Deck 9: Pay-For-Performance: the Evidence

Question 1

All of the following EXCEPT _____ require periodically re-earning the added pay.

A)success-sharing plans
B)merit bonuses
C)profit-sharing plans
D)cost-of-living increases

Answer 1

D

Question 2

_____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating.

A)Equity
B)Expectancy and agency
C)Herzberg's two-factor
D)Agency

Answer 2

C

Question 3

Grabhouse Inc.is experiencing an increase in turnover rates of its top employees.Upon consulting with its managers for the reasons for this increase, Grabhouse finds that employees are uneasy with the current pay mix as it involves too many risky elements.In order to make its pay mix less risky, Grabhouse needs to:

A)increase the base pay component of its pay mix.
B)introduce a profit-sharing plan to its pay mix.
C)introduce a risk-sharing plan to its pay mix.
D)increase the merit bonus component of its pay mix.

Answer 3

A

Question 4

Which of the following theories states that people choose the behavior that leads to the greatest reward?

A)Maslow's need theory
B)Expectancy theory
C)Herzberg's two-factor theory
D)Goal-setting theory

Question 5

According to research, which of the following is NOT one of the most important factors for employees influencing their pay systems?

A)Team-based pay
B)Changes in cost of living
C)Pay at market rate
D)Seniority

Question 6

_____ is employees' beliefs that requisite job performance will be rewarded by the organization.

A)Valence
B)Expectancy
C)Instrumentality
D)Utility

Question 7

_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.

A)Reinforcement
B)Goal-setting
C)Agency
D)Expectancy

Question 8

When an organization's performance has regular and large swings and individual performance is unclear and hard to measure, the most effective compensation mix is to offer _____.

A)a base pay with low incentives and a variety of rewards
B)monetary rewards with large incentives
C)a large base pay and low-incentive pay
D)a wide range of rewards and significant incentives

Question 9

When employee performance is easily measured and the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

A)a large base pay and low-incentive pay
B)a variety of rewards in addition to base pay
C)a variety of rewards with significant incentive pay
D)monetary rewards with large incentives

Question 10

The corporate performance of Yellow Corp.is fairly stable.However, it is difficult to measure individual performance.In this case, the most effective compensation mix is to offer _____.

A)a high base pay with high incentives
B)monetary rewards alone
C)a large base pay and low-incentive pay
D)a wide range of awards beyond just money

Question 11

The ability triangle includes _____.

A)selection
B)performance management
C)compensation
D)organization development

Question 12

_____ is an individual level form of performance pay.

A)Risk sharing
B)Gain sharing
C)Merit bonus
D)Success sharing

Question 13

When employee performance measures are ambiguous and vary from time to time, but the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

A)a large base pay and low-incentive pay
B)an increase in base pay
C)a variety of rewards with significant incentive pay
D)monetary rewards with no benefits

Question 14

According to the _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.

A)equity
B)expectancy
C)agency
D)reinforcement

Question 15

The motivation triangle includes _____.

A)selection
B)organization design
C)culture
D)organization development

Question 16

_____ is the value employees attach to the organization rewards offered for satisfactory job performance.

A)Equity
B)Instrumentality
C)Valence
D)Reinforcement

Question 17

When an organization's performance has frequent highs and lows, but individual performance is fairly stable, and performance measures are clear, the most effective compensation mix is to offer _____.

A)a base pay with low incentives and a variety of rewards
B)monetary rewards with large incentives
C)a large base pay and low-incentive pay
D)a wide range of rewards and significant incentives

Question 18

A person with low self-esteem is likely to seek _____.

A)a small, hierarchical organization with pay plans based upon individual performance
B)a flat organization with a significant amount of pay based upon performance
C)a small organization with large benefits based on group performance
D)a large, decentralized organization with little performance-based pay

Question 19

When identifying what is important to employees, which theory would be most useful?

A)Expectancy theory
B)Equity theory
C)Maslow's need theory
D)Agency theory

Question 20

Which of the following is NOT true?

A)More companies are using pay systems based upon individual, group, and organization performance.
B)Workers with high security needs may accept lower pay if they come in a package that is stable.
C)Workers may need higher pay to stay and perform in a company that uses at-risk pay plan.
D)Companies are moving back to entitlement-oriented pay to reduce turnover.

Question 21

An important implication of reinforcement theory is that the timing of payouts to employees is very important.

Question 22

Maslow's theory suggests that performance-based pay can be demotivating if it impinges upon employees' capacity to meet daily living needs.

Question 23

When a company moves from an individual incentive plan to a group incentive plan, the company is most likely to experience _____.

A)higher turnover among high performers
B)an increase in instrumentality
C)higher turnover among poor performers
D)an increase in perceived equity

Question 24

Company X pays for performance.Allan, an employee of the company, is not in favor of this reward system and, therefore, leaves Company X in search of another company with different rules for getting rewards.This is an example of the:

A)design effect.
B)compensation effect.
C)sorting effect.
D)incentive effect.

Question 25

When pay raises are based on events over which employees lack significant control, they are likely to regard the system as unfair.

Question 26

Workload and work variety are both components of a total reward system.

Question 27

Herzberg's two-factor theory argues success-sharing plans will be motivating, while at-risk plans will be demotivating.

Question 28

In the formula "Behavior = f (M, A, E)," M denotes monetary incentives.

Question 29

Most experts agree that employees do not begin to consider changing their behaviors unless payouts are at least _____ percent higher.

A)5
B)8
C)20
D)10

Question 30

According to the agency theory, because employees prefer a salary, they will demand a wage premium in exchange for accepting performance-based pay.

Question 31

When pay is based on individual performance, turnover tends to be highest among _____.

A)poor performers
B)good performers
C)single women with children
D)ethnic minorities

Question 32

Flexible compensation is based on the idea that the organization knows what package of rewards would best suit an individual employee's needs.

Question 33

Agency theory argues that employees prefer risky pay as rewards can be greater than a salary.

Question 34

Droppiece Inc.is a company that provides more performance-based pay and less base pay than its competitors.Who among the following is most likely to join Droppiece?

A)George, a recently married man who wants a stable income
B)Stella, a recent college graduate who loves to take on a challenge
C)Mark, a musician who wants to supplement his income
D)Sara, a senior citizen who wants a job only to keep herself busy

Question 35

The most obvious sorting factor is _____.

A)seniority
B)ability
C)experience
D)educational qualification

Question 36

There is evidence that every 10 percent increase in the bonus paid to employees by a firm yields a _____ percent increase in ROA to the firm.

A)1
B) 1.5
C)5
D)15

Question 37

Which of the following is an example of the sorting effect in action?

A)An employee leaving a high-paying job for one that provides more work/life balance
B)The provision of across-the-board pay increases by a company
C)The provision of cost-of-living increases by a company
D)An employee choosing fewer incentives in his flexible compensation plan

Question 38

Goal-setting theory argues that employees' performance is maximized when performance targets are unchallenging and unspecific.

Question 39

The amount of fairness given to employees refers to _____.

A)total justice
B)quantitative justice
C)procedural justice
D)distributive justice

Question 40

Available evidence indicates managers believe the most important factor for pay increases is _____.

A)experience
B)nature of the job
C)seniority
D)performance

Question 41

Evidence suggests that skill-based pay may not increase productivity.

Question 42

Explain the expectancy theory of motivation.

Question 43

Group incentive pay increases turnover of better performers, while individual incentive increases turnover of poorer performers.

Question 44

The trend today is toward less stable and less secure compensation packages.

Question 45

Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when an organization meets performance objectives.

Question 46

What are the behaviors that compensation needs to enforce?

Question 47

Briefly explain the concept of flexible compensation.

Question 48

Group pay is always more effective than individual pay.

Question 49

What predictions can be made about performance-based pay based on Maslow's theory?

Question 50

Gain sharing poses greater risk to individual employees than profit sharing.

Question 51

A problem with incentive pay plans is workers may end up focusing exclusively on behaviors that are rewarded.

Question 52

The authors argue that a system of flexible compensation could lead to more desirable employee behaviors at a lower total cost.

Question 53

Evidence suggests that talented people are motivated to join organizations with strong links between performance and pay.

Question 54

Security in terms of compensation refers to the predictability of one's paycheck from one time to the next.

Question 55

Compare risk-sharing and success-sharing plans.