Question 1

Which incentive plan is based on a philosophy that managers and employees must cooperate together?

Accepted Answer

B)The Scanlon plan is based on a philosophy of cooperation. This philosophy assumes that managers and workers must rid themselves of the "us" and "them" attitudes that normally inhibit employees from developing a sense of ownership in the company.

Question 2

Gainsharing is an incentive plan that ________.

Accepted Answer

B)Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives, with any resulting cost-savings gains shared among employees and the company.

Question 3

Tanner's employer puts a predetermined portion of profits into a trust account for Tanner's retirement. Which of the following is most likely the type of profit-sharing plan used by Tanner's employer?

Accepted Answer

A)With deferred profit-sharing plans, the employer puts cash awards into trust accounts for the employees' retirement. Here the employer generally distributes the awards based on a percentage of the employee's salary, or some measure of the employee's contribution to company profits.

Question 4

The Lincoln incentive system is an incentive plan that ________.

Accepted Answer

D)In one version of the Lincoln incentive system, first instituted at the Lincoln Electric Company of Ohio, employees work on a guaranteed piecework basis. The company distributes total annual profits each year among employees based on their merit rating.

Question 5

Studies suggest that ESOPs probably do lead to increases in employee:

Accepted Answer

B)Studies suggest that ESOPs probably do encourage employees to develop a sense of ownership in and commitment to the firm, but their effects on motivation and performance are questionable.

Question 6

Competence in the Scanlon plan refers to a focus on ________.

Accepted Answer

C)Competence is a third basic feature of the Scanlon plan. The program, say three experts, "explicitly recognizes that a Scanlon plan demands a high level of competency from employees at all levels." This suggests careful selection and training.

Question 7

What percentage of large employers use some type of group- or team-based incentives?

Accepted Answer

D)About 85% of large employers reportedly use some type of group- or team-based incentives,

Question 8

Which of the following best explains identity in regards to the Scanlon plan?

Accepted Answer

B)One feature of the Scanlon plan is identity. Identity means that in order to focus employee involvement, the company must articulate its mission or purpose, and employees must understand how the business operates in terms of customers, prices, and costs.

Question 9

When hired by Delmar Designs, Shane agreed to forego 6% of his normal pay if he didn't meet his goals in return for a 12% bonus if he exceeded his goals. In which type of plan does Shane most likely participate?

Accepted Answer

A)At-risk variable pay plans are plans that put some portion of the employee's weekly, monthly, or yearly pay at risk. If employees meet or exceed their goals, they earn back not only the portion of their pay that was at risk, but also an incentive. If they fail to meet their goals, they forego some of the pay they would normally earn.

Question 10

Which profit-sharing plan provides tax advantages for employees by postponing income taxes, often until the employee retires?

Accepted Answer

C)With deferred profit-sharing plans, the employer puts cash awards into trust accounts for the employees' retirement. Here the employer generally distributes the awards based on a percentage of the employee's salary, or some measure of the employee's contribution to company profits. There is a tax advantage, since employees' income taxes on the distributions are deferred, often until the employee retires.

Question 11

The employees at DataMax participate in a profit-sharing plan. DataMax distributes 15% of its profits as profit shares to employees at regular intervals. Which of the following is most likely used at DataMax?

Accepted Answer

A)There are several types of profit-sharing plans. With current profit-sharing or cash plans, employees share in a portion of the employer's profits quarterly or annually. In cash plans, the firm simply distributes a percentage of profits (usually 15% to 20%)as profit shares to employees at regular intervals.

Question 12

Employees at GameTime Software participate in a gainsharing plan. Employee bonuses are calculated by dividing payroll expenses by total sales. GameTime Software most likely uses which of the following plans?

Accepted Answer

D)The Scanlon formula divides payroll expenses by total sales (or, sometimes, by total sales plus increases in inventory).

Question 13

The main feature of broad-based stock option plans is:

Accepted Answer

D)All or most employees can participate in broad-based stock option plans. The basic thinking is that sharing ownership in the company with employees makes motivational and practical sense.

Question 14

The Scanlon plan is an early version of a ________ plan, an incentive plan that engages employees in a common effort to achieve productivity objectives.

Accepted Answer

C)The Scanlon plan is one early version of a gainsharing plan. Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives, with any resulting cost-savings gains shared among employees and the company.

Question 15

McDonald Manufacturing contributes cash to a trust established to purchase shares of McDonald stock for employees. Which of the following is most likely offered by McDonald Manufacturing?

Accepted Answer

D)Employee stock ownership plans (ESOPs)are company-wide plans in which the employer contributes shares of its own stock to a trust established to purchase shares of the firm's stock for employees. The firm generally makes these contributions annually in proportion to total employee compensation, with a limit of 15% of compensation.

Question 16

Elaine, the HR manager at Western Enterprises, will get stock distributed to her from a trust when she retires. This is known as a(n):

Accepted Answer

C)Employee stock ownership plans (ESOP)are company-wide plans in which the employer contributes shares of its own stock (or cash to be used to purchase such stock)to a trust established to purchase shares of the firm's stock for employees. The trust holds the stock in individual employee accounts. It then distributes the stock to employees upon retirement.

Question 17

Tyler Oil offers a profit-sharing plan to its employees. Each year, Tyler Oil distributes total annual profits less taxes among employees based on employee merit ratings. Which of the following is most likely used by Tyler Oil?

Accepted Answer

B)In one version of the Lincoln incentive system, first instituted at the Lincoln Electric Company of Ohio, employees work on a guaranteed piecework basis. The company distributes total annual profits (less taxes, 6% dividends to stockholders, and a reserve)each year among employees based on their merit rating.

Question 18

In ________, employees agree to put some portion of their normal pay at risk if they don't meet their goals, in return for a much larger bonus if they exceed their goals.

Accepted Answer

A)In earnings-at-risk pay plans, employees agree to put some portion (say, 10%)of their normal pay at risk (forego it)if they don't meet their goals, in return for possibly obtaining a much larger bonus if they exceed their goals.

Question 19

The Scanlon plan includes all of the following features EXCEPT ________.

Accepted Answer

D)The five features of the Scanlon plan include a philosophy of cooperation, identity, competency, an involvement system, and a sharing of benefits formula. The plan does not call for focusing on individual achievement.

Question 20

Which of the following is NOT a type of gainsharing plan?

Accepted Answer

D)In addition to the Scanlon plan, other popular gainsharing plans include the Lincoln, Rucker, and Improshare plans. Roth is not a type of gainsharing plan.

Quiz 12: Pay for Performance and Financial Incentives