Deck 12: Recognizing Employee Contributions With Pay

Question 1

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

Answer 1

False
Explanation: Employees have a right to participate in votes by shareholders if the stock is registered on a national exchange, such as the New York Stock Exchange.

Question 2

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

Answer 2

False
Explanation: Incentive pay for executives lays the groundwork for significant ethical issues. When an organization links pay to its stock performance, executives need the ethical backbone to be honest about their company's performance even when dishonesty or clever shading of the truth offers the tempting potential for large earnings.

Question 3

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

Answer 3

False
Explanation: The drawback of stock ownership as a form of incentive pay is that employees may not see a strong link between their actions and the company's stock price, especially in larger organizations.

Question 4

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.

Question 5

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.

Question 6

Successful gainsharing plans include employee stock ownership plans.

Question 7

Employees should exercise the stock options even if the stock price has decreased.

Question 8

Generally,team awards do not use cost savings as a performance measure.

Question 9

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

Question 10

Like merit pay,performance bonuses for individual performance are rolled into an employee's base pay.

Question 11

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

Question 12

Profit sharing costs more when the organization experiences financial difficulties.

Question 13

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

Question 14

Merit increase grids display an organization's policies for linking the size and frequency of pay increases to an individual's performance rating and position within the pay range.

Question 15

In stock ownership plans,employees may not see a strong link between their actions and the company's stock price.

Question 16

Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes.

Question 17

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

Question 18

Merit pay incentive system is usually used to attract employees who are more team-oriented.

Question 19

Piecework rates are most suited for routine,standardized jobs with output that is easy to measure.

Question 20

Gainsharing addresses the challenge of identifying appropriate performance measures for complex jobs.

Question 21

Pay specifically designed to energize,direct,or control employees' behavior is known as:

A) monthly salary.
B) wage.
C) incentive pay.
D) annual salary.
E) fixed pay.

Question 22

Differential piece rates system refers to:

A) an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees.
B) a wage system designed for salespeople who earn a differential pay for every piece sold.
C) an incentive pay in which the piece rate is higher when a greater amount is produced.
D) a system of linking pay increases to ratings on performance appraisals.
E) an incentive pay plan where every employee is paid different wages based on the skills they possess.

Question 23

Which of the following is true about a piece rate plan?

A) It can be used for all types of jobs and in all types of industries.
B) It is best suited for complex jobs and tasks.
C) It can be used to encourage team work and collaboration.
D) It has a direct link between the work and how much the employee earns.
E) It encourages peers to perform as well as the co-workers and reduce conflicts.

Question 24

A company provides wages to its employees based on the amount workers produce.The more employees produce,the more they earn.This type of plan is called:

A) piecework rate plan.
B) merit pay plan.
C) Scanlon plan.
D) profit sharing plan.
E) standard hour plan.

Question 25

The balanced scorecard helps employees understand the organization's goals and how they can contribute to these goals.

Question 26

An employee who produces 10 components in an hour earns $9 ($.90 X 10)per hour,while an employee who produces 15 components earns $13.50 ($.90 x 15).This is an example of a:

A) commission plan.
B) differential piece rate plan.
C) direct commission plan.
D) profit sharing plan.
E) straight piecework plan.

Question 27

Which of the following types of incentive pay plans are used to reward individual performance?

A) Gainsharing
B) Merit pay
C) Scanlon plan
D) Profit sharing
E) Stock ownership

Question 28

The balanced-scorecard approach is not particularly useful in designing executive pay.

Question 29

Martin owns and manages a small auto-parts shop.He determines the time required to complete each task in his shop.When an employee completes the repair in less time,he/she receives an amount of pay equal to the rate determined by Martin for .Martin is using a:

A) standard hour plan.
B) differential piecework plan.
C) merit pay plan.
D) straight piecework plan.
E) Scanlon plan.

Question 30

_____ refers to an incentive pay in which the wage paid is higher when a greater amount is produced.

A) Profit sharing
B) Differential piece rate
C) Gain sharing
D) Scanlon pay
E) Merit pay

Question 31

A piecework rate plan is best suited for:

A) HR professionals.
B) executives.
C) production workers.
D) managers.
E) knowledge workers.

Question 32

An effective incentive pay plan should:

A) have performance measures based on employees' requirements.
B) not be provided as a direct percentage of employees' performance.
C) encourage group performance and dispirit individual achievements.
D) be the same for all types of employees in the organization.
E) have performance measures linked to the organization's goals.

Question 33

As an incentive to work efficiently,some organizations pay production workers a ____,a wage based on the amount they produce.

A) merit pay
B) commission
C) standard hour pay
D) piecework rate
E) special bonus

Question 34

Piecework rate plans are most suited for _____.

A) innovative tasks
B) non-standard jobs
C) managerial jobs
D) jobs with difficult-to-measure output
E) routine, standardized jobs

Question 35

Which of the following is a disadvantage of using incentive plans?

A) The goals of an incentive plan may interfere with other management goals.
B) The goals of incentive plans cannot be linked to particular outcomes or behaviors.
C) Incentive plans cannot be used to promote group and organizational performance.
D) Incentive plans cause dissatisfaction among the non-performing employees in the organization.
E) Incentive plans are not very effective for jobs other than sales and service.

Question 36

Standard hour plans are likely to succeed if:

A) most or all of a salesperson's compensation is in the form of commissions.
B) employers keep labor costs to a minimum.
C) the pay increase is linked to ratings on performance appraisals.
D) employees want the extra money more than they want to work at a pace that feels comfortable.
E) the organization values employee satisfaction and motivation more than profits.

Question 37

ESOP does not give employees the right to participate in votes by shareholders even if the stock is registered on a national exchange.

Question 38

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

Question 39

An organization should always communicate with employees when changing an incentive plan.

Question 40

When designing incentives,managers should make sure that:

A) all the employees are paid equal amounts.
B) even the lowest performing employees get some rewards.
C) employees focus only completing the task quickly.
D) employees think that the pay plan is fair.
E) they focus on hiring employees for whom earning money is the only reason to do a good job.

Question 41

Straight commission plans:

A) imply that the employees receive a straight salary.
B) are useful when the organization wants salespeople to concentrate on listening to customers.
C) help to attract employees risk-averse employees.
D) are common among insurance and real estate agents.
E) are not common among car salespeople.

Question 42

Paying most or all of a salesperson's compensation in the form of commissions encourages the salesperson to focus on:

A) closing the sale.
B) developing customer goodwill.
C) working as a team member.
D) building a relationship with the customer.
E) improving the quality of customer experience.

Question 43

_____ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.

A) Differential piece rate
B) Standard hour plan
C) Merit pay
D) Piece rate
E) Commission

Question 44

In order to control compensation costs,administrators of merit pay programs must closely monitor the compa-ratio and the:

A) number of pay grades in the pay structure.
B) an individual's performance ratings.
C) number of new hires in the company.
D) company's stock price in the financial year.
E) average pay of the area where the organization is functioning.

Question 45

When an employee's pay is calculated as a percentage of sales,it is referred to as:

A) commission.
B) gain sharing.
C) merit plan.
D) variable wage plan.
E) profit sharing.

Question 46

An organization uses a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard.This incentive plan is referred to as:

A) group bonus.
B) merit pay plan.
C) Scanlon plan.
D) piecework rate.
E) team award.

Question 47

Which of the following is true about standard hour plans?

A) They always encourage employees to focus on customer service.
B) They succeed only for employees who are not motivated by money.
C) They encourage employees to focus mainly on quality.
D) In terms of their pros and cons, they are very different from piecework plans.
E) They encourage employees to work as fast as they can.

Question 48

Which of the following is true of a performance bonus?

A) It is designed to reward group performance.
B) It should be re-earned by employees during each performance period.
C) It is rolled into base pay and provided yearly or monthly.
D) It lacks flexibility and hence it is less popular.
E) It is not a one time reward in most of the cases.

Question 49

What is the function of a merit increase grid?

A) To make the merit increases consistent
B) To further increase the pay for those whose pay is relatively higher for their job
C) To increase the employees' compa-ratio
D) To stabilize economic conditions
E) To increase incentives on an year-by-year basis

Question 50

Which of the following is a disadvantage of a merit pay system?

A) It does not relate the rewards to economic conditions.
B) It cannot be used effectively in performance appraisals.
C) Comparative pay is not considered in its evaluation.
D) It is not consistent with performance management's dimensions.
E) It can quickly become expensive for the company.

Question 51

An advantage of merit pay is that:

A) it makes the reward more valuable by relating it to economic conditions.
B) it promotes group performance instead of promoting individual behavior.
C) it provides merit increases to employees only on the basis of performance.
D) it would never become costly for the employers.
E) it results in a bigger short-term reward for the best performers.

Question 52

The Scanlon plan is a variation of:

A) profit sharing plans.
B) gainsharing plans.
C) merit pay plans.
D) individual bonus plans.
E) commission plans.

Question 53

What should employees do to earn bonuses under the Scanlon plan?

A) They should produce products at a rate which is much higher than the standard production time.
B) They should create goodwill with customers and close as many sales as possible.
C) They should follow a defined set of quality standard to produce the desired outcome.
D) They should keep labor costs to a minimum and produce as much as possible with that amount of labor.
E) They should improve their performance year after year so that they re-earn the bonus during each performance period.

Question 54

Retention bonuses refer to:

A) the special reward programs used to satisfy the lower and middle level managers.
B) the bonuses provided to union members to withhold a strike decision.
C) the bonuses provided to employees who take long leaves without pay.
D) annual incentives paid to daily wage workers to remain in the organization.
E) one-time incentives paid in exchange for remaining with the company.

Question 55

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program.

A) gainsharing
B) standard hour
C) bonus
D) commission
E) piece rate pay

Question 56

The decisions about merit pay are based on two factors: the individual's performance rating and the individual's:

A) compa-ratio.
B) seniority.
C) pay grade.
D) longevity.
E) emotional quotient.

Question 57

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as:

A) commission.
B) a Scanlon plan.
C) merit pay.
D) gain sharing.
E) profit sharing.

Question 58

Which of the following types of incentive plans are specifically designed to promote group performance?

A) Performance bonuses
B) Gainsharing
C) Standard hour plans
D) Merit pay
E) Commissions

Question 59

Which of the following incentive programs measures improvements in productivity and effectiveness and distributes a portion of each profit to employees?

A) Merit pay
B) Team award
C) Commission
D) Profit sharing
E) Gainsharing

Question 60

In merit pay programs,an individual's compa-ratio represents his/her:

A) pay relative to performance of other workers in the industry.
B) pay relative to average pay.
C) comparable worth versus others.
D) ratio of pay to benefits.
E) the average worth of the skills possessed by the individual.

Question 61

What is the difference between bonuses and team awards?

A) Bonuses are for bigger work groups whereas team awards are for small teams.
B) Bonuses reward individual performance whereas team awards encourage cooperation.
C) Bonuses are usually given to employees who meet deadlines whereas team awards are given only when the team as a whole meets the targets.
D) Bonuses encourages competition among individuals whereas team awards only foster cooperation.
E) Bonuses reward attainment of goals measured in terms of physical output whereas team awards reward performance in terms of cost savings.

Question 62

What is the drawback of stock ownership as a form of incentive pay?

A) Financial benefits mostly come when the employee leaves the organization.
B) Employees have the right to participate in votes by shareholders, hence reducing the negotiating power of the employer.
C) It causes the employers to lose control over their employees.
D) The employees will not benefit even if the organization is performing well.
E) Stock options do not provide any ownership to employees, instead it offers an equivalent sum.

Question 63

Which of the following incentive plans would enable its employees to think like owners,taking a broad view of what they need to do in order to make the organization more effective?

A) Merit pay
B) Gain sharing
C) Scanlon plan
D) Performance bonuses
E) Profit sharing

Question 64

Which of the following is a reason for ESOPs' popularity?

A) Earnings of the trust holdings are exempt from income taxes.
B) ESOPs provide very high risk-free retirement income.
C) Employees can use ESOPs to buy their company during financial crises.
D) ESOPs require companies to invest 51 percent in the company's own stocks.
E) The employees are provided with many more stocks than they actually own.

Question 65

Identify the disadvantage of using profit sharing plans.

A) They cannot be used to improve the organization's performance as a whole.
B) The employees may develop a narrow view of their roles in the organization.
C) They cost more when the organization experiences financial difficulties.
D) Sharing profit with the employees ultimately reduces the organization's profitability.
E) Profit sharing is not directly linked to individual behavior.

Question 66

Which of the following is an incentive plan that is intended to improve the overall performance of an organization?

A) Profit sharing
B) Gainsharing
C) Merit pay
D) Group bonus
E) Scanlon plan

Question 67

An organization uses Scanlon plan to provide incentives to employees.The workers produce parts worth $5 million.The target ratio set by the organization is 30%.The employees will be given a bonus if the actual labor costs are less than:

A) $0.5 million.
B) $1 million.
C) $1.5 million.
D) $2 million.
E) $2.5 million.

Question 68

By law,what is the minimum percentage of assets that an ESOP must invest in its company's stock?

A) 10
B) 26
C) 51
D) 60
E) 76

Question 69

Why do organizations use profit sharing?

A) It has been established that profit sharing helps organizations perform better.
B) It makes employees feel that they have control over the company's profits.
C) It costs less when the organization is experiencing financial difficulties.
D) It helps employees find a direct relation between their performance and gain.
E) It motivates employees more than individual incentives.

Question 70

What is profit sharing?

A) A gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard.
B) An incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary.
C) A group incentive program that measures improvements in productivity and effectiveness and distributes a portion of profit to employees.
D) A combination of performance measures directed toward the company's profit and used as the basis for awarding incentive pay.
E) An incentive plan where a percentage of the previous year's profits is provided to employees as a part of salary.

Question 71

Team awards differ from group bonuses in that they:

A) are typically plant-wide group incentive programs.
B) make payments in company stock rather than in cash.
C) are more likely to use a broad range of performance measures.
D) encourage competition among individual employees to achieve higher bonus.
E) give more importance to organizational performance than small groups' performance.

Question 72

The link between employees' performance and pay is harder to establish in:

A) piece rate plans.
B) merit pay plans.
C) standard hour plans.
D) stock ownership plans.
E) Scanlon plans.

Question 73

Stock options have their greatest motivational potential during periods of:

A) high unemployment.
B) downturns in the economy.
C) high economic growth.
D) low inflation.
E) slowdown in the company's growth.

Question 74

Which of the following is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust?

A) Stock options
B) Employee stock ownership plan
C) Scanlon plan
D) Collective stock options
E) Profit sharing plan

Question 75

Which of the following is an advantage of group incentives?

A) Group incentives always use a broad range of performance measures.
B) Groups try to outdo one another in satisfying customers and therefore create healthy competition.
C) They encourage employees to achieve their goals irrespective of the cooperation of team members.
D) They reward the performance of all the employees at a facility.
E) They always result in cooperation among team members without any competition.

Question 76

In 2003,a company employee received an option to purchase the company's stock at $45 per share.If the stock is trading at $40 a share in 2005,the employee will most likely:

A) exercise the option, receiving a gain of $5.
B) exercise the option, receiving a gain of $40.
C) would not bother to exercise the options.
D) be eligible to obtain a price $45 per share.
E) sell the shares to a third party slightly above the market price.

Question 77

What is the difference between stock options and employee stock ownership plan (ESOP)?

A) Stock options carry significant risk whereas ESOPs are risk-free.
B) Stock options are usually used with top management whereas ESOPs are provided to all employees.
C) In stock options, stocks are placed into a trust whereas ESOPs give employees the right to buy a certain number of shares of stock.
D) Under stock options, employees can sell their stocks whereas ESOPs do not allow employees to sell their stocks.
E) Earnings from stock options are exempt from income taxes whereas earnings from ESOPs are taxable.

Question 78

What is meant by backdating a stock option?

A) Reaping windfall in the stock market by selling stock based on company's nonpublic information
B) Falsifying numbers in the company's annual report to hide losses and inflate the stock prices
C) Buying company's stock just before the date of key product launch
D) Changing the price in the original option agreement so that the option holder can buy stock at a bargain price
E) Re-evaluating a company's stocks to adjust it to a previous date so that the shareholders and employees minimize the losses

Question 79

Which of the following is a disadvantage of using group bonuses?

A) Physical outputs are not rewarded.
B) It reduces the level of cooperation between the members of the group.
C) The performance measures used are narrow.
D) It could result in competition among groups.
E) It cannot be used to promote specific goals.

Question 80

A major problem with ESOPs is that:

A) they carry a significant risk for employees.
B) employees are not allowed to participate in votes by shareholders.
C) the stocks within the trust are too widely diversified to earn high returns.
D) any earnings from the trust holdings are taxed at an extremely high rate.
E) they result in reduced profitability for the employees.