Deck 13: Recognizing Employee Contributions With Pay

Question 1

Under incentive pay,piecework rates are most suited for routine,standardized jobs with output that is easy to measure.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Merit pay is a system of linking pay increases to ratings on performance appraisals.

Answer 3

True

Question 4

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

Question 5

Employees who receive stock options as incentive pay must exercise the stock options even if the stock price decreases.

Question 6

Incentive pay is specifically designed to energize,direct,or control employees' behavior and is influential because the amount paid is linked to certain predefined behaviors or outcomes.

Question 7

The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.

Question 8

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

Question 9

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 10

An ESOP denies employees the right to participate in votes by shareholders even if the stock is registered on a national exchange.

Question 11

A merit pay incentive system is used to attract employees who are more team-oriented.

Question 12

An 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 13

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

Question 14

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

Question 15

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

Question 16

Under the team awards type of group incentive,cost savings is excluded as a performance measure.

Question 17

Successful gainsharing plans include employee stock ownership plans.

Question 18

As in the case of merit pay,performance bonuses for rewarding individual performance are rolled into an employee's base pay.

Question 19

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

Question 20

The costs associated with profit sharing increase substantially when the organization experiences financial difficulties.

Question 21

Vactin Motors,an automobile company,ties individual performance,profits,and other measures of employees' success to a particular form of pay.This form of pay is influential because the amount paid is linked to certain predefined behaviors or outcomes.Which of the following is exemplified in this scenario?

A) minimum wage
B) overtime pay
C) incentive pay
D) piecework rates
E) salary

Question 22

Token Inc.is an envelope manufacturer based in Dallas.The employees of the organization receive pay based on the amount of work produced.If the output of an employee is more than the average production volume,then the organization pays more for the work performed.In this case,which of the following incentives is offered by Token Inc.?

A) differential piecework rate
B) minimum wage
C) merit pay
D) retention bonus
E) group bonus

Question 23

The balanced-scorecard approach should be avoided while designing executive pay.

Question 24

An employee at CellWorks who produces 10 components in an hour earns $9 ($.90 × 10)per hour,while another employee who produces 15 components earns $13.50 ($.90 × 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 25

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

Question 26

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

A) gainsharing
B) merit pay
C) Scanlon plan
D) profit sharing
E) stock ownership

Question 27

The differential piece rate 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 system that gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.
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 employees are paid different wages based on the skills they possess.

Question 28

A feature of an effective incentive pay plan is that it 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 sideline individual achievements.
D) be the same for all employees in the organization.
E) have performance measures linked to the organization's goals.

Question 29

Wayan Inc. ,a health insurance company,pays clerks an incentive based on the average amount of work completed per hour.Wayan pays $10 for processing 20 invoices per hour.An employee who processes 30 invoices would earn $15 per hour.Hence,Wayan pays the same rate per invoice no matter how many invoices an employee processes per hour.Which type of incentive pay does this scenario illustrate?

A) straight piecework plan
B) falling differential
C) rising differential
D) standard hour plan
E) straight commission plan

Question 30

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

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

Question 31

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 can seldom 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 32

The many kinds of incentive pay fall into three broad categories: _____.

A) incentives linked to individual,group,or organizational performance
B) incentives linked to output,productivity,or quality of a product
C) pay linked to goals,focus,or achievements of an organization
D) pay related to base salary,bonus,and travel allowance
E) incentives obtained in the form of company shares,gift coupons,and trial products

Question 33

An organization should keep information,such as changes made to its incentive plan,confidential from its employees.

Question 34

A pay structure 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 35

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

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

Question 36

For incentive pay to motivate employees to contribute to the organization's success,the pay plans must be well designed.Which of the following statements describes a characteristic of a well-designed plan?

A) Performance measures are to be linked to the individual's goals.
B) Employees are given unattainable performance standards.
C) Employees value the rewards or incentives that are being offered.
D) Employees are given limited resources to meet their goals.
E) The pay plan takes into account that employees will accept all goals irrespective of their rewards.

Question 37

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

Question 38

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

Question 39

Jules & Co. ,a smartphone manufacturing company,provides wages to its employees based on the number of smartphones the workers assemble.The more the employees assemble,the more they earn.This type of plan is called a

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

Question 40

In the process of designing incentives,managers should make sure that

A) all the employees are paid the same amount.
B) even the lowest performing employees are rewarded.
C) employees focus only on completing the task quickly.
D) employees believe that the pay plan is fair.
E) they hire employees who consider earning money as the sole reason to perform well.

Question 41

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 jobs

Question 42

Which of the following is a drawback of a standard hour plan?

A) It does not focus on quality or customer service.
B) It escalates costs for an employer in the long term.
C) It is applicable only in team-based work environments.
D) It helps employees work at a comfortable pace.
E) It does not pay workers extra for work done in less than the standard time.

Question 43

Which of the following statements is true about a piecework 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 teamwork and collaboration.
D) It has a direct link between the work done by the employee and the amount earned.
E) It encourages the employee's peers to perform and reduces conflicts.

Question 44

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 with performance appraisals.
C) Comparative pay is not considered in its evaluation.
D) It does not provide rewards for performance in all the dimensions measured in the organization's performance management system.
E) It can quickly become expensive for the company.

Question 45

Which of the following statements is true about standard hour plans?

A) They encourage employees to focus exclusively 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 46

To make merit increases consistent,administrators of merit pay programs must closely monitor the compa-ratio and the

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

Question 47

Which of the following is an advantage of the merit pay incentive system?

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 solely on the basis of performance.
D) It is the most economical incentive system for the employers.
E) It provides a direct link between the work done by the employee and the amount earned.

Question 48

Which of the following statements 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 exclusively linked to subjective ratings,rather than objective performance measures.

Question 49

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

A) commissions
B) the Scanlon plan
C) merit pay
D) gainsharing
E) profit sharing

Question 50

Jeff owns and manages a small electronics repair store.He determines the time required by his employees to complete each task assigned by him.When employees complete the repairs in less time,they receive an amount of pay equal to that time determined by him.In this scenario,Jeff is using a

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

Question 51

In a company's merit pay program,an individual's compa-ratio represents

A) the individual's pay relative to the individual's performance rating.
B) the individual's pay relative to company's average pay for that position.
C) the individual's worth versus that of others in the organization.
D) the ratio of the individual's pay to benefits.
E) the average worth of the skills possessed by the individual.

Question 52

Julianna,the HR manager at Hudson Corp. ,wants to ensure that incentive pay rewards the individuals who contribute the most to the organization and whose contributions have grown since their pay rates were originally set.She determines that she can best accomplish these goals by paying an incentive amount based on individuals' performance ratings and compa-ratios.In this scenario,Julianna would be applying the system of

A) merit pay.
B) piecework pay.
C) standard hour pay.
D) commissions.
E) attendance bonus.

Question 53

Songreen Inc. ,a firm that manufactures ready-to-eat soups,offers incentives based on an employee's performance rating and the employee's compa-ratio.Which of the following payment plans is exemplified in this scenario?

A) piecework plan
B) merit pay
C) standard hour plan
D) differential plan
E) skill-based plan

Question 54

The primary function of a merit increase grid is to

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

Question 55

Merit pay system decisions are based on two factors: an individual's performance rating and their

A) compa-ratio.
B) seniority.
C) pay grade.
D) educational qualifications.
E) experience.

Question 56

A standard hour incentive plan is likely to be successful 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,product quality,and customer service more than profits.

Question 57

A _____ gives the biggest pay increases to the best performers and to those whose pay is relatively low for their job.

A) piecework pay system
B) merit pay system
C) standard hour plan
D) differential plan
E) skill-based plan

Question 58

Jupiter Systems,an information technology company,determines that most problems handled by employees at its help desk can be resolved within 20 minutes.The company sets 20 minutes as the standard time for resolving a customer problem.If an employee solves a customer's problem in less than 20 minutes,the employee still earns 20 minutes' worth of wages.Which of the following payment methods does this scenario illustrate?

A) piecework plan
B) differential plan
C) standard hour plan
D) merit pay
E) performance bonus

Question 59

_____ 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 60

A piecework rate plan is best suited for

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

Question 61

QVO Financial,an auditing firm,distributes a portion of the profits resulting from improvements in productivity and efficiency among its employees.If the company enjoys an improvement of $45,000,60% of the improvement is the company's share.The other 40% is distributed among the employees in the company.Which of the following is being exemplified in this scenario?

A) profit rate
B) gainsharing
C) commission sharing
D) merit gain
E) group bonus

Question 62

East Bay Hospital was concerned about rising costs for patients who have surgery for joint replacement.It tried rewarding staff in any quarter they met targets for lower use of supplies,but costs continued to rise.An investigation showed that one source of costs was the readmission of patients who experienced infections after surgery.The human resource department proposed setting up a gainsharing program with an effectiveness measure related to reducing infections.Which statement about gainsharing best supports this recommendation?

A) With gainsharing,employees are freed to collaborate on how to improve performance.
B) Gainsharing creates a competitive environment,so employees will try to outdo one another.
C) Gainsharing is appropriate because the jobs in this case are simple,and so are the performance standards.
D) Gainsharing will narrow employees' focus to the key aspects of their individual jobs and rewards.
E) The success of gainsharing requires management acceptance of employee input.

Question 63

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

A) They should produce products at a rate that 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 64

Which of the following is most likely a consequence of paying most or all of a salesperson's compensation in the form of commissions?

A) It encourages the salesperson to focus on closing the sale.
B) It frees the salesperson to focus on developing customer goodwill.
C) It encourages teamwork over individual performance.
D) It makes the employee appreciate the reward as the reward relates to economic conditions.
E) It will quickly become expensive for the employer.

Question 65

Brendan,the HR manager at Baretta & Co. ,is trying to implement an effective group incentive plan which measures increases in productivity and effectiveness and distributes a portion of its earnings to all employees.In this case,Brendan should apply the incentive scheme of _____.

A) piecework rate
B) gainsharing
C) sales commission
D) merit pay
E) ESOPs

Question 66

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

A) commissions.
B) gainsharing.
C) a merit plan.
D) a variable wage plan.
E) profit sharing.

Question 67

Which of the following is a common condition for gainsharing to be a success in an organization?

A) employees who value working in groups
B) employers who do not set short-term goals for employees
C) work environment with minimum management commitment
D) employees who prefer minimum interaction and cooperation
E) low levels of cooperation and interaction

Question 68

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

A) performance bonuses
B) gainsharing
C) standard hour plans
D) merit pay
E) commissions

Question 69

Developed in the 1930s,the Scanlon plan is a variation of a(n)

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

Question 70

When Greater Aircraft acquired Middling Aircraft,the executives of the two companies identified key employees they needed for the combined companies' success.One of them was Michael,the vice president of engineering.The executives offered Michael a one-time bonus of $25,000 if he stayed with Greater Middling for 12 months following the acquisition.In this scenario,Michael's the $25,000 represents _____.

A) a commission
B) a retention bonus
C) stock options
D) merit pay
E) a differential piece rate

Question 71

What is the difference between bonuses and team awards?

A) Bonuses are for bigger work groups,whereas team awards are for small teams.
B) Unlike bonuses,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) Unlike team awards,bonuses encourage competition among individuals.
E) Bonuses reward attainment of a specific goal,whereas team awards reward performance measured more broadly.

Question 72

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 73

Straight commission plans are plans which

A) provide a straight salary to employees.
B) are useful when the organization wants salespeople to concentrate on listening to customers.
C) help to attract risk-averse employees.
D) are common among insurance and real estate agents.
E) are uncommon among car salespeople.

Question 74

For five years,Speed-All Production Systems offered $500 bonuses to individuals who identified ways to reduce costs by at least $1,000 per year.In the first year of that incentive program,23 employees earned the bonus,but last year,only 7 submitted ideas,and only two of the ideas would actually save more than a few dollars.The company's HR director suggests that the company is likely to see more improvement if it replaces individual incentives with a gainsharing plan.Which of the following statements best supports this argument?

A) Gainsharing succeeds regardless of whether employees understand how performance is measured.
B) Gainsharing is likely to succeed under almost any organizational conditions.
C) Gainsharing broadens employees' horizons beyond the range of activities they can influence.
D) Gainsharing measures oversimplify the complex responsibilities of production work.
E) Gainsharing expands employees' thinking beyond their individual interests.

Question 75

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

Question 76

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.
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 77

The Rudd-Mitchell organization uses the Scanlon plan to provide incentives to its employees.The workers produce electrical components 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 78

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

A) merit pay
B) team award
C) commission
D) standard hour plans
E) gainsharing

Question 79

_____ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.

A) Profit rate
B) Gainsharing
C) Commission sharing
D) Merit rate
E) Group bonus

Question 80

The CEO of Logiworks asked the human resource manager,April,to propose an approach to incentive pay.April proposes that the company create a gainsharing plan.What action(s)by the company will best increase the likelihood that gainsharing will succeed?

A) hiring employees who prefer to work alone and equipping them with cost data
B) sharing data about costs and setting up time for employees to interact
C) indicating that failure to achieve goals will lead to job cuts
D) using incentive pay as a substitute for goal setting and performance standards
E) promoting continuous improvement and limiting time spent on personal interactions