Deck 10: Pay-For-Performance: Incentive Rewards

Question 1

Meshing compensation and organizational objectives help employees assume ownership of their jobs,thereby improving their effort and overall job performance.

Answer 1

True

Question 2

The standard hour plan provides bonus payment for completing work in less than the specified time.

Answer 2

False

Question 3

Incentive plans based on productivity can reduce labor costs.

Answer 3

True

Question 4

Standard hour plans are based on specific production standards set for individual jobs.

Question 5

Employees receive a specified payment for each unit produced under a straight piecework program.

Question 6

Incentive plans may fail because employees have little ability to affect performance standards.

Question 7

Management must be careful to ensure that incentive payments are viewed as both a reward and an entitlement.

Question 8

Under a straight piecework plan,if five minutes is the standard time to produce one unit and the employee's hourly rate is $7.50.The piece rate is $1.50 per unit.

Question 9

Under a differential piece rate,employees whose production performance exceeds the standard output receive a higher rate for all of their work than the rate paid to those who do not exceed the standard.

Question 10

Organizational goals can impact choice of incentive plans.

Question 11

More than 80 percent of companies globally are offering variable pay programs.

Question 12

Piecework may be inappropriate where technology changes are frequent.

Question 13

Incentive plans can create an organizational environment of shared commitment since individuals contribute to organizational success.

Question 14

Fixed pay is more flexible than variable pay.

Question 15

Generally,a bonus plan does not become part of an employee's base pay.

Question 16

For incentive plans to work effectively,employees must see a clear connection between the incentive payments they receive and their performance.

Question 17

Historically,incentive plans have not been a major element of strategic compensation management.

Question 18

Standard hour plans are popular in service departments in automobile dealerships.

Question 19

The performance threshold in incentive plans is the name given to the amount awarded to an employer.

Question 20

Major advantages of piecework systems are that the wage payment is simple to compute,and an organization can predict labor costs with reasonable accuracy.

Question 21

A spot bonus is usually given for some employee effort that is not directly tied to an established performance standard.

Question 22

Sales incentives can be affected by external factors beyond a salesperson's control.

Question 23

An advantage of using a straight salary plan to compensate sales employees is that employees are paid for performing only sales effort.

Question 24

The operation of a merit pay plan depends on the effectiveness of the performance appraisal system.

Question 25

Under a straight commission plan,compensation is based entirely on a percentage of sales.

Question 26

An analysis of executive salaries shows that the largest portion of executive pay is received in long-term incentive rewards and bonuses.

Question 27

Generally,an employee stock ownership plan is more likely to serve its intended purposes in privately held companies than in publicly held ones.

Question 28

A bonus is an incentive payment that is supplemental to base wages.

Question 29

The principal reason guiding executive stock options as an incentive is for senior managers to have a significant stake in the success of a business.

Question 30

Under the Scanlon plan or Improshare program,psychological ownership can play a stronger role than financial ownership in employee performance.

Question 31

Employees may not believe that their compensation is tied to effort and performance,and they may not be able to differentiate between merit pay and other types of pay increases.

Question 32

Merit pay plans have been criticized because the merit increase may not be sufficient to raise all employees' base pay.

Question 33

Under a straight commission plan,sales people may be allowed a salary draw.

Question 34

Unlike a bonus,a merit raise may be perpetuated year after year even when performance declines.

Question 35

Straight commission plans may induce salespeople to grant price concessions.

Question 36

Executive-base salaries represent between 10 and 20 percent of total annual compensation.

Question 37

Employees do not actually buy shares in an employee stock exchange plan.

Question 38

Annual bonuses represent the main element of executive short-term incentives.

Question 39

Research clearly shows that noncash incentive awards are most effective as motivators when the award is combined with a meaningful employee recognition program.

Question 40

The percentage of cash compensation paid out in commissions is called a draw.

Question 41

By using employee stock ownership plans,employers can provide retirement benefits for their employees at a relatively low cost.

Question 42

The idea behind the Scanlon Plan is that employees should offer ideas to improve productivity and,in turn,be rewarded for those ideas.

Question 43

Improshare plans promote interaction and support between management and employees.

Question 44

A major criticism of short-term incentives for executives is that they place too much emphasis on short-term performance,which may lead to negligence of long-term survival and growth objectives.

Question 45

Employers use stock ownership incentive plans to increase employee ownership in the company.

Question 46

ESOPs have been criticized because a pensioner can become dependent on the stock price.

Question 47

A weakness of profit-sharing plans is that employees do not have total control over the profitability of an organization.

Question 48

The incentive payout under the Scanlon Plan is based upon increases in the sales volume of an organization's products.

Question 49

Stock options are rights attached to the achievement of specific organizational objectives.

Question 50

Compensation committees justify large executive salaries and bonuses in part because good executive talent is in high demand.

Question 51

Stock options have become popular in service organizations but have lost favor in manufacturing firms.

Question 52

In most profit-sharing plans,about 20 to 25 percent of net profits are shared with employees.

Question 53

The performance threshold in incentive pay programs is:

A)the minimum level an employee must reach in order to qualify for fixed pay.
B)the minimum level an employee must reach in order to qualify for variable pay.
C)an organizational objective that signifies profitability.
D)a customized incentive plan which measures employee output and rewards exceptional employee performance.

Question 54

Employees are comfortable with the employee stock ownership plan because the federally established Pension Benefit Guaranty Corporation guarantees them their contribution to the plan.

Question 55

Enterprise incentive plans allow all organizational members to participate in the plan's payout.

Question 56

Team bonuses may be paid out equally to each team member,in proportion to their base pay,or in proportion to their relative contribution to the team.

Question 57

Profit-sharing plans have limited motivational value as payments are only made once a year or deferred until retirement.

Question 58

Perquisites are special nonmonetary benefits given to executive employees.

Question 59

Most experts advocate abolition of stock options due to their failing popularity and media scandals.

Question 60

Gainsharing plans are designed to increase employee job satisfaction and improve customer awareness.

Question 61

Enterprise incentive plans include:

A)the Scanlon Plan.
B)the Rucker Plan.
C)stock options.
D)sales incentives.

Question 62

If an employee's pay is based not on the actual amount of time it takes him or her to complete a job but instead on a predetermined amount of time for completing the job,he or she is working under the _____.

A)piece rate plan
B)standard hour plan
C)time division plan
D)completion pay system

Question 63

Piecework is appropriate when:

A)technology changes are frequent.
B)quality is more important than quantity.
C)productivity standards are difficult to develop.
D)a job is fairly standardized.

Question 64

Which of the following is NOT an advantage of an incentive pay program?

A)Incentives focus employee efforts on specific performance targets.
B)Incentives are a way to increase equity and justice in an organization.
C)Incentives are a way to distribute success among those not responsible for producing that success.
D)Incentives are a means to reward or attract top performers when salary budgets are low.

Question 65

Rate busting refers to:

A)an increase in productivity due to external competition.
B)an increase in output that results in the disapproval of fellow employees.
C)setting incentive performance standards for employees.
D)a decrease in productivity due to lack of motivation.

Question 66

In 2011,a study by the American Psychological Association found that _____ of employees feel they receive inadequate nonmonetary awards and recognition for their contributions at work.

A)16 percent
B)25 percent
C)34 percent
D)43 percent

Question 67

Contemporary reasons given by organizations for implementing incentive plans are:

A)improving or maintaining high levels of productivity.
B)focusing employee efforts on specific performance targets.
C)linking compensation rewards to the achievement of results.
D)all of the above.

Question 68

According to Sammer,which of the following is NOT a characteristic of a successful incentive plan?

A)Identify important organizational metrics that encourage employee behavior.
B)Involve employees and have incentive programs that seem fair to employees.
C)Find technically detailed, quantitative, and extremely thorough payout formulas.
D)Establish a clear link between performance and payout.

Question 69

Group incentive plans include:

A)straight salary plan.
B)Improshare.
C)straight commission plan.
D)sales incentives.

Question 70

Research shows that a merit increase in the range of _____ is necessary to serve as a pay motivator.

A)3 to 5 percent
B)7 to 9 percent
C)11 to 13 percent
D)15 to 17 percent

Question 71

More than _____ of companies globally are offering variable pay programs.

A)20 percent
B)40 percent
C)60 percent
D)80 percent

Question 72

When employees receive a certain rate for each unit produced,they are working under the _____ incentive plan.

A)differential piece rate
B)standard piece rate
C)straight piecework
D)individual rate pay

Question 73

Which of the following is NOT a reason for variable pay plans to not achieve their proposed objectives or lead to organizational improvements?

A)Failure of incentive plans to satisfy employee expectations for pay gains
B)Employment of employee and management committees to gain cost-reduction improvements
C)Failure of management in giving adequate attention to the design and implementation of a plan
D)Reduced liability of employees in affecting performance standards

Question 74

When setting performance measures for incentive systems,we can say that the best measures are those that:

A)are quantitative, simple to understand, and show a clear relationship to improved performance.
B)are qualitative, flexible, and create competition between employees.
C)allow employers to "ratchet up" standards and base rewards on qualitative standards.
D)reduce administrative costs, determine rewards based only on quantity, and reward only exceptional employees.

Question 75

An incentive given for a special employee contribution not directly tied to a performance standard is a:

A)piece rate plan.
B)differential piece rate.
C)merit pay.
D)spot bonus.

Question 76

An appropriate reward for a consumer service representative who worked long hours to fill a new customer's large order is a:

A)piece rate.
B)differential piece rate.
C)merit pay.
D)spot bonus.

Question 77

When employees receive a higher rate of pay for all of their work and production exceeds a standard level of output,they are working under the _____ incentive plan.

A)differential piece rate
B)standard piece rate
C)exception bonus rate
D)individual rate pay

Question 78

_____ describes the design of individual incentive plans.

A)Motivation
B)Comprehensiveness
C)Flexibility
D)Consistency

Question 79

A study on bonus versus actual pay raises showed that improving one's pay through merit increases by 1 percent would increase future performance by ____ percent.

A)2
B)5
C)8
D)10

Question 80

The standard time for producing one unit of work in a job paying $12.75 per hour was set at twelve minutes.The piece rate would be ____ per unit.

A)$1.95
B)$2.55
C)$2.95
D)$3.15