Question 1

How does merit pay differ from incentive pay?

Accepted Answer

Merit pay is typically based on subjective performance appraisals that focus on overall performance for a given period of time; incentive pay, however, emphasizes performance based on quantifiable outcomes. Incentive pay can be tied to specific goals or metrics, such as sales quotas or production targets, whereas merit pay is not always tied to specific performance goals.

Question 2

Profit-sharing plans:

Accepted Answer

The answer of Profit-sharing plans:
...

Question 3

_____ are among the oldest and most popular forms of incentive pay.

Accepted Answer

The answer of _____ are among the oldest and most...

Question 4

Under a merit pay system with a small merit pool,it is likely that _____ will be dissatisfied with their raises.

Accepted Answer

High performers are likely to be dissatisfied with their raises under a merit pay system with a small merit pool because the limited funds available for distribution may not adequately reflect their superior performance or sufficiently differentiate their compensation from that of average or poor performers.

Question 5

The Scanlon and Rucker plans for gain sharing are based on the principle that:

Accepted Answer

The Scanlon and Rucker plans are both based on the idea that management should adopt a philosophy of employee participation in order to motivate employees to offer input and suggestions for improving operations and increasing productivity. This involvement is considered essential to the success of these gain sharing plans. Choice A is incorrect because it emphasizes individual evaluation over collaboration and teamwork. Choice B is incorrect because it suggests that an informal suggestion system will be more effective than a more organized and structured approach. Choice D is incorrect because participation is typically expected in gain sharing plans in order to foster a sense of ownership and motivation among all employees. Choice E is incorrect because implementation is a joint effort between management and employees, and both should be rewarded through gain sharing.

Question 6

The Scanlon Plan

Accepted Answer

The Scanlon Plan is appropriate for small, mature firms and focuses on labor cost savings, while using simple measures of performance. Additionally, it was developed during the Depression Era. Therefore, all of the options are correct.

Question 7

When compared to merit pay,incentive pay:

Accepted Answer

Incentive pay can take the form of profit sharing and gain sharing, which are both examples of pay that is tied to outcomes. Option A is incorrect because incentive pay is typically based on objective measures, such as sales or production goals. Option B is incorrect because incentive pay is often temporary and tied to achieving specific goals. Option C is also incorrect because incentive pay is more useful in tying rewards to outcomes than merit pay.

Question 8

Carmen is in the first quartile (bottom)of the pay range and she has displayed superior performance this year.Hugo is in the fourth quartile (top)of the pay range and he has also displayed superior performance this year.In terms of percentage of pay:

Accepted Answer

Given that Carmen is in the first quartile (bottom) of the pay range and has displayed superior performance, she is likely to receive a higher percentage raise compared to Hugo, who is already in the fourth quartile (top) of the pay range. Organizations often give higher percentage raises to lower-paid employees who perform exceptionally well to motivate them and help adjust their pay to be more in line with their performance and market rates.

Question 9

Kiely's mother is paying her to read this summer.For every chapter of David Copperfield that she reads and prepares a written synopsis of in one and one-half hours or less,she receives $3.If she completes the task in more then the allotted time she receives only $2.What payment plan is Kiely's mother using to encourage Kiely to read at the faster rate?

Accepted Answer

The differential piece rate plan pays different rates for different levels of performance, encouraging faster work by offering higher pay for completing tasks within a certain time frame.

Question 10

Which of the following statements about earnings-at-risk pay plans is true?

Accepted Answer

Earnings-at-risk plans, such as those involving straight commissions, mean that the employee's earnings are directly tied to their performance. If they do not perform, they do not earn, placing their earnings at risk.

Question 11

Improshare

Accepted Answer

Improshare focuses on labor hours saved, rather than labor costs saved, as it measures productivity improvements by comparing the actual hours worked to a standard.

Question 12

Dixie Manufacturing uses a strict merit pay system.Angel is one of 12 assembly line workers in your department,and she has been a good performer for the last nine years.But this year,her performance has been significantly below average.Angel has not mentioned problems at home,but you noticed in the crime section of the local paper that her teenage son was convicted for driving under the influence at New Year's,and in the legal postings you learned she divorced her husband for desertion at Easter.The local paper also carried a story about children with learning disabilities,and you noticed that Angel's youngest daughter was featured.What should Angel's merit raise be this year? Angel's raise should be

Accepted Answer

Under a strict merit pay system, raises are based solely on performance. Since Angel's performance has been significantly below average this year, she would not qualify for a merit raise.

Question 13

When tax rates for long-term capital gains are _____ relative to tax rates for ordinary income,stock options become _____ popular.

Accepted Answer

The answer of When tax rates for long-term capital gains...

Question 14

Todd's grandmother makes quilts for a gallery in New York City.For each completed full-size quilt she completes and delivers to the gallery buyer,she earns $350.What payment plan is used by the gallery to pay Todd's grandmother for her work?

Accepted Answer

In the straight piecework plan, payment is based on the number of completed units produced. In this case, Todd's grandmother is paid $350 for each completed full-size quilt she produces and delivers to the gallery buyer, which aligns with the straight piecework plan.

Question 15

When designed appropriately,team-based incentives offer four major advantages when compared with individual incentive systems.Which of the following statements describes one of those advantages?

Accepted Answer

All of the above statements are advantages of team-based incentives, including the ability for successful behavior to be modeled by a member of the team, the increased motivation from the presence of control over rewards, the added strength of group-administered rewards, and the reduction of counterproductive peer pressure.

Question 16

As a bank teller,Diane realized there was a problem in how customers waited in line.She made a suggestion that reduced the average customer wait by two minutes,causing an increase in customer satisfaction.Diane received a special plaque from the president of the bank and a $200 check.This is an example of a(n):

Accepted Answer

This scenario describes an on-the-spot award, which is a type of recognition given immediately after an employee's outstanding performance. The plaque and check given to Diane are typical examples of on-the-spot awards.

Question 17

Current distribution plans:

Accepted Answer

Providing a percentage of profits to be distributed quarterly or annually to employees is the most common and straightforward form of profit sharing plan. It allows employees to directly benefit from the company's success and incentivizes them to work harder to increase profits. Option A, B, C, and E are also potential distribution plans, but they are not as widely used or easily implemented as option D.

Question 18

Dakota stopped by the alteration shop yesterday.In the shop was posted a sign that said,"Buttons put on for $3,zippers repaired for $8,dresses hemmed for $10,pants hemmed for $8.50,all other prices based on job." From this information,you should be able to tell that the alteration shop uses a:

Accepted Answer

The answer of Dakota stopped by the alteration shop yesterday.In...

Question 19

Gain-sharing plans are premised on the assumption that:

Accepted Answer

Gain-sharing plans are designed to incentivize employees to reduce unnecessary costs and improve efficiency in order to increase profitability for the organization. Therefore, the assumption underlying gain-sharing plans is that it is possible to reduce costs by eliminating wasted materials and labor, developing new or better products, or working smarter.

Question 20

The most popular recognition award that firms use is

Accepted Answer

Certificates and plaques are the most popular recognition award as they are a tangible symbol of achievement and can be displayed prominently in the recipient's workspace. They are also relatively inexpensive to produce and can be customized to reflect the specific accomplishment being recognized. Cash, gift certificates, travel, and company merchandise may also be appreciated by recipients, but they lack the lasting impact and visibility of a certificate or plaque.

Quiz 11: Using Performance-Based Pay to Achieve Strategic Objectives