Question 1

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

Accepted Answer

Team awards are similar to group bonuses, but they are more likely to use a broad range of performance measures, such as cost savings, successful completion of a project, or even meeting deadlines.

Question 2

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

Accepted Answer

Most jobs, including those of managers, have no physical output, so it is hard to develop an appropriate performance measure. So piecework rates are most suited for very routine, standardized jobs with output that is easy to measure.

Question 3

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

Accepted Answer

A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay.

Question 4

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

Accepted Answer

If the stock price falls, employees do not need to exercise the options.

Question 5

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

Accepted Answer

Standard hour plans are quantity-oriented incentives for production workers.

Question 6

Successful gainsharing plans include employee stock ownership plans.

Accepted Answer

Employee stock ownership plan (ESOP) is an example of an organizational performance incentive plan.

Question 7

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

Accepted Answer

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 8

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

Accepted Answer

Profit sharing has the practical advantage of costing less when the organization is experiencing financial difficulties.

Question 9

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

Accepted Answer

Organizations with team-based rewards will tend to attract employees who are more team-oriented, while rewards tied to individual performance make an organization more attractive to those who think and act independently, as individuals. Merit pay incentive system is used to reward individual performance.

Question 10

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.

Accepted Answer

Along with wages and salaries, many organizations offer incentive pay-that is, pay specifically designed to energize, direct, or control employees' behavior. Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes.

Question 11

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

Accepted Answer

Like merit pay, performance bonuses reward individual performance, but bonuses are not rolled into base pay. The employee must re-earn them during each performance period.

Question 12

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.

Accepted Answer

Retention bonuses are one-time incentives paid in exchange for remaining with the company to top managers, engineers, top-performing salespeople, and information technology specialists.

Question 13

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.

Accepted Answer

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. To keep this ratio low enough to earn the bonus, workers have to keep labor costs to a minimum and produce as much as possible with that amount of labor.

Question 14

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.

Accepted Answer

Employee stock ownership plan refers to an arrangement in which the organization distributes shares of stock to all its employees by placing the stock into a trust managed on the employees' behalf.

Question 15

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

Accepted Answer

Under profit sharing, payments are a percentage of the organization's profits and do not become part of the employees' base salary.

Question 16

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.

Accepted Answer

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 17

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

Accepted Answer

Bonuses for group performance tend to be for smaller work groups. These bonuses reward the members of a group for attaining a specific goal, usually measured in terms of physical output.

Question 18

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

Accepted Answer

Almost all organizations have established a program of merit pay; linking pay increases to ratings on performance appraisals. To make the merit increases consistent, so they will be seen as fair, many merit pay programs use a merit increase grid.

Question 19

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

Accepted Answer

A drawback of merit pay, from the employer's standpoint, is that it can quickly become expensive.

Question 20

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

Accepted Answer

Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk. Profits and stock price can soar very high very fast, but they can also fall. The result is a great deal of uncertainty about the amount of incentive pay each employee will receive in each period.

Quiz 13: Recognizing Employee Contributions With Pay