Question 1

Individual-oriented plans tend to use a broader range of performance measures than do group incentive pay plans.

Accepted Answer

Group incentives (like individual incentives)tend to measure performance in terms of physical output, whereas team award plans may use a broader range of performance measures (like cost savings, successful completion of product design, or meeting deadlines).

Question 2

Employee Stock Ownership Plans (ESOPs)carry significant investment risks for employees.

Accepted Answer

Employee Stock Ownership Plans (ESOPs)carry significant investment risks for employees.

Question 3

Pay plans are typically used to energize, direct, or control employee behavior.

Accepted Answer

Pay plans are typically used to energize, direct, or control employee behavior.

Question 4

The reinforcement theory to compensation management suggests that monetary rewards will not motivate employees.

Accepted Answer

Reinforcement theory is based on the principle that a response followed by a reward is more likely to recur in the future. The implication for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely.

Question 5

An employee's assessment of the fairness of his or her compensation based on the amount received is referred to as distributive fairness.

Accepted Answer

In any situation where rewards are distributed, employees appear to assess fairness along two dimensions: distributive and procedural. Distributive fairness is based on how much the employees receive.

Question 6

One significant difference between gainsharing and profit-sharing plans is that gainsharing-plan payouts are generally distributed more frequently.

Accepted Answer

Gainsharing programs offer a means of sharing productivity gains with employees. Although sometimes confused with profit sharing plans, gainsharing differs in two key respects, one of which is that payouts are distributed more frequently and not deferred.

Question 7

Individual incentives are rolled into base pay of employees.

Accepted Answer

Like merit pay, individual incentives reward individual performance. However, payments are not rolled into base pay.

Question 8

Gainsharing programs offer a means of sharing productivity gains with employees based on organization-level performances.

Accepted Answer

Gainsharing programs offer a means of sharing productivity gains with employees. Instead of using an organization-level performance measure (profits), the programs measure group or plant performance, which is likely to be seen as more controllable by employees.

Question 9

A major criticism of merit pay programs is that the differential in pay between high performers and mediocre or even poor performers is not significant enough to influence employee behavior or attitudes.

Accepted Answer

The most basic criticism is that merit pay does not really exist. High performers it is argued are not paid significantly more than mediocre or even poor performers in most cases. Critics of merit pay point out that this difference is probably not significant enough to influence employee behaviors or attitudes.

Question 10

One solution to profit-sharing during a downturn is to design plans that have upside but not downside risk.

Accepted Answer

One solution to profit-sharing during a downturn is to design plans that have upside but not downside risk.

Question 11

Deferred profit-sharing plans increase employee motivation.

Accepted Answer

One of the factors that reduces motivational impact of profit sharing plans is that most plans are of the deferred type.

Question 12

The performance motivational effects of profit sharing is likely to be stronger in smaller firms or units than in larger organizations or units.

Accepted Answer

The performance motivational effects of either profit sharing or gainsharing are likely to be greater stronger in smaller firms or units than in larger organizations or units.Refer: Table 12.1

Question 13

Pay and benefits are examples of intrinsic rewards.

Accepted Answer

Extrinsic motivation depends on rewards (such as pay and benefits)controlled by an external source, whereas intrinsic motivation depends on rewards that flow naturally from work itself (like performing interesting work).

Question 14

The performance motivation of stock option plans is particularly high from a reinforcement theory standpoint.

Accepted Answer

Because employees may not realize any financial gain until they actually sell their stock, the link between pay and performance may be even less obvious under gainsharing than under profit sharing. Thus, from a reinforcement theory standpoint (with its emphasis on actually experiencing rewards), the effect on performance motivation may be limited.

Question 15

Merit pay has the ability to define and reward a broad range of performance dimensions.

Accepted Answer

Some employers have moved toward a form of merit pay that relies on bonuses rather than increases to base pay. One reason for the widespread use of merit pay is its ability to define and reward a broad range of performance dimensions.

Question 16

While the agency theory has value in the analysis and design of managerial compensation, it is not applicable to nonmanagerial compensation.

Accepted Answer

Agency theory is also of value in the analysis and design of nonmanagers' compensation.

Question 17

Organizations that provide individual incentives are more likely to attract team-oriented employees.

Accepted Answer

Organizations relying more heavily on team rewards are more likely to attract team-oriented employees.

Question 18

Linking annual pay increases to performance appraisal ratings refers to incentive pay system.

Accepted Answer

In merit pay programs, annual pay increases are usually linked to performance appraisal ratings.

Question 19

The flow of feedback tends to be multi-directional in merit pay programs.

Accepted Answer

One of the advantages of merit pay programs is that the flow of feedback tends to be largely unidirectional, from supervisor to subordinate.

Question 20

Gainsharing plans encompass more than just a monetary component.

Accepted Answer

Gainsharing plans like the Scanlon plan and pay-for-performance plans in general often encompass more than just a monetary component.

Quiz 12: Recognizing Employee Contributions With Pay

Individual-oriented plans tend to use a broader range of performance measures than do group incentive pay plans.

Employee Stock Ownership Plans (ESOPs)carry significant investment risks for employees.

Pay plans are typically used to energize, direct, or control employee behavior.

The reinforcement theory to compensation management suggests that monetary rewards will not motivate employees.

An employee's assessment of the fairness of his or her compensation based on the amount received is referred to as distributive fairness.

One significant difference between gainsharing and profit-sharing plans is that gainsharing-plan payouts are generally distributed more frequently.

Individual incentives are rolled into base pay of employees.

Gainsharing programs offer a means of sharing productivity gains with employees based on organization-level performances.

A major criticism of merit pay programs is that the differential in pay between high performers and mediocre or even poor performers is not significant enough to influence employee behavior or attitudes.

One solution to profit-sharing during a downturn is to design plans that have upside but not downside risk.

Deferred profit-sharing plans increase employee motivation.

The performance motivational effects of profit sharing is likely to be stronger in smaller firms or units than in larger organizations or units.

Pay and benefits are examples of intrinsic rewards.

The performance motivation of stock option plans is particularly high from a reinforcement theory standpoint.

Merit pay has the ability to define and reward a broad range of performance dimensions.

While the agency theory has value in the analysis and design of managerial compensation, it is not applicable to nonmanagerial compensation.

Organizations that provide individual incentives are more likely to attract team-oriented employees.

Linking annual pay increases to performance appraisal ratings refers to incentive pay system.

The flow of feedback tends to be multi-directional in merit pay programs.

Gainsharing plans encompass more than just a monetary component.