. Commission-based pay is common in sales-driven organizations, where employees earn a set percentage of the sales price for every transaction they complete.

Question 17

Souped Inc., a firm that manufactures ready-to-eat soups, offers incentives based on an employee's performance rating and the employee's compa-ratio. Which payment plan is exemplified in this scenario?
A) piecework plan
B) merit pay
C) standard hour plan
D) differential plan
E) skill-based plan

Accepted Answer

The scenario exemplifies a merit pay plan as it offers incentives based on an employee's performance rating. The compa-ratio (comparison of an employee's pay to the pay of others in similar positions) is used as a factor in determining the amount of the incentive, which is a common practice in merit pay plans. A piecework plan pays employees based on the number of units they produce, a standard hour plan pays employees based on the time they spend on the job, a differential plan pays employees based on their skills or job responsibilities, and a skill-based plan pays employees based on their level of skill or knowledge.

Question 18

QVT Financial, an auditing firm, distributes a portion of the profits resulting from improvements in productivity and efficiency among its employees. If the company enjoys an improvement of $45,000, 60 percent of the improvement is the company's share. The other 40 percent is distributed among the employees in the company. What is being exemplified in this scenario?
A) profit rate
B) gainsharing
C) commission sharing
D) merit gain
E) group bonus

Accepted Answer

This scenario exemplifies gainsharing, which is a type of incentive program where a portion of the financial gains resulting from increased productivity or efficiency is shared among employees.

Question 19

What is a disadvantage of a merit pay system?
A) It does not relate the rewards to economic conditions.
B) It cannot be used effectively with performance appraisals.
C) Comparative pay is not considered in its evaluation.
D) It does not provide rewards for performance in all the dimensions measured in the organization's performance management system.
E) It can quickly become expensive for the company.

Accepted Answer

Merit pay systems can become expensive for companies as they require continuous financial resources to reward employees based on their performance, especially if many employees are performing well.

Question 20

Which incentive plans are specifically designed to promote group performance?
A) performance bonuses
B) gainsharing
C) standard hour plans
D) merit pay
E) commissions

Accepted Answer

Gainsharing plans are specifically designed to promote group performance by providing incentives to groups of employees for achieving cost savings, productivity increases, or quality improvements. The incentive payout is typically a percentage of the achieved cost savings or productivity improvements, which encourages collaboration and teamwork among employees to work together towards achieving common goals.

Quiz 13: Recognizing Employee Contributions With Pay

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a ________ program.

Paul, the HR manager at Carletta & Co., is trying to implement an effective group incentive plan that measures increases in productivity and effectiveness and distributes a portion of its earnings to all employees. In this case, Paul should apply the incentive scheme of

Retention bonuses refer to

________ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.

Which statement is true of a performance bonus?

________ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.

What common condition is necessary for gainsharing to be successful in an organization?

To make merit increases consistent, administrators of merit pay programs must closely monitor the compa-ratio and the

Straight commission plans are plans that

What is most likely a consequence of paying most or all of a salesperson's compensation in the form of commissions?

In a company's merit pay program, an individual's compa-ratio represents

When an employee's pay is calculated as a percentage of sales, it is referred to as

Souped Inc., a firm that manufactures ready-to-eat soups, offers incentives based on an employee's performance rating and the employee's compa-ratio. Which payment plan is exemplified in this scenario?

What is a disadvantage of a merit pay system?

Which incentive plans are specifically designed to promote group performance?