Deck 6: Formulating the Reward and Compensation Strategy

Question 1

Company ABC Inc. tends to offer compensation packages below market for entry-level positions, while compensating significantly above market for more highly skilled senior positions in the company. ABC Inc. is utilizing a hybrid compensation policy.

Answer 1

True

Question 2

The process of formulating a compensation strategy includes five distinct yet interrelated steps.

Answer 2

True

Question 3

When we discuss labour market constraints, what are we specifically referring to?

A) union constraints on labour allocation
B) availability of employees versus demand
C) cost-of-living constraints on pay demands
D) managerial strategy in recruitment methods

Answer 3

B

Question 4

Before adopting a compensation strategy, it must be able to pass through three screens: affordability, legality, and employee attraction.

Question 5

In developing a compensation strategy, the two key questions that must be addressed are: "How much is to be paid?" and "When should it be paid?"

Question 6

The text identifies four basic foundational issues that need to be understood when formulating a compensation strategy. Included in these four understandings are; the organization and context, the work force, compensation options, and compensation constraints.

Question 7

Utility analysis is used to determine which benefits will be included in the compensation system.

Question 8

Which type of legislation covers issues such as overtime pay rates, paid time off, and minimum wage levels?

A) human rights
B) employment standards
C) trade union
D) tax

Question 9

Jurisdiction over labour markets is primarily within the realm of the federal government of Canada.

Question 10

Classical organizations typically provide organizational level performance pay only to senior management, based on the rationale that senior management are the only employees able to influence organizational success

Question 11

A "lead-the-market" compensation policy should be deployed only in situations when organizations face very tight labour markets.

Question 12

In Canada, organizations face numerous legislated constraints creating so-called "boundaries" to their compensation systems. Which of the following is NOT categorized as a legislated constraint or boundary?

A) Employment Standards Act or the Canada Labour Code
B) Human Rights Act
C) management strategy constraints
D) income tax, both individual and corporate

Question 13

You work for a local school board responsible for all human resource functions for employees working at the school's cafeteria. You determine that male cooks are paid 33 percent more than female cooks with the same work experience and qualifications. The board asks you to provide recommendations to deal with this issue. Which of the following should be included in your recommendations?

A) Contract the cafeteria functions to a third-party service provider.
B) Dovetail increases for the female cooks over a two-year period.
C) Continue with the status quo.
D) Lower the male cooks' wages by 33 percent over a two-year period.

Question 14

All Canadian jurisdictions have passed human rights legislation prohibiting employment discrimination based on specific employee factors. Which of the following is NOT covered under these broad human rights legislation?

A) marital status
B) race
C) gender
D) education

Question 15

Which of the following best explains the legal difference between an employee and a contractor?

A) Only employees are allowed on the work site.
B) Contractors cannot hire another person to complete the work.
C) Contractors are exempt from employment standards legislation.
D) Employees can be forced to work overtime.

Question 16

This term refers to the boundaries within which the compensation system must be designed.

A) liabilities
B) constraints
C) demographics
D) opportunities

Question 17

Trucks Are Us Ltd. is a British-Columbia-based trucking company providing long-haul services across Canada. Which level of government has the primary responsibility for passing labour-related legislation covering employees of Trucks Are Us Ltd.?

A) British Columbia and other provinces in which Trucks Are Us Ltd. operates
B) British Columbia government
C) municipalities and provincial governments in which Trucks Are Us Ltd. operates
D) federal government

Question 18

Which of the following workers are NOT covered under minimum wage legislation in some jurisdictions?

A) students
B) employees working from home
C) domestic servants
D) commissioned salespeople

Question 19

The key reason that executives earn so much more than other employees is because their base pay is so much higher.

Question 20

A particular organization wants to explore the potential for converting many of their employees into contractors. Which of the following characteristics would potentially lead the Canada Revenue Agency to reject this change in classification?

A) The worker has the ability to refuse or accept work from the organization.
B) The company directs how and where the work should be completed.
C) The worker has control over who actually completes the work.
D) The worker can choose the manner in which the work is completed.

Question 21

The demand for carpenters far outstrips the supply in British Columbia. In fact, many of the construction companies are relying on the international market to fill vacancies. Which of the following terms best describes the labour market for carpenters in British Columbia?

A) tight
B) loose
C) contingent
D) contractual

Question 22

You are attempting to define the role compensation will play in your reward strategy. What is the first thing that needs to be examined?

A) the nature of intrinsic and other extrinsic rewards offered
B) the compensation level strategy
C) the indicators of goal achievement
D) the compensation system behavioural objectives

Question 23

As a human resource compensation specialist, you are recommending that your company compensate entry-level factory workers 10 percent below market, while paying 10 percent above market for engineers. What type of compensation policy are you recommending to your organization?

A) lag
B) lead
C) match
D) hybrid

Question 24

Lag strategies are cost-effective for which type of firms?

A) firms that are labour-intensive
B) firms needing to attract top-quality applicants
C) firms that value employee stability
D) firms that invest heavily in training and development

Question 25

Which type of management strategy will use economic variables as key motivators to drive employee behaviour?

A) lead
B) high-involvement
C) classical
D) human relations

Question 26

Which of the following behavioural objectives is appropriate for companies using a high-involvement strategy?

A) attracting applicants to staff initial needs
B) attracting top-quality applicants well in excess of needs
C) attracting job applicants able to perform basic tasks
D) attracting applicants to replace turnover

Question 27

Which of the following should be your first step when starting an organization's compensation formulation process?

A) Define the required behaviour.
B) Determine the compensation mix.
C) Evaluate the proposed strategy.
D) Determine the compensation level.

Question 28

A hybrid compensation-level strategy is one that varies across which of the following?

A) employee groups
B) managerial strategies
C) business segments
D) industrial sectors

Question 29

To keep work interesting and provide higher compensation opportunities for your design engineers, you have created a compensation system that allows them to move from an entry level to an expert specialist level. What term is used to describe this system?

A) management pathing
B) technical ladder
C) competency-based
D) leader development

Question 30

As the owner of a medium-sized engineering consulting firm, you decide to implement a compensation level policy that compensates your employees based on market rates. Which type of compensation policy have you adopted?

A) lead
B) match
C) hybrid
D) lag

Question 31

Which pair of job characteristics is likely associated with a high-involvement managerial strategy?

A) individual and low customer contact jobs
B) low task interdependence and narrow-in-scope jobs
C) simple and repetitious jobs
D) broad and creative jobs

Question 32

A particular company operates several food processing plants across Canada. An internal audit of the company determined that several plants were paying above-market wages while other plants were paying below-market wages. What systemic issue could be causing this situation?

A) The company most likely uses one pay scale across Canada.
B) Workers in some of the plants appear to be negotiating higher wages.
C) Different management strategies are being used in each plant.
D) The compensation mix is likely the cause.

Question 33

Before implementing a compensation strategy, human resources professionals must ensure the appropriate screens are in place to evaluate the strategy's appropriateness. Which of the following screens is NOT considered one of the so-called "must pass screens"?

A) Costs are within the financial means of the organization.
B) The new compensation strategy meets the minimum standards under employment standards legislation.
C) The new compensation strategy attracts potential employees with the required skill sets.
D) Current employees will be happy with the new compensation strategy.

Question 34

What two main aspects need to be considered to help you determine what you want the executive compensation system to accomplish?

A) a symbolic aspect and a market aspect
B) a behavioural aspect and a market aspect
C) a behavioural aspect and a symbolic aspect
D) a pay equity aspect and a market aspect

Question 35

Your organization is facing significant competition, putting pressure on your margins. Labour costs account for a significant percentage of your cost structure, and you are concerned with your profitability, moving forward. Furthermore, you are finding that it is extremely difficult to find production workers willing to work for minimum wage in Canada. As a result, you decide to move operations to Vietnam so you can take advantage of lower labour costs. Which type of key constraint has caused you to make this decision?

A) tax
B) financial
C) legislated
D) service market

Question 36

What does utility analysis help managers determine?

A) minimum changes in outcomes required for the new policy to pay off
B) which compensation mix policy is most efficient
C) the utility of different types of task behaviour
D) which managerial strategy will be most efficient for a firm

Question 37

Which of the following variables in executive compensation packages accounts for the majority of the value associated with executive pay in Canada?

A) annual bonuses
B) base pay
C) stock grants and stock options
D) perks

Question 38

Which method involves using a "what if" scenario to determine which compensation-level strategy is most efficient for your organization?

A) cost-benefit analysis
B) market share analysis
C) trial analysis
D) utility analysis

Question 39

In which of the following circumstances does the compensation system need to be relied on less heavily to motivate behaviour?

A) food processing plant
B) shelter helping the homeless
C) underground coal mine
D) tire manufacturer

Question 40

According to studies, what is the least important reason for using contingent workers?

A) acquiring special expertise
B) screening candidates for future employment
C) developing labour flexibility to meet demand fluctuations
D) buffering core workers against job loss

Question 41

Briefly describe the five main steps in the formulation of compensation strategy.

Question 42

What are a firm's choices for compensation-level strategy and how can it decide between them?

Question 43

Briefly discuss the four key understandings necessary for successful formulation of compensation strategy.

Question 44

What are the four special employee groups discussed in the text, and what are some the implications for compensation?

Question 45

You have been asked to provide recommendations to a compensation committee in their attempts to shift the CEO's compensation into a mix of rewards that facilitates and encourages a long-term view of business performance. What foci should your recommendations take?

Question 46

Briefly summarize the legislative framework that compensation must comply with.