Question 1

An indication that the organization's compensation system is ineffective includes all of the following EXCEPT
A) lower proportion of job applicants who are made offers by the organization.
B) high turnover of valuable employees.
C) retention of poor performing employees.
D) high performing employees who are dissatisfied with their pay.

Accepted Answer

A lower proportion of job applicants who are made offers by the organization may be due to factors such as poor employer brand or uncompetitive salaries in the market, rather than an ineffective compensation system. The other options all indicate potential issues with the organization's compensation system. High turnover of valuable employees may indicate that they are leaving for better-paying opportunities elsewhere. Retention of poor performing employees may suggest that there are inadequate performance incentives or consequences. High performing employees who are dissatisfied with their pay may be a sign that the organization is not offering sufficient rewards or recognition for their contributions.

Question 2

In an equity calculation,an employee's base pay,variable pay,and benefits are the ____ he/she receives from a job.
A) outcomes
B) outputs
C) inputs
D) motivators

Accepted Answer

Outcomes in an equity calculation refer to what an employee receives from their job, which includes base pay, variable pay, and benefits. This is in contrast to inputs, which would be the employee's contributions or efforts.

Question 3

A third-quartile approach is a compensation strategy
A) in which the company pays higher wages than its competitors do.
B) to pay below the average in the labor market.
C) where one-third of the competitors in the labor market pay higher wages than what the company does.
D) in which the company pays the median of what its competitors pay.

Accepted Answer

A third-quartile approach to compensation means the company aims to pay higher than the majority (75%) of its competitors, positioning itself above average in the market to attract and retain talent.

Question 4

Simon is outraged that his co-worker Missy was given a raise.Simon believes Missy got the raise because she married the chairman of the board's son.Simon's sense of ____ has been violated.
A) compensatory equity
B) distributive justice
C) external equity
D) procedural justice

Accepted Answer

The answer of Simon is outraged that his co-worker Missy...

Question 5

Organizations that have specific policies about where they wish to position themselves in the labor market use a/an ____ strategy.
A) industry
B) quartile
C) benchmarking
D) labor market

Accepted Answer

A quartile strategy refers to an organization's decision on where it wants to position itself in terms of pay relative to the market. Quartiles (first, second, third, fourth) represent segments of the market rate for salaries, allowing organizations to target a specific pay level (e.g., above, at, or below market average) to attract and retain employees.

Question 6

Amanda is upset because she makes the same salary as Carl does,even though Amanda has 18 clients and Carl has only 11 clients.Amanda is making a judgment about
A) discriminatory compensation.
B) procedural justice.
C) internal equity.
D) external equity.

Accepted Answer

Amanda is making a judgment about internal equity, which is the perception of fairness in the distribution of rewards among employees within the organization based on the value of their jobs or tasks. She believes that her compensation should reflect her superior performance or ability to handle more clients compared to Carl. External equity, on the other hand, refers to the fairness of an organization's compensation relative to what other companies pay for similar jobs. Discriminatory compensation deals with unequal pay based on an individual's race, gender, or other demographic factors, while procedural justice is concerned with fair processes and procedures for making employment decisions.

Question 7

Typical compensation appeals procedures require the employee to discuss the problem first with
A) the organizational ombuds.
B) the EEOC.
C) the HR department.
D) his/her supervisor.

Accepted Answer

Typical compensation appeals procedures often start with the employee discussing the problem with his/her immediate supervisor. This is usually the first step in the process to address and potentially resolve the issue internally before escalating it to higher levels or external entities.

Question 8

The HR unit is typically responsible for all of the following EXCEPT
A) recommending pay increases for employees.
B) analyzing pay structures.
C) evaluating jobs.
D) administering the compensation system.

Accepted Answer

The HR unit is typically responsible for analyzing pay structures, evaluating jobs, and administering the compensation system. However, recommending pay increases for employees is typically the responsibility of the employee's immediate supervisor or manager.

Question 9

Larry has decided to go back to his hometown of Mellonburg and set up an architectural design business for "green" homes.Mellonburg is a depressed farming community of 1,351 residents.It is 20 miles from the nearest restaurant,70 miles from the nearest Starbucks coffee shop,and the local schools are the worst in the state.The winters are severe,the summers are oppressive.Few single people live there,and the social and cultural life is negligible.In order to attract good quality architects,Larry will probably
A) need to ignore the market compensation for architects and pay the architects on an entitlement basis.
B) be able to lag the market significantly in pay because of the low cost of living.
C) have pay more than the market because of the unappealing location.
D) make market comparisons irrelevant by hiring the architects as independent contractors.

Accepted Answer

Given the unappealing location and conditions described, Larry will likely need to offer higher compensation to attract good quality architects to Mellonburg.

Question 10

Pay increases for individual,non-executive,employees in a compensation system based on individual performance are typically decided by
A) operating managers.
B) the compensation committee.
C) a compensation consultant.
D) HR compensation specialists.

Accepted Answer

Pay increases for individual, non-executive employees in a compensation system based on individual performance are typically decided by the operating managers who have the most direct knowledge and involvement in the employee's performance. They are in the best position to evaluate an employee's contribution and make decisions about their compensation. B) The compensation committee is typically responsible for setting overall compensation policies and guidelines, but specific pay decisions for individual employees are generally made at the managerial level. C) A compensation consultant may be involved in designing or evaluating compensation systems, but their role in making individual pay decisions would be limited. D) HR compensation specialists may advise managers on compensation best practices, but the final decision on individual pay increases usually rests with the operating manager.

Question 11

The CEO of BizMark Equipment wants to know what return the firm is getting on the money it is spending on its employees.As the director of HR,you know this is considered return on human capital.You will calculate this as
A) Total Compensation and Benefits / FTEs
B) Revenue - Operating Expense -Pay and Benefits = Adjusted Profit / Pay and Benefits
C) Revenue - Operating Expense - Pay and Benefits + Adjusted Profit / FTEs
D) Total Pay and Benefits Expenditures / Operating Expense

Accepted Answer

The correct formula for calculating return on human capital typically involves assessing the profit generated beyond the cost of pay and benefits in relation to those costs. Choice B, "Revenue - Operating Expense - Pay and Benefits = Adjusted Profit / Pay and Benefits," accurately represents this calculation by isolating the adjusted profit (which is the revenue minus operating expenses and pay and benefits) and then dividing it by the pay and benefits to assess the return specifically on the investment in human capital.

Question 12

The director of HR at Megatherium Industries knows that there are serious flaws in the company's compensation system.If employees freely discuss their wage or salary levels,raises and bonuses,the director is concerned that there will be widespread dissatisfaction and employee questions that will place the HR department and top management in a bad light.Consequently,Megatherium has a strict pay secrecy policy,and employees who discuss their pay are disciplined.Which of the following statements is TRUE?
A) Megatherium's policy of pay secrecy is unusual among U.S. organizations.
B) If Megatherium opens its pay policies, employee satisfaction and retention will improve because employees will not have to rely on conjecture and rumor.
C) Closed pay systems, such as Megatherium's, are illegal for any company traded on the NY Stock Exchange.
D) It is possible that Megatherium's policy violates the National Labor Relations Act.

Accepted Answer

It is possible that Megatherium's policy violates the National Labor Relations Act, which protects employees' right to engage in "concerted activities for the purpose of collective bargaining or other mutual aid or protection." This includes discussing wages and other terms and conditions of employment. Therefore, Megatherium's policy of pay secrecy may be seen as a violation of the NLRA.

Question 13

Paul is a single parent.He received consistently high performance appraisals from his employer,until the company went bankrupt.Now,Paul is looking for a new job.As the recruiter at MilqueMaid Chocolate,you are very interested in Paul.But,your firm has a lag-the-market compensation strategy.You know that Paul has had an offer from a firm that has a meet-the-market strategy.You are not authorized to offer Paul a market-level salary.Your best way to lure Paul to MilqueMaid is to
A) point out MilqueMaid's broad-based performance incentive programs.
B) emphasize MilqueMaid's entitlement compensation philosophy.
C) discuss the method that MilqueMaid used to determine its quartile strategy.
D) discuss MilqueMaid's broadband pay structure.

Accepted Answer

The best way to lure Paul to MilqueMaid despite its lag-the-market compensation strategy would be to point out the company's broad-based performance incentive programs. This would emphasize the potential for Paul to earn more through exceptional performance, even if the base salary is lower than what he could get at another firm. This approach also aligns with Paul's history of receiving high performance appraisals, making it more likely that he would be motivated by the opportunity to earn more through his individual efforts.

Question 14

Brian,the director of compensation,has been asked by the board of directors to present the "employee cost factor" for the last 10 years at the next board meeting.Brian needs to do the following calculation for each year:
A) total compensation and benefits / FTEs
B) revenue - operating expense - pay and benefits = adjusted profit / FTEs
C) revenue - operating expense - pay and benefits = adjusted profit / pay and benefits
D) total pay and benefits / total operating expenses

Accepted Answer

The "employee cost factor" is typically calculated as the total compensation and benefits divided by the number of full-time equivalent employees (FTEs). Option A provides this calculation and is therefore the best choice for Brian to use. Options B, C, and D do not provide the appropriate calculation for the employee cost factor.

Question 15

Abundance Nurseries needs large numbers of unskilled employees every spring and summer to plant,maintain,and harvest the flower fields.Abundance is located in an area where there is a large supply of unskilled workers,and it has few problems recruiting workers as needed.It would be reasonable for Abundance Nurseries to position its pay for these workers in the ____ -quartile of the labor market.
A) first
B) second
C) third
D) fourth

Accepted Answer

Since there is a large supply of unskilled workers in the area and Abundance Nurseries has few problems recruiting workers, it suggests that the demand for this type of labor is relatively low compared to the supply. Therefore, Abundance Nurseries could position its pay for these workers in the first quartile of the labor market, which may be lower than the market median or average. This could help the company save labor costs while still attracting enough workers to meet its seasonal demands.

Question 16

If employees feel their pay is unfair,they are likely to do or feel all the following EXCEPT
A) quit.
B) be dissatisfied with their jobs.
C) lose self-esteem.
D) change their job performance.

Accepted Answer

Feeling that pay is unfair typically affects job satisfaction, the decision to quit, or changes in job performance as a form of protest or disengagement. However, it doesn't directly cause a loss in self-esteem, as self-esteem is more deeply rooted in one's overall sense of self-worth and can be influenced by a broader range of factors beyond just perceptions of pay fairness.

Question 17

In order to show how the rate of compensation changes compares with the rate of changes in the organization's revenues overall
A) compensation metrics should be calculated each year and compared with previous years' metrics.
B) compensation metrics should be calculated for regular employees (excluding compensation for part time employees) and compared with previous years' metrics.
C) the board of directors should have compensation metrics calculated on a rotating basis: Human value added one year, return on human capital invested the next year, and so forth. This provides the "big picture" strategically.
D) total compensation should be charted against total revenues, and any upward change in total compensation should be analyzed.

Accepted Answer

The answer of In order to show how the rate...

Question 18

All the following are likely outcomes when an organization's compensation is viewed by employees and outsiders as lacking external equity EXCEPT
A) increased turnover among high quality employees.
B) lower organizational performance.
C) increased likelihood of pay discrimination complaints to the EEOC.
D) difficulty recruiting qualified and high-demand employees

Accepted Answer

An organization's compensation being viewed as lacking external equity is likely to result in increased turnover among high quality employees, lower organizational performance, and difficulty recruiting qualified and high-demand employees. However, it is less likely to result in increased likelihood of pay discrimination complaints to the EEOC, as external equity refers to ensuring compensation is competitive with similar jobs in the external job market, rather than discriminatory practices within the organization.

Question 19

In terms of procedural justice,the process of determining base pay,allocating pay increases,and measuring performance all must be seen by employees as
A) fair.
B) legal.
C) performance-based.
D) non-discriminatory.

Accepted Answer

Procedural justice requires that the process of determining base pay, allocating pay increases, and measuring performance must be perceived as fair by employees. This means that the process must be transparent, consistent, and unbiased, and that employees have a voice in the process. While legality, performance-based criteria, and non-discrimination are important aspects of procedural justice, the key factor is the perception of fairness by employees.

Question 20

A company that structures its compensation system so that half of its competitors pay their employees more than it does and half of its competitors pay less than it does is using a ____ the market strategy.
A) lag
B) meet
C) lead
D) follow

Accepted Answer

A "meet the market" strategy involves setting compensation levels that are competitive with the market average, meaning that the company aims to pay similarly to how other companies in the industry pay. In this scenario, being in the middle where half of the competitors pay more and half pay less is indicative of meeting the market.

Quiz 11: Total Rewards and Compensation

An indication that the organization's compensation system is ineffective includes all of the following EXCEPT

In an equity calculation,an employee's base pay,variable pay,and benefits are the ____ he/she receives from a job.

A third-quartile approach is a compensation strategy

Simon is outraged that his co-worker Missy was given a raise.Simon believes Missy got the raise because she married the chairman of the board's son.Simon's sense of ____ has been violated.

Organizations that have specific policies about where they wish to position themselves in the labor market use a/an ____ strategy.

Amanda is upset because she makes the same salary as Carl does,even though Amanda has 18 clients and Carl has only 11 clients.Amanda is making a judgment about

Typical compensation appeals procedures require the employee to discuss the problem first with

The HR unit is typically responsible for all of the following EXCEPT

Pay increases for individual,non-executive,employees in a compensation system based on individual performance are typically decided by

The CEO of BizMark Equipment wants to know what return the firm is getting on the money it is spending on its employees.As the director of HR,you know this is considered return on human capital.You will calculate this as

Brian,the director of compensation,has been asked by the board of directors to present the "employee cost factor" for the last 10 years at the next board meeting.Brian needs to do the following calculation for each year:

If employees feel their pay is unfair,they are likely to do or feel all the following EXCEPT

In order to show how the rate of compensation changes compares with the rate of changes in the organization's revenues overall

All the following are likely outcomes when an organization's compensation is viewed by employees and outsiders as lacking external equity EXCEPT

In terms of procedural justice,the process of determining base pay,allocating pay increases,and measuring performance all must be seen by employees as

A company that structures its compensation system so that half of its competitors pay their employees more than it does and half of its competitors pay less than it does is using a ____ the market strategy.