Question 1

Long-term incentives most often reserved for senior executives are called

Accepted Answer

Long-term incentives for senior executives are often referred to as capital accumulation programs, which include stock options and other equity-based compensation designed to align executives' interests with those of shareholders over the long term.

Question 2

All of the following are reasons to use team incentive plans except

Accepted Answer

Team incentive plans are meant to reinforce group efforts towards a common goal and encourage collaboration, problem-solving, and planning. They are not meant to reinforce individual incentives, as the focus should be on the team's success rather than individual contributions. Facilitating on-the-job training may be a benefit of team incentive plans, but it is not the primary reason for implementing them.

Question 3

With a true individual incentive, it is the manager's individual effort and performance that are rewarded with a(n)

Accepted Answer

A true individual incentive is designed to reward an individual's performance, and a bonus is a common form of individual incentive. Bonuses are often tied to specific goals or targets that are set and agreed upon by the manager and their supervisor. This means that the manager's performance is directly linked to the bonus they receive, making it a true individual incentive. Options A, D, and E are not necessarily tied to the individual's performance or effort and are often determined by factors such as job level or organization policies. Cost-of-living adjustments (B), while sometimes tied to an individual's performance, are typically applied broadly across an organization to help offset inflation.

Question 4

A plan that offers each person a bonus based on the company's results, regardless of the person's actual effort, is called

Accepted Answer

Profit sharing involves distributing a portion of the company's profits among its employees based on predetermined criteria. It does not necessarily depend on individual effort, but is tied to the company's overall performance. A lump-sum bonus is a one-time payment based on meeting certain goals or objectives. Gainsharing involves sharing the savings generated from productivity improvements among the employees who contributed to those improvements. Financial incentives refer to any type of reward given to employees for achieving certain goals or objectives. Piece-rate production involves paying employees based on the number of units they produce.

Question 5

The chief disadvantage of group plans is that

Accepted Answer

Group plans distribute rewards based on the collective performance of the group, which means individual efforts are not directly tied to individual rewards, potentially reducing motivation for some workers.

Question 6

When all employees earning over a threshold amount are automatically eligible for consideration for short-term incentives, this is called the criterion of

Accepted Answer

The scenario described is referring to a salary-level cutoff point, which is a predetermined salary amount above which employees become eligible for short-term incentives. This is a common criterion used in many organizations for determining eligibility for these types of rewards. The other answer choices do not accurately describe the scenario described.

Question 7

All of the following are ways that employers use team or group incentive plans except

Accepted Answer

Employers do not typically set a standard that all members receive payment equal to the 75th percentile of the group as a whole as a method of team or group incentive plans. The other options listed are commonly used methods of incentivizing groups or teams.

Question 8

Aziz is the human resources professional at a consulting engineering company.He has been asked by the executive team to implement a short term incentive plan for senior managers.Which of the following is not a basic issues he should consider?

Accepted Answer

While salary grade is important in determining eligibility and the amount to be paid out, it is not a basic issue to consider when implementing a short term incentive plan for senior managers. The other options listed (eligibility, how much to pay out, fund-size determination, individual awards) are all fundamental considerations.

Question 9

When a target bonus is set for each eligible position and adjustments are then made for greater- or less-than-targeted performance, this is called

Accepted Answer

An individual award is a bonus that is given to an individual employee based on their performance. The bonus is typically set for each eligible position and adjustments are then made for greater- or less-than-targeted performance.

Question 10

In a profit-sharing plan, each participant gets a bonus based on the company's results

Accepted Answer

In a profit-sharing plan, the bonus is typically based on the company's results and not on individual effort or performance. The bonus amount is distributed equally among all the eligible participants regardless of their actual effort. This is done to create a sense of ownership and shared responsibility among the employees towards the company's success.

Question 11

One drawback to the split-award approach is that it pays too much to the marginal performer, who, even if his or her own performance is mediocre, at least gets the second, company-based bonus.One way to get around this would be to use the

Accepted Answer

The multiplier method adjusts the bonus based on both individual and company performance, reducing the reward for marginal performers.

Question 12

Which of the following are criteria to become eligible for a short-term incentive program?

Accepted Answer

The criteria to become eligible for a short-term incentive program include key position (meaning a job with a significant impact on the success of the company), salary level (usually above a certain threshold), and salary grade (a categorization of jobs based on their responsibilities and requirements). Length of service may be a factor in some cases, but it is not one of the primary criteria. Industry requirements for piece rate production may apply in certain industries where productivity is measured by the number of units produced, but it is not a universal criterion. Position level alone is not a sufficient criterion as some positions may not have a direct impact on the company's performance. Therefore, the best choice is E.

Question 13

Revlex Inc.has implemented a refinement of the salary cutoff approach to short-term incentive eligibility, which assumes that all managers should be eligible for short-term incentives.This is known as

Accepted Answer

The refinement of the salary cutoff approach to short-term incentive eligibility mentioned in the question is referring to the concept of salary grades, where employees are grouped into salary ranges based on their level of responsibility and qualifications. This approach assumes that all managers should be eligible for short-term incentives, which is consistent with the salary grade approach. The other options listed are not directly relevant to this concept.

Question 14

To determine eligibility in a short-term incentive program, a job-by-job review is conducted to identify the key jobs (typically only line jobs)that have measurable impact on profitability.This is called the criterion of

Accepted Answer

The criterion being used is identifying the key positions that have measurable impact on profitability, which is referred to as the "key position." The other options do not accurately describe this criterion.

Question 15

A short-term incentive plan that is designed to motivate the short-term performance of managers and is tied to company profitability is called a(n)

Accepted Answer

An annual bonus is typically a short-term incentive plan that rewards managers for achieving specific financial or performance goals. This type of bonus is often tied to company profitability, as it motivates managers to take actions that will increase the company's bottom line in the short term. Gainsharing, eligibility plans, capital accumulation programs, and commission plans may also be used as short-term incentives, but they are not always tied to company profitability.

Question 16

In a true individual incentive bonus plan, each individual person gets a bonus based on

Accepted Answer

In a true individual incentive bonus plan, bonuses are awarded based on individual effort and performance. Each person's performance is evaluated individually and their bonus is based on how well they met their own goals and objectives, rather than those of the group or department. This type of plan is often used to encourage employees to work harder and be more productive, by providing a direct monetary reward for their efforts.

Question 17

Because of the role managers play in determining divisional and corporate profitability, most employers pay their managers and executives some type of

Accepted Answer

The answer of Because of the role managers play in...

Question 18

A non-deductible formula is

Accepted Answer

A non-deductible formula refers to a long-term incentive that pays out on a straight-line basis without any deductible, meaning there is no threshold or minimum performance level that must be met before the incentive is paid.

Question 19

For short term incentives, the term fund size means

Accepted Answer

The term "fund size" refers to the total amount of bonus money that will be available to be paid out, typically as a short-term incentive. It does not refer to the specific amount each employee will receive, the company's net income, the incentive bonus formula, or the average capital invested in the business.

Question 20

All of the following are long-term incentive plans extended to employees except

Accepted Answer

Retained earnings plans are not a form of long-term incentive plans extended to employees. Retained earnings are a portion of a company's profits that are kept for future use such as reinvestment in the business or paying off debt. They are not a form of compensation for employees. The other options listed are all forms of long-term incentive plans commonly used to motivate and reward employees.

Quiz 12: Pay-for-Performance and Financial Incentives