Question 1

All merit raises become part of an employee's base salary.

Accepted Answer

A merit raise is any salary increase the firm awards to an individual employee based on his or her individual performance. It usually becomes part of the employee's base salary.

Question 2

Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products, such as drills, circular saws, and routers, for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan. Which of the following questions is most relevant to the decision by Ryobi executives to discontinue all merit raises?

Accepted Answer

D)In order for merit raises to be effective, there should be a clear and consistent connection between productivity and merit pay. There are not different types of merit raises.

Question 3

Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products, such as drills, circular saws, and routers, for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan. Which of the following, if true, supports the argument that Ryobi should eliminate all merit raises?

Accepted Answer

A)In order for merit raises to be effective, performance appraisals need to be consistent and fair. The distribution method of a merit raise, monthly sales quotas, and enterprise management systems are less relevant to the decision.

Question 4

The complicated nature of piecework makes it an unpopular individual incentive plan among employers.

Accepted Answer

Piecework is the oldest and still most popular individual incentive plan. The straightforward plan requires an employer to pay the worker a sum (called a piece rate)for each unit he or she produces.

Question 5

Employers may award merit pay as traditional merit increases that increase an employee's base pay or as a lump sum merit raise. Explain the pros and cons of these two choices.

Accepted Answer

The answer of Employers may award merit pay as traditional...

Question 6

________ is a program where informal manager-employee exchanges such as praise, approval, or expressions of appreciation are given for a job well done.

Accepted Answer

B)Social recognition programs are programs where informal manager-employee exchanges such as praise, approval, or expressions of appreciation are given for a job well done.

Question 7

The standard hour plan is like the piece rate plan except instead of getting a rate per piece, the employee gets a premium equal to the percent by which his or her performance exceeds the standard.

Accepted Answer

The standard hour plan is a plan by which a worker is paid a basic hourly rate but is paid an extra percentage of his or her rate for production exceeding the standard per hour or per day. It is similar to piecework payment but based on a percent premium.

Question 8

A straight salary is most appropriate when a salesperson's primary duties involve ________.

Accepted Answer

A)Some firms pay salespeople fixed salaries, which makes sense when the main task involves prospecting (finding new clients)or account servicing (such as participating in trade shows). Meeting with clients and selling difficult items should be paid with commissions.

Question 9

Ryobi is a large, international power tool manufacturer that develops affordable, high-quality products, such as drills, circular saws, and routers, for both homeowners and craftspeople. As the company continues to grow, its top executives want to ensure that employees are appropriately paid for their performance and that financial incentives are both fair and effective. Currently, the firm provides merit raises based on performance appraisals; however, executives are considering changing the current incentive plan. Which of the following, if true, undermines the argument that Ryobi should discontinue all merit raises?

Accepted Answer

C)If Ryobi managers have noticed productivity improvements among employees who receive merit raises, then the system is most likely effective and should not be discontinued. The decision to discontinue merit raises is supported by employees who prefer stock options and managers who lack performance appraisal training. Executive pay is less relevant to the decision.

Question 10

Dual-career ladders are effective tools for managing the professional pay of working mothers who desire a work-life balance.

Accepted Answer

Dual-career ladders are another way to manage professionals' pay but not necessarily working mothers. At many employers, a bigger salary and bonus requires re-routing from, say, engineering into management. However, not all professionals want such paths. Therefore, many employers institute dual career paths, in other words one path for managers, and another for technical experts.

Question 11

Craig is a line manager at a paper supply company. All of the following are methods that Craig should most likely implement to motivate his subordinates EXCEPT ________.

Accepted Answer

B)The best option for motivating employees is to make sure the employee has a doable goal and that he or she agrees with that. Next, recognizing an employee's contribution is a powerful motivation tool. Finally, managers can use social recognition as daily positive reinforcement. Encouraging overtime is less likely to motivate employees.

Question 12

Which of the following was shown by the Harvard Business School to have the greatest impact on employee engagement?

Accepted Answer

B)A study by Harvard Business School researchers concluded that job design is a primary driver of employee engagement. A study by Sibson consulting concluded that job responsibility and feedback from a job were the fifth and seventh most important drivers of employee engagement. A study by Towers Watson concluded that challenging work ranked as the seventh most important driver for attracting employees.

Question 13

Employers are shifting away from piecework in many industries due to the incentive plan's poor reputation.

Accepted Answer

In the garment industry and other industries, the term piecework has a dreadful reputation because the hourly pay didn't always fulfill the Wage and Hour Act's minimum wage requirements. For these and other reasons, more employers are moving to other plans.

Question 14

In order for a firm to have an effective incentive plan, there should be a clear relationship between employee effort and quantity or quality of output.

Accepted Answer

It makes sense to use an incentive plan when there is a clear relationship between employee effort and the quantity or quality of output.

Question 15

Sometimes managers need to reinforce positive behavior but cannot turn to a cash incentive to do so. Identify some positive reinforcement rewards that a manager could use on a day-to-day basis to reward employees.

Accepted Answer

The answer of Sometimes managers need to reinforce positive behavior...

Question 16

According to the FLSA, merit pay can only be given to exempt, nonmanagement employees at a company.

Accepted Answer

Although the term merit pay can apply to the incentive raises given to any employee-exempt or nonexempt, office or factory, management or nonmanagement-the term is more often used for white-collar employees and particularly professional, office, and clerical employees.

Question 17

Explain the advantages and disadvantages of using piecework as a pay plan.

Accepted Answer

The answer of Explain the advantages and disadvantages of using...

Question 18

With a standard hour plan, employers do not need to recalculate piece rates when changes are made to the hourly pay rate.

Accepted Answer

Some firms find that expressing the incentive in percentages reduces the workers' tendency to link their production standard to pay (thus making the standard easier to change). It also eliminates the need to recalculate piece rates whenever hourly wage rates are changed.

Question 19

Lump sum merit increases can be a more significant motivator than traditional merit pay because the amount seems greater when received all at once.

Accepted Answer

Lump-sum merit increases can also be more dramatic motivators than a traditional merit raise. For example, a 5% lump-sum merit payment to a $30,000 employee is $1,500 cash, as opposed to a traditional weekly merit payout of $29 for 52 weeks.

Question 20

Enterprise incentive management systems enable firms to ________.

Accepted Answer

C)Incentive programs can be expensive and complicated to administer. As one solution, vendors provide enterprise incentive management (EIM)systems. These automate the planning, analysis, and management of incentive compensation plans.

Quiz 12: Pay for Performance and Financial Incentives