Deck 9: Evaluating the Market

Question 1

What are two main disadvantages associated with using informal in-house surveys?

A) complexity and cost
B) cost and reliability issues
C) cost and speed
D) reliability and validity issues

Answer 1

D

Question 2

What are three of the main "third-party" sources of compensation data?

A) Statistics Canada, trade journals, and government agencies
B) private agencies, trade journals, and government agencies
C) government agencies, industry groups, and consulting firms
D) consulting firms, boards of trade, and publishers

Answer 2

C

Question 3

Data can be collected through personal interviews, random sampling, and questionnaires.

Answer 3

False

Question 4

Which of the following is a potential drawback associated with using compensation consultants to gather labour market information?

A) The data is usually not presented in a "user-friendly manner"; hence, it is difficult to use.
B) The data is usually old and not relevant.
C) The data may be restricted to a few organizations; hence, it does not comprise an appropriate sample.
D) The data tends to be more expensive compared to designing and administering your own survey.

Question 5

Compensation surveys reflect the value placed on jobs by the labour market, but this does not always mean that the market values jobs fairly.

Question 6

Which of the following conditions tends to explain why jobs in the higher hierarchy positions of the public sector tend to be paid less than similar positions in the private sector?

A) a strong union
B) publicly visible salaries
C) the levels of indirect pay provided to senior public sector positions
D) a poor industry reputation

Question 7

New companies tend to compensate employees at a lower price point than existing companies when the demand for labour exceeds supply.

Question 8

In broad terms, wages paid for a particular labourer depend on the relationship between supply and demand for labour, and a specific company's ability to pay.

Question 9

In order to calibrate a compensation system, a sample of 25 to 45 percent of sample of jobs should be a minimum.

Question 10

According to the text, sources of compensation market data include government agencies, trade journals, and compensation consultants.

Question 11

A very large interquartile quotient tends to indicate that all jobs in the sample are equivalent.

Question 12

In conducting a compensation survey, the first step should be to identify the jobs to be surveyed.

Question 13

Third-party surveys tend to be inexpensive and much easier to acquire than by developing them internally.

Question 14

The compa-ratio is calculated by taking the average pay of all employees holding a particular job title and then dividing this by the midpoint of the pay range for that job.

Question 15

Which of the following characteristics is NOT typically considered in the selection of market comparator firms?

A) the type of product or service the firm provides
B) whether the firm has achieved pay equity
C) whether the firm is union or non-union
D) the geographic area over which it operates

Question 16

Which of the following is NOT considered a general pattern in compensation levels?

A) Union employees receive more compensation than comparable non-union employees.
B) Male employees earn more than female employees on average.
C) Resource sector employees earn more than those in the service sector.
D) The wage gap between public-sector organizations and private-sector firms is narrow for top-level employees.

Question 17

Typically, employees working in the natural resource sector tend to experience long periods of layoffs, while at the same time, they are paid higher compensation compared to other sectors that are less cyclical in nature. Which of the following terms best describes this phenomenon?

A) the supply/demand equilibrium
B) the union effect
C) compensation differential
D) wage compression

Question 18

Which of the following best explains why current employers do not seem to reduce wages for existing employees in the short term when the supply for a particular set of skills far outstrips the demand?

A) because of the wage compression phenomenon
B) because of the negative impact on morale
C) because labour budgets tend to be determined on an annual basis
D) because fewer potential employees tend to put upwards pressure on wages

Question 19

Which of the following identifies two crucial dimensions of the labour market?

A) occupational grouping and geographic scope
B) unemployment rate and turnover in the area
C) availability of labour and types of legislation
D) education levels and experience ratings

Question 20

As a human resource specialist, you recommend an international scope when defining the relevant labour market for a nuclear physicist to be responsible for the safety of a Canadian nuclear reactor. Which of the following variables is likely to be informing your decision?

A) the level of job specialization
B) the international nature of the industry
C) the highly visible nature of the role
D) the level of responsibility and high profile nature of the role

Question 21

You determined that $65,000.00 in salary represents the 85th percentile of total compensation paid by employers for the heavy-duty mechanic job in British Columbia. Which of the following statements is accurate, given the aforementioned statement?

A) 15% of employers compensate above $65,000.00.
B) $65,000.00 represents the median.
C) 15% of employers compensate below $65,000.00.
D) 85% of employers compensate above $55,250.00.

Question 22

Which of the following survey sources raises concerns among HR professionals about the validity of their data?

A) industry groups
B) formal in-house
C) free websites
D) consultants

Question 23

Which of the following topics would typically NOT be included in survey questions asked by most consultants in the process of populating their compensation databases?

A) number of employees
B) criteria associated with movements within the pay range
C) base pay, performance pay, and indirect pay
D) turnover rates

Question 24

What critical assumption underpins labour market compensation surveys that may serve to illustrate the need for pay equity legislation?

A) Usage of compensation surveys assumes that the market values jobs in a fair manner.
B) The market demand and supply of labour tends to operate at an equilibrium in the short term.
C) Calibration of the pay system will insure a near-perfect labour price.
D) Targeting a compa-ratio of 1 eliminates the need for pay equity legislation.

Question 25

Which of the following steps should be classified as the last step in conducting a compensation survey?

A) identifying the jobs to be surveyed
B) determining the information to be collected about each job
C) determining which employers are to be surveyed
D) determining the method of data collection

Question 26

Which of the following is NOT a possible limitation of compensation surveys?

A) Free labour market data is not readily available.
B) We cannot surmise anything about compensation strategies practised by other firms.
C) They may misrepresent actual pay trends.
D) Markets may not value jobs fairly.

Question 27

Which of the following is NOT a main step in conducting a proper compensation survey?

A) identifying jobs to be surveyed
B) identifying employees to be surveyed
C) determining the information needed
D) determining how you will collect the data

Question 28

Which of the following situations is an indication that the pay level for a particular job in your firm is inappropriate?

A) excessively high employee turnover
B) internal equity conflicts with market data
C) a 1.07 compa-ratio
D) a high dispersion between your rate and the highest-paying firms

Question 29

Which of the following measures can be used to assess the central tendency of pay?

A) dispersion
B) standard deviation
C) quartiles and deciles
D) mean

Question 30

You have determined that the lowest-paying employer pays it secretaries a mean total compensation of $30,000, and the highest-paying employer pays its secretaries a mean total compensation of $42,000. What is the dispersion in secretarial compensation across firms?

A) 12 percent
B) 25 percent
C) 40 percent
D) 50 percent

Question 31

Our textbook identifies two in-house methods that may be used to collect compensation data. Which of the following is classified as a so-called "in-house" source?

A) formal surveys
B) government agencies
C) consultants
D) industry groups

Question 32

Which of the following statements refers to compa-ratio?

A) It is calculated by averaging the pay ranges in the quartiles.
B) It is a measure of pay dispersion across employers.
C) It is derived by dividing mean base pay by the midpoint of the pay range.
D) It is a calculation based on average base pay for each job.

Question 33

What does a compa-ratio of greater than 1 mean?

A) Employees, on average, are being paid above the midpoint at that firm.
B) The majority of employees are in the first pay quartile.
C) The firm is paying their employees in the bottom half of the pay range.
D) The firm has only a minority of their employees in the top pay bracket.

Question 34

What term describes the process of adjusting survey results to account for the dated nature of compensation surveys, while at the same time, taking into consideration potential market increases in the following year?

A) benchmarking the data
B) aging the data
C) data alignment
D) pay trending

Question 35

Which of the following is NOT a procedure used to analyze and interpret survey data?

A) central tendency
B) dispersion
C) compa-ratio
D) data aging

Question 36

What is the main challenge facing organizations that use the "simple mean" to assess central tendency?

A) It is not easily understood by users.
B) It tends to be very accurate, particularly if the data points are skewed by a few outliers.
C) It weighs all employers proportionally, based on the number of employees in each company.
D) Its conclusions may be skewed by a few outlier data points and the numbers of employees in each organization performing a specific role.

Question 37

You have surveyed five companies and obtained the following data regarding the midpoints of the base pay range for the job of "benefit clerk" and the number of employees employed at each company performing that role: $32,000 (Company A with 10 employees), $31,000 (Company B with 20 employees), $30,000 (Company C with 20 employees), $29,000 (Company D with 10 employees), and $29,000 (Company E with 40). What is the weighted mean for this set of data?

A) $30,200
B) $30,000
C) $29,900
D) $29,000

Question 38

How does the use of questionnaires to collect data compare to personal interviews and telephone interviews?

A) It is the most complete and efficient survey method.
B) It is the least expensive and least reliable survey method.
C) It is the most favourable and user friendly survey method.
D) It is the least efficient and most expensive survey method.

Question 39

An employer is contemplating conducting their own in-house compensation surveys. Which of the following points would you caution them about?

A) There is a lack of control over process.
B) There is no need to involve outside consultants.
C) Skills and abilities associated with survey methodology are needed.
D) They are likely to sample the wrong jobs and/or industry.

Question 40

Although very costly to use on a significant scale, which method of data collection provides the best quality of information?

A) internet surveys
B) personal interviews
C) telephone interviews
D) questionnaires

Question 41

Briefly discuss some of the limitations of compensation surveys.

Question 42

Identify and briefly describe the four main steps in conducting a compensation survey.

Question 43

Discuss some of the advantages and disadvantages of in-house surveys.

Question 44

Briefly discuss the factors to be considered in defining the relevant labour market for a given firm.

Question 45

Briefly describe the process for analyzing and interpreting survey data.