Question 1

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

Accepted Answer

Group bonuses are usually designed to reward the performance of specific teams or groups within an organization, rather than all employees.

Question 2

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.

Accepted Answer

An employee stock ownership plan (ESOP) is an arrangement in which an organization contributes shares of stock to a trust on behalf of the employees. The trust then allocates shares to individual employee accounts based on a vesting schedule.

Question 3

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

Accepted Answer

Transparency about changes to incentive plans is crucial for maintaining trust and ensuring employees understand how their performance impacts their rewards, which can motivate and engage them.

Question 4

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.

Accepted Answer

In larger organizations, the actions of individual employees may not have a direct impact on the company's stock price due to its size and complexity. Additionally, employees may be more focused on their own individual job responsibilities rather than the overall performance of the company.

Question 5

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

Accepted Answer

A balanced scorecard is a strategic management tool that includes a set of measures covering financial, customer, internal process, and learning and growth perspectives. It is designed to align performance measures with the company's long- and short-term goals.

Question 6

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

Accepted Answer

Standard hour plans are efficiency-oriented incentives designed to reward workers for completing tasks in less time than a predetermined standard, rather than focusing on quality.

Question 7

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

Accepted Answer

Cost savings can be included as a performance measure in team awards type of group incentive, along with measures such as productivity, quality, and customer satisfaction.

Question 8

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

Accepted Answer

Employees who participate in an employee stock ownership plan (ESOP) do have the right to vote their shares on issues such as the election of board members and other corporate matters. However, there may be restrictions or limitations on the voting rights depending on the specifics of the ESOP.

Question 9

Employees who receive stock options as incentive pay must exercise the stock options even if the stock price decreases.

Accepted Answer

Employees with stock options have the option (but are not required) to exercise their options to buy company stock at a predetermined price. However, if the stock price decreases, it may no longer be advantageous for the employee to exercise their options and purchase the stock at a higher price than it is currently trading for. Therefore, employees are not required to exercise their stock options if the stock price decreases.

Question 10

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

Accepted Answer

Piecework rates incentivize workers to produce more output, which works well for routine, standardized jobs with easily measurable output.

Question 11

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.

Accepted Answer

Retention bonuses are one-time incentives paid to employees as an incentive to stay with the company. They are often given to top managers, engineers, top-performing salespeople, and information technology specialists.

Question 12

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

Accepted Answer

A merit pay incentive system is typically used to reward individual employees for their performance, rather than promote team-oriented behavior.

Question 13

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.

Accepted Answer

Incentive pay is designed with the intention of motivating employees to improve their performance by linking the amount paid to specific behaviors or outcomes.

Question 14

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

Accepted Answer

Under profit sharing, payments are not added to the employees' base salary but are usually distributed separately as bonuses or incentives based on the organization's profitability.

Question 15

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

Accepted Answer

Merit pay requires employers to evaluate employee performance and provide monetary rewards accordingly. This process can be time-consuming and may require additional resources for training and development. Therefore, it may not necessarily be cheap for employers to implement.

Question 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

Linking incentives to the organization's profits or stock price exposes employees to the volatility of the market which can result in high risk. Changes in market conditions, economic events, or internal factors can result in a decrease in profits and a decrease in the value of the company's stock, leading to lower incentives or even none at all. This is a common concern among employees, as their financial stability is tied to the organization's financial performance.

Question 18

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

Accepted Answer

Stock options are typically used as long-term incentives, aligning employees' interests with shareholders and encouraging retention, rather than motivating daily performance.

Question 19

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

Accepted Answer

Incentive pay for executives can lead to ethical concerns such as prioritizing short-term gains and neglecting long-term consequences or engaging in unethical behavior to achieve targets and secure bonuses. Additionally, the subjective nature of performance evaluations and target setting can create opportunities for manipulation and favoritism.

Question 20

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.

Accepted Answer

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

Quiz 13: Recognizing Employee Contributions With Pay