Deck 8: Designing Pay Levels, Mix, and Pay

Question 1

Which of the following jobs would most likely fall into a fuzzy market?

A)The position of English professor that was filled by a Ph.D.holder in English Language and Literature with five years of teaching experience
B)The position of Sound Engineer that was filled by a graduate with a degree in audio engineering
C)The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience
D)The position of Vice-President of a marketing firm that was filled by a marketing manager with 15 years of experience in the marketing field

Answer 1

C

Question 2

A company using a skill-based pay system prices the job of lead assembler between $10 and $22 per hour.Survey data showed that the job of assembler averaged $10 per hour and the job of assembly supervisor averaged $22 per hour.The company is using the _____ method of job matching.

A)benchmark-job
B)low-high
C)survey leveling
D)benchmark conversion

Answer 2

B

Question 3

The _____ publishes extensive information on various occupations in different geographic areas.It is a major source of publicly available compensation data.

A)Chamber of Commerce
B)Bureau of Labor Statistics
C)Compensation Association
D)Department of Economics

Answer 3

B

Question 4

_____ measures reveal competitors' use of performance-based cash payments.

A)Base cash pay
B)Short-term incentive pay
C)Total cash
D)Long-term incentive pay

Question 5

The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____.

A)updating
B)point factor adjustment
C)lead/lag policy adjustment
D)survey leveling

Question 6

All of the following are examples of potential anomalies EXCEPT _____.

A)outliers
B)a large variation in base pay for a job at one company
C)one company dominating the results
D)a large variation in average base pay for a job across companies

Question 7

The _____ minimizes the distortion of the central tendency caused by outliers.

A)weighted mean
B)mean
C)mode
D)median

Question 8

Because employers are raising employee pay at various times during the year, survey data must be updated using a process called _____ or _____.

A)aging; trending
B)leading; smoothing
C)matching; leveling
D)gaining; smoothing

Question 9

In most organizations, the responsibility for managing a pay survey lies with _____.

A)top management
B)the facility or plant manager
C)outside consultants
D)the compensation manager

Question 10

A survey conducted in January 2013 found that the median pay effective January 1, 2013, for a clerk was $22,000 and that the forecast rate of wage increases in the market for 2013 was 5 percent and another 5 percent for 2014.An employer choosing to follow a lead strategy of 4 percent above the market for the plan year will need to _____.

A)multiply the salary by 105 percent and then by 109 percent
B)increase the clerk salary by $2,200
C)multiply the salary by 109 percent
D)multiply the salary by 114 percent

Question 11

Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?

A)Weighted mean
B)Mean
C)Standard deviation
D)Median

Question 12

The second major decision in pay-level determination is to _____.

A)specify relevant markets
B)define the purpose of a survey
C)design and conduct a survey
D)select product and labor market competitors

Question 13

For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is _____.

A)benchmark-job approach
B)low-high approach
C)survey leveling
D)benchmark conversion

Question 14

The first step in setting competitive pay and designing a pay structure is to _____.

A)specify a pay-level policy
B)conduct a job evaluation
C)draw policy lines
D)specify the relevant market

Question 15

Gramhold Inc., a pharmaceutical company, reduces its 10 salary grades to just three broad bands.Which of the following statements is most likely to be true in this case?

A)Gramhold will face difficulty in defining job responsibilities broadly with the new structure.
B)Gramhold will find that the new structure hinders cross-functional growth.
C)Gramhold will experience career moves within bands more than career moves between bands.
D)Gramhold will offer recognition via titles rather than through cross-functional experience and lateral progression.

Question 16

Which of the following is true regarding the Employment Cost Index (ECI)?

A)It is published by the Department of Commerce.
B)It is an excellent source of competitor labor costs.
C)It measures annual changes in employer compensation costs.
D)It allows comparison of changes in its average costs to an all-industry average.

Question 17

The final major decision in pay-level determination is to _____.

A)interpret and apply the results of the survey
B)obtain top-management acceptance of the final decisions
C)design grades and ranges or bands
D)draw policy lines

Question 18

A common first step in interpreting survey data is to _____.

A)check for the accuracy of job matches
B)seek out non-responders
C)check for anomalies
D)remove the top- and bottom-paying companies

Question 19

Which of the following is an example of a company that uses broad banding?

A)A company in which there is more lateral movement with no pay adjustment than promotions
B)A company that has pay guidelines and controls designed right into the pay system
C)A company that has unlimited total salary budget
D)A company that pays all its employees the same salary

Question 20

Which of the following is often used to set pay ranges?

A)Median
B)Weighted mean
C)Quartiles and percentiles
D)Standard deviation

Question 21

Identifying pay survey participants by company name is considered price fixing under the Sherman Act.

Question 22

Which of the following statements is true about market pricers?

A)They align pay structures with the business strategy.
B)Their pay structures are unique and difficult to imitate.
C)They assume that little value is added through internal alignment.
D)They emphasize pay structures based on unique technology or the way work is organized.

Question 23

The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.

A)job structure
B)broad banding
C)reference rate
D)market pricing

Question 24

Mark and Steve work as crane operators in a construction company called Asai Corp.Asai uses a skill-based plan that establishes single flat rates for each skill level.Mark performs better than Steve even though Steve has more seniority.Which of the following statements is most likely to be true in this scenario?

A)Mark will be paid more than Steve as his performance is higher.
B)Steve will be paid more than Mark as he has more seniority.
C)Both Mark and Steve will be paid the same amount.
D)Steve will be given more incentives than Mark.

Question 25

Which of the following statements is true regarding broad bands?

A)They remove limits on total salary budgets.
B)They support recognition via titles or career progression.
C)They foster cross-functional growth.
D)They increase the hierarchical nature of organizations.

Question 26

If the purpose of a survey is to price the entire structure of a job, then benchmark jobs can be selected to include the entire job structure.

Question 27

Regression smoothes large amounts of data while minimizing variations.

Question 28

Many employers use market surveys to validate their own job evaluation results.

Question 29

Size of pay differentials between grades should _____.

A)be based upon differentials in market surveys
B)be approximately 15 percent
C)support career movement through the pay structure
D)be between 10 and 25 percent

Question 30

It is easier for employers to determine the worth of jobs that fall into fuzzy markets than traditionally relevant markets.

Question 31

A market pay line _____.

A)reflects an organization's pay scale based on the ratings given by its employees
B)links a company's benchmark jobs with market rates paid by competitors
C)provides an accurate prediction of an organization's entry level pay rates
D)compares an organization's minimum and maxi mum pay rates for each skill level

Question 32

Aging the market data to a point halfway through a plan year is called _____.

A)leveling
B)updating
C)lead/lag
D)matching

Question 33

Pay ranges for office and production work commonly range between _____ and _____ percent.

A)5; 15
B)15; 30
C)30; 40
D)40; 60

Question 34

In cases where the content of an organization's jobs does not sufficiently match that of the jobs in the salary survey, an effort can be made to quantify the difference via benchmark conversion.

Question 35

When there is an unusual level of turnover in a job, an employer is likely to conduct a market survey.

Question 36

Adjustments to forms of pay occur more often than adjustments to overall pay level.

Question 37

The final step in determining externally competitive pay levels and structures is the merging of internal and external pressure.

Question 38

In the regression equation, y = a + bx, job evaluation points are denoted by _____.

A)a
B)b
C)x
D)y

Question 39

Turnover and organizational revenues are examples of survey data collected to gather competitive intelligence.

Question 40

Pay ranges:

A)are flexible enough to deal with differences in quality but not with the productivity or value of these quality variations.
B)usually lead to an increase in employee turnover.
C)reflect the differences in performance or experience that an employer wishes to recognize with pay.
D)cause employees to believe that their compensation cannot increase in the same job.

Question 41

What is a market line?

Question 42

Managers often regard external market data as more objective than internal job evaluation.

Question 43

Explain the low-high approach in selecting jobs for inclusion in a compensation survey.

Question 44

A pay range exists when at least two employees in the same job are paid different rates.

Question 45

Pay ranges for top-level management positions are smaller than the pay ranges for entry-level managerial positions.

Question 46

Pay ranges for managerial jobs are larger than the ranges for other jobs because these jobs have greater opportunity for both discretion and performance than lower-level jobs.

Question 47

A pure market pricing strategy carried to its extreme tends to ignore internal alignment completely.

Question 48

Skill-based plans establish single flat rates for each skill level regardless of performance or seniority.

Question 49

Who should be involved in designing a compensation survey?

Question 50

Explain the difference between standard deviation and quartiles and percentiles.

Question 51

Market pricers emphasize any unique or difficult-to-imitate aspects of an organization's pay structure.

Question 52

Career moves between bands are more common than within bands.

Question 53

Aging the market data to a point halfway through the plan year is called lead/lag.

Question 54

Smaller pay ranges may reduce the opportunities for promotion.

Question 55

What is a survey? What purpose does it serve in terms of compensation?