Question 1

Straight commission plans:

Accepted Answer

In group bonuses, depending on the reward system, competition among individuals may be replaced by competition among groups. Competition may be healthy in some situations, as when groups try to outdo one another in satisfying customers.

Question 2

Paying most or all of a salesperson's compensation in the form of commissions encourages the salesperson to focus on:

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 3

_____ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.

Accepted Answer

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

Question 4

In order to control compensation costs,administrators of merit pay programs must closely monitor the compa-ratio and the:

Accepted Answer

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

Question 5

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

Accepted Answer

Bonuses reward the members of a group for attaining a specific goal, usually measured in terms of physical output. 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 6

An 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:

Accepted Answer

Profit sharing has the practical advantage of costing less when the organization is experiencing financial difficulties. If the organization has little or no profit, this incentive pay is small or nonexistent, so employers may not need to rely as much on layoffs to reduce costs.

Question 7

Which of the following is true about standard hour plans?

Accepted Answer

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

Question 8

Which of the following is true of a performance bonus?

Accepted Answer

The Scanlon plan 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 9

What is the function of a merit increase grid?

Accepted Answer

To win group incentives, employees must cooperate and share knowledge so that the entire group can meet its performance targets. Common group incentives include gainsharing, bonuses, and team awards.

Question 10

Which of the following is a disadvantage of a merit pay system?

Accepted Answer

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

Question 11

An advantage of merit pay is that:

Accepted Answer

Organizations that want employees to focus on efficiency and on group incentives may adopt a gainsharing program, which measures increases in productivity and effectiveness and distributes a portion of each gain to employees.

Question 12

The Scanlon plan is a variation of:

Accepted Answer

Profit sharing is an incentive-pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary. Organizations use profit sharing may encourage employees to think more like owners, taking a broad view of what they need to do in order to make the organization more effective.

Question 13

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

Accepted Answer

The profit sharing plans are not directly linked to individual behavior as they are designed to promote organizational goals. They treat individuals in the same manner regardless of the performance. This could raise concerns of fairness.

Question 14

Retention bonuses refer to:

Accepted Answer

The target ratio refers to the ratio of labor costs and sales value of production. In this example, the standard is a ratio of 30/100, or 30 percent, and the workers produced parts worth $5 million. To meet the standard, the labor costs should be less than 30 percent of $5 million, or $1.5 million.

Question 15

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program.

Accepted Answer

Incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary is termed profit sharing.

Question 16

The decisions about merit pay are based on two factors: the individual's performance rating and the individual's:

Accepted Answer

Some salespeople earn a commission in addition to a base salary; others earn only commissions-a pay arrangement called a straight commission plan. Straight commissions are common among insurance and real estate agents and car salespeople.

Question 17

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

Accepted Answer

A variation on piece rates and bonuses is the payment of commissions, or pay calculated as a percentage of sales.

Question 18

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

Accepted Answer

When using group bonuses, depending on the reward system, competition among individuals may be replaced by competition among groups.

Question 19

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

Accepted Answer

Rather than trying to figure out what performance measures will motivate employees to do the things that generate high profits and a rising stock price, many organizations offer incentive pay tied to those organizational performance measures. These organization-level incentives can motivate employees to align their activities with the organization's goals. Profit sharing is an example of organizational incentives.

Question 20

In merit pay programs,an individual's compa-ratio represents his/her:

Accepted Answer

Paying most or all of a salesperson's compensation in the form of commissions encourages the salesperson to focus on closing sales.

Quiz 12: Recognizing Employee Contributions With Pay