Deck 13: Recognizing Employee Contributions With Pay

Question 1

Under the team awards type of group incentive,cost savings is excluded as a performance measure.

Answer 1

False
Explanation: Team awards are similar to group bonuses, but they are more likely to use a broad range of performance measures, such as cost savings, successful completion of a project, or even meeting deadlines.

Question 2

Under incentive pay,piecework rates are most suited for routine,standardized jobs with output that is easy to measure.

Answer 2

True
Explanation: Most jobs, including those of managers, have no physical output, so it is hard to develop an appropriate performance measure. So piecework rates are most suited for very routine, standardized jobs with output that is easy to measure.

Question 3

A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals.

Answer 3

True
Explanation: A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay.

Question 4

Employees should exercise the stock options even if the stock price has decreased.

Question 5

Standard hour plans are quality-oriented incentives for professional employees.

Question 6

Successful gainsharing plans include employee stock ownership plans.

Question 7

ESOP denies employees the right to participate in votes by shareholders even if the stock is registered on a national exchange.

Question 8

The costs associated with profit sharing increase substantially when the organization experiences financial difficulties.

Question 9

A merit pay incentive system is used to attract employees who are more team-oriented.

Question 10

Incentive pay is specifically designed to energize,direct,or control employees' behavior and is influential because the amount paid is linked to certain predefined behaviors or outcomes.

Question 11

As in the case of merit pay,performance bonuses for rewarding individual performance are rolled into an employee's base pay.

Question 12

Retention bonuses are one-time incentives paid to top managers,engineers,top-performing salespeople,and information technology specialists in exchange for remaining with the company.

Question 13

The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.

Question 14

An employee stock ownership plan is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.

Question 15

Under profit sharing,payments are a percentage of the organization's profits and become part of the employees' base salary.

Question 16

In larger organizations that have stock ownership plans,the employees may not see a strong link between their actions and the company's stock price.

Question 17

Group bonuses typically reward the performance of all employees in an organization.

Question 18

Merit pay is a system of linking pay increases to ratings on performance appraisals.

Question 19

From employers' perspective,an advantage of merit pay is that it is cheap.

Question 20

Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk.

Question 21

In the process of designing incentives,managers should make sure that:

A) all the employees are paid the same amount.
B) even the lowest performing employees are rewarded.
C) employees focus only on completing the task quickly.
D) employees believe that the pay plan is fair.
E) they hire employees who consider earning money as the sole reason to perform well.

Question 22

An organization should keep information,such as changes made to its incentive plan,confidential from its employees.

Question 23

An employee at CellWorks who produces 10 components in an hour earns $9 ($.90 × 10)per hour,while another employee who produces 15 components earns $13.50 ($.90 × 15).This is an example of a:

A) commission plan.
B) differential piece rate plan.
C) direct commission plan.
D) profit sharing plan.
E) straight piecework plan.

Question 24

The balanced-scorecard approach should be avoided while designing executive pay.

Question 25

Wayan Inc.,a health care insurance company,pays an incentive based on the average work per hour.Wayan pays $10 for billing 20 medical charts per hour.An employee who bills 30 charts would earn $15 per hour.Hence,Wayan pays the same rate per chart no matter how many charts an employee produces per hour.Which of the following is being exemplified in this scenario?

A) Straight piecework plan
B) Skill-based pay system
C) Merit pay system
D) Quality-based pay system
E) Straight commission plan

Question 26

Incentive pay for executives lays the groundwork for significant ethical issues.

Question 27

_____ refers to an incentive pay in which the wage paid is higher when a greater amount is produced.

A) Profit sharing
B) Differential piece rate
C) Gain sharing
D) Scanlon pay
E) Merit pay

Question 28

The many kinds of incentive pay fall into three broad categories: _____

A) incentives linked to individual, group, or organizational performance.
B) incentives linked to output, productivity, or quality of a product.
C) pay linked to goals, focus, or achievements of an organization.
D) pay related to base salary, bonus, and travel allowance.
E) incentives obtained in the form of company shares, gift coupons, and trial products.

Question 29

Jules & Co.,a smartphone manufacturing company,provides wages to its employees based on the number of smartphones the workers assemble.The more the employees assemble,the more they earn.This type of plan is called:

A) piecework rate plan.
B) merit pay plan.
C) Scanlon plan.
D) profit sharing plan.
E) standard hour plan.

Question 30

Token Inc.is an envelope manufacturer based in Dallas.The employees of the organization receive incentive pay based on the amount of work produced.If the output of an employee is more than the average production volume,then the organization pays an incentive in addition to wages and salaries.In this case,which of the following incentives is offered by Token Inc.?

A) Piecework rate
B) Minimum wage
C) Employee labor
D) Training stipend
E) Group bonus

Question 31

A pay structure specifically designed to energize,direct,or control employees' behavior is known as:

A) monthly salary.
B) wage.
C) incentive pay.
D) annual salary.
E) fixed pay.

Question 32

Which of the following is a disadvantage of using incentive plans?

A) The goals of an incentive plan may interfere with other management goals.
B) The goals of incentive plans can seldom be linked to particular outcomes or behaviors.
C) Incentive plans cannot be used to promote group and organizational performance.
D) Incentive plans cause dissatisfaction among the non-performing employees in the organization.
E) Incentive plans are not very effective for jobs other than sales and service.

Question 33

A piecework rate plan is best suited for:

A) HR professionals.
B) executives.
C) production workers.
D) managers.
E) knowledge workers.

Question 34

As an incentive to work efficiently,some organizations pay production workers a _____,a wage based on the amount they produce.

A) merit pay
B) sales commission
C) standard hour pay
D) piecework rate
E) special bonus

Question 35

Which of the following types of incentive plans are used to reward individual performance?

A) Gainsharing
B) Merit pay
C) Scanlon plan
D) Profit sharing
E) Stock ownership

Question 36

A feature of an effective incentive pay plan is that it should:

A) have performance measures based on employees' requirements.
B) not be provided as a direct percentage of employees' performance.
C) encourage group performance and sideline individual achievements.
D) be the same for all employees in the organization.
E) have performance measures linked to the organization's goals.

Question 37

The balanced scorecard helps employees understand the organization's goals and how they can contribute to these goals.

Question 38

For incentive pay to motivate employees to contribute to the organization's success,the pay plans must be well designed.Which of the following statements would strengthen this argument?

A) Performance measures are to be linked to the individual's goals.
B) Employees are given unattainable performance standards.
C) Employees will value the rewards or incentives that are being offered.
D) Employees are given limited resources to meet their goals.
E) The pay plan takes into account that employees will accept all goals irrespective of their rewards.

Question 39

Stock options are best suited to motivate day-to-day effort or to attract and retain top individual performers.

Question 40

Vactin Motors,an automobile company,ties individual performance,profits,and other measures of employees' success to a particular form of pay.This form of pay is influential because the amount paid is linked to certain predefined behaviors or outcomes.Which of the following is exemplified in this scenario?

A) Minimum wage
B) Overtime pay
C) Incentive pay
D) Piecework rates
E) Bonus payment

Question 41

Michael,formerly a model employee at his organization,has recently begun losing interest in his work due to personal and financial issues.He has spoken to his manager about leaving the company,complaining that he hasn't been receiving enough recognition for his work of the last 12 years.In an effort to change Michael's mind,his manager decides to give him a large amount of money as an incentive.In this scenario,Michael's manager is giving him _____.

A) a commission
B) a retention bonus
C) stock options
D) merit pay
E) an attendance bonus

Question 42

The primary function of a merit increase grid is to:

A) make the increases consistent.
B) further increase the pay for those whose pay is relatively higher for their job.
C) increase the employees' compa-ratio.
D) stabilize economic conditions.
E) increase incentives on a year-by-year basis.

Question 43

Which of the following statements is true about standard hour plans?

A) They encourage employees to focus exclusively on customer service.
B) They succeed only for employees who are not motivated by money.
C) They encourage employees to focus mainly on quality.
D) In terms of their pros and cons, they are very different from piecework plans.
E) They encourage employees to work as fast as they can.

Question 44

Merit pay system decisions are based on two factors: an individual's performance rating and their:

A) compa-ratio.
B) seniority.
C) pay grade.
D) educational qualification.
E) experience.

Question 45

In a company's merit pay program,individuals' compa-ratio represents their:

A) pay relative to performance of other workers in the industry.
B) pay relative to average pay.
C) comparable worth versus others.
D) ratio of pay to benefits.
E) the average worth of the skills possessed by the individual.

Question 46

Which of the following is an advantage of the merit pay incentive system?

A) It makes the reward more valuable by relating it to economic conditions.
B) It promotes group performance instead of promoting individual behavior.
C) It provides merit increases to employees solely on the basis of performance.
D) It is the most economical incentive system for the employers.
E) It provides a direct link between the work done by the employee and the amount earned.

Question 47

A standard hour incentive plan is likely to be successful if:

A) most or all of a salesperson's compensation is in the form of commissions.
B) employers keep labor costs to a minimum.
C) the pay increase is linked to ratings on performance appraisals.
D) employees want the extra money more than they want to work at a pace that feels comfortable.
E) the organization values employee satisfaction, product quality, and customer service more than profits.

Question 48

Johan,a manager of a construction company,believes that a piecework plan benefits all types of work areas.However,his colleague,George,argues that a piecework plan is not suitable for a few complex jobs and that it might have a negative impact on the work production.Which of the following statements,if true,strengthens George's argument?

A) It is easy to measure the output of managers using a piecework plan.
B) A piecework plan is not suitable for very routine, standardized jobs.
C) Complex jobs involve the coordination of many team members to complete tasks.
D) Using a piecework plan helps employee empowerment.
E) Incentive plans do not impact productivity when work involves complex jobs.

Question 49

Which of the following is a drawback of a standard hour plan?

A) It does not focus on quality or customer service.
B) It escalates costs for an employer in the long term.
C) It is applicable only in team-based work environments.
D) It helps employees work at a comfortable pace.
E) It does not pay workers extra for work done in less than the standard time.

Question 50

The differential piece rates system refers to:

A) an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees.
B) a system that gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.
C) an incentive pay in which the piece rate is higher when a greater amount is produced.
D) a system of linking pay increases to ratings on performance appraisals.
E) an incentive pay plan where every employee is paid different wages based on the skills they possess.

Question 51

Jupiter Systems,an information technology company,determines a particular time to complete a particular task.Even if an employee completes the allotted task before the time of completion,the employee receives an amount of pay equal to the wage for the designated time.Which of the following payment methods is exemplified in this scenario?

A) Piecework plan
B) Differential plan
C) Standard hour plan
D) Merit plan
E) Skill-based plan

Question 52

_____ gives the biggest pay increases to the best performers and to those whose pay is relatively low for their job.

A) Piecework pay system
B) Merit pay system
C) Standard hour plan
D) Differential plan
E) Skill-based plan

Question 53

Jeff owns and manages a small electronics repair store.He determines the time required by his employees to complete each task assigned by him.When employees complete the repairs in less time,they receive an amount of pay equal to that time determined by him.In this scenario,Jeff is using the:

A) standard hour plan.
B) differential piecework plan.
C) merit pay plan.
D) straight piecework plan.
E) Scanlon plan.

Question 54

To make the 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.

Question 55

Alex,a researcher,claims that an exceptional employee with low pay will benefit more than his or her co-workers,who receive significantly better pay but perform below expectations,in a merit pay system.Which of the following statements strengthens Alex's claim?

A) An employee receiving high pay performs better than other employees.
B) The quality of the output produced by employees with high pay is better than that of other employees.
C) Employees with high pay complete their work before the standard time.
D) A higher pay range results in lower compa-ratios causing a bigger merit raise.
E) The average pay in a merit pay system can only rise by a maximum of 2% each year.

Question 56

Piecework rate plans are most suited for _____.

A) innovative tasks
B) non-standard jobs
C) managerial jobs
D) jobs with difficult-to-measure output
E) routine jobs

Question 57

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as _____.

A) commission
B) the Scanlon plan
C) merit pay
D) gain sharing
E) profit sharing

Question 58

Which of the following statements is true about a piecework rate plan?

A) It can be used for all types of jobs and in all types of industries.
B) It is best suited for complex jobs and tasks.
C) It can be used to encourage team work and collaboration.
D) It has a direct link between the work done by the employee and the amount earned.
E) It encourages the employee's peers to perform as well and reduces conflicts.

Question 59

Songreen 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 of the following payment plans is exemplified in this scenario?

A) Piecework plan
B) Merit pay
C) Standard hour plan
D) Differential plan
E) Skill-based plan

Question 60

Julianna,the HR manager at Hudson Corp.,is facing criticism from the company's high-performing employees for the lack of an effective incentive scheme that rewards them with the necessary pay.The company has avoided paying out incentives in addition to employees' monthly salary in an attempt to minimize costs.But,after the last annual meeting,it has been decided to pay employees an incentive amount based on their performance ratings and their compa-ratio.In this scenario,Julianna would be applying the system of:

A) merit pay.
B) piecework pay.
C) standard hour pay.
D) commission.
E) attendance bonus.

Question 61

Which of the following statements 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.

Question 62

Which of the following 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.

Question 63

Which of the following 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.

Question 64

Which of the following incentive plans are specifically designed to promote group performance?

A) Performance bonuses
B) Gainsharing
C) Standard hour plans
D) Merit pay
E) Commissions

Question 65

QVO 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% of the improvement might be the company's share.The other 40% would be distributed among the employees in the company.Which of the following is being exemplified in this scenario?

A) Profit rate
B) Gainsharing
C) Commission sharing
D) Merit gain
E) Group bonus

Question 66

_____ 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

Question 67

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

A) piecework rate
B) gainsharing
C) sales commission
D) merit pay
E) ESOPs

Question 68

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

Question 69

_____ 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

Question 70

The distribution of a portion of a company's earnings to its employees will motivate them to focus more on efficiency and productivity.Which of the following would strengthen this argument?

A) It helps create job opportunities.
B) It helps avoid competition among employees.
C) Employees spend long hours working.
D) Employees avoid taking days off when they are given a share of profit.
E) Employees consider the organization's goals along with their personal interests.

Question 71

Straight commission plans are plans which:

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

Question 72

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

A) commission.
B) gain sharing.
C) merit plan.
D) variable wage plan.
E) profit sharing.

Question 73

What should employees typically do to earn bonuses under the Scanlon plan?

A) They should produce products at a rate that is much higher than the standard production time.
B) They should create goodwill with customers and close as many sales as possible.
C) They should follow a defined set of quality standard to produce the desired outcome.
D) They should keep labor costs to a minimum and produce as much as possible with that amount of labor.
E) They should improve their performance year after year so that they re-earn the bonus during each performance period.

Question 74

Which of the following is a common condition for gainsharing to be a success 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

Question 75

Which of the following incentive programs measures improvements in productivity and effectiveness and distributes a portion of the earnings to all employees?

A) Merit pay
B) Team award
C) Commission
D) Standard hour plans
E) Gainsharing

Question 76

A multi-national organization uses a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard.This incentive plan is referred to as the:

A) group bonus.
B) merit pay plan.
C) Scanlon plan.
D) piecework rate.
E) team award.

Question 77

Developed in the 1930s,the Scanlon plan is a variation of the:

A) profit sharing plans.
B) gainsharing plans.
C) merit pay plans.
D) individual bonus plans.
E) commission plans.

Question 78

Jennifer believes that the challenge of identifying appropriate performance measures for complex jobs can be resolved by implementing a gainsharing plan.Natalie argues that it is a poor incentive program in an organization that wants to encourage teamwork.Which of the following statements weakens Natalie's argument?

A) It oversimplifies the responsibilities involved in teamwork and motivates employees to work hard.
B) It creates a competitive environment among the employees working in a team.
C) It offers less incentives because the incentives are distributed equally among team members.
D) It encourages employees to learn new skills from other team members.
E) It encourages teams to take pay-related decisions.

Question 79

Gerald,the CEO of Logiworks,decides to scrap the current individual incentive pay scheme for a group incentive structure in an effort to increase the overall benefit to the organization.Which of the following statements,if true,would weaken his decision?

A) Most of the employees had exercised their stock options before this change.
B) The employees were unaware of the impact of their actions on the company's finances.
C) The move was a response to problems that arose out of a poorly constructed bonus plan.
D) The organization was divided into departments whose managers were rewarded as one group.
E) The employees in the company are required to work in teams in order to accomplish their goals.

Question 80

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.