Question 1

With incentive pay,there is substantial downside risk for employees and there is less upside potential.

Accepted Answer

With incentive pay, there is typically greater upside potential as employees have the opportunity to earn more based on their performance. However, there is also a risk of not meeting the goals required to earn the incentive, resulting in less or no additional pay.

Question 2

Deferred distribution plans:
A)are types of gain-sharing plans
B)are devised to relate long-term profitability to top management performance
C)place earnings in an escrow account for distribution upon retirement,termination,disability,or death
D)are not as popular as current distribution plans because they lack immediacy
E)are accurately described by all of the above

Accepted Answer

Deferred distribution plans place earnings in an escrow account for distribution upon retirement, termination, disability, or death. They are not related to gain-sharing plans or top management performance and their lack of immediacy does not make them less popular than current distribution plans.

Question 3

Broad-based stock option plans
A)are easy to develop because performance measures are easy to locate and quantify
B)seldom include cash payments
C)always relate incentives to the attainment of corporate or strategic business unit goals
D)seldom put earnings at risk.
E)are accurately defined by none of the above

Accepted Answer

The answer of Broad-based stock option plans
A)are easy to develop...

Question 4

When the strategic goal is growth,it's reasonable to reward employees for achieving growth targets.

Accepted Answer

When a company sets a strategic goal of growth, achieving growth targets becomes a key performance indicator. Rewarding employees for achieving growth targets can be a way to motivate and incentivize employees to work towards the company's goals. Therefore, it is reasonable to reward employees for achieving growth targets if the strategic goal is growth.

Question 5

Employee stock ownership plans (ESOPs):
A)are types of broad-based stock ownership plans
B)grant shares of stock to employees as a means of long-term savings and retirement
C)usually do not link stocks that can be purchased to individual or group performance indicators
D)vary in when payments are made
E)are accurately described by all of the above

Accepted Answer

ESOPs are types of broad-based stock ownership plans that grant shares of stock to employees as a means of long-term savings and retirement. They can vary in when payments are made and usually do not link stocks that can be purchased to individual or group performance indicators. Therefore, all of the above options accurately describe ESOPs.

Question 6

Stock option plans:
A)give the employee a chance to buy stock in the company under certain conditions
B)are being considered too hazardous after the Enron collapse in 2002
C)are restricted to executives
D)are always based on individual performance
E)all of the above are true

Accepted Answer

Stock option plans allow employees to purchase company stock under certain conditions. The other options listed are incorrect. While there may be concerns about the potential for abuse in stock option plans, they are not universally considered too hazardous after the Enron collapse. Additionally, stock option plans are not restricted to executives, and they may not always be based on individual performance.

Question 7

In setting up a combined payment plan for salespeople,the most critical question for an organization to answer is,"
A)"What percentage of total compensation should be salary and what percentage should be commission?"
B)"How much of the salesperson's time should be spent selling and how much in nonselling activities?"
C)"How can the sales program compensation plan be devised so as not to cause other employees to become unmotivated?"
D)"How long will the plan be operational before it needs to be evaluated?"
E)"What is the strategic basis for the plan and how will its implementation be monitored?"

Accepted Answer

The most critical question for an organization when setting up a combined payment plan for salespeople is determining the balance between salary and commission. This balance directly impacts the motivation and behavior of salespeople, influencing their focus on short-term sales versus long-term customer relationships.

Question 8

In terms of labor costs,it is advantageous for the company to keep base pay rates stable,and tie added compensation to performance.

Accepted Answer

By tying added compensation to performance, the company can motivate employees to work harder and be more productive without incurring excessive labor costs from across-the-board pay raises. This approach also aligns with the concept of pay-for-performance, which is commonly used in modern compensation practices.

Question 9

Performance based pay recognizes that people working in the same job can contribute to the organization at a different level in terms of value and seeks to provide an incentive for maximizing their contribution.

Accepted Answer

Performance based pay systems are designed to incentivize employees to perform at the highest level possible in order to maximize their contribution to the organization. This recognizes that people working in the same job may have different levels of skill or experience, and that compensating them based on their performance is a way to recognize and reward those who contribute the most value.

Question 10

Combined distribution plans:
A)are types of gain-sharing plans
B)are devised to relate long-term profitability to top management performance
C)distribute a portion of profits immediately to employees,setting the remaining amount aside in a designated account.
D)are not as popular as current distribution plans because they lack immediacy
E)are accurately described by all of the above

Accepted Answer

The answer of Combined distribution plans:
A)are types of gain-sharing plans
B)are...

Question 11

When a reward is paid in a lump sum,it seems to have more impact than when it is paid out as small additions to employees' weekly or monthly paychecks.

Accepted Answer

This is because a lump sum reward is perceived as a one-time windfall and can create a greater sense of appreciation and motivation in employees. Small additions to their regular paychecks, on the other hand, may not stand out as much and may not be perceived as a significant reward.

Question 12

By paying for performance,a company signals that it's interested in employees who want to be paid for good performance.

Accepted Answer

By offering pay for performance, a company is demonstrating that it values good performance and is willing to compensate employees accordingly. This can attract individuals who are motivated to excel and deliver results.

Question 13

A requirement of implementing a pay for performance system is to eliminate nonmonetary rewards at an organization.

Accepted Answer

Implementing a pay for performance system does not necessarily require eliminating nonmonetary rewards. Nonmonetary rewards can still be used to incentivize and recognize employees, in addition to the pay for performance system.

Question 14

Cash rewards that are tied to some aspect of performance and paid in lump sums rather than as raises are known as merit pay.

Accepted Answer

Merit pay refers to raises or ongoing salary increases based on performance, not lump-sum payments. Lump-sum payments tied to performance are typically referred to as bonuses.

Question 15

Which of the following questions need to be answered when an organization is establishing a commission pay program?
A)Can the company afford to do this?
B)How do we guarantee everyone receives the same commission payout?
C)Are the methods to be used to measure performance flexible enough to allow for any possible sales event?
D)To what measures should commissions be tied to curb salespersons' behaviors that could negatively affect the organization?
E)Does each salesperson have the same number of accounts?

Accepted Answer

The answer of Which of the following questions need to...

Question 16

Incentive pay pegs base pay near the market average and employees earn additional monetary compensation for excellent performance.

Accepted Answer

Incentive pay is designed to reward employees for excellent performance beyond their base pay, which is typically set near the market average.

Question 17

As one approach to implementing performance-based pay plans,indexed stock options:
A)allow employees to buy stock at a premium price
B)are also called premium-priced options
C)are used more often than any other plan
D)are designed to ensure that employees are not punished with the economy takes a downturn
E)are accurately described by all of the above

Accepted Answer

Indexed stock options are designed to ensure that employees are not punished if the economy takes a downturn. They are often tied to larger economic indicators, so the value of the stock options is not solely dependent on the performance of the company. This helps to reduce the risk for employees and incentivizes them to work towards overall economic growth, rather than just the success of their specific company. None of the other choices accurately describe indexed stock options.

Question 18

A _____ plan is an award of shares with restrictions that require a predetermined length of service to elapse before vesting occurs.
A)premium-priced stock option
B)performance-vested restricted stock
C)time-based restricted stock
D)time-restricted stock option
E)indexed stock option

Accepted Answer

Time-based restricted stock is a type of equity compensation plan where shares are awarded to employees with a requirement that a certain amount of time elapse before vesting occurs. This is meant to incentivize employees to remain with the company for a predetermined period of time before they can fully benefit from the shares awarded to them.

Question 19

When performance measures are deficient or contaminated,employees are less likely to feel that their efforts directly influence the performance measures used to determine performance-based pay.

Accepted Answer

This statement is true. If performance measures are deficient or contaminated, employees may feel that their efforts are not accurately reflected in the performance measures used for performance-based pay, which can lead to decreased motivation and engagement.

Question 20

What challenges does a multinational company face in using performance-based pay?
A)Differences in laws,tax regulations,and cultural values all affect the applicability of performance-based pay.
B)Any incentive system developed in the parent country would immediately become policy in the host country.
C)Compensation for incentive systems is always paid in the currency of the host country.
D)Stock option plans are typically more valued by employees working in host countries as they are by employees working in the parent country.
E)Compensation for incentive systems is always paid in the currency of the parent country.

Accepted Answer

Multinational companies face challenges in using performance-based pay due to differences in laws, tax regulations, and cultural values. This affects the applicability of performance-based pay and can make it difficult to develop incentive systems that work across all countries where the company operates. For example, some countries may have regulations that restrict the use of certain types of incentives, while others may have cultural values that place a higher emphasis on teamwork rather than individual performance. It's important for companies to consider these factors when developing performance-based pay programs.

Quiz 11: Using Performance-Based Pay to Achieve Strategic Objectives

With incentive pay,there is substantial downside risk for employees and there is less upside potential.

Deferred distribution plans:

Broad-based stock option plans

When the strategic goal is growth,it's reasonable to reward employees for achieving growth targets.

Employee stock ownership plans (ESOPs) :

Stock option plans:

In setting up a combined payment plan for salespeople,the most critical question for an organization to answer is,"

In terms of labor costs,it is advantageous for the company to keep base pay rates stable,and tie added compensation to performance.

Performance based pay recognizes that people working in the same job can contribute to the organization at a different level in terms of value and seeks to provide an incentive for maximizing their contribution.

Combined distribution plans:

When a reward is paid in a lump sum,it seems to have more impact than when it is paid out as small additions to employees' weekly or monthly paychecks.

By paying for performance,a company signals that it's interested in employees who want to be paid for good performance.

A requirement of implementing a pay for performance system is to eliminate nonmonetary rewards at an organization.

Cash rewards that are tied to some aspect of performance and paid in lump sums rather than as raises are known as merit pay.

Which of the following questions need to be answered when an organization is establishing a commission pay program?

Incentive pay pegs base pay near the market average and employees earn additional monetary compensation for excellent performance.

As one approach to implementing performance-based pay plans,indexed stock options:

A _____ plan is an award of shares with restrictions that require a predetermined length of service to elapse before vesting occurs.

When performance measures are deficient or contaminated,employees are less likely to feel that their efforts directly influence the performance measures used to determine performance-based pay.

What challenges does a multinational company face in using performance-based pay?