Compensation 12th Edition Milkovich Test Bank by Ace Test Banks

Compensation ,12th Edition

by George Milkovich Jerry Newman, Barry Gerhart

Chapter 01 The Pay Model

Multiple Choice Questions

Which of the following programs introduced by Congress includes restrictions on executive pay that are designed to discourage executives from taking "unnecessary and excessive risks"?

A. Corporate Welfare Program B. Employee Welfare Program C. Troubled Asset Relief Program D. Corporate Liability Relief Program 2.

Hourly compensation costs for production workers in manufacturing are higher in _____ than in the United States.

A. Germany B. Czech Republic C. Mexico D. China 3.

One of the reasons why 8 in 10 of the uninsured in the United States are from working families is that _____.

A. many larger employers do not offer health insurance as it does not guarantee an increase in productivity levels B. health insurance is more costly for larger employers C. many small employers are much less likely than larger employers to offer health insurance to their employees D. most workers decline health insurance when offered by their employers

The degree to which pay influences individual and aggregate motivation among employees at any point in time is referred to as a(n):

A. sorting effect. B. incentive effect. C. turnover effect. D. directional effect. 5.

Which of the following is an example of a relational return?

A. Short-term incentives B. Employment security C. Long-term incentives D. Income protection 6.

Which of the following is given as an increment to the base pay in recognition of past work behavior?

A. Base pay B. Long-term incentive C. Merit pay D. Short-term incentive 7.

GreenRain Corp. faces an increase in employee turnover rate. The CEO calls for a board meeting with the senior executives to discuss the issue. Who among the following suggests increasing the relational returns that employees receive to reduce the turnover rate at GreenRain?

A. Tom suggests increasing the decision-making authorities given to the employees to make work more challenging. B. Deena suggests providing more work/life balance for the employees by increasing the number of paid leaves. C. Syed suggests increasing the medical insurance coverage offered to the employees. D. Liam suggests increasing merit bonuses. 8.

Which form of pay does not permanently increase labor costs?

A. Incentive B. Merit pay C. Cost-of-living adjustments D. Base pay

Recent surveys show that, on average, an outstanding performer receives a _____ merit increase, an average performer a _____ merit increase, and a poor performer a 0.4% merit increase.

A. 10.5%; 7% B. 8.4%; 5.2% C. 6.7%; 4.2% D. 4.4%; 2.8% 10. Which of the following companies is taking efforts to improve the work/life balance of its employees?

A. MH Corp. increases the number of paid holidays given to its senior employees. B. Kay Corp. increases the transport allowance for its employees by 10 percent. C. Haywire Corp. allows its employees to buy company stocks at a reduced price of $30 per share. D. Halo Corp. increases the variable pay for its employees. 11. Variable pay may also be called _____.

A. relational returns B. pensions C. stock options D. incentives 12. Which of the following is often the largest component in an executive pay package?

A. Base pay B. Stock options C. Merit pay D. Perks 13. Among employers that provide health insurance, the cost to provide family coverage per year per employee is approximately _____.

A. $4,000 B. $9,000 C. $16,000 D. $22,000

14. Robert, the CEO of GameTrack Corp., wants to restructure the pay plan without increasing the labor costs in the long run. He is most likely to achieve this, while retaining his top employees, by:

A. increasing base pay and decreasing variable pay. B. increasing incentive pay and decreasing base pay. C. hiring more employees and reducing the marginal product output requirements. D. providing across-the-board increases on a monthly basis. 15. Incentives do not permanently increase labor costs because:

A. they rely on a subjective rating of performance. B. they are given based on the past performances of the employees. C. they increase the base wage. D. they are one-time payments. 16. A difference between incentives and merit increases is that incentives:

A. do not increase the base wage, whereas merit increases the base wage. B. cannot be tied to the performance of an individual, whereas merit increases can be tied to the performance of an individual. C. rely on a subjective measure of performance, whereas merit increases rely on an objective measure of performance. D. are relational returns, whereas merit increases are part of the total compensation. 17. Which of the following is a fundamental objective, and NOT a policy, in the pay model?

A. Fairness B. Competitiveness C. Contributions D. Alignment 18. Which of the following is a policy, and NOT an objective, in the pay model?

A. Ethics B. Competitiveness C. Efficiency D. Fairness

19. Incentives and merit guidelines are techniques of the _____ policy of the pay model.

A. internal alignment B. external competitiveness C. employee contributions D. management of the pay system 20. _____ refers to comparisons among jobs or skills inside a single organization.

A. External competitiveness B. Internal alignment C. Compliance D. Merit increase 21. In the context of pay relationships, which of the following is illegal in the United States?

A. Paying on the basis of the nature of jobs B. Paying on the basis of pay comparisons with competitors C. Paying on the basis of one's age D. Paying on the basis of one's skill level 22. Managers seek internal alignment within their organization by:

A. matching the competitors' pay rates. B. following FLSA guidelines. C. using fair merit increases. D. paying on the basis of similarities among jobs. 23. Compensation policy choices that affect the pay level relative to other companies are most closely associated with the _____ aspect of the pay model.

A. internal alignment B. external competitiveness C. employee contributions D. pay system management

24. The decisions to implement pay for performance, flat rate pay, and profit sharing are examples of _____ policy decisions.

A. internal alignment B. efficiency C. employee contributions D. management 25. According to the text, which of the following decisions should be made jointly?

A. Internal alignment and management decisions B. External competitiveness and employee contribution decisions C. Employee contribution and internal alignment decisions D. Management and external competitiveness decisions 26. Which of the following policy decisions directly affects employees' attitudes and work behaviors?

A. Employee contributions B. Internal alignment C. External competitiveness D. Management 27. You are an HR manager, and your boss has told you to find the best way to raise job performance. After some research, you find that _____ have the greatest instrumental value.

A. job responsibilities B. training and skill development programs C. goal setting and job enrichment D. monetary incentives 28. Which of the following is NOT a question to ask for determining if research has value?

A. Is the research useful? B. Can alternative explanations be ruled out? C. Was the research conducted by PhD researchers? D. Is correlation separated from causation?

29. A measure of how changes in one variable are related to changes in another variable is the:

A. standard deviation B. analysis of variance C. correlation coefficient D. mean deviation 30. The best way to establish _____ is to account for competing explanations, either statistically or through control groups.

A. causation B. profitability C. correlation coefficient D. internal alignment

True / False Questions

31. When unemployment increases, the proportion of the population covered by health insurance decreases. True

False

32. The degree to which pay influences individual and aggregate motivation among employees is called the sorting effect. True

False

33. Base wage is the overtime pay given to employees who are exempt from regulations of the Fair Labor Standards Act. True

False

34. Commissions are an example of incentives. True

False

35. Most U.S. firms use merit pay increases. True

False

36. Base wage reflects both the value of the work and individual employee skills and experience. True

False

37. Pension and health benefits are a very large component of total compensation for many large companies such as American Airlines and GM. True

False

38. A major challenge facing most employers is the rising cost of health care benefits. True

False

39. Procedural fairness suggests that the way a pay decision is made is of less importance to employees than the results of the decision. True

False

40. If the objective is to increase customer satisfaction, then incentive programs and merit pay might be used to pay for performance. True

False

41. Objectives guide the design of pay systems and provide the standards for evaluating their effectiveness. True

False

42. Even if the federal compensation laws change, it is unnecessary to change pay systems to ensure continued compliance. True

False

43. Internal alignment refers to comparisons among jobs or skill levels inside a single organization. True

False

44. Since HR research contains information useful to managers, most managers read research in HR management, and compensation journals. True

False

45. Management and HR research has conclusively shown that goal setting and job enrichment produce the largest and most reliable increases in job performance. True

False

46. Monetary incentives produce the biggest increases in job performance. True

False

47. A study found that only a very small amount of change in CEO pay is related to changes in company performance. True

False

48. A study of IBM showed that its long-standing policy of no layoffs was the major cause of its strong profits. True

False

49. Causality is one of the most difficult questions to answer and continues to be an important and sometimes perplexing problem for researchers. True

False

50. The R2, which is an output from a regression analysis, is different from correlation in that it tells us what percentage of the variation is accounted for by the variables we are using to predict or explain. True

False

Short Answer Questions

51. Describe the perspective of stockholders on compensation.

52. What are the different ways in which pay can influence employee motivation and behavior?

53. Describe the various returns received from work.

54. List the basic elements of the pay model.

55. Explain the basic compensation objectives of pay systems.

Chapter 01 The Pay Model Answer Key

Multiple Choice Questions

Which of the following programs introduced by Congress includes restrictions on executive pay that are designed to discourage executives from taking "unnecessary and excessive risks"?

A. Corporate Welfare Program B. Employee Welfare Program C. Troubled Asset Relief Program D. Corporate Liability Relief Program Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation: Does It Matter? (or, "So What?")

Hourly compensation costs for production workers in manufacturing are higher in _____ than in the United States.

A. Germany B. Czech Republic C. Mexico D. China Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation: Definition, Please

One of the reasons why 8 in 10 of the uninsured in the United States are from working families is that _____.

The degree to which pay influences individual and aggregate motivation among employees at any point in time is referred to as a(n):

A. sorting effect. B. incentive effect. C. turnover effect. D. directional effect. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation: Definition, Please

Which of the following is an example of a relational return?

A. Short-term incentives B. Employment security C. Long-term incentives D. Income protection Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Forms of Pay

Which of the following is given as an increment to the base pay in recognition of past work behavior?

A. Base pay B. Long-term incentive C. Merit pay D. Short-term incentive Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

Which form of pay does not permanently increase labor costs?

A. Incentive B. Merit pay C. Cost-of-living adjustments D. Base pay Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

Recent surveys show that, on average, an outstanding performer receives a _____ merit increase, an average performer a _____ merit increase, and a poor performer a 0.4% merit increase.

A. 10.5%; 7% B. 8.4%; 5.2% C. 6.7%; 4.2% D. 4.4%; 2.8% Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Forms of Pay

10.

Which of the following companies is taking efforts to improve the work/life balance of its employees?

11.

Variable pay may also be called _____.

A. relational returns B. pensions C. stock options D. incentives Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

12.

Which of the following is often the largest component in an executive pay package?

A. Base pay B. Stock options C. Merit pay D. Perks Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

13.

Among employers that provide health insurance, the cost to provide family coverage per year per employee is approximately _____.

A. $4,000 B. $9,000 C. $16,000 D. $22,000 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Forms of Pay

14.

Robert, the CEO of GameTrack Corp., wants to restructure the pay plan without increasing the labor costs in the long run. He is most likely to achieve this, while retaining his top employees, by:

A. increasing base pay and decreasing variable pay. B. increasing incentive pay and decreasing base pay. C. hiring more employees and reducing the marginal product output requirements. D. providing across-the-board increases on a monthly basis. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Forms of Pay

15.

Incentives do not permanently increase labor costs because:

A. they rely on a subjective rating of performance. B. they are given based on the past performances of the employees. C. they increase the base wage. D. they are one-time payments. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Forms of Pay

16.

A difference between incentives and merit increases is that incentives:

A. do not increase the base wage, whereas merit increases the base wage. B. cannot be tied to the performance of an individual, whereas merit increases can be tied to the performance of an individual. C. rely on a subjective measure of performance, whereas merit increases rely on an objective measure of performance. D. are relational returns, whereas merit increases are part of the total compensation. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Forms of Pay

17.

Which of the following is a fundamental objective, and NOT a policy, in the pay model?

A. Fairness B. Competitiveness C. Contributions D. Alignment Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model 1-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

18.

Which of the following is a policy, and NOT an objective, in the pay model?

A. Ethics B. Competitiveness C. Efficiency D. Fairness Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

19.

Incentives and merit guidelines are techniques of the _____ policy of the pay model.

A. internal alignment B. external competitiveness C. employee contributions D. management of the pay system Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

20.

_____ refers to comparisons among jobs or skills inside a single organization.

A. External competitiveness B. Internal alignment C. Compliance D. Merit increase Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

21.

In the context of pay relationships, which of the following is illegal in the United States?

A. Paying on the basis of the nature of jobs B. Paying on the basis of pay comparisons with competitors C. Paying on the basis of one's age D. Paying on the basis of one's skill level Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

22.

Managers seek internal alignment within their organization by:

A. matching the competitors' pay rates. B. following FLSA guidelines. C. using fair merit increases. D. paying on the basis of similarities among jobs. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: A Pay Model

23.

Compensation policy choices that affect the pay level relative to other companies are most closely associated with the _____ aspect of the pay model.

A. internal alignment B. external competitiveness C. employee contributions D. pay system management Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

24.

The decisions to implement pay for performance, flat rate pay, and profit sharing are examples of _____ policy decisions.

A. internal alignment B. efficiency C. employee contributions D. management Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: A Pay Model

25.

According to the text, which of the following decisions should be made jointly?

A. Internal alignment and management decisions B. External competitiveness and employee contribution decisions C. Employee contribution and internal alignment decisions D. Management and external competitiveness decisions Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

26.

Which of the following policy decisions directly affects employees' attitudes and work behaviors?

A. Employee contributions B. Internal alignment C. External competitiveness D. Management Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

27.

You are an HR manager, and your boss has told you to find the best way to raise job performance. After some research, you find that _____ have the greatest instrumental value.

A. job responsibilities B. training and skill development programs C. goal setting and job enrichment D. monetary incentives Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Caveat Emptor-Be an Informed Consumer

28.

Which of the following is NOT a question to ask for determining if research has value?

A. Is the research useful? B. Can alternative explanations be ruled out? C. Was the research conducted by PhD researchers? D. Is correlation separated from causation? Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Caveat Emptor-Be an Informed Consumer

29.

A measure of how changes in one variable are related to changes in another variable is the:

A. standard deviation B. analysis of variance C. correlation coefficient D. mean deviation Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

30.

The best way to establish _____ is to account for competing explanations, either statistically or through control groups.

A. causation B. profitability C. correlation coefficient D. internal alignment Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

True / False Questions

31.

When unemployment increases, the proportion of the population covered by health insurance decreases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation: Definition, Please

32.

The degree to which pay influences individual and aggregate motivation among employees is called the sorting effect. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation: Definition, Please

33.

Base wage is the overtime pay given to employees who are exempt from regulations of the Fair Labor Standards Act. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

34.

Commissions are an example of incentives. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay 1-19 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

35.

Most U.S. firms use merit pay increases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

36.

Base wage reflects both the value of the work and individual employee skills and experience. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

37.

Pension and health benefits are a very large component of total compensation for many large companies such as American Airlines and GM. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

38.

A major challenge facing most employers is the rising cost of health care benefits. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Forms of Pay

39.

Procedural fairness suggests that the way a pay decision is made is of less importance to employees than the results of the decision. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

40.

If the objective is to increase customer satisfaction, then incentive programs and merit pay might be used to pay for performance. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

41.

Objectives guide the design of pay systems and provide the standards for evaluating their effectiveness. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

42.

Even if the federal compensation laws change, it is unnecessary to change pay systems to ensure continued compliance. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

43.

Internal alignment refers to comparisons among jobs or skill levels inside a single organization. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: A Pay Model

44.

Since HR research contains information useful to managers, most managers read research in HR management, and compensation journals. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

45.

Management and HR research has conclusively shown that goal setting and job enrichment produce the largest and most reliable increases in job performance. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

46.

Monetary incentives produce the biggest increases in job performance. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

47.

A study found that only a very small amount of change in CEO pay is related to changes in company performance. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

48.

A study of IBM showed that its long-standing policy of no layoffs was the major cause of its strong profits. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

49.

Causality is one of the most difficult questions to answer and continues to be an important and sometimes perplexing problem for researchers. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

50.

The R2, which is an output from a regression analysis, is different from correlation in that it tells us what percentage of the variation is accounted for by the variables we are using to predict or explain. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Caveat Emptor-Be an Informed Consumer

Short Answer Questions

51.

Describe the perspective of stockholders on compensation.

Stockholders are interested in how employees are paid. Using stock to pay employees creates a sense of ownership that improves performance and increases stockholder wealth. However, granting employees too much ownership dilutes stockholder wealth. Stockholders have a particular interest in executive pay. The interests of executives are aligned with those of shareholders who hope that company performance will be higher.

Difficulty: 2 Medium Topic: Compensation: Definition, Please

52.

What are the different ways in which pay can influence employee motivation and behavior?

Pay can influence employee motivation and behavior in two ways: i. Pay can affect the motivational intensity, direction, and persistence of current employees. The degree to which pay influences individual and aggregate motivation among the employees at any point in time is referred to as an incentive effect. ii. Pay can also have an indirect, but important influence, via, a sorting effect. Different types of pay strategies cause different types of people to apply to and stay with an organization.

Difficulty: 2 Medium Topic: Compensation: Definition, Please

53.

Describe the various returns received from work.

Returns are categorized into two types: i. Relational returns are psychological and include learning opportunities, status, challenging work, and other psychological aspects. ii. Total compensations are transactional and include: a. Pay received directly as cash through base pay, merit, incentives, cost-of-living adjustments, etc. b. Pay received indirectly as benefits through pensions, medical insurance, programs to help balance work and life demands, bright colored uniform, etc.

Difficulty: 2 Medium Topic: Forms of Pay

54.

List the basic elements of the pay model.

The pay model contains three basic building blocks: i. the compensation objective, ii. the policies that form the foundation of the compensation system, and iii. the techniques that make up the compensation system.

Difficulty: 1 Easy Topic: A Pay Model

55.

Explain the basic compensation objectives of pay systems.

The basic objectives include efficiency, fairness, ethics, and compliance with laws and regulations. i. Efficiency can be stated more specifically: (1) improving performance, increasing quality, delighting customers and stockholders, and (2) controlling labor costs. ii. The fairness objective calls for fair treatment for all employees by recognizing both employee contributions (e.g., higher pay for greater performance, experience, or training) and employee needs (e.g., a fair wage as well as fair procedures). iii. Ethics means the organization cares about how its results are achieved. Because it is so important, it is inevitable that managing pay sometimes creates ethical dilemmas. iv. Compliance as a pay objective means conforming to federal and state compensation laws and regulations. If laws change, pay systems may need to change, too, to ensure continued compliance. As companies go global, they must comply with the laws of all the countries in which they operate.

Difficulty: 2 Medium Topic: A Pay Model

Chapter 02 Strategy: The Totality of Decisions

Multiple Choice Questions

A compensation system that focuses on competitor's labor costs is most closely associated with a(n) _____ strategy.

A. innovator B. customer-focused C. cost-cutter D. differentiated 2.

A compensation system using market-based pay is most likely to be part of a(n) _____ strategy.

A. innovator B. cost-cutter C. cost leadership D. customer-focused 3.

Flexible-generic job descriptions would most likely be used with a(n) _____ strategy.

A. innovator B. customer-focused C. differentiated D. cost-cutter 4.

Mich Inc., a hardware store, has a rating system in place that rates employees on their friendliness, usefulness, and product knowledge. Based on the ratings an employee receives, he or she gets an incentive. The compensation strategy followed by Mich is most closely described as a:

A. customer-focused strategy. B. cost-cutter strategy. C. innovator strategy. D. differentiation strategy.

A compensation system focusing on system control and work specifications is most closely associated with a(n) _____ strategy.

A. innovator B. customer-focused C. cost-cutter D. differentiated 6.

All of the following EXCEPT _____ are compensation systems associated with a cost-cutter strategy.

A. focus on competitor's labor costs B. focus on system control and work specifications C. increase in variable pay D. customer satisfaction incentives 7.

In the formula predicting performance, the component most closely related to compensation is _____.

A. A B. M C. O D. C 8.

Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?

A. External competitiveness B. Employee contributions C. Corporate responsibility D. Internal alignment 9.

Comparisons on the forms of compensation used by other companies are part of _____.

A. internal alignment B. external competitiveness C. employee contributions D. corporate responsibility

10. The second step of developing a total compensation strategy is to:

A. implement the strategy. B. assess total compensation implications. C. estimate the cost of the strategy. D. map the strategy. 11. Which of the following is the correct order of the steps in formulating a total compensation strategy?

A. Assess the strategy, implement the strategy, map the strategy, and reassess the strategy. B. Assess the strategy, map the strategy, implement the strategy, and reassess the strategy. C. Map the strategy, implement the strategy, assess the strategy, and reassess the strategy. D. Map the strategy, assess the strategy, implement the strategy, and reassess the strategy. 12. Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select _____.

A. more supplemental insurance B. more job training C. a more flexible work schedule D. more personal days and family leave 13. According to the Hudson survey, _____ is the single thing that would make 41 percent of the U.S. workers happier.

A. more personal days B. flexible work schedule C. more money D. better health insurance 14. Which of the following statements regarding allowing employees a choice in their pay mix is NOT true?

15. Union preferences are a major factor in _____ a total compensation strategy.

A. implementing B. reassessing C. assessing D. mapping 16. In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of _____.

A. objectives B. internal alignment C. external competitiveness D. corporate responsibility 17. _____ refers to openness and communication about pay.

A. Transparency B. Ownership C. Prominence D. Centrality 18. _____ is the measure of how important total compensation is in the overall HR strategy.

A. Competitiveness B. Prominence C. Centrality D. Ownership 19. The role non-HR managers play in making pay decisions is called _____.

A. ownership B. transparency C. technology D. decentralized decision-making

20. Issues of transparency, technology, and choice are most closely associated with the _____ aspect of mapping a total compensation strategy.

A. objectives B. management C. employee contributions D. internal alignment 21. Career growth, hierarchy, and flexible design are most closely associated with the _____ aspect of mapping a total compensation strategy.

A. objectives B. internal alignment C. external competitiveness D. employee contributions 22. Which of the following is NOT included in a strategy map?

A. External competitiveness B. Management C. HR alignment D. Employee contributions 23. Which of the following is NOT a test of whether a pay strategy is a source of competitive advantage?

A. Alignment test B. Cost-effectiveness test C. Differentiation test D. Value-addition test 24. Which of the following tests of competitive advantage is probably the easiest test to pass?

A. Alignment test B. Differentiation test C. Integration test D. Value-addition test

25. The alignment test

A. is difficult to imitate. B. is the most difficult test. C. helps ensure passing the differentiation test. D. becomes difficult if the differentiation test is not clear. 26. Trying to measure an ROI for any compensation strategy implies that

A. it is possible to align and differentiate and still fail to add value. B. people are "human capital," similar to other factors of production. C. adding value is the most difficult test. D. value created as a result of costs is difficult to specify. 27. Which of the following statements is NOT true?

A. The effect of performance incentives depends on the context. B. Embedding compensation strategy in HR strategy affects results. C. Focusing only on one dimension of the pay strategy is a best practice. D. The effect of paying more than competitors depends on the context. 28. Research investigating high-performance workplaces found that performance-based pay _____ when combined with other high-performance practices.

A. improves attitudes and behaviors B. increases the number of middle men required C. reduces labor costs D. has little effect on quality 29. When organization performance declines

A. a virtuous circle may be created. B. performance-based pay plans do not pay off. C. managers must avoid changing the pay practices. D. employee attrition rate declines considerably.

30. Research shows that _____ will effectively shift an organization in a downward performance spiral to an upward one.

A. reinforcing performance-based pay B. implementing team-based pay C. improving work-life balance D. it is unclear what compensation practices

True / False Questions

31. Most organizations rely upon the market to determine how to pay their employees as compensation strategy is uncertain and complex. True

False

32. Strategy refers to the fundamental direction that an organization chooses. True

False

33. An organization defines its strategy through the tradeoffs it makes in choosing what to do and what not to do. True

False

34. At the corporate level, the fundamental strategic decision involves defining the role of the HR in compensation strategies. True

False

35. Customer-focused pay strategies are most likely to use market-based pay. True

False

36. Compensation systems focusing on competitors' labor costs typically follow a cost-cutter strategy. True

False

37. Although three separate compensation strategies may be identified, many companies use a combination of all three. True

False

38. Most firms do not have generic strategies but use a blend of cost and innovation. True

False

39. Whole Foods' shared-fate philosophy means that executive salaries are at least 19 times the average pay of full-time employees. True

False

40. How an organization positions its total compensation against its competitors is part of external competitiveness strategic choices. True

False

41. All organizations that pay their employees have a compensation strategy even though it may not be stated or written. True

False

42. A compensation strategy should reflect an organization's values. True

False

43. A major challenge in the design of future pay systems is how to better satisfy individual needs and preferences. True

False

44. Providing unlimited compensation choices to employees would meet with disapproval from the U.S. Internal Revenue Service. True

False

45. Since unions represent such a small fraction of the labor force, their influence on pay decisions is insignificant. True

False

46. Pay systems should fit well with other HR systems. True

False

47. In a high-performance system, pay strategy always plays a lead role. True

False

48. Benchmarking and copying best practices does not lead to competitive advantage. True

False

49. Research on the effects of pay level shows that how employees are paid has no effect on the performance of the employees. True

False

50. In a virtuous circle, a pay-for-performance strategy results in the improvement of performance. True

False

Short Answer Questions

51. Define defenders and prospectors as referred to by Miles and Snow.

52. Compensation systems can be tailored to general business strategies. List and explain these strategies.

53. Explain AMO theory.

54. What are the aspects of the alignment of pay strategy?

55. Write short notes on virtuous and vicious circles.

Chapter 02 Strategy: The Totality of Decisions Answer Key

Multiple Choice Questions

A compensation system that focuses on competitor's labor costs is most closely associated with a(n) _____ strategy.

A. innovator B. customer-focused C. cost-cutter D. differentiated Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

A compensation system using market-based pay is most likely to be part of a(n) _____ strategy.

A. innovator B. cost-cutter C. cost leadership D. customer-focused Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

Flexible-generic job descriptions would most likely be used with a(n) _____ strategy.

A. innovator B. customer-focused C. differentiated D. cost-cutter Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

A. customer-focused strategy. B. cost-cutter strategy. C. innovator strategy. D. differentiation strategy. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Support Business Strategy

A compensation system focusing on system control and work specifications is most closely associated with a(n) _____ strategy.

A. innovator B. customer-focused C. cost-cutter D. differentiated Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

All of the following EXCEPT _____ are compensation systems associated with a cost-cutter strategy.

A. focus on competitor's labor costs B. focus on system control and work specifications C. increase in variable pay D. customer satisfaction incentives Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

In the formula predicting performance, the component most closely related to compensation is _____.

A. A B. M C. O D. C Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support HR Strategy 2-12 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?

A. External competitiveness B. Employee contributions C. Corporate responsibility D. Internal alignment Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Pay Model Guides Strategic Pay Decisions

Comparisons on the forms of compensation used by other companies are part of _____.

A. internal alignment B. external competitiveness C. employee contributions D. corporate responsibility Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Pay Model Guides Strategic Pay Decisions

10.

The second step of developing a total compensation strategy is to:

A. implement the strategy. B. assess total compensation implications. C. estimate the cost of the strategy. D. map the strategy. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

11.

Which of the following is the correct order of the steps in formulating a total compensation strategy?

A. Assess the strategy, implement the strategy, map the strategy, and reassess the strategy. B. Assess the strategy, map the strategy, implement the strategy, and reassess the strategy. C. Map the strategy, implement the strategy, assess the strategy, and reassess the strategy. D. Map the strategy, assess the strategy, implement the strategy, and reassess the strategy. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

12.

Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select _____.

A. more supplemental insurance B. more job training C. a more flexible work schedule D. more personal days and family leave Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

13.

According to the Hudson survey, _____ is the single thing that would make 41 percent of the U.S. workers happier.

A. more personal days B. flexible work schedule C. more money D. better health insurance Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

14.

Which of the following statements regarding allowing employees a choice in their pay mix is NOT true?

A. Allowing employees their choice is difficult to manage B. Allowing employees their choice is easy for competitor companies to imitate C. Providing unlimited choices for employees to choose from is difficult to design D. Providing too many choices can confuse people Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Developing a Total Compensation Strategy: Four Steps

15.

Union preferences are a major factor in _____ a total compensation strategy.

A. implementing B. reassessing C. assessing D. mapping Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps 2-14 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

16.

In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of _____.

A. objectives B. internal alignment C. external competitiveness D. corporate responsibility Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

17.

_____ refers to openness and communication about pay.

A. Transparency B. Ownership C. Prominence D. Centrality Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

18.

_____ is the measure of how important total compensation is in the overall HR strategy.

A. Competitiveness B. Prominence C. Centrality D. Ownership Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

19.

The role non-HR managers play in making pay decisions is called _____.

A. ownership B. transparency C. technology D. decentralized decision-making Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

20.

Issues of transparency, technology, and choice are most closely associated with the _____ aspect of mapping a total compensation strategy.

A. objectives B. management C. employee contributions D. internal alignment Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

21.

Career growth, hierarchy, and flexible design are most closely associated with the _____ aspect of mapping a total compensation strategy.

A. objectives B. internal alignment C. external competitiveness D. employee contributions Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

22.

Which of the following is NOT included in a strategy map?

A. External competitiveness B. Management C. HR alignment D. Employee contributions Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

23.

Which of the following is NOT a test of whether a pay strategy is a source of competitive advantage?

A. Alignment test B. Cost-effectiveness test C. Differentiation test D. Value-addition test Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Source of Competitive Advantage: Three Tests

24.

Which of the following tests of competitive advantage is probably the easiest test to pass?

A. Alignment test B. Differentiation test C. Integration test D. Value-addition test Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Source of Competitive Advantage: Three Tests

25.

The alignment test

A. is difficult to imitate. B. is the most difficult test. C. helps ensure passing the differentiation test. D. becomes difficult if the differentiation test is not clear. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Source of Competitive Advantage: Three Tests

26.

Trying to measure an ROI for any compensation strategy implies that

27.

Which of the following statements is NOT true?

A. The effect of performance incentives depends on the context. B. Embedding compensation strategy in HR strategy affects results. C. Focusing only on one dimension of the pay strategy is a best practice. D. The effect of paying more than competitors depends on the context. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Guidance from the Evidence

28.

Research investigating high-performance workplaces found that performance-based pay _____ when combined with other high-performance practices.

A. improves attitudes and behaviors B. increases the number of middle men required C. reduces labor costs D. has little effect on quality Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Virtuous and Vicious Circles

29.

When organization performance declines

A. a virtuous circle may be created. B. performance-based pay plans do not pay off. C. managers must avoid changing the pay practices. D. employee attrition rate declines considerably. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Virtuous and Vicious Circles

30.

Research shows that _____ will effectively shift an organization in a downward performance spiral to an upward one.

A. reinforcing performance-based pay B. implementing team-based pay C. improving work-life balance D. it is unclear what compensation practices Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Virtuous and Vicious Circles

True / False Questions

31.

Most organizations rely upon the market to determine how to pay their employees as compensation strategy is uncertain and complex. FALSE Accessibility: Keyboard Navigation 2-18 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 1 Easy Topic: Similarities and Differences in Strategies

32.

Strategy refers to the fundamental direction that an organization chooses. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices

33.

An organization defines its strategy through the tradeoffs it makes in choosing what to do and what not to do. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices

34.

At the corporate level, the fundamental strategic decision involves defining the role of the HR in compensation strategies. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices

35.

Customer-focused pay strategies are most likely to use market-based pay. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

36.

Compensation systems focusing on competitors' labor costs typically follow a cost-cutter strategy. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

37.

Although three separate compensation strategies may be identified, many companies use a combination of all three. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

38.

Most firms do not have generic strategies but use a blend of cost and innovation. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Support Business Strategy

39.

Whole Foods' shared-fate philosophy means that executive salaries are at least 19 times the average pay of full-time employees. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Pay Model Guides Strategic Pay Decisions

40.

How an organization positions its total compensation against its competitors is part of external competitiveness strategic choices. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Pay Model Guides Strategic Pay Decisions

41.

All organizations that pay their employees have a compensation strategy even though it may not be stated or written. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Pay Model Guides Strategic Pay Decisions

42.

A compensation strategy should reflect an organization's values. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

43.

A major challenge in the design of future pay systems is how to better satisfy individual needs and preferences. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

44.

Providing unlimited compensation choices to employees would meet with disapproval from the U.S. Internal Revenue Service. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

45.

Since unions represent such a small fraction of the labor force, their influence on pay decisions is insignificant. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

46.

Pay systems should fit well with other HR systems. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

47.

In a high-performance system, pay strategy always plays a lead role. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Developing a Total Compensation Strategy: Four Steps

48.

Benchmarking and copying best practices does not lead to competitive advantage. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Source of Competitive Advantage: Three Tests

49.

Research on the effects of pay level shows that how employees are paid has no effect on the performance of the employees. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Virtuous and Vicious Circles

50.

In a virtuous circle, a pay-for-performance strategy results in the improvement of performance. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Virtuous and Vicious Circles

Short Answer Questions

51.

Define defenders and prospectors as referred to by Miles and Snow.

According to Miles and Snow, defenders are those firms that operate in stable markets and compete on cost, while prospectors are firms that are more focused on innovation and new markets.

Difficulty: 1 Easy Topic: Support Business Strategy

52.

Compensation systems can be tailored to general business strategies. List and explain these strategies.

Compensation systems can be tailored to three general business strategies: i. The innovator stresses new products and short response time to market trends. A supporting compensation approach places less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations. ii. The cost cutter's efficiency-focused strategy stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed. iii. The customer-focused business strategy stresses delighting customers and bases employee pay on how well they do this.

Difficulty: 2 Medium Topic: Support Business Strategy

53.

Explain AMO theory.

Boxall and Purcell found an increasingly common "very basic theory of performance" being used, which they referred to as "AMO theory": P = f (A, M, O) P is performance, which is specified to be a function (f) of three factors: A is ability, M is motivation, and O is opportunity. In other words, the AMO logic is that HR systems will be most effective when roles are designed to allow employees to be involved in decisions and have an opportunity to make an impact, when employee ability is developed through selective hiring and training and development, and when the compensation system motivates employees to act on their abilities and take advantage of the opportunity to make a difference.

Difficulty: 2 Medium Topic: Support HR Strategy

54.

What are the aspects of the alignment of pay strategy?

Alignment of the pay strategy includes three aspects: i. align with the business strategy, ii. align externally with the economic and sociopolitical conditions, and iii. align internally within the overall HR system.

Difficulty: 1 Easy Topic: Source of Competitive Advantage: Three Tests

55.

Write short notes on virtuous and vicious circles.

Virtuous circle - Thinking of pay as part of a circle suggests that performance-based pay works best when there is success to share. An organization whose profits or market share is increasing is able to pay larger bonuses and stock awards, which fairly improves employee attitudes and work behaviors, which in turn improves their performance. The circle gains upward momentum. Employees receive returns that compensate for the risks they take. And they behave like owners, since they are sharing in the organization's success. Vicious circle - Circles can also gain momentum going downward to become a vicious circle. When organization performance declines, performance-based pay plans do not pay off; there are no bonuses, and the value of stock declines—with potentially negative effects on organization performance. Declining organization performance increases the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs. Unless the increased risks are offset by larger returns, the risk-return imbalance will reinforce declining employee attitudes and speed the downward spiral.

Difficulty: 2 Medium Topic: Virtuous and Vicious Circles

Chapter 03 Defining Internal Alignment

Multiple Choice Questions

The parable of the vineyard owner and the compensation paid to the laborers illustrated:

A. the payment to the laborers according to their productivity. B. the payment to the laborers based upon the content of the job. C. the payment to the laborers based upon the hours of work. D. the ignorance of the owner toward the content of work. 2.

Common bases for modern pay structures include all BUT which of the following?

A. The content of the work B. The skills and knowledge required to perform the work C. The extent of external competitiveness and equity D. The work's relative value for achieving organizational objectives 3.

In the strategic approach to pay, internal alignment is the _____ issue to be decided.

A. first B. second C. third D. fourth 4.

Which of the following is NOT one of the factors that define an internal pay structure?

A. The pay differentials between the levels B. The criteria used to determine pay differentials C. The number of times the pay structure has been changed D. The number of levels of work

The most common bases for determining internal structures are:

A. work content and its value B. seniority and experience C. use value and exchange value D. pay surveys and job evaluation 6.

Content refers to the

A. worth of the work. B. work performed in a job and how it gets done. C. relative contribution of the work to the organization objectives. D. different pay level policies. 7.

Most job structures are best described as

A. job-based structures. B. person-based structures. C. both person- and job-based structures. D. competency-based structures. 8.

Organization factors that shape internal pay structures include all BUT which of the following?

A. Technology B. Cost implications C. HR policy D. Economic pressures 9.

Organization factors that shape internal pay structures include all BUT which of the following?

A. Strategy B. Human capital C. Cultures and customs D. Employee acceptance

10. Marginal productivity theory argues that employers pay _____.

A. use value B. exchange value C. surplus value D. differential value 11. Which of the following is NOT a factor in defining equal work according to the Equal Pay Act?

A. Equal skill B. Equal effort C. Equal experience D. Equal responsibility 12. Most unions prefer which of the following?

A. Small pay differences among jobs and seniority-based promotions B. Large pay differences among jobs and seniority-based promotions C. Large pay differences among jobs and performance-based promotions D. Equal pay raises for employees 13. Pay for temporary workers is based upon

A. the internal structure of their home employer. B. the internal structure of the temporary workplace. C. the strict requirements set by an international workers union. D. education only. 14. External factors are dominant influences on jobs filled via:

A. demotions. B. promotions. C. transferring employees. D. hiring graduates.

15. Which of the following pay structure procedures would NOT increase perceptions of pay fairness?

A. Consistently applying pay procedures to all employees B. Using accurate data C. Hiring consultants to develop the pay structure D. Including appeals procedures 16. James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about _____.

A. procedural justice B. distributive justice C. internal equity D. external equity 17. Which of the following is NOT a characteristic of aligned pay structures?

A. They support the way the work gets done. B. They fit an organization's business strategy. C. They are fair to employees. D. They are designed to increase the turnover rate. 18. The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) _____ internal pay structure.

A. closely tailored B. loosely coupled C. very competitive D. egalitarian 19. Jacob works at PrimeClean Corp., a carwash company. He is asked to follow a set of instructions in a predetermined order to wash a car. All the details including the amount of washing liquid to use for each type of car are clearly specified. In this case, Jacob's company is most likely to use a:

A. closely tailored pay structure. B. loosely coupled pay structure. C. pay structure with large differences in pay among jobs. D. pay structure that is highly flexible.

20. Joshua believes that treating employees equally will improve their job satisfaction, which in turn will increase their work productivity and performance. In accordance to his beliefs, he wants to reduce the number of job levels and the pay differentials between the levels. In this case, he is most likely to use a(n):

A. highly layered pay structure. B. hierarchical pay structure. C. highly inequitable pay structure. D. egalitarian pay structure. 21. Organizations in a turbulent and unpredictable environment requiring flexibility in jobs and work processes are likely to be more successful with a(n) _____ internal pay structure.

A. egalitarian B. bureaucratic C. loosely coupled D. closely tailored 22. Egalitarian pay structures have all BUT which of the following characteristics?

A. Few levels B. Small differentials C. Support equal treatment D. Prefer individual performance over team performance 23. Hierarchical pay structures have all BUT which of the following characteristics?

A. Support a close fit with the organization B. Prefer team performance over individual performance C. Many levels D. Based upon the job or person 24. The problem that is most likely to be faced by organizations using an egalitarian pay structure is _____.

A. the difficulty in external recruitment B. in maintaining cooperation among employees C. the perception of excessive CEO pay D. the difficulty in performing teamwork

25. Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her?

A. A company that uses an egalitarian pay structure B. A company that pays its employees based on their seniority rather than their performance C. A company that uses a hierarchical pay structure to pay its employees based on performance D. A company that pays all its employees the same amount of money 26. Which theory predicts that individual performance will be maximized when the pay differentials between job levels is large?

A. Tournament theory B. Equity theory C. Marginal productivity theory D. Reinforcement theory 27. When cooperation is important for successful organization performance, which of the following pay structures is most suitable?

A. A tournament theory-based pay structure B. An egalitarian pay structure C. An hierarchical pay structure D. A layered pay structure 28. Which of the following is NOT true?

A. Greater pay dispersion is related to higher turnover among executives. B. Egalitarian structures are a better fit for executive groups that need to work closely as a team. C. Large raises with a promotion decreases effort and increases absenteeism. D. Employees judge the fairness of their pay structure by making multiple pay comparisons. 29. In firefighting and rescue squads and global software design teams, a(n) _____ structure is most closely associated with higher performance.

A. hierarchical B. pyramidal C. egalitarian D. layered

30. _____ are related to greater performance when the work flow depends on individual contributors.

A. More egalitarian structures B. More hierarchical structures C. More delayered structures D. More even-handed structures

True / False Questions

31. Internal alignment is sometimes called internal equity. True

False

32. Pay structure refers to the array of pay rates for different work or skills within a single organization. True

False

33. Pay structure refers to the array of pay rates for different work or skills between competing companies. True

False

34. Pay differences among levels in an organization are called differentials. True

False

35. The content and value of work are the most common bases for determining internal structures. True

False

36. Exchange value is always higher than use value. True

False

37. The content of a job refers to the worth of the job and its relative contribution to the organization's objectives. True

False

38. Both external and organization factors shape internal pay structures. True

False

39. According to the marginal productivity theory, employers pay use value to their employees. True

False

40. Wage legislation affects the wage structure at both the minimum and the maximum pay level. True

False

41. Pay structures are immune to changes in external factors such as skill shortages. True

False

42. Distributive justice is more important than procedural justice for employee acceptance of their pay. True

False

43. Egalitarian pay structures send the message that the organization values differences in work content, individual skills, and contributions to the organization. True

False

44. CEOs of organizations with egalitarian pay structures usually have higher salaries than that of CEOs in organizations with hierarchical pay structures. True

False

45. A layered pay structure is more hierarchical than a delayered pay structure and less egalitarian in terms of number of levels. True

False

46. A potential problem in egalitarian pay structures is that high-performing employees may feel underpaid and quit. True

False

47. Teachers will feel pay structures are fair even when they are relatively low in the internal structure if they work in a high-paying school district. True

False

48. Greater pay dispersion is related to lower turnover among executives. True

False

49. The institutional model states that it is best to wait for other organizations to adopt innovative practices and then copy those practices. True

False

50. Labor unions support small pay differentials. True

False

Short Answer Questions

51. Write a short note on pay structure.

52. State the theory of marginal productivity.

53. How do employees judge the fairness of their pay?

54. According to the text, when are pay procedures more likely to be perceived as fair?

55. Explain tailored and loosely coupled structures.

Chapter 03 Defining Internal Alignment Answer Key

Multiple Choice Questions

The parable of the vineyard owner and the compensation paid to the laborers illustrated:

Common bases for modern pay structures include all BUT which of the following?

In the strategic approach to pay, internal alignment is the _____ issue to be decided.

A. first B. second C. third D. fourth Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: Internal Alignment

Which of the following is NOT one of the factors that define an internal pay structure?

A. The pay differentials between the levels B. The criteria used to determine pay differentials C. The number of times the pay structure has been changed D. The number of levels of work Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Structures Vary among Organizations

The most common bases for determining internal structures are:

A. work content and its value B. seniority and experience C. use value and exchange value D. pay surveys and job evaluation Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

Content refers to the

A. worth of the work. B. work performed in a job and how it gets done. C. relative contribution of the work to the organization objectives. D. different pay level policies. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

Most job structures are best described as

A. job-based structures. B. person-based structures. C. both person- and job-based structures. D. competency-based structures. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

Organization factors that shape internal pay structures include all BUT which of the following?

A. Technology B. Cost implications C. HR policy D. Economic pressures Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

Organization factors that shape internal pay structures include all BUT which of the following?

A. Strategy B. Human capital C. Cultures and customs D. Employee acceptance Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

10.

Marginal productivity theory argues that employers pay _____.

A. use value B. exchange value C. surplus value D. differential value Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

11.

Which of the following is NOT a factor in defining equal work according to the Equal Pay Act?

A. Equal skill B. Equal effort C. Equal experience D. Equal responsibility Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

12.

Most unions prefer which of the following?

13.

Pay for temporary workers is based upon

A. the internal structure of their home employer. B. the internal structure of the temporary workplace. C. the strict requirements set by an international workers union. D. education only. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Shapes Internal Structures?

14.

External factors are dominant influences on jobs filled via:

A. demotions. B. promotions. C. transferring employees. D. hiring graduates. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Shapes Internal Structures?

15.

Which of the following pay structure procedures would NOT increase perceptions of pay fairness?

A. Consistently applying pay procedures to all employees B. Using accurate data C. Hiring consultants to develop the pay structure D. Including appeals procedures Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Shapes Internal Structures?

16.

James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about _____.

A. procedural justice B. distributive justice C. internal equity D. external equity Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Shapes Internal Structures?

17.

Which of the following is NOT a characteristic of aligned pay structures?

A. They support the way the work gets done. B. They fit an organization's business strategy. C. They are fair to employees. D. They are designed to increase the turnover rate. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

18.

The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) _____ internal pay structure.

A. closely tailored B. loosely coupled C. very competitive D. egalitarian Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

19.

Jacob works at PrimeClean Corp., a carwash company. He is asked to follow a set of instructions in a predetermined order to wash a car. All the details including the amount of washing liquid to use for each type of car are clearly specified. In this case, Jacob's company is most likely to use a:

A. closely tailored pay structure. B. loosely coupled pay structure. C. pay structure with large differences in pay among jobs. D. pay structure that is highly flexible. Accessibility: Keyboard Navigation

Difficulty: 3 Hard Topic: Strategic Choices in Designing Internal Structures

20.

Joshua believes that treating employees equally will improve their job satisfaction, which in turn will increase their work productivity and performance. In accordance to his beliefs, he wants to reduce the number of job levels and the pay differentials between the levels. In this case, he is most likely to use a(n):

A. highly layered pay structure. B. hierarchical pay structure. C. highly inequitable pay structure. D. egalitarian pay structure. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Strategic Choices in Designing Internal Structures

21.

Organizations in a turbulent and unpredictable environment requiring flexibility in jobs and work processes are likely to be more successful with a(n) _____ internal pay structure.

A. egalitarian B. bureaucratic C. loosely coupled D. closely tailored Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

22.

Egalitarian pay structures have all BUT which of the following characteristics?

A. Few levels B. Small differentials C. Support equal treatment D. Prefer individual performance over team performance Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

23.

Hierarchical pay structures have all BUT which of the following characteristics?

A. Support a close fit with the organization B. Prefer team performance over individual performance C. Many levels D. Based upon the job or person Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

24.

The problem that is most likely to be faced by organizations using an egalitarian pay structure is _____.

A. the difficulty in external recruitment B. in maintaining cooperation among employees C. the perception of excessive CEO pay D. the difficulty in performing teamwork Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

25.

Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her?

A. A company that uses an egalitarian pay structure B. A company that pays its employees based on their seniority rather than their performance C. A company that uses a hierarchical pay structure to pay its employees based on performance D. A company that pays all its employees the same amount of money Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Guidance from the Evidence

26.

Which theory predicts that individual performance will be maximized when the pay differentials between job levels is large?

A. Tournament theory B. Equity theory C. Marginal productivity theory D. Reinforcement theory Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Guidance from the Evidence

27.

When cooperation is important for successful organization performance, which of the following pay structures is most suitable?

A. A tournament theory-based pay structure B. An egalitarian pay structure C. An hierarchical pay structure D. A layered pay structure Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Guidance from the Evidence

28.

Which of the following is NOT true?

A. Greater pay dispersion is related to higher turnover among executives. B. Egalitarian structures are a better fit for executive groups that need to work closely as a team. C. Large raises with a promotion decreases effort and increases absenteeism. D. Employees judge the fairness of their pay structure by making multiple pay comparisons. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Guidance from the Evidence

29.

In firefighting and rescue squads and global software design teams, a(n) _____ structure is most closely associated with higher performance.

A. hierarchical B. pyramidal C. egalitarian D. layered Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Guidance from the Evidence

30.

_____ are related to greater performance when the work flow depends on individual contributors.

A. More egalitarian structures B. More hierarchical structures C. More delayered structures D. More even-handed structures Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Guidance from the Evidence

True / False Questions

31.

Internal alignment is sometimes called internal equity. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: Internal Alignment

32.

Pay structure refers to the array of pay rates for different work or skills within a single organization. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: Internal Alignment

33.

Pay structure refers to the array of pay rates for different work or skills between competing companies. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: Internal Alignment

34.

Pay differences among levels in an organization are called differentials. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

35.

The content and value of work are the most common bases for determining internal structures. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

36.

Exchange value is always higher than use value. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

37.

The content of a job refers to the worth of the job and its relative contribution to the organization's objectives. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Vary among Organizations

38.

Both external and organization factors shape internal pay structures. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

39.

According to the marginal productivity theory, employers pay use value to their employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

40.

Wage legislation affects the wage structure at both the minimum and the maximum pay level. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

41.

Pay structures are immune to changes in external factors such as skill shortages. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

42.

Distributive justice is more important than procedural justice for employee acceptance of their pay. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes Internal Structures?

43.

Egalitarian pay structures send the message that the organization values differences in work content, individual skills, and contributions to the organization. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices in Designing Internal Structures

44.

CEOs of organizations with egalitarian pay structures usually have higher salaries than that of CEOs in organizations with hierarchical pay structures. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices in Designing Internal Structures

45.

A layered pay structure is more hierarchical than a delayered pay structure and less egalitarian in terms of number of levels. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices in Designing Internal Structures

46.

A potential problem in egalitarian pay structures is that high-performing employees may feel underpaid and quit. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Choices in Designing Internal Structures

47.

Teachers will feel pay structures are fair even when they are relatively low in the internal structure if they work in a high-paying school district. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Guidance from the Evidence

48.

Greater pay dispersion is related to lower turnover among executives. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Guidance from the Evidence

49.

The institutional model states that it is best to wait for other organizations to adopt innovative practices and then copy those practices. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Guidance from the Evidence

50.

Labor unions support small pay differentials. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Consequences of Structures

Short Answer Questions

51.

Write a short note on pay structure.

Pay structure refers to the array of pay rates for different work or skills within a single organization. The number of levels, the differentials in pay between the levels, and the criteria used to determine those differences describe the structure.

Difficulty: 2 Medium Topic: Compensation Strategy: Internal Alignment

52.

State the theory of marginal productivity.

The theory of marginal productivity says that employers pay use value. Unless an employee can produce a value equal to the value received in wages, it will not be worthwhile to hire that worker. One job is paid more or less than another because of differences in relative productivity of the job and/or differences in how much a consumer values the output.

Difficulty: 2 Medium Topic: What Shapes Internal Structures?

53.

How do employees judge the fairness of their pay?

Employees judge the fairness of their pay through comparisons with the compensation paid to others for work related in some fashion to their own. Accordingly, an important factor influencing the internal pay structure is its acceptability to the employees involved. Employees make multiple pay comparisons to assess the fairness of an internal pay structure. They compare both with other jobs in the same internal structure and with the pay for their job in the external market (i.e., at competing employers). Two sources of fairness are important: the procedures for determining the pay structure, called procedural justice; and the results of those procedures—the pay structure itself—called distributive justice. Procedural justice refers to the process by which a decision is reached. Distributive justice refers to the fairness of the decision.

Difficulty: 2 Medium Topic: What Shapes Internal Structures?

54.

According to the text, when are pay procedures more likely to be perceived as fair?

Pay procedures are more likely to be perceived as fair (1) if they are consistently applied to all employees, (2) if employees participated in the process, (3) if appeals procedures are included, and (4) if the data used are accurate.

Difficulty: 2 Medium Topic: What Shapes Internal Structures?

55.

Explain tailored and loosely coupled structures.

Tailored structure: A low-cost, customer-focused business strategy is supported by a closely tailored structure. Jobs are well defined with detailed tasks or steps to follow. All the jobs are very well defined in order to eliminate variance in how they are performed. It seems hard to make a mistake in these jobs. Differences in pay among jobs are very small. Loosely coupled structure: This business strategy requires constant product innovation and short product-design-to-market cycle times. This structure is suitable for companies that are in turbulent and unpredictable competitive environments. No steps at all are laid out. Employees work on several teams developing several products at the same time. The pay structures are more loosely linked to the organization in order to provide flexibility.

Difficulty: 2 Medium Topic: Strategic Choices in Designing Internal Structures

Chapter 04 Job Analysis

Multiple Choice Questions

The process of collecting information that identifies the similarities and differences among jobs is known as _____.

A. job performance B. job analysis C. use value evaluation D. exchange value analysis 2.

The list of tasks, duties, and responsibilities that make up a job is known as a _____.

A. job search B. job control C. job specification D. job description 3.

Which of the following is an ordering of jobs based on their content or relative value?

A. Job analysis B. Job description C. Job structure D. Job evaluation 4.

Job analysis is important for both managers and employees because it is

A specific statement of what a worker does on a job is known as a(n) _____.

A. appraisal B. task C. position D. job structure 6.

A group of tasks performed by one person makes up a(n) _____.

A. position B. job title C. appraisal D. incumbency 7.

A set of identical positions makes a _____.

A. procedure B. task C. title D. job 8.

Engineering, sales, and maintenance are examples of _____.

A. tasks B. job families C. job dimensions D. appraisals 9.

According to the government's procedures of the job analysis process, the first interview should be conducted with the _____.

A. first-level supervisor B. chief executive officer C. HR manager D. incumbent's co-workers

10. Mike, a job analyst, is in the process of conducting a job analysis. He is given an initial tour of the work site by George, a first-level supervisor, and by Haley, a new recruit. According to the conventional job analysis procedures developed by the U.S. federal government, which of the following steps should Mike perform next?

A. Mike should conduct an interview with Hayley as she is in a better position to understand how the different tasks fit in the big picture. B. Mike should prepare a preliminary list of duties that will serve as a framework for conducting interviews with Hayley and George. C. Mike should conduct an interview with George to get an overview of the job. D. Mike should review existing documents in order to develop an initial familiarity with the job. 11. The government's job analysis procedures recommend interviewing

A. the best performing employees. B. the long-tenure employees. C. the typical employee. D. workers just completing the probationary period. 12. The verification step of the government's job analysis method is always conducted with _____.

A. only the HR manager B. all the interviewees together C. either the supervisor or the manager D. only the high-performing employees 13. The job analysis method that uses information input, mental processes, work output, job context, other job characteristics, relationships with other persons, and general dimensions is _____.

A. task inventories method B. the PAQ C. essential elements questionnaire D. job tasks and elements inventory 14. Inclusion of essential elements in job descriptions for jobs covered by the legislation is required by the

A. Americans With Disabilities Act. B. Civil Rights Act. C. Fair Labor Standards Act. D. Equal Pay Act.

15. ADA has directly led many employers to _____.

A. only use the task inventory method for job analysis B. only use the PAQ method for job analysis C. modify special benefits so that allowances can be made for people with disabilities as required by the law D. modify the format of their job descriptions to specifically call out the essential elements 16. Jane works as a copy editor at TreeTime Inc. She receives an e-mail from the human resources department with a link to a questionnaire that asks her to rate the necessary attributes required for her job. In this scenario, the approach used by TreeTime is characterized as:

A. quantitative job analysis. B. objective job analysis. C. conventional job analysis. D. paired-comparison job analysis. 17. The most common way to collect job information is _____.

A. to interview incumbents B. to ask incumbents to fill out a questionnaire C. to ask supervisors to fill out a questionnaire D. to observe the person at work and take notes when on what is being done 18. The advantage of using questionnaires in job analysis is that the involvement of employees _____.

A. open to bias and favoritism B. reliable and objective C. not well-suited to small organizations D. relatively less time consuming

20. Today, job analysis is typically performed by _____.

A. experienced job incumbents B. new employees C. HR generalists and supervisors D. experienced workers 21. When job analysis shows that managers and employees disagree on parts of a job, the best answer is to

A. collect more data. B. use quantitative job analysis. C. refer the problem to the compensation committee. D. use an experienced compensation consultant. 22. One of the more readily accessible sources for generic job descriptions is the _____.

A. Bureau of National Affairs B. Department of Labor C. O*NET D. Dictionary of Occupational Titles 23. _____ looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.

A. Job analysis B. Market analysis C. Job structure D. Supply chain analysis 24. All of the following statements regarding offshoring are true EXCEPT that _____.

A. offshoring is limited to low-skill jobs B. art director and animal scientist jobs are low in susceptibility to offshoring C. medial transcriptionists and proofreaders are high in susceptibility to offshoring D. labor costs and proximity to customers affect offshoring decisions

25. Gina announces that she would lose her job as her company is considering to offshore her job to another country. In this case, Gina is most likely to be working in a job that requires her to:

A. devise advertising campaigns for his or her company. B. curate art pieces in a museum. C. promote the image of his company to the public. D. manually fix typos in a document. 26. Which of the following statements regarding reliability of job analysis is NOT true?

A. Reliability is higher when analysts are professionals. B. Differences in performance across incumbents affect reliability. C. Gender and race of analysts affect reliability. D. Reliability is higher for specific tasks than for general ones. 27. Which of the following statements about reliability of job analysis is true?

A. It is a measure of the practicality of the information collected. B. It reflects whether there is a convergence of results among sources of data and methods. C. It is a necessary condition for validity. D. It is a sufficient condition for validity. 28. If several incumbents, supervisors, and peers respond in similar ways to job analysis questionnaires, it suggests that the results are most likely to be _____.

A. useful B. valid C. invalid D. unreliable 29. All of the following EXCEPT _____ are bases for judging job analysis.

A. currency B. acceptability C. cost D. usefulness

30. Apart from being reliable, a job analysis is also considered valid if:

A. the results of the job analysis are consistent among various analysts. B. the results of the job analysis are consistent among various methods. C. the job analysis is found to be acceptable. D. the results converge among various sources of data and methods.

True / False Questions

31. In the context of work-related internal structure, job-based and person-based structures use similar methods but have different purposes. True

False

32. Both skills and competencies can be used as the basis for developing an internal structure. True

False

33. The verification process of job analysis is conducted with both the supervisor and the job incumbents. True

False

34. Typical data collected for a job analysis would not include relationships with suppliers and customers. True

False

35. The PAQ measures jobs in terms of seven factors that are specific to each job. True

False

36. All job incumbents can easily complete the PAQ as the reading level required for it is relatively low. True

False

37. According to ADA regulations, essential functions refers to the fundamental job duties of the employment position the individual with a disability holds or desires. True

False

38. The Americans With Disabilities Act has led to a significant increase in the employment rate of people with disabilities. True

False

39. The level at which an analysis begins affects whether the work is similar or dissimilar. True

False

40. The Americans With Disabilities Act's essential-elements requirement for hiring and promotion decisions seems to require less detail than what is required for pay decisions. True

False

41. Employers are more likely to collect task-level job information if the jobs are flexible and fast-changing. True

False

42. Reducing the number of job titles in a pay structure tends to raise morale and reduce turnover. True

False

43. An increasingly common method of conducting job analysis is quantitative job analysis, which is conducted on a website. True

False

44. Most organizations find it more practical and cost-effective to develop their own quantitative job analysis questionnaires than modifying existing questionnaires. True

False

45. Some organizations analyze work content as part of work flow and supply chain analysis. True

False

46. Traditional job analysis that makes fine distinctions among levels of jobs has been accused of reinforcing rigidity in organizations. True

False

47. Recent research shows that different jobs, such as computer programmer and first-line supervisor, have significantly different ratings of importance and job requirements across countries. True

False

48. Quantitative job analysis methods increase reliability. True

False

49. Most organizations do not engage in any regular updating of job analysis information. True

False

50. The reliability and validity of quantitative methods of job analysis have significantly reduced the importance of human judgment in job analysis. True

False

Short Answer Questions

51. What are the usual steps in a conventional job analysis procedure? List them in their order of occurrence.

52. Write a short note on Americans With Disabilities Act.

53. Discuss the ways information can be collected.

54. What should the manager do if employees and their supervisors do not agree on what is part of the job?

55. Write a short note on offshoring and the susceptibility of job analysis to offshoring.

Chapter 04 Job Analysis Answer Key

Multiple Choice Questions

The process of collecting information that identifies the similarities and differences among jobs is known as _____.

A. job performance B. job analysis C. use value evaluation D. exchange value analysis Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Based on Jobs, People, or Both

The list of tasks, duties, and responsibilities that make up a job is known as a _____.

A. job search B. job control C. job specification D. job description Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Based on Jobs, People, or Both

Which of the following is an ordering of jobs based on their content or relative value?

A. Job analysis B. Job description C. Job structure D. Job evaluation Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job-Based Approach: Most Common

Job analysis is important for both managers and employees because it is

A. the basis for a work-related rationale for pay differences. B. an important result of the job evaluation process. C. required under the Fair Labor Standards Act. D. required for increasing employee turnover rates. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Job-Based Approach: Most Common

A specific statement of what a worker does on a job is known as a(n) _____.

A. appraisal B. task C. position D. job structure Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis Procedures

A group of tasks performed by one person makes up a(n) _____.

A. position B. job title C. appraisal D. incumbency Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis Procedures

A set of identical positions makes a _____.

A. procedure B. task C. title D. job Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis Procedures

Engineering, sales, and maintenance are examples of _____.

A. tasks B. job families C. job dimensions D. appraisals Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis Procedures

According to the government's procedures of the job analysis process, the first interview should be conducted with the _____.

A. first-level supervisor B. chief executive officer C. HR manager D. incumbent's co-workers Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Information Should Be Collected?

10.

Mike, a job analyst, is in the process of conducting a job analysis. He is given an initial tour of the work site by George, a first-level supervisor, and by Haley, a new recruit. According to the conventional job analysis procedures developed by the U.S. federal government, which of the following steps should Mike perform next?

A. Mike should conduct an interview with Hayley as she is in a better position to understand how the different tasks fit in the big picture. B. Mike should prepare a preliminary list of duties that will serve as a framework for conducting interviews with Hayley and George. C. Mike should conduct an interview with George to get an overview of the job. D. Mike should review existing documents in order to develop an initial familiarity with the job. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: What Information Should Be Collected?

11.

The government's job analysis procedures recommend interviewing

A. the best performing employees. B. the long-tenure employees. C. the typical employee. D. workers just completing the probationary period. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

12.

The verification step of the government's job analysis method is always conducted with _____.

A. only the HR manager B. all the interviewees together C. either the supervisor or the manager D. only the high-performing employees Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

13.

The job analysis method that uses information input, mental processes, work output, job context, other job characteristics, relationships with other persons, and general dimensions is _____.

A. task inventories method B. the PAQ C. essential elements questionnaire D. job tasks and elements inventory Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

14.

Inclusion of essential elements in job descriptions for jobs covered by the legislation is required by the

A. Americans With Disabilities Act. B. Civil Rights Act. C. Fair Labor Standards Act. D. Equal Pay Act. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

15.

ADA has directly led many employers to _____.

16.

Jane works as a copy editor at TreeTime Inc. She receives an e-mail from the human resources department with a link to a questionnaire that asks her to rate the necessary attributes required for her job. In this scenario, the approach used by TreeTime is characterized as:

A. quantitative job analysis. B. objective job analysis. C. conventional job analysis. D. paired-comparison job analysis. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: How Can the Information Be Collected?

17.

The most common way to collect job information is _____.

A. to interview incumbents B. to ask incumbents to fill out a questionnaire C. to ask supervisors to fill out a questionnaire D. to observe the person at work and take notes when on what is being done Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: How Can the Information Be Collected?

18.

The advantage of using questionnaires in job analysis is that the involvement of employees _____.

A. increases their understanding of the process B. lowers the use value of the goods produced by an organization C. reduces the subjectivity of employment decisions D. increases the exchange value that is agreed upon by employees and employers Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: How Can the Information Be Collected? 4-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

19.

Conventional methods of collecting job information are _____.

A. open to bias and favoritism B. reliable and objective C. not well-suited to small organizations D. relatively less time consuming Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: How Can the Information Be Collected?

20.

Today, job analysis is typically performed by _____.

A. experienced job incumbents B. new employees C. HR generalists and supervisors D. experienced workers Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: How Can the Information Be Collected?

21.

When job analysis shows that managers and employees disagree on parts of a job, the best answer is to

A. collect more data. B. use quantitative job analysis. C. refer the problem to the compensation committee. D. use an experienced compensation consultant. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: How Can the Information Be Collected?

22.

One of the more readily accessible sources for generic job descriptions is the _____.

A. Bureau of National Affairs B. Department of Labor C. O*NET D. Dictionary of Occupational Titles Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Descriptions Summarize the Data

23.

_____ looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.

A. Job analysis B. Market analysis C. Job structure D. Supply chain analysis Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis: Bedrock or Bureaucracy?

24.

All of the following statements regarding offshoring are true EXCEPT that _____.

25.

Gina announces that she would lose her job as her company is considering to offshore her job to another country. In this case, Gina is most likely to be working in a job that requires her to:

A. devise advertising campaigns for his or her company. B. curate art pieces in a museum. C. promote the image of his company to the public. D. manually fix typos in a document. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Job Analysis and Globalization

26.

Which of the following statements regarding reliability of job analysis is NOT true?

A. Reliability is higher when analysts are professionals. B. Differences in performance across incumbents affect reliability. C. Gender and race of analysts affect reliability. D. Reliability is higher for specific tasks than for general ones. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Judging Job Analysis

27.

Which of the following statements about reliability of job analysis is true?

A. It is a measure of the practicality of the information collected. B. It reflects whether there is a convergence of results among sources of data and methods. C. It is a necessary condition for validity. D. It is a sufficient condition for validity. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Judging Job Analysis

28.

If several incumbents, supervisors, and peers respond in similar ways to job analysis questionnaires, it suggests that the results are most likely to be _____.

A. useful B. valid C. invalid D. unreliable Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Judging Job Analysis

29.

All of the following EXCEPT _____ are bases for judging job analysis.

A. currency B. acceptability C. cost D. usefulness Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Judging Job Analysis

30.

Apart from being reliable, a job analysis is also considered valid if:

True / False Questions

31.

In the context of work-related internal structure, job-based and person-based structures use similar methods but have different purposes. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Based on Jobs, People, or Both

32.

Both skills and competencies can be used as the basis for developing an internal structure. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structures Based on Jobs, People, or Both

33.

The verification process of job analysis is conducted with both the supervisor and the job incumbents. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

34.

Typical data collected for a job analysis would not include relationships with suppliers and customers. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

35.

The PAQ measures jobs in terms of seven factors that are specific to each job. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

36.

All job incumbents can easily complete the PAQ as the reading level required for it is relatively low. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

37.

According to ADA regulations, essential functions refers to the fundamental job duties of the employment position the individual with a disability holds or desires. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

38.

The Americans With Disabilities Act has led to a significant increase in the employment rate of people with disabilities. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

39.

The level at which an analysis begins affects whether the work is similar or dissimilar. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

40.

The Americans With Disabilities Act's essential-elements requirement for hiring and promotion decisions seems to require less detail than what is required for pay decisions. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

41.

Employers are more likely to collect task-level job information if the jobs are flexible and fastchanging. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

42.

Reducing the number of job titles in a pay structure tends to raise morale and reduce turnover. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Information Should Be Collected?

43.

An increasingly common method of conducting job analysis is quantitative job analysis, which is conducted on a website. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: How Can the Information Be Collected?

44.

Most organizations find it more practical and cost-effective to develop their own quantitative job analysis questionnaires than modifying existing questionnaires. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: How Can the Information Be Collected?

45.

Some organizations analyze work content as part of work flow and supply chain analysis. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis: Bedrock or Bureaucracy?

46.

Traditional job analysis that makes fine distinctions among levels of jobs has been accused of reinforcing rigidity in organizations. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis: Bedrock or Bureaucracy?

47.

Recent research shows that different jobs, such as computer programmer and first-line supervisor, have significantly different ratings of importance and job requirements across countries. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Analysis and Globalization

48.

Quantitative job analysis methods increase reliability. TRUE Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Judging Job Analysis

49.

Most organizations do not engage in any regular updating of job analysis information. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Judging Job Analysis

50.

The reliability and validity of quantitative methods of job analysis have significantly reduced the importance of human judgment in job analysis. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Judging Job Analysis

Short Answer Questions

51.

What are the usual steps in a conventional job analysis procedure? List them in their order of occurrence.

The steps in conventional job analysis procedures are: i. developing preliminary job information, ii. conducting initial tour of work site, iii. conducting interviews, iv. conducting second tour of work site, v. consolidating job information, and vi. verifying job description.

Difficulty: 1 Easy Topic: What Information Should Be Collected?

52.

Write a short note on Americans With Disabilities Act.

Americans With Disabilities Act regulations state that "essential functions refers to the fundamental job duties of the employment position the individual with a disability holds or desires." The law does not make any allowances for special pay rates or special benefits for people with disabilities. While the law does not require any particular kind of analysis, many employers have modified the format of their job descriptions to specifically call out the essential elements.

Difficulty: 2 Medium Topic: What Information Should Be Collected?

53.

Discuss the ways information can be collected.

Information can be collected in two ways: conventional methods and quantitative methods. Conventional methods: The most common way to collect job information is to ask the people who are doing a job to fill out a questionnaire. Sometimes an analyst will interview the jobholders and their supervisors to be sure they understand the questions and that the information is correct. Or the analyst may observe the person at work and take notes on what is being done. The advantage of conventional questionnaires and interviews is that the involvement of employees increases their understanding of the process. However, the results are only as good as the people involved. If important aspects of a job are omitted, or if the jobholders themselves either do not realize or are unable to express the importance of certain aspects, the resulting job descriptions will be faulty. The process is open to bias and favoritism and takes a huge amount of time. Quantitative methods: Increasingly, employees are directed to a website where they complete a questionnaire online. Such an approach is characterized as quantitative job analysis (QJA). In addition to facilitating statistical analysis of the results, quantitative data collection allows more data to be collected faster. A questionnaire typically asks jobholders to assess each item in terms of whether or not that particular item is part of their job. If it is, they are asked to rate how important it is and the amount of job time spent on it. The responses can be machine-scored, similar to the process for a multiple-choice test, and the results can be used to develop a profile of the job. Questions are grouped around five compensable factors: knowledge, accountability, reasoning, communication, and working conditions. If important aspects of a job are omitted or if the jobholders themselves do not realize the importance of certain aspects, the resulting job descriptions will be faulty. This analysis needs to include good performers to ensure that the work is usefully analyzed.

Difficulty: 2 Medium Topic: How Can the Information Be Collected?

54.

What should the manager do if employees and their supervisors do not agree on what is part of the job?

Differences in job data may arise among jobholders. Some may see the job one way, some another. The best answer is to collect more data. Enough data are required to ensure consistent, accurate, useful, and acceptable results.

Difficulty: 2 Medium Topic: How Can the Information Be Collected?

55.

Write a short note on offshoring and the susceptibility of job analysis to offshoring.

Offshoring refers to the movement of jobs to locations beyond a country's borders. Historically, manual, low-skill jobs were most susceptible to offshoring. There are substantial differences in hourly compensation costs across countries for manufacturing workers; this has played an important role in companies' decisions about where to locate production operations. Increasingly, susceptibility to offshoring is no longer limited to low-skill jobs. White-collar jobs are also increasingly at risk. Jobs are most susceptible to outsourcing when inputs and outputs can easily be transmitted electronically, little interaction with other workers is required, little local knowledge is required, and the work can be routinized.

Difficulty: 2 Medium Topic: Job Analysis and Globalization

Chapter 05 Job-Based Structures and Job Evaluation

Multiple Choice Questions

_____ is the process of systematically determining the relative worth of jobs for the purpose of creating an organization's job structure.

A. Performance evaluation B. Job restructuring C. Job evaluation D. Point factor evaluation 2.

Which of the following is the underlying assumption in the assessment of job content?

The exchange value of a job is its _____.

A. content value B. performance value C. internal market value D. external market value 4.

Which of the following statements is true of a job evaluation plan?

A. It is developed using benchmark jobs and then applied to nonbenchmark jobs. B. It excludes the pay decisions made by a company. C. It provides the impetus to increase job levels and titles. D. It is always carried out separately for major domains of work.

A major decision in job evaluation is to:

A. choose which stakeholders to eliminate in the process. B. figure out how to eliminate the use of multiple plans. C. choose among alternative approaches. D. figure out how to eliminate the use single plans. 6.

Which of the following is a major decision in job evaluation?

A. Choosing the stakeholders to eliminate in the process B. Choosing the method of eliminating multiple plans C. Establishing standards that solely use a single plan D. Establishing the purpose of evaluation 7.

In the context of internal alignment, which of the following is the correct sequence?

A. Job description > Pay structure > Job evaluation B. Job evaluation > Job description > Job structure C. Pay structure > Job description > Job evaluation > Job analysis D. Job description > Job evaluation > Job structure 8.

Which of the following is NOT true of the usage of multiple plans versus single job evaluation plans?

A. Employers rarely evaluate all jobs in the organization at one time. B. Many employers design different evaluation plans for different types of work. C. Typically, a related group of jobs is used for evaluation. D. A single universal plan is acceptable to employees if the work covered is highly diverse. 9.

Which of the following is NOT a characteristic of a benchmark job?

A. It is not unique to a particular employer. B. A reasonable proportion of the work force is employed in this job. C. The pay level is the best in the industry. D. The content of the job is relatively stable over time.

10. MXB Inc. is a carwash service provider. It orders the jobs in the company on the basis of the least important job to the most important job. In this case, MXB is most likely using a(n):

A. alternation-ranking method. B. paired-comparison method. C. classification method. D. point method. 11. TreeWind Inc. is a bookstore that uses skill and responsibility as its compensable factors. It assigns 20 percent weight to responsibility and 80 percent weight to skill. If the responsibility factor scores a 60 after multiplying the subfactors with their corresponding weights, and if the skill factor has two subfactors that are rated as 4 and 5, what is the total weightage given to the job?

A. 40 B. 120 C. 420 D. 990 12. KayDen Corp., a small organization with 15 employees, conducts job evaluation using the least expensive method for the first time. In this case, KayDen is most likely to have used the _____.

A. classification method B. point method C. ranking method D. Hay plan 13. All of the following are advantages of the ranking method of job evaluation EXCEPT that:

A. rankings are easy to defend and justify. B. the evaluation process is fast. C. the evaluation process is inexpensive. D. the evaluation process is not complex. 14. According to a WorldatWork survey, the primary method of job evaluation is _____.

A. ranking B. market pricing C. the point method D. the classification method

15. The job evaluation method that most resembles a bookcase with many shelves is:

A. ranking. B. the Hay plan. C. the point method. D. classification. 16. A job description is compared to class descriptions in the _____ of job evaluation.

A. Position Analysis Questionnaire method B. point method C. Hay Group Guide Chart—Profile MethodSM D. classification method 17. The _____ method of job evaluation uses compensable factors.

A. classification B. Position Analysis Questionnaire C. point D. ranking 18. Common characteristics of the point method include all of the following EXCEPT:

A. benchmark factor classes. B. numerically scaled factor degrees. C. factor weights. D. compensable factors. 19. The _____ method of job evaluation is the most commonly used method in the United States and Europe.

A. ranking B. factor comparison C. classification D. point

20. In the point method, the second step in designing a plan is to:

A. conduct job analysis. B. scale the factors. C. determine the compensable factors. D. prepare a job evaluation manual. 21. In the context of the point method of job evaluation, _____ are those characteristics in the work that an organization values; that help it pursue its strategy and achieve its objectives.

A. competitive skills B. compensable factors C. core competencies D. benchmark factors 22. Which of the following is a disadvantage of the point method?

A. It can leave too much room for manipulation. B. It can become bureaucratic and rule-bound. C. It does not allow for comparisons. D. It does not communicate what is valued. 23. Which of the following methods requires evaluators to agree on which jobs are the most and least valuable, then the next most and least valued, and so on until all the jobs have been ordered?

A. Alternation-ranking method B. Classification method C. Point method D. Paired-comparison method 24. The final step in designing a point plan involves _____.

A. developing online software support B. selecting compensable factors C. communicating the plan and training users D. scaling the factors

25. The most widely used point method job evaluation is the:

A. Hay plan. B. Equal Pay Act generic plan. C. factor comparison plan. D. Position Analysis Questionnaire plan. 26. Research shows that skills, one of the compensable factors, accounts for _____ percent or more of the variance in job evaluation results.

A. 90 B. 70 C. 55 D. 42 27. Research shows that _____ factor(s) account(s) for 98 to 99 percent of the variance in job evaluation plans.

A. one B. two C. three D. four 28. Most factor scales have _____ degrees.

A. 6-9 B. 4-8 C. 3-7 D. 2-4 29. When a statistical process is used to duplicate an existing pay structure, it is called:

A. policy capturing. B. committee a priori judgment approach. C. factor analysis. D. regression analysis.

30. _____ are more likely to conduct job evaluations of senior management jobs.

A. Compensation analysts B. Compensation managers C. Peers D. Junior incumbents

True / False Questions

31. A job structure based upon job value orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization's goals. True

False

32. A representative sample of benchmark jobs will include the entire domain of work being evaluated and capture the diversity of the work within that domain. True

False

33. The number of job evaluation plans required depends only upon the number of employees in the organization. True

False

34. Paired-comparison and alternate-ranking methods may be more reliable than simple ranking. True

False

35. An advantage of the ranking method is that the basis for comparison is called out. True

False

36. Point plans represent a significant change from ranking and classification methods in that they make explicit the criteria for evaluating jobs: compensable factors. True

False

37. Compensable factors are aspects of work that add value to the organization. True

False

38. One way of evaluating a managerial job's multinational responsibilities would be to rate the percent of time spent on multinational issues. True

False

39. Since business strategies may change often, compensable factors should rarely be added or deleted. True

False

40. The primary reason for documenting the views of employees and supervisors on compensable factors is to meet requirements of the Equal Pay Act. True

False

41. The NEMA plan explicitly states that the compensable factor experience should be correlated with tenure. True

False

42. Each compensable factor degree should be equidistant from the adjacent degrees. True

False

43. One of the criteria for scaling compensable factors is to ensure that the number of degrees used is necessary to distinguish among jobs. True

False

44. Factors are scaled after factor weights have been assigned. True

False

45. The most common way of allocating weights to factors is regression modeling. True

False

46. A criterion pay structure is a pay structure that can be duplicated with a point evaluation plan. True

False

47. The policy capturing approach and the committee a priori approach for developing pay structures yield the same pay structure. True

False

48. Research shows that the weights assigned to compensable factors can affect the resulting pay structure. True

False

49. Focusing on the end product of the internal alignment process, the pay structure, is more important for acceptance of the results than focusing on the approach chosen. True

False

50. The final result of the job analysis-job description-job evaluation process is a hierarchy of work. True

False

Short Answer Questions

51. What are the major decisions in a job evaluation process?

52. What are the characteristics of a benchmark job?

53. What are the two aspect of diversity in work?

54. Discuss the two common methods of ranking.

55. What are the steps in designing a point plan?

Chapter 05 Job-Based Structures and Job Evaluation Answer Key

Multiple Choice Questions

_____ is the process of systematically determining the relative worth of jobs for the purpose of creating an organization's job structure.

A. Performance evaluation B. Job restructuring C. Job evaluation D. Point factor evaluation Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job-Based Structures: Job Evaluation

Which of the following is the underlying assumption in the assessment of job content?

A. Content has intrinsic value outside external market. B. Content has no artistic value. C. Stakeholders are the best judge for assessing the quality of content. D. Content can be determined with or without external market. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Defining Job Evaluation: Content, Value, and External Market Links

The exchange value of a job is its _____.

A. content value B. performance value C. internal market value D. external market value Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Defining Job Evaluation: Content, Value, and External Market Links

Which of the following statements is true of a job evaluation plan?

A major decision in job evaluation is to:

Which of the following is a major decision in job evaluation?

In the context of internal alignment, which of the following is the correct sequence?

Which of the following is NOT true of the usage of multiple plans versus single job evaluation plans?

Which of the following is NOT a characteristic of a benchmark job?

10.

MXB Inc. is a carwash service provider. It orders the jobs in the company on the basis of the least important job to the most important job. In this case, MXB is most likely using a(n):

A. alternation-ranking method. B. paired-comparison method. C. classification method. D. point method. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Job Evaluation Methods

11.

TreeWind Inc. is a bookstore that uses skill and responsibility as its compensable factors. It assigns 20 percent weight to responsibility and 80 percent weight to skill. If the responsibility factor scores a 60 after multiplying the subfactors with their corresponding weights, and if the skill factor has two subfactors that are rated as 4 and 5, what is the total weightage given to the job?

A. 40 B. 120 C. 420 D. 990 Accessibility: Keyboard Navigation

Difficulty: 3 Hard Topic: Job Evaluation Methods

12.

KayDen Corp., a small organization with 15 employees, conducts job evaluation using the least expensive method for the first time. In this case, KayDen is most likely to have used the _____.

A. classification method B. point method C. ranking method D. Hay plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Job Evaluation Methods

13.

All of the following are advantages of the ranking method of job evaluation EXCEPT that:

A. rankings are easy to defend and justify. B. the evaluation process is fast. C. the evaluation process is inexpensive. D. the evaluation process is not complex. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Job Evaluation Methods

14.

According to a WorldatWork survey, the primary method of job evaluation is _____.

A. ranking B. market pricing C. the point method D. the classification method Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

15.

The job evaluation method that most resembles a bookcase with many shelves is:

A. ranking. B. the Hay plan. C. the point method. D. classification. Accessibility: Keyboard Navigation Difficulty: 1 Easy 5-14 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Topic: Job Evaluation Methods

16.

A job description is compared to class descriptions in the _____ of job evaluation.

A. Position Analysis Questionnaire method B. point method C. Hay Group Guide Chart—Profile MethodSM D. classification method Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

17.

The _____ method of job evaluation uses compensable factors.

A. classification B. Position Analysis Questionnaire C. point D. ranking Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

18.

Common characteristics of the point method include all of the following EXCEPT:

A. benchmark factor classes. B. numerically scaled factor degrees. C. factor weights. D. compensable factors. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

19.

The _____ method of job evaluation is the most commonly used method in the United States and Europe.

A. ranking B. factor comparison C. classification D. point Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods 5-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

20.

In the point method, the second step in designing a plan is to:

A. conduct job analysis. B. scale the factors. C. determine the compensable factors. D. prepare a job evaluation manual. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

21.

In the context of the point method of job evaluation, _____ are those characteristics in the work that an organization values; that help it pursue its strategy and achieve its objectives.

A. competitive skills B. compensable factors C. core competencies D. benchmark factors Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

22.

Which of the following is a disadvantage of the point method?

A. It can leave too much room for manipulation. B. It can become bureaucratic and rule-bound. C. It does not allow for comparisons. D. It does not communicate what is valued. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Job Evaluation Methods

23.

Which of the following methods requires evaluators to agree on which jobs are the most and least valuable, then the next most and least valued, and so on until all the jobs have been ordered?

A. Alternation-ranking method B. Classification method C. Point method D. Paired-comparison method Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods 5-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24.

The final step in designing a point plan involves _____.

A. developing online software support B. selecting compensable factors C. communicating the plan and training users D. scaling the factors Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

25.

The most widely used point method job evaluation is the:

A. Hay plan. B. Equal Pay Act generic plan. C. factor comparison plan. D. Position Analysis Questionnaire plan. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

26.

Research shows that skills, one of the compensable factors, accounts for _____ percent or more of the variance in job evaluation results.

A. 90 B. 70 C. 55 D. 42 Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

27.

Research shows that _____ factor(s) account(s) for 98 to 99 percent of the variance in job evaluation plans.

A. one B. two C. three D. four Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods 5-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

28.

Most factor scales have _____ degrees.

A. 6-9 B. 4-8 C. 3-7 D. 2-4 Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

29.

When a statistical process is used to duplicate an existing pay structure, it is called:

A. policy capturing. B. committee a priori judgment approach. C. factor analysis. D. regression analysis. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

30.

_____ are more likely to conduct job evaluations of senior management jobs.

A. Compensation analysts B. Compensation managers C. Peers D. Junior incumbents Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Who Should Be Involved?

True / False Questions

31.

A job structure based upon job value orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization's goals. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Defining Job Evaluation: Content, Value, and External Market Links 5-18 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

32.

A representative sample of benchmark jobs will include the entire domain of work being evaluated and capture the diversity of the work within that domain. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How-to": Major Decisions

33.

The number of job evaluation plans required depends only upon the number of employees in the organization. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How-to": Major Decisions

34.

Paired-comparison and alternate-ranking methods may be more reliable than simple ranking. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

35.

An advantage of the ranking method is that the basis for comparison is called out. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

36.

Point plans represent a significant change from ranking and classification methods in that they make explicit the criteria for evaluating jobs: compensable factors. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

37.

Compensable factors are aspects of work that add value to the organization. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

38.

One way of evaluating a managerial job's multinational responsibilities would be to rate the percent of time spent on multinational issues. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

39.

Since business strategies may change often, compensable factors should rarely be added or deleted. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

40.

The primary reason for documenting the views of employees and supervisors on compensable factors is to meet requirements of the Equal Pay Act. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

41.

The NEMA plan explicitly states that the compensable factor experience should be correlated with tenure. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

42.

Each compensable factor degree should be equidistant from the adjacent degrees. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

43.

One of the criteria for scaling compensable factors is to ensure that the number of degrees used is necessary to distinguish among jobs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

44.

Factors are scaled after factor weights have been assigned. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

45.

The most common way of allocating weights to factors is regression modeling. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

46.

A criterion pay structure is a pay structure that can be duplicated with a point evaluation plan. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

47.

The policy capturing approach and the committee a priori approach for developing pay structures yield the same pay structure. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

48.

Research shows that the weights assigned to compensable factors can affect the resulting pay structure. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Job Evaluation Methods

49.

Focusing on the end product of the internal alignment process, the pay structure, is more important for acceptance of the results than focusing on the approach chosen. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Who Should Be Involved?

50.

The final result of the job analysis-job description-job evaluation process is a hierarchy of work. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Final Result: Structure

Short Answer Questions

51.

What are the major decisions in a job evaluation process?

The major decisions in the job evaluation process are to: • establish the purpose(s); • decide on single versus multiple plans; • choose among alternative methods; • obtain involvement of relevant stakeholders; and • evaluate the usefulness of the results.

Difficulty: 1 Easy Topic: "How-to": Major Decisions

52.

What are the characteristics of a benchmark job?

A benchmark job has the following characteristics: • Its contents are well known and relatively stable over time. • The job is common across a number of different employers. It is not unique to a particular employer. • A reasonable proportion of the work force is employed in this job.

Difficulty: 2 Medium Topic: "How-to": Major Decisions

53.

What are the two aspect of diversity in work?

Diversity in work can be thought of in terms of depth (vertically) and breadth (horizontally). The depth of work in most organizations probably ranges from strategic leadership jobs to the filing and mail distribution tasks in entry-level office jobs. Horizontally, the breadth of work depends on the nature of business. Relatively similar work can be found in specialty consulting firms. The breadth of work performed in some multinational conglomerates such as General Electric mirrors the occupations in the entire nation.

Difficulty: 2 Medium Topic: "How-to": Major Decisions

54.

Discuss the two common methods of ranking.

The two common ways of ranking are alternation ranking and paired comparison. Alternation ranking orders job descriptions alternately at each extreme. Agreement is reached among evaluators on which jobs are the most and least valuable, then the next most and least valued, and so on, until all the jobs have been ordered. The paired comparison method uses a matrix to compare all possible pairs of jobs. When all comparisons have been completed, the job most frequently judged "more valuable" becomes the highest-ranked job, and so on.

Difficulty: 2 Medium Topic: Job Evaluation Methods

55.

What are the steps in designing a point plan?

There are eight steps in the design of a point plan. 1) Conduct job analysis. 2) Determine compensable factors. 3) Scale the factors. 4) Weight the factors according to importance. 5) Select criterion pay structure. 6) Communicate the plan and train users. 7) Apply to nonbenchmark jobs. 8) Develop online software support.

Difficulty: 1 Easy Topic: Job Evaluation Methods

Chapter 06 Person-Based Structures

Multiple Choice Questions

The roots of job-based pay structures is traced to _____.

A. Frederick Taylor B. Karl Marx C. Adam Smith D. Ronald McFreyer 2.

Routine work is also termed _____.

A. transactional work B. hygiene work C. tacit work D. system work 3.

In today's organizations, in order to increase competitiveness and success, work is analyzed by separating transactional work from:

A. core work. B. hygiene work. C. tacit work. D. system work. 4.

Which of the following is most likely to be a disadvantage of skill-based pay plans?

A. They are generally not favored by employees as it is difficult to see the connection between the plan, the work, and the size of the paycheck. B. They discourage adaptability of employees to changing production needs. C. They are expensive in the long run as the majority of employees become certified at the highest pay levels. D. They dampen employee versatility.

Which of the following is an advantage of skill-based pay plans?

A. They guarantee a low rate of employee turnover. B. They aid in deploying workers in a way that better matches the work flow. C. They are less expensive than job-based plans. D. They are viewed more favorably by courts than any other type of pay plans. 6.

The majority of applications of skill-based pay have been in:

A. education industries. B. manufacturing industries. C. health-care industries. D. service industries. 7.

The certification processes in skill-based pay is analogous to the _____ in a job-based analysis.

A. classes B. compensable factors C. regression analysis D. factor degrees and weights 8.

Compensable factors, skill blocks, and competency sets are used for:

A. assessing relative value. B. collecting work content information. C. determining what to value. D. completely different purposes. 9.

Employees in a multiskill system earn pay increases:

A. by increasing their productivity. B. based on job content. C. based on job assignments. D. by acquiring new knowledge.

10. Which of the following is least likely to be used in establishing skill-based certification methods?

A. Tests B. College degree C. Peer review D. On-the-job demonstration 11. _____ is a crucial factor that affects the perception of fairness of a skill-based plan.

A. The design of the certification process B. The number of compensable factors C. The extent of alignment with an organization's strategy D. The number of weights and factor degrees 12. A camper is an employee who _____ in a skill-based pay system.

A. tops out B. is a jack-of-all-trades C. does not want to rotate jobs D. moves too quickly from job to job 13. Skill-based plans tend to work best in organizations using a(n) _____ strategy.

A. innovator B. defender C. laissez-faire D. cost-cutter 14. _____ are the observable behaviors that indicate the level of competency.

A. Competency sets B. Core competencies C. Competency indicators D. Behavior scale points

15. _____ translate each core competency into action.

A. Competency indicators B. Multifunctional skills C. Skill-based structures D. Competency sets 16. The process of identifying competencies in person-based structures resembles identifying _____ as part of job evaluation in job-based structures.

A. compensable factors B. job description C. employee requirement D. work flow outlay 17. Which of the following reasons makes competencies a risky foundation for a pay system?

A. Number of stakeholders and the lack of a global standard B. Openness and non-quantifiable nature C. Vagueness and subjectivity D. Lack of motivation and objectivity 18. The scheme used in the text for classifying competencies consists of three groups. Which of the following is NOT one of them?

A. Personal characteristics B. Team dynamics C. Visionary D. Organization specific 19. Leadership, customer orientation, and functional expertise are examples of which group of competencies?

A. Personal characteristics B. Visionary C. Organization specific D. Team dynamics

20. Competencies are derived from the _____ beliefs about the organization and its strategic intent.

A. executive leadership's B. stakeholders' C. competitors' D. customers' 21. Most studies report that when different people rank-order jobs, the correlations are between:

A. .15 and .36 B. .35 and .46 C. .55 and .66 D. .85 and .96 22. Reliability of job evaluation techniques is measured by:

A. determining if different evaluators produce the same results. B. asking the question "What does the evaluation measure?" C. determining hit rates. D. surveying employee attitudes about the evaluation. 23. Who among the following is examining the validity of a job evaluation?

A. Keira, who is measuring the degree to which the job evaluation plan matches an agreed-upon pay structure for benchmark jobs B. Laila, who is measuring the effectiveness of a formal appeals process C. Keith, who is surveying employee attitudes about the job evaluation plan D. Rita, who is requesting the management for a reanalysis and a reevaluation of the required skills as she feels her job is evaluated incorrectly 24. A study of 400 compensation specialists revealed that:

A. job evaluation data had a larger effect on pay decisions than market data. B. current pay data had a larger effect on pay decisions than market data. C. job titles had a larger effect on pay decisions than job evaluation data. D. market data had a substantially larger effect on pay decisions than job evaluation data.

25. Which of the following is the reason why skill-based pay plans have maximum flexibility?

A. They pay employees for the highest level of skill they have achieved regardless of the work they perform. B. They focus on placing the right people in the right job. C. They only pay as much as the work performed is worth, regardless of any greater skills the employee may possess. D. They encourage employees to focus on how to get promoted rather than on how to get the required competencies. 26. Managers whose employers use _____ plans focus on placing the right people in the right job.

A. person-based B. skill-based C. competency-based D. job-based 27. A _____ approach controls costs by paying only as much as the work performed is worth, regardless of any greater skills the employee may possess.

A. performance-based B. competency-based C. job-based D. skill-based 28. Which of the following sentences regarding skill-based structure is FALSE?

A. Employees have control over their own development. B. Training is a source of complaints. C. Less supervision is required in comparison to all other pay plans. D. Training costs are the lowest in comparison to all other pay plans. 29. Lisa is a manager at Trell Inc. When she hires her employees, she focuses on finding the right job for the right person. Which of the following pay plans is her employer most likely using?

A. Skill-based pay plan B. Competency-based pay plan C. Aptitude-based pay plan D. Job-based pay plan

30. Who among the following is most likely to be working for a company that uses a competency-based pay plan?

True / False Questions

31. Transactional work is typically paid more than tacit work. True

False

32. A disadvantage of a skill-based plan is that people cannot be deployed in a way that matches the flow of work, thus causing bottlenecks as well as idle hands. True

False

33. Skill-based pay plans can focus on both the depth and breadth of work. True

False

34. By encouraging employees to take charge of their own development, skill-based plans may give them more control over their work lives. True

False

35. Person-based plans have the potential to clarify new standards and behavioral expectations. True

False

36. Compared to an on-demand review of certifications, scheduling fixed review points makes it easier to budget and control payroll increases. True

False

37. Skill-based plans are generally well accepted by employees because it is easy to see the connection between the plan, the work, and the size of the paycheck. True

False

38. A potential disadvantage of skill-based pay is that labor costs can be a source of competitive disadvantage. True

False

39. Skill-based plans become increasingly economical as the majority of employees become certified at the highest pay levels. True

False

40. Scaled competency indicators are similar to degrees of compensable factors. True

False

41. As experience with competencies has grown, organizations are placing greater emphasis on businessrelated descriptions of behaviors. True

False

42. The main appeal of competencies is the direct link to the organization's strategy. True

False

43. Advocates of competencies say that by focusing on optimum performance, rather than average performance, competencies can help employees maintain their marketability. True

False

44. Competencies provide guidelines for behavior and keep people focused. True

False

45. Basing pay on race or gender seems appalling today, but basing pay on someone's judgment of another person's integrity is considered the norm nowadays. True

False

46. In virtually all the studies on job evaluation, job-based evaluation is treated as a measurement device. True

False

47. Validity refers to the degree to which an evaluation assesses the relative worth of jobs to an organization. True

False

48. One approach to both improving and measuring the level of acceptance of job evaluation is to establish a formal appeals process. True

False

49. Recent research shows that the use of online job evaluation by independent managers is more reliable than traditional job evaluation committees. True

False

50. Defining the compensable factors and scales to include the content of jobs held predominantly by women is one of the methods to ensure that job evaluation plans are bias-free. True

False

Short Answer Questions

51. How do modern organizations analyze work processes?

52. What is the relevance of certification in a multiskill system?

53. How do skill-based plans motivate employees?

54. What is relevance of flexibility in skill-based plans?

55. How are organizations redefining the original definition of competencies?

Chapter 06 Person-Based Structures Answer Key

Multiple Choice Questions

The roots of job-based pay structures is traced to _____.

A. Frederick Taylor B. Karl Marx C. Adam Smith D. Ronald McFreyer Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

Routine work is also termed _____.

A. transactional work B. hygiene work C. tacit work D. system work Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

In today's organizations, in order to increase competitiveness and success, work is analyzed by separating transactional work from:

A. core work. B. hygiene work. C. tacit work. D. system work. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

Which of the following is most likely to be a disadvantage of skill-based pay plans?

Which of the following is an advantage of skill-based pay plans?

The majority of applications of skill-based pay have been in:

A. education industries. B. manufacturing industries. C. health-care industries. D. service industries. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

The certification processes in skill-based pay is analogous to the _____ in a job-based analysis.

A. classes B. compensable factors C. regression analysis D. factor degrees and weights Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

Compensable factors, skill blocks, and competency sets are used for:

A. assessing relative value. B. collecting work content information. C. determining what to value. D. completely different purposes. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

Employees in a multiskill system earn pay increases:

A. by increasing their productivity. B. based on job content. C. based on job assignments. D. by acquiring new knowledge. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Person-Based Structures: Skill Plans

10.

Which of the following is least likely to be used in establishing skill-based certification methods?

A. Tests B. College degree C. Peer review D. On-the-job demonstration Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: "How To": Skill Analysis

11.

_____ is a crucial factor that affects the perception of fairness of a skill-based plan.

A. The design of the certification process B. The number of compensable factors C. The extent of alignment with an organization's strategy D. The number of weights and factor degrees Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: "How To": Skill Analysis

12.

A camper is an employee who _____ in a skill-based pay system.

A. tops out B. is a jack-of-all-trades C. does not want to rotate jobs D. moves too quickly from job to job Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: "How To": Skill Analysis

13.

Skill-based plans tend to work best in organizations using a(n) _____ strategy.

A. innovator B. defender C. laissez-faire D. cost-cutter Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Person-Based Structures: Competencies

14.

_____ are the observable behaviors that indicate the level of competency.

A. Competency sets B. Core competencies C. Competency indicators D. Behavior scale points Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

15.

_____ translate each core competency into action.

A. Competency indicators B. Multifunctional skills C. Skill-based structures D. Competency sets Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

16.

The process of identifying competencies in person-based structures resembles identifying _____ as part of job evaluation in job-based structures.

A. compensable factors B. job description C. employee requirement D. work flow outlay Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

17.

Which of the following reasons makes competencies a risky foundation for a pay system?

A. Number of stakeholders and the lack of a global standard B. Openness and non-quantifiable nature C. Vagueness and subjectivity D. Lack of motivation and objectivity Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: "How-To": Competency Analysis

18.

The scheme used in the text for classifying competencies consists of three groups. Which of the following is NOT one of them?

A. Personal characteristics B. Team dynamics C. Visionary D. Organization specific Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How-To": Competency Analysis

19.

Leadership, customer orientation, and functional expertise are examples of which group of competencies?

A. Personal characteristics B. Visionary C. Organization specific D. Team dynamics Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How-To": Competency Analysis 6-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

20.

Competencies are derived from the _____ beliefs about the organization and its strategic intent.

A. executive leadership's B. stakeholders' C. competitors' D. customers' Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How-To": Competency Analysis

21.

Most studies report that when different people rank-order jobs, the correlations are between:

A. .15 and .36 B. .35 and .46 C. .55 and .66 D. .85 and .96 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Administering and Evaluating the Plan

22.

Reliability of job evaluation techniques is measured by:

A. determining if different evaluators produce the same results. B. asking the question "What does the evaluation measure?" C. determining hit rates. D. surveying employee attitudes about the evaluation. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Administering and Evaluating the Plan

23.

Who among the following is examining the validity of a job evaluation?

A. Keira, who is measuring the degree to which the job evaluation plan matches an agreed-upon pay structure for benchmark jobs B. Laila, who is measuring the effectiveness of a formal appeals process C. Keith, who is surveying employee attitudes about the job evaluation plan D. Rita, who is requesting the management for a reanalysis and a reevaluation of the required skills as she feels her job is evaluated incorrectly Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Administering and Evaluating the Plan 6-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24.

A study of 400 compensation specialists revealed that:

25.

Which of the following is the reason why skill-based pay plans have maximum flexibility?

A. They pay employees for the highest level of skill they have achieved regardless of the work they perform. B. They focus on placing the right people in the right job. C. They only pay as much as the work performed is worth, regardless of any greater skills the employee may possess. D. They encourage employees to focus on how to get promoted rather than on how to get the required competencies. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Perfect Structure

26.

Managers whose employers use _____ plans focus on placing the right people in the right job.

A. person-based B. skill-based C. competency-based D. job-based Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Perfect Structure

27.

A _____ approach controls costs by paying only as much as the work performed is worth, regardless of any greater skills the employee may possess.

A. performance-based B. competency-based C. job-based D. skill-based Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Perfect Structure

28.

Which of the following sentences regarding skill-based structure is FALSE?

A. Employees have control over their own development. B. Training is a source of complaints. C. Less supervision is required in comparison to all other pay plans. D. Training costs are the lowest in comparison to all other pay plans. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Perfect Structure

29.

Lisa is a manager at Trell Inc. When she hires her employees, she focuses on finding the right job for the right person. Which of the following pay plans is her employer most likely using?

A. Skill-based pay plan B. Competency-based pay plan C. Aptitude-based pay plan D. Job-based pay plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: The Perfect Structure

30.

Who among the following is most likely to be working for a company that uses a competency-based pay plan?

A. Julia, who focuses on getting promoted to get a pay increase B. Faiza, a manager, who focuses on choosing the employees best suited for job roles C. Juan, a manager, who focuses on controlling costs through budgets and work assignments D. Carlos, who focuses on obtaining certifications in her field to get a pay increase Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: The Perfect Structure 6-18 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

True / False Questions

31.

Transactional work is typically paid more than tacit work. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

32.

A disadvantage of a skill-based plan is that people cannot be deployed in a way that matches the flow of work, thus causing bottlenecks as well as idle hands. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

33.

Skill-based pay plans can focus on both the depth and breadth of work. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

34.

By encouraging employees to take charge of their own development, skill-based plans may give them more control over their work lives. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

35.

Person-based plans have the potential to clarify new standards and behavioral expectations. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Skill Plans

36.

Compared to an on-demand review of certifications, scheduling fixed review points makes it easier to budget and control payroll increases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How To": Skill Analysis

37.

Skill-based plans are generally well accepted by employees because it is easy to see the connection between the plan, the work, and the size of the paycheck. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How To": Skill Analysis

38.

A potential disadvantage of skill-based pay is that labor costs can be a source of competitive disadvantage. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How To": Skill Analysis

39.

Skill-based plans become increasingly economical as the majority of employees become certified at the highest pay levels. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: "How To": Skill Analysis

40.

Scaled competency indicators are similar to degrees of compensable factors. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

41.

As experience with competencies has grown, organizations are placing greater emphasis on businessrelated descriptions of behaviors. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

42.

The main appeal of competencies is the direct link to the organization's strategy. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

43.

Advocates of competencies say that by focusing on optimum performance, rather than average performance, competencies can help employees maintain their marketability. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

44.

Competencies provide guidelines for behavior and keep people focused. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

45.

Basing pay on race or gender seems appalling today, but basing pay on someone's judgment of another person's integrity is considered the norm nowadays. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Person-Based Structures: Competencies

46.

In virtually all the studies on job evaluation, job-based evaluation is treated as a measurement device. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering and Evaluating the Plan

47.

Validity refers to the degree to which an evaluation assesses the relative worth of jobs to an organization. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering and Evaluating the Plan

48.

One approach to both improving and measuring the level of acceptance of job evaluation is to establish a formal appeals process. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering and Evaluating the Plan

49.

Recent research shows that the use of online job evaluation by independent managers is more reliable than traditional job evaluation committees. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering and Evaluating the Plan

50.

Defining the compensable factors and scales to include the content of jobs held predominantly by women is one of the methods to ensure that job evaluation plans are bias-free. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Bias in Internal Structures

Short Answer Questions

51.

How do modern organizations analyze work processes?

In today's organizations, the work process is analyzed with an eye toward increasing competitiveness and success. Routine work (transactional work) is separated from more complex work (tacit work). The more routine work generates lower revenues and requires less knowledge. Once fragmented, work processes can be rebundled into new, different jobs. Pay structures based on each person's skills/knowledge/experience offer flexibility to align talent with continuously redesigned workplaces.

Difficulty: 2 Medium Topic: Person-Based Structures: Skill Plans

52.

What is the relevance of certification in a multiskill system?

Employees in a multiskill system earn pay increases by acquiring new knowledge, but the knowledge is specific to a range of related jobs. Pay increases come with certification of new skills, rather than with job assignments. Employees can then be assigned to any of the jobs for which they are certified, based on the flow of work.

Difficulty: 2 Medium Topic: Person-Based Structures: Skill Plans

53.

How do skill-based plans motivate employees?

Skill-based plans are generally well accepted by employees because it is easy to see the connection between the plan, the work, and the size of the paycheck. Consequently, the plans provide strong motivation for individuals to increase their skills.

Difficulty: 2 Medium Topic: "How To": Skill Analysis

54.

What is relevance of flexibility in skill-based plans?

Research suggests that the greatest impact on results occurs immediately after just a small amount of increased flexibility. Greater increments in flexibility achieve fewer improvements. There may be an optimal number of skills for any individual to possess. Beyond that number, productivity returns are less than the pay increases. Additionally, some employees may not be interested in giving up the job they are doing.

Difficulty: 2 Medium Topic: "How To": Skill Analysis

55.

How are organizations redefining the original definition of competencies?

As experience with competencies has grown, organizations are moving away from the vagueness of self-concepts, traits, and motives. Instead, they are placing greater emphasis on business-related descriptions of behaviors. Competencies are becoming "a collection of observable behaviors (not a single behavior) that require no inference, assumption or interpretation."

Topic: Person-Based Structures: Competencies

Chapter 07 Defining Competitiveness

Multiple Choice Questions

Which of the following statements is true of pay level?

A. Pay level is the same across all organizations for the same job. B. The higher the pay level relative to what competitors pay, the lower the relative costs to provide similar products or services. C. Pay level is directly proportional to labor costs. D. Pay level is independent of the number of employees in an organization. 2.

_____ refers to the average of the array of rates inside an organization.

A. Revenue margin B. Remuneration C. Compensation D. Pay level 3.

Pay level decisions have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the:

A. profit margins. B. labor costs. C. return on investments. D. revenues. 4.

Which of the following is NOT a reason a company might pay base wages above market?

A. To increase employee productivity B. To increase turnover rates C. To increase wage satisfaction D. To attract more job applicants

Which of the following is an example of a quoted-price market?

A. Streetcash, a website that allows buyers to negotiate product prices with the sellers B. Vidwom, a website that allows buyers to bid for items sold by other users C. Gramspot, a website where cars are auctioned by sellers for charity D. Nile, a website that allows sellers to sell their products for a fixed price 6.

Which of the following is an example of a bourse market?

A. Neurofort, a website that sells surgical equipment in bulk at fixed prices B. Hardknox, a hardware store that sells all its products at 10 percent above the maximum retail price C. Needlefarm, a store that sells premium furniture at discounted rates D. Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods 7.

_____ is an example of a bourse.

A. The stated starting wage of a job in an ad B. The total compensation for a top athlete C. The price of a product on Amazon D. The price of a box of cereal at a grocery store 8.

Which of the following is an example of the demand side of labor?

A. Level of pay applicants will accept B. Qualifications of applicants C. Pay level offered by an employer D. Locations of potential employees 9.

The market pay rate is the:

A. minimum wage rate set by the Department of Labor. B. pay rate at which applicants will deny a job offer. C. difference between use value and surplus value. D. point at which supply and demand lines cross.

10. _____ is the additional output associated with the employment of one additional person, with other production factors held constant.

A. Productivity B. The marginal product of labor C. Incremental productivity D. The marginal revenue of labor 11. A small lawn care company has two mowers and four employees. If it hires another employee and the factors of production remain the same, how will the productivity of the fifth employee compare to that of the current four employees?

A. The productivity will reduce. B. The productivity will increase. C. The productivity will remain the same. D. There is not enough information to determine productivity. 12. Employers continue to hire until the marginal revenue of the last hire equals his or her wage rate. This is based on the first labor market theory assumption that:

A. markets are competitive. B. pay rates reflect all costs of employment. C. employers seek to maximize profits. D. workers are homogeneous and interchangeable. 13. In a hiring situation, considering that other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the _____ of the last hire is equal to the _____ for that hire.

A. demand factor; supply factor B. marginal output; market price C. incremental output; marginal output D. marginal revenue; wage rate 14. The assumption of the upward sloping supply curve that offers of higher pay will increase supply will most likely NOT hold when _____.

A. absenteeism is high B. turnover is low C. unemployment is low D. unemployment is high

15. If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result?

A. The labor costs for Company A will increase, but it will be unable to hire additional workers. B. Company A will hire the needed workers at a higher wage rate. C. Competitors of Company A will lose employees to Company A. D. Company A will hire higher quality workers. 16. Druk Inc. is a consulting firm with 10 employees. Each new client generates $10,000 in revenue. If the company hires another employee who brings in five new clients and all other factors of production are constant, which of the following statements is true?

A. Druk will break even if it hires a twelfth employee for a wage of $50,000. B. Druk needs to pay $10,000 as wage to the eleventh employee to break even. C. Druk will break even if it hires a thirteenth employee for a wage of $10,000. D. Druk needs to pay $50,000 as wage to the eleventh employee to break even. 17. A study of graduating college students found they sought jobs with all of the following pay characteristics EXCEPT _____.

A. individual-based pay B. variable pay C. flexible benefits D. job-based pay 18. The _____ theory is the most influential in explaining pay-level differences.

A. human capital B. marginal productivity C. efficiency-wage D. signaling 19. _____ puts a lid on the maximum pay level an employer can set.

A. Government legislation B. The product market C. The labor market D. Labor market competition

20. Wages tend to be the lowest in which of the following industries?

A. Education and health care B. Technology-intensive industries C. Professional services D. Pharmaceuticals 21. Which of the following is NOT true of the relationship between employer size and its ability to pay?

A. Talented individuals have a lower marginal value in a larger organization. B. Talented people can influence more people and decisions. C. Influence of talented people leads to more profits. D. Talented people prefer to work in larger organizations. 22. Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level.

A. turnover B. productivity C. job description D. total cost 23. All of the following are important factors in defining a market for compensation purposes EXCEPT:

A. the skill or knowledge required. B. geography. C. the ability to pay. D. product and/or labor market competitors. 24. In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors?

A. Labor costs are a small share of total costs. B. Employee skills are generic across all product markets. C. Product demand is responsive to price changes. D. The supply of labor is not responsive to changes in pay.

25. The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy.

A. lead B. match C. lag D. employer of choice 26. The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____.

A. lead policy B. employer of choice policy C. lag policy D. match policy 27. The most common pay policy is a(n) _____.

A. lead policy B. lag policy C. hybrid policy D. match policy 28. All of the following are advantages of a lead pay-level policy EXCEPT _____.

A. reduced vacancy rates B. higher turnover rates C. reduced absenteeism D. better-quality employees 29. Among pay-mix alternatives, the percentage of base pay is highest in _____.

A. work-life balance policy B. security or commitment policy C. performance-driven policy D. market match policy

30. The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as _____.

A. work/life balance policy B. security policy C. performance-driven policy D. market match policy

True / False Questions

31. In determining the compensation strategy, a major strategic decision is whether to mirror what competitors are paying. True

False

32. Both pay level and pay mix decisions focus on two objectives: (1) control costs and increase revenues and (2) attract and retain employees. True

False

33. A manager of a company could be a factor affecting the company's external competitiveness. True

False

34. Stores that label each item's price or ads that list a job opening's starting wage are examples of bourses. True

False

35. Graduating students usually find themselves in a quoted-labor market. True

False

36. In a labor market, the demand side focuses on the actions of the employers. True

False

37. In a labor market, the market rate is where the lines for labor demand and labor supply cross. True

False

38. According to efficiency-wage theory, paying higher wages than competitors can lower labor costs due to more efficient workers. True

False

39. An employer offering lower base pay with high bonuses is a likely signal that it is seeking risk-taking employees. True

False

40. The most influential theory explaining pay-level differences is marginal revenue productivity. True

False

41. Human capital theory assumes that people are paid at the value of their marginal product. True

False

42. The product market sets the floor on the minimum wage required to attract sufficient numbers of employees. True

False

43. Employers tend to overestimate the importance of pay to employees and underestimate the role of relationships with the supervisor. True

False

44. Employers in highly competitive markets are more able to raise prices without loss of revenues. True

False

45. Segmenting sources of labor is a means of reducing labor costs. True

False

46. Wages in labor-intensive industries are generally higher than in technology-intensive industries. True

False

47. Talented individuals have a higher marginal value in larger organizations. True

False

48. The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors. True

False

49. Combat pay premiums paid to military personnel to offset some of the risk of being fired upon is an example of a lead pay-level policy. True

False

50. Research shows that a lead pay strategy reduces turnover. True

False

Short Answer Questions

51. Explain external competitiveness.

52. What are the factors that influence decisions on pay level and pay mix?

53. What are the basic assumptions of labor market theories?

54. What is the significance of marginal revenue?

55. According to efficiency-wage theory, how do increased wages increase efficiency and lower labor costs?

Chapter 07 Defining Competitiveness Answer Key

Multiple Choice Questions

Which of the following statements is true of pay level?

_____ refers to the average of the array of rates inside an organization.

A. Revenue margin B. Remuneration C. Compensation D. Pay level Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: External Competitiveness

Pay level decisions have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the:

A. profit margins. B. labor costs. C. return on investments. D. revenues. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: External Competitiveness

Which of the following is NOT a reason a company might pay base wages above market?

A. To increase employee productivity B. To increase turnover rates C. To increase wage satisfaction D. To attract more job applicants Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy: External Competitiveness

Which of the following is an example of a quoted-price market?

Which of the following is an example of a bourse market?

_____ is an example of a bourse.

A. The stated starting wage of a job in an ad B. The total compensation for a top athlete C. The price of a product on Amazon D. The price of a box of cereal at a grocery store Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Labor Market Factors

Which of the following is an example of the demand side of labor?

A. Level of pay applicants will accept B. Qualifications of applicants C. Pay level offered by an employer D. Locations of potential employees Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Labor Market Factors

The market pay rate is the:

10.

_____ is the additional output associated with the employment of one additional person, with other production factors held constant.

A. Productivity B. The marginal product of labor C. Incremental productivity D. The marginal revenue of labor Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Labor Market Factors

11.

A small lawn care company has two mowers and four employees. If it hires another employee and the factors of production remain the same, how will the productivity of the fifth employee compare to that of the current four employees?

A. The productivity will reduce. B. The productivity will increase. C. The productivity will remain the same. D. There is not enough information to determine productivity. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Labor Market Factors 7-13 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12.

Employers continue to hire until the marginal revenue of the last hire equals his or her wage rate. This is based on the first labor market theory assumption that:

A. markets are competitive. B. pay rates reflect all costs of employment. C. employers seek to maximize profits. D. workers are homogeneous and interchangeable. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Labor Market Factors

13.

In a hiring situation, considering that other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the _____ of the last hire is equal to the _____ for that hire.

A. demand factor; supply factor B. marginal output; market price C. incremental output; marginal output D. marginal revenue; wage rate Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Labor Market Factors

14.

The assumption of the upward sloping supply curve that offers of higher pay will increase supply will most likely NOT hold when _____.

A. absenteeism is high B. turnover is low C. unemployment is low D. unemployment is high Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Labor Market Factors

15.

If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result?

16.

Druk Inc. is a consulting firm with 10 employees. Each new client generates $10,000 in revenue. If the company hires another employee who brings in five new clients and all other factors of production are constant, which of the following statements is true?

A. Druk will break even if it hires a twelfth employee for a wage of $50,000. B. Druk needs to pay $10,000 as wage to the eleventh employee to break even. C. Druk will break even if it hires a thirteenth employee for a wage of $10,000. D. Druk needs to pay $50,000 as wage to the eleventh employee to break even. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Labor Market Factors

17.

A study of graduating college students found they sought jobs with all of the following pay characteristics EXCEPT _____.

A. individual-based pay B. variable pay C. flexible benefits D. job-based pay Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Modifications to the Demand Side

18.

The _____ theory is the most influential in explaining pay-level differences.

A. human capital B. marginal productivity C. efficiency-wage D. signaling Accessibility: Keyboard Navigation

Difficulty: 1 Easy Topic: Modifications to the Supply Side (Only Two More Theories to Go)

19.

_____ puts a lid on the maximum pay level an employer can set.

A. Government legislation B. The product market C. The labor market D. Labor market competition Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Product Market Factors and Ability to Pay

20.

Wages tend to be the lowest in which of the following industries?

A. Education and health care B. Technology-intensive industries C. Professional services D. Pharmaceuticals Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Organization Factors

21.

Which of the following is NOT true of the relationship between employer size and its ability to pay?

A. Talented individuals have a lower marginal value in a larger organization. B. Talented people can influence more people and decisions. C. Influence of talented people leads to more profits. D. Talented people prefer to work in larger organizations. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Organization Factors

22.

Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level.

A. turnover B. productivity C. job description D. total cost Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Organization Factors

23.

All of the following are important factors in defining a market for compensation purposes EXCEPT:

A. the skill or knowledge required. B. geography. C. the ability to pay. D. product and/or labor market competitors. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Relevant Markets

24.

In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors?

25.

The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy.

A. lead B. match C. lag D. employer of choice Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Competitive Pay Policy Alternatives

26.

The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____.

A. lead policy B. employer of choice policy C. lag policy D. match policy Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives 7-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

27.

The most common pay policy is a(n) _____.

A. lead policy B. lag policy C. hybrid policy D. match policy Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives

28.

All of the following are advantages of a lead pay-level policy EXCEPT _____.

A. reduced vacancy rates B. higher turnover rates C. reduced absenteeism D. better-quality employees Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives

29.

Among pay-mix alternatives, the percentage of base pay is highest in _____.

A. work-life balance policy B. security or commitment policy C. performance-driven policy D. market match policy Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives

30.

The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as _____.

A. work/life balance policy B. security policy C. performance-driven policy D. market match policy Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives

True / False Questions

31.

In determining the compensation strategy, a major strategic decision is whether to mirror what competitors are paying. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: External Competitiveness

32.

Both pay level and pay mix decisions focus on two objectives: (1) control costs and increase revenues and (2) attract and retain employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy: External Competitiveness

33.

A manager of a company could be a factor affecting the company's external competitiveness. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Shapes External Competitiveness?

34.

Stores that label each item's price or ads that list a job opening's starting wage are examples of bourses. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Labor Market Factors

35.

Graduating students usually find themselves in a quoted-labor market. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Labor Market Factors

36.

In a labor market, the demand side focuses on the actions of the employers. TRUE Accessibility: Keyboard Navigation 7-19 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 1 Easy Topic: Labor Market Factors

37.

In a labor market, the market rate is where the lines for labor demand and labor supply cross. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Labor Market Factors

38.

According to efficiency-wage theory, paying higher wages than competitors can lower labor costs due to more efficient workers. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Modifications to the Demand Side

39.

An employer offering lower base pay with high bonuses is a likely signal that it is seeking risk-taking employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Modifications to the Demand Side

40.

The most influential theory explaining pay-level differences is marginal revenue productivity. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Modifications to the Supply Side (Only Two More Theories to Go)

41.

Human capital theory assumes that people are paid at the value of their marginal product. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Modifications to the Supply Side (Only Two More Theories to Go)

42.

The product market sets the floor on the minimum wage required to attract sufficient numbers of employees. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Product Market Factors and Ability to Pay

43.

Employers tend to overestimate the importance of pay to employees and underestimate the role of relationships with the supervisor. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Product Market Factors and Ability to Pay

44.

Employers in highly competitive markets are more able to raise prices without loss of revenues. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Product Market Factors and Ability to Pay

45.

Segmenting sources of labor is a means of reducing labor costs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Product Market Factors and Ability to Pay

46.

Wages in labor-intensive industries are generally higher than in technology-intensive industries. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Organization Factors

47.

Talented individuals have a higher marginal value in larger organizations. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Organization Factors

48.

The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Relevant Markets

49.

Combat pay premiums paid to military personnel to offset some of the risk of being fired upon is an example of a lead pay-level policy. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives

50.

Research shows that a lead pay strategy reduces turnover. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Competitive Pay Policy Alternatives

Short Answer Questions

51.

Explain external competitiveness.

External competitiveness refers to the pay relationships among organizations—the organization's pay relative to its competitors. It is expressed in practice by (1) setting a pay level that is above, below, or equal to that of competitors; and (2) determining the pay mix relative to those of competitors.

Difficulty: 2 Medium Topic: Compensation Strategy: External Competitiveness

52.

What are the factors that influence decisions on pay level and pay mix?

The factors include (1) competition in the labor market for people with various skills; (2) competition in the product and service markets, which affects the financial condition of the organization; and (3) characteristics unique to each organization and its employees. These factors act in concert to influence pay-level and pay-mix decisions.

Difficulty: 2 Medium Topic: What Shapes External Competitiveness?

53.

What are the basic assumptions of labor market theories?

Theories of labor markets usually begin with four basic assumptions: • Employers always seek to maximize profits. • People are homogeneous and therefore interchangeable. • The pay rates reflect all costs associated with employment. • The markets faced by employers are competitive.

Difficulty: 2 Medium Topic: Labor Market Factors

54.

What is the significance of marginal revenue?

Marginal revenue is the money generated by the sale of marginal product, the additional output from the employment of one additional person. An employer will continue to hire until the marginal revenue generated by the last hire is equal to the costs associated with employing that person. Because other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the marginal revenue of the last hire is equal to the wage rate for that hire.

Difficulty: 2 Medium Topic: Labor Market Factors

55.

According to efficiency-wage theory, how do increased wages increase efficiency and lower labor costs?

According to efficiency-wage theory, high wages may increase efficiency and actually lower labor costs if they: • Attract higher-quality applicants. • Lower turnover. • Increase worker effort. • Reduce "shirking" (what economists say when they mean "screwing around"). • Reduce the need to supervise employees (academics say "monitoring").

Difficulty: 2 Medium Topic: Modifications to the Demand Side

Chapter 08 Designing Pay Levels, Mix, and Pay Structures

Multiple Choice Questions

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 2.

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 3.

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 4.

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.

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 ecommerce, 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 6.

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 7.

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 8.

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 9.

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

10. _____ 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 11. 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 12. 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 13. 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 14. Which of the following is often used to set pay ranges?

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

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

A. weighted mean B. mean C. mode D. median 16. 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 17. 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 18. 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 19. 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.

20. 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 21. 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 22. In the regression equation, y = a + bx, job evaluation points are denoted by _____.

A. a B. b C. x D. y 23. Aging the market data to a point halfway through a plan year is called _____.

A. leveling B. updating C. lead/lag D. matching 24. Mark and Steve work as crane operators in a construction company called Asai Corp. Asai uses a skillbased 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?

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

A. 5; 15 B. 15; 30 C. 30; 40 D. 40; 60 27. 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 28. 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. 29. The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.

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

30. 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.

True / False Questions

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

False

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

False

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

False

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

False

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

False

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

False

37. 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. True

False

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

False

39. 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. True

False

40. Regression smoothes large amounts of data while minimizing variations. True

False

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

False

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

False

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

False

44. 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. True

False

45. Smaller pay ranges may reduce the opportunities for promotion. True

False

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

False

47. Career moves between bands are more common than within bands. True

False

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

False

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

False

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

False

Short Answer Questions

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

52. Who should be involved in designing a compensation survey?

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

54. Explain the difference between standard deviation and quartiles and percentiles.

55. What is a market line?

Chapter 08 Designing Pay Levels, Mix, and Pay Structures Answer Key

Multiple Choice Questions

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Specify Competitive Pay Policy

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Specify Competitive Pay Policy

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Specify Competitive Pay Policy

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

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Select Relevant Market Competitors

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 Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Design the Survey

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 Accessibility: Keyboard Navigation

Difficulty: 1 Easy Topic: Design the Survey

A. benchmark-job B. low-high C. survey leveling D. benchmark conversion Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Design the Survey

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Design the Survey

10.

_____ 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 Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Design the Survey

11.

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Interpret Survey Results and Construct a Market Line

12.

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 Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Interpret Survey Results and Construct a Market Line

13.

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Interpret Survey Results and Construct a Market Line

14.

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

A. Median B. Weighted mean C. Quartiles and percentiles D. Standard deviation Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Interpret Survey Results and Construct a Market Line

15.

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

A. weighted mean B. mean C. mode D. median Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Interpret Survey Results and Construct a Market Line

16.

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Interpret Survey Results and Construct a Market Line

17.

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 Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Interpret Survey Results and Construct a Market Line

18.

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 Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Interpret Survey Results and Construct a Market Line

19.

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?

20.

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

21.

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Interpret Survey Results and Construct a Market Line

22.

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

A. a B. b C. x D. y Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Interpret Survey Results and Construct a Market Line

23.

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

A. leveling B. updating C. lead/lag D. matching Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: From Policy to Practice: The Pay-Policy Line

24.

Mark and Steve work as crane operators in a construction company called Asai Corp. Asai uses a skillbased 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. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: From Policy to Practice: Grades and Ranges 8-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

25.

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. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: From Policy to Practice: Grades and Ranges

26.

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

A. 5; 15 B. 15; 30 C. 30; 40 D. 40; 60 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: From Policy to Practice: Grades and Ranges

27.

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 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: From Policy to Practice: Grades and Ranges

28.

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. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: From Policy to Practice: Broad Banding

29.

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

A. job structure B. broad banding C. reference rate D. market pricing Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Market Pricing

30.

Which of the following statements is true about market pricers?

True / False Questions

31.

The final step in determining externally competitive pay levels and structures is the merging of internal and external pressure. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specify Competitive Pay Policy

32.

Adjustments to forms of pay occur more often than adjustments to overall pay level. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Purpose of a Survey

33.

Many employers use market surveys to validate their own job evaluation results. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Purpose of a Survey

34.

When there is an unusual level of turnover in a job, an employer is likely to conduct a market survey. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Purpose of a Survey

35.

It is easier for employers to determine the worth of jobs that fall into fuzzy markets than traditionally relevant markets. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Select Relevant Market Competitors

36.

Identifying pay survey participants by company name is considered price fixing under the Sherman Act. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Design the Survey

37.

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. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Design the Survey

38.

Turnover and organizational revenues are examples of survey data collected to gather competitive intelligence. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Design the Survey

39.

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. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Design the Survey

40.

Regression smoothes large amounts of data while minimizing variations. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Interpret Survey Results and Construct a Market Line

41.

Aging the market data to a point halfway through the plan year is called lead/lag. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: The Pay-Policy Line

42.

A pay range exists when at least two employees in the same job are paid different rates. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: Grades and Ranges

43.

Pay ranges for top-level management positions are smaller than the pay ranges for entry-level managerial positions. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: Grades and Ranges

44.

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. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: Grades and Ranges

45.

Smaller pay ranges may reduce the opportunities for promotion. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: Grades and Ranges

46.

Skill-based plans establish single flat rates for each skill level regardless of performance or seniority. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: Grades and Ranges

47.

Career moves between bands are more common than within bands. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: From Policy to Practice: Broad Banding

48.

Managers often regard external market data as more objective than internal job evaluation. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Balancing Internal and External Pressures: Adjusting the Pay Structure

49.

A pure market pricing strategy carried to its extreme tends to ignore internal alignment completely. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Market Pricing

50.

Market pricers emphasize any unique or difficult-to-imitate aspects of an organization's pay structure. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Market Pricing

Short Answer Questions

51.

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

A survey is the systematic process of collecting and making judgments about the compensation paid by other employers. Translating any external pay policy into practice requires information on the external market. Surveys provide the data for translating that policy into pay levels, pay mix, and structures. An employer conducts or participates in a survey for a number of reasons: (1) to adjust the pay level in response to changing rates paid by competitors, (2) to set the mix of pay forms relative to that paid by competitors, (3) to establish or price a pay structure, (4) to analyze pay-related problems, or (5) to estimate the labor costs of product/service market competitors.

Difficulty: 2 Medium Topic: Specify Competitive Pay Policy Topic: The Purpose of a Survey

52.

Who should be involved in designing a compensation survey?

In most organizations, the responsibility for managing the survey lies with the compensation manager. But since compensation expenses have a powerful effect on profitability, including managers and employees on task forces makes sense. Outside consulting firms are typically used as third-party protection from possible "price-fixing" lawsuits.

Difficulty: 2 Medium Topic: Design the Survey

53.

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

If an organization is using skill-competency-based structures or generic job descriptions, it may not have benchmark jobs to match with jobs at competitors who use a traditional job-based approach. Market data must be converted to fit the skill or competency structure. The simplest way to do this is to identify the lowest- and highest-paid benchmark jobs for the relevant skills in the relevant market and to use the wages for these jobs as anchors for the skill-based structures. Work at various levels within the structure can then be slotted between the anchors. For example, if the entry market rate for operator A is $12 per hour and the rate for a team leader is $42 per hour, then the rate for operator B can be somewhere between $12 and $42 per hour. The usefulness of this approach depends on how well the extreme benchmark jobs match the organization's work and whether they really do tap the entire range of skills.

Difficulty: 2 Medium Topic: Design the Survey

54.

Explain the difference between standard deviation and quartiles and percentiles.

Standard deviation tells us how tightly all pay rates are clustered around the mean. As such, they show how similar or dissimilar the market rates are from each other. A small standard deviation means they are tightly bunched at center; a large standard deviation means rates are more spread out. Quartiles and percentiles order all data points from lowest to highest and then convert them to percentages. Quartiles are frequently used to set pay ranges or zones.

Difficulty: 2 Medium Topic: Interpret Survey Results and Construct a Market Line

55.

What is a market line?

A market line links a company's benchmark jobs on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis. It summarizes the distribution of going rates paid by competitors in the market.

Difficulty: 1 Easy Topic: Interpret Survey Results and Construct a Market Line

Chapter 09 Pay-for-Performance: The Evidence

Multiple Choice Questions

The motivation triangle includes _____.

A. selection B. organization design C. culture D. organization development 2.

The ability triangle includes _____.

A. selection B. performance management C. compensation D. organization development 3.

When employee performance measures are ambiguous and vary from time to time, but the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

A. a large base pay and low-incentive pay B. an increase in base pay C. a variety of rewards with significant incentive pay D. monetary rewards with no benefits 4.

When an organization's performance has frequent highs and lows, but individual performance is fairly stable, and performance measures are clear, the most effective compensation mix is to offer _____.

A. a base pay with low incentives and a variety of rewards B. monetary rewards with large incentives C. a large base pay and low-incentive pay D. a wide range of rewards and significant incentives

The corporate performance of Yellow Corp. is fairly stable. However, it is difficult to measure individual performance. In this case, the most effective compensation mix is to offer _____.

A. a high base pay with high incentives B. monetary rewards alone C. a large base pay and low-incentive pay D. a wide range of awards beyond just money 6.

When employee performance is easily measured and the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

A. a large base pay and low-incentive pay B. a variety of rewards in addition to base pay C. a variety of rewards with significant incentive pay D. monetary rewards with large incentives 7.

When an organization's performance has regular and large swings and individual performance is unclear and hard to measure, the most effective compensation mix is to offer _____.

A. a base pay with low incentives and a variety of rewards B. monetary rewards with large incentives C. a large base pay and low-incentive pay D. a wide range of rewards and significant incentives 8.

According to research, which of the following is NOT one of the most important factors for employees influencing their pay systems?

A. Team-based pay B. Changes in cost of living C. Pay at market rate D. Seniority 9.

When identifying what is important to employees, which theory would be most useful?

A. Expectancy theory B. Equity theory C. Maslow's need theory D. Agency theory

10. _____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating.

A. Equity B. Expectancy and agency C. Herzberg's two-factor D. Agency 11. _____ is the value employees attach to the organization rewards offered for satisfactory job performance.

A. Equity B. Instrumentality C. Valence D. Reinforcement 12. _____ is employees' beliefs that requisite job performance will be rewarded by the organization.

A. Valence B. Expectancy C. Instrumentality D. Utility 13. According to the _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.

A. equity B. expectancy C. agency D. reinforcement 14. _____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.

A. Reinforcement B. Goal-setting C. Agency D. Expectancy

15. Which of the following theories states that people choose the behavior that leads to the greatest reward?

A. Maslow's need theory B. Expectancy theory C. Herzberg's two-factor theory D. Goal-setting theory 16. All of the following EXCEPT _____ require periodically re-earning the added pay.

A. success-sharing plans B. merit bonuses C. profit-sharing plans D. cost-of-living increases 17. Grabhouse Inc. is experiencing an increase in turnover rates of its top employees. Upon consulting with its managers for the reasons for this increase, Grabhouse finds that employees are uneasy with the current pay mix as it involves too many risky elements. In order to make its pay mix less risky, Grabhouse needs to:

A. increase the base pay component of its pay mix. B. introduce a profit-sharing plan to its pay mix. C. introduce a risk-sharing plan to its pay mix. D. increase the merit bonus component of its pay mix. 18. _____ is an individual level form of performance pay.

A. Risk sharing B. Gain sharing C. Merit bonus D. Success sharing 19. Which of the following is NOT true?

A. More companies are using pay systems based upon individual, group, and organization performance. B. Workers with high security needs may accept lower pay if they come in a package that is stable. C. Workers may need higher pay to stay and perform in a company that uses at-risk pay plan. D. Companies are moving back to entitlement-oriented pay to reduce turnover.

20. A person with low self-esteem is likely to seek _____.

A. a small, hierarchical organization with pay plans based upon individual performance B. a flat organization with a significant amount of pay based upon performance C. a small organization with large benefits based on group performance D. a large, decentralized organization with little performance-based pay 21. Which of the following is an example of the sorting effect in action?

A. An employee leaving a high-paying job for one that provides more work/life balance B. The provision of across-the-board pay increases by a company C. The provision of cost-of-living increases by a company D. An employee choosing fewer incentives in his flexible compensation plan 22. Droppiece Inc. is a company that provides more performance-based pay and less base pay than its competitors. Who among the following is most likely to join Droppiece?

A. George, a recently married man who wants a stable income B. Stella, a recent college graduate who loves to take on a challenge C. Mark, a musician who wants to supplement his income D. Sara, a senior citizen who wants a job only to keep herself busy 23. When pay is based on individual performance, turnover tends to be highest among _____.

A. poor performers B. good performers C. single women with children D. ethnic minorities 24. When a company moves from an individual incentive plan to a group incentive plan, the company is most likely to experience _____.

A. higher turnover among high performers B. an increase in instrumentality C. higher turnover among poor performers D. an increase in perceived equity

25. Available evidence indicates managers believe the most important factor for pay increases is _____.

A. experience B. nature of the job C. seniority D. performance 26. Company X pays for performance. Allan, an employee of the company, is not in favor of this reward system and, therefore, leaves Company X in search of another company with different rules for getting rewards. This is an example of the:

A. design effect. B. compensation effect. C. sorting effect. D. incentive effect. 27. The most obvious sorting factor is _____.

A. seniority B. ability C. experience D. educational qualification 28. There is evidence that every 10 percent increase in the bonus paid to employees by a firm yields a _____ percent increase in ROA to the firm.

A. 1 B. 1.5 C. 5 D. 15 29. Most experts agree that employees do not begin to consider changing their behaviors unless payouts are at least _____ percent higher.

A. 5 B. 8 C. 20 D. 10

30. The amount of fairness given to employees refers to _____.

A. total justice B. quantitative justice C. procedural justice D. distributive justice

True / False Questions

31. In the formula "Behavior = f (M, A, E)," M denotes monetary incentives. True

False

32. When pay raises are based on events over which employees lack significant control, they are likely to regard the system as unfair. True

False

33. Flexible compensation is based on the idea that the organization knows what package of rewards would best suit an individual employee's needs. True

False

34. Maslow's theory suggests that performance-based pay can be demotivating if it impinges upon employees' capacity to meet daily living needs. True

False

35. Herzberg's two-factor theory argues success-sharing plans will be motivating, while at-risk plans will be demotivating. True

False

36. An important implication of reinforcement theory is that the timing of payouts to employees is very important. True

False

37. Goal-setting theory argues that employees' performance is maximized when performance targets are unchallenging and unspecific. True

False

38. Agency theory argues that employees prefer risky pay as rewards can be greater than a salary. True

False

39. According to the agency theory, because employees prefer a salary, they will demand a wage premium in exchange for accepting performance-based pay. True

False

40. Workload and work variety are both components of a total reward system. True

False

41. Security in terms of compensation refers to the predictability of one's paycheck from one time to the next. True

False

42. The trend today is toward less stable and less secure compensation packages. True

False

43. The authors argue that a system of flexible compensation could lead to more desirable employee behaviors at a lower total cost. True

False

44. Gain sharing poses greater risk to individual employees than profit sharing. True

False

45. Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when an organization meets performance objectives. True

False

46. Evidence suggests that talented people are motivated to join organizations with strong links between performance and pay. True

False

47. Group incentive pay increases turnover of better performers, while individual incentive increases turnover of poorer performers. True

False

48. Evidence suggests that skill-based pay may not increase productivity. True

False

49. A problem with incentive pay plans is workers may end up focusing exclusively on behaviors that are rewarded. True

False

50. Group pay is always more effective than individual pay. True

False

Short Answer Questions

51. What are the behaviors that compensation needs to enforce?

52. What predictions can be made about performance-based pay based on Maslow's theory?

53. Briefly explain the concept of flexible compensation.

54. Explain the expectancy theory of motivation.

55. Compare risk-sharing and success-sharing plans.

Chapter 09 Pay-for-Performance: The Evidence Answer Key

Multiple Choice Questions

The motivation triangle includes _____.

A. selection B. organization design C. culture D. organization development Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

The ability triangle includes _____.

A. selection B. performance management C. compensation D. organization development Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

When employee performance measures are ambiguous and vary from time to time, but the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

A. a large base pay and low-incentive pay B. an increase in base pay C. a variety of rewards with significant incentive pay D. monetary rewards with no benefits Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

When an organization's performance has frequent highs and lows, but individual performance is fairly stable, and performance measures are clear, the most effective compensation mix is to offer _____.

A. a base pay with low incentives and a variety of rewards B. monetary rewards with large incentives C. a large base pay and low-incentive pay D. a wide range of rewards and significant incentives Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

The corporate performance of Yellow Corp. is fairly stable. However, it is difficult to measure individual performance. In this case, the most effective compensation mix is to offer _____.

A. a high base pay with high incentives B. monetary rewards alone C. a large base pay and low-incentive pay D. a wide range of awards beyond just money Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

When employee performance is easily measured and the organization's performance is fairly stable over time, the most effective type of compensation is to offer _____.

A. a large base pay and low-incentive pay B. a variety of rewards in addition to base pay C. a variety of rewards with significant incentive pay D. monetary rewards with large incentives Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

When an organization's performance has regular and large swings and individual performance is unclear and hard to measure, the most effective compensation mix is to offer _____.

Difficulty: 2 Medium Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

According to research, which of the following is NOT one of the most important factors for employees influencing their pay systems?

A. Team-based pay B. Changes in cost of living C. Pay at market rate D. Seniority Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

When identifying what is important to employees, which theory would be most useful?

A. Expectancy theory B. Equity theory C. Maslow's need theory D. Agency theory Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

10.

_____ theory states that success-sharing plans will be motivating, whereas at-risk plans will be demotivating.

A. Equity B. Expectancy and agency C. Herzberg's two-factor D. Agency Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

11.

_____ is the value employees attach to the organization rewards offered for satisfactory job performance.

A. Equity B. Instrumentality C. Valence D. Reinforcement Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

12.

_____ is employees' beliefs that requisite job performance will be rewarded by the organization.

A. Valence B. Expectancy C. Instrumentality D. Utility Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

13.

According to the _____ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.

A. equity B. expectancy C. agency D. reinforcement Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

14.

_____ theory argues that performance-based pay is the optimal compensation choice for complex jobs, where monitoring employee performance is difficult.

A. Reinforcement B. Goal-setting C. Agency D. Expectancy Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says 9-14 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

15.

Which of the following theories states that people choose the behavior that leads to the greatest reward?

A. Maslow's need theory B. Expectancy theory C. Herzberg's two-factor theory D. Goal-setting theory Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

16.

All of the following EXCEPT _____ require periodically re-earning the added pay.

A. success-sharing plans B. merit bonuses C. profit-sharing plans D. cost-of-living increases Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

17.

Grabhouse Inc. is experiencing an increase in turnover rates of its top employees. Upon consulting with its managers for the reasons for this increase, Grabhouse finds that employees are uneasy with the current pay mix as it involves too many risky elements. In order to make its pay mix less risky, Grabhouse needs to:

A. increase the base pay component of its pay mix. B. introduce a profit-sharing plan to its pay mix. C. introduce a risk-sharing plan to its pay mix. D. increase the merit bonus component of its pay mix. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: What Does It Take to Get These Behaviors? What Practitioners Say

18.

_____ is an individual level form of performance pay.

A. Risk sharing B. Gain sharing C. Merit bonus D. Success sharing Accessibility: Keyboard Navigation Difficulty: 1 Easy 9-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Topic: What Does It Take to Get These Behaviors? What Practitioners Say

19.

Which of the following is NOT true?

20.

A person with low self-esteem is likely to seek _____.

A. a small, hierarchical organization with pay plans based upon individual performance B. a flat organization with a significant amount of pay based upon performance C. a small organization with large benefits based on group performance D. a large, decentralized organization with little performance-based pay Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Does Compensation Motivate Behavior?

21.

Which of the following is an example of the sorting effect in action?

A. An employee leaving a high-paying job for one that provides more work/life balance B. The provision of across-the-board pay increases by a company C. The provision of cost-of-living increases by a company D. An employee choosing fewer incentives in his flexible compensation plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Does Compensation Motivate Behavior?

22.

Droppiece Inc. is a company that provides more performance-based pay and less base pay than its competitors. Who among the following is most likely to join Droppiece?

A. George, a recently married man who wants a stable income B. Stella, a recent college graduate who loves to take on a challenge C. Mark, a musician who wants to supplement his income D. Sara, a senior citizen who wants a job only to keep herself busy Accessibility: Keyboard Navigation Difficulty: 3 Hard 9-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Topic: Does Compensation Motivate Behavior?

23.

When pay is based on individual performance, turnover tends to be highest among _____.

A. poor performers B. good performers C. single women with children D. ethnic minorities Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

24.

When a company moves from an individual incentive plan to a group incentive plan, the company is most likely to experience _____.

A. higher turnover among high performers B. an increase in instrumentality C. higher turnover among poor performers D. an increase in perceived equity Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Does Compensation Motivate Behavior?

25.

Available evidence indicates managers believe the most important factor for pay increases is _____.

A. experience B. nature of the job C. seniority D. performance Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

26.

Company X pays for performance. Allan, an employee of the company, is not in favor of this reward system and, therefore, leaves Company X in search of another company with different rules for getting rewards. This is an example of the:

A. design effect. B. compensation effect. C. sorting effect. D. incentive effect. Accessibility: Keyboard Navigation 9-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 2 Medium Topic: Does Compensation Motivate Behavior?

27.

The most obvious sorting factor is _____.

A. seniority B. ability C. experience D. educational qualification Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

28.

There is evidence that every 10 percent increase in the bonus paid to employees by a firm yields a _____ percent increase in ROA to the firm.

A. 1 B. 1.5 C. 5 D. 15 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Does Compensation Motivate Behavior?

29.

Most experts agree that employees do not begin to consider changing their behaviors unless payouts are at least _____ percent higher.

A. 5 B. 8 C. 20 D. 10 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Designing a Pay-for-Performance Plan

30.

The amount of fairness given to employees refers to _____.

A. total justice B. quantitative justice C. procedural justice D. distributive justice Accessibility: Keyboard Navigation 9-18 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 1 Easy Topic: Designing a Pay-for-Performance Plan

True / False Questions

31.

In the formula "Behavior = f (M, A, E)," M denotes monetary incentives. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

32.

When pay raises are based on events over which employees lack significant control, they are likely to regard the system as unfair. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

33.

Flexible compensation is based on the idea that the organization knows what package of rewards would best suit an individual employee's needs. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

34.

Maslow's theory suggests that performance-based pay can be demotivating if it impinges upon employees' capacity to meet daily living needs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

35.

Herzberg's two-factor theory argues success-sharing plans will be motivating, while at-risk plans will be demotivating. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

36.

An important implication of reinforcement theory is that the timing of payouts to employees is very important. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

37.

Goal-setting theory argues that employees' performance is maximized when performance targets are unchallenging and unspecific. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

38.

Agency theory argues that employees prefer risky pay as rewards can be greater than a salary. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

39.

According to the agency theory, because employees prefer a salary, they will demand a wage premium in exchange for accepting performance-based pay. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Theory Says

40.

Workload and work variety are both components of a total reward system. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

41.

Security in terms of compensation refers to the predictability of one's paycheck from one time to the next. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

42.

The trend today is toward less stable and less secure compensation packages. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

43.

The authors argue that a system of flexible compensation could lead to more desirable employee behaviors at a lower total cost. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

44.

Gain sharing poses greater risk to individual employees than profit sharing. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

45.

Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when an organization meets performance objectives. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Does It Take to Get These Behaviors? What Practitioners Say

46.

Evidence suggests that talented people are motivated to join organizations with strong links between performance and pay. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

47.

Group incentive pay increases turnover of better performers, while individual incentive increases turnover of poorer performers. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

48.

Evidence suggests that skill-based pay may not increase productivity. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

49.

A problem with incentive pay plans is workers may end up focusing exclusively on behaviors that are rewarded. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

50.

Group pay is always more effective than individual pay. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Does Compensation Motivate Behavior?

Short Answer Questions

51.

What are the behaviors that compensation needs to enforce?

First, compensation should be sufficiently attractive to make recruiting and hiring good potential employees possible (attraction). Second, compensation should be used to ensure that the good employees stay with the company (retention). It should also concentrate on further building employee knowledge and skills (develop skills). Compensation should motivate employees to perform well on their jobs—to take their knowledge and abilities and apply them in ways that contribute to organizational performance.

Difficulty: 2 Medium Topic: What Behaviors Do Employers Care About? Linking Organization Strategy to Compensation and Performance Management

52.

What predictions can be made about performance-based pay based on Maslow's theory?

Based on Maslow's need hierarchy, the following predictions can be made about performance-based pay: 1. Base pay must be set high enough to provide individuals with the economic means to meet their basic living needs. 2. An at-risk program will not be motivating since it restricts employees' ability to meet lower order needs. 3. Success-sharing plans may be motivating to the extent they help employees pursue higher-order needs. Performance-based pay may be demotivating if it impinges upon employees' capacity to meet daily living needs. Incentive pay is motivating to the extent it is attached to achievement, recognition, or approval.

Difficulty: 2 Medium Topic: What Does It Take to Get These Behaviors? What Theory Says

53.

Briefly explain the concept of flexible compensation.

Flexible compensation is based on the idea that only the individual employee knows what package of rewards would best suit personal needs. Employees choose their own blend of rewards, which may be both more satisfying and less expensive. As such, employees who hate risk could opt for more base pay and less incentive pay. Tradeoffs between pay and benefits could also be selected. The key ingredient is careful cost analysis to make sure the dollar cost of the package an employee selects meets employer budgetary limits.

Difficulty: 2 Medium Topic: What Does It Take to Get These Behaviors? What Theory Says

54.

Explain the expectancy theory of motivation.

According to the expectancy theory, motivation is the product of three perceptions: Expectancy is employees' assessment of their ability to perform required job tasks. Instrumentality is employees' beliefs that requisite job performance will be rewarded by the organization. Valence is the value employees attach to the organization rewards offered for satisfactory job performance.

Difficulty: 2 Medium Topic: What Does It Take to Get These Behaviors? What Theory Says

55.

Compare risk-sharing and success-sharing plans.

A success-sharing plan is a generic category of pay add-on (variable pay) which is tied to some measure of group performance, not individual performance. It is not a part of an employee's base pay. In these plans, employees share in any success—performance above standard—but are not penalized for performance below standard. A risk-sharing plan is also a generic category of pay add-on (variable pay). It differs from success sharing in that an employee not only shares in successes but is also penalized during poor performance years. Penalty is in form of lower total compensation in poor corporate performance years. Rewards, though, are typically higher than that for success-sharing programs in high performance years. These plans pose greater risk than success-sharing plans.

Difficulty: 2 Medium Topic: What Does It Take to Get These Behaviors? What Practitioners Say

Chapter 10 Pay-for-Performance Plans

Multiple Choice Questions

Surveys show the most popular type of variable pay plans are _____.

A. stock option plans B. gainsharing plans C. individual incentive plans D. special recognition plans 2.

Which of the following statements about merit pay is NOT true?

A. It has a small but significant effect on performance. B. Removal of merit pay lowers satisfaction but not performance. C. Departments and units with merit pay show higher performance. D. Merit pay has a sorting effect. 3.

The authors argue that for merit pay to live up to its potential, all of the following should be done EXCEPT _____.

Which of the following is NOT true of merit bonuses?

Which of the following statements is true of individual spot awards?

A. They are an example of long-term incentives. B. They are more expensive than merit pay increases. C. They are given to employees for exceptional performance as an add-on bonus. D. They are given to all employees as a one-time cost-of-living adjustment. 6.

Which of the following is NOT true about individual spot awards?

A. Smaller companies may be more casual about recognition for spot awards. B. Someone in an organization alerts top management about performances deserving of an award. C. A majority of companies do not feel that these awards are effective. D. Smaller companies are more subjective about deciding the size of the award. 7.

One common feature of all types of incentive plans is:

A. an established standard of performance that is used to determine the magnitude of the incentive pay. B. a sharing contract between the employees and employers, which stipulates that the losses incurred by the companies will be shared by both employees and employers. C. the established formula that specifies the maximum percentage of base pay allocated as incentives. D. a risk-sharing plan that increases pay depending upon the turnover rate of a company. 8.

Which of the following does NOT provide for incentives based on standards that are expressed in terms of time period per unit of production?

A. Gantt plan B. Rowan plan C. Halsey 50-50 method D. Merrick system 9.

Paying a dime for every bottle collected and turned into a collection center is an example of a:

A. standard hour plan. B. Merrick system. C. straight piecework system. D. Rowan plan.

10. The most frequently used incentive system is the:

A. standard hour plan. B. straight piecework system. C. Merrick system. D. Taylor differential piece-rate plan. 11. A _____ plan requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action.

A. standard hour B. Rowan C. Bedeaux D. Merrick 12. An incentive system with three piecework rates is the _____ plan.

A. Taylor B. Gantt C. Halsey 50-50 D. Merrick 13. If you had repair work done on your car, the shop most likely used the _____ plan to pay the mechanic.

A. Bedeaux B. standard hour C. Halsey 50-50 D. straight piecework 14. For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the _____ plan.

A. Halsey 50-50 B. Gantt C. Taylor D. Rowan

15. Menthorp Inc. wants to design a variable-pay plan that fosters teamwork and business knowledge of its employees. In order to ensure maximum motivation, Menthorp wants its variable-pay plan to show a clear performance-reward link. Which of the following plans is most suitable for Menthorp?

A. Gain-sharing plan B. Cash profit sharing plan C. Stock ownership plan D. Stock options plan 16. TreeDen Corp. experiences an increase in employee turnover rate. Upon investigating, it discovers that employees are dissatisfied with the company's pay. Employees cannot see a direct link between their performance and their pay. They are also unhappy about having to pay out of their pockets to obtain grants. In this case, TreeDen is most likely using a _____.

A. stock ownership plan B. cash profit sharing plan C. gain-sharing plan D. team incentive plan 17. Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants to introduce a variable-pay plan that is easy to understand and does not cost much to administer. Which of the following variable-pay plans is Maxwell most likely to introduce?

A. Balanced scorecard plan B. Gain-sharing plan C. Stock ownership plan D. Cash profit sharing plan 18. Which of the following is the most commonly used team incentive performance standard?

A. Quality of goods B. Customer satisfaction measures C. Financial performance D. Quality of services

19. When a firm is _____ on business risk, and its outcomes are _____, its performance is more likely to be higher without any incentive plans.

A. variable; certain B. high; uncertain C. low; certain D. low; invariable 20. Which of the following is an advantage of providing stock ownership options as variable pay to employees?

A. It reinforces team identity. B. It is the simplest type of variable-pay plan. C. It defers a portion of taxes to employees. D. It provides a direct pay-performance link. 21. _____ have the disadvantage of requiring employees to spend money to obtain their incentive.

A. Cash profit sharing plans B. Balanced scorecard plans C. Stock options plans D. Deferred profit sharing plans 22. Which of the following is an advantage of gain-sharing plans?

A. They are the simplest type of variable-pay plan. B. They allow payouts to occur even if a company's financial performance is poor. C. They are administratively easy to implement. D. They increase employees' knowledge of business. 23. Which of the following is a disadvantage of gain-sharing plans?

A. Payouts can occur even if a company's financial performance is poor. B. Pay-performance link is indirect. C. Employees are required to put up money to exercise grants. D. Mandatory stock ownership required by gain-sharing plans can increase turnover rates.

24. Which of the following is NOT an advantage of team incentives?

A. Stimulates problem solving B. May better reflect how work is performed C. Easy to set equitable targets for all teams D. Minimizes distinctions between team members 25. All of the following support the use of individual incentives EXCEPT:

A. the independent nature of task accomplishment. B. the high commitment levels of workers to their profession. C. the readily apparent performance standards. D. the presence of a union. 26. A team leader with a free-rider problem in his team can most likely maximize the performance of his team by:

A. instructing them to do their best. B. specifying performance levels and due dates. C. assigning tasks only to the top performers in the team. D. punishing free riders who fail to meet standards. 27. In gain-sharing plan formulas, _____ are in the numerator and _____ are in the denominator.

A. productivity measures; inputs B. productivity measures; labor inputs C. costs; revenues D. labor inputs; productivity outcomes 28. Components identified as vital to the success of both Scanlon and Rucker plans are:

29. Which of the following is NOT a long-term incentive plan?

A. ESOPs B. Broad-based option plans (BBOPs) C. Improshares D. Performance plans 30. The trend in recent variable-pay design is to combine the best of _____ and _____ plans.

A. individual; group B. gain-sharing; profit-sharing C. Halsey 50-50; Rowan D. balanced scorecard; cash profit sharing

True / False Questions

31. The percentage of companies using some form of variable pay is declining because many employees prefer base wages. True

False

32. Merit pay is a pay-for-performance plan used for more than three-quarters of all exempt, clerical, and administrative employees. True

False

33. High performance ratings are nearly always statistically related to high merit increases. True

False

34. In the long run, merit bonuses cost employers less than merit pay. True

False

35. All incentive plans share an established standard against which worker performance is compared to determine the magnitude of the incentive pay. True

False

36. Standard hour plans are better for nonrepetitive jobs requiring numerous skills for completion. True

False

37. A fast and efficient worker would earn more money under a Rowan plan than under a Halsey 50-50. True

False

38. The Rowan plan uses a standard that is purposefully set high requiring high performance levels. True

False

39. Employees working under individual incentive plans tend to resist the introduction of new technology. True

False

40. Individual incentives yield higher productivity gains than group incentives. True

False

41. The free-rider problem is common in firms using individual incentive plans. True

False

42. Unions prefer individual incentive pay plans to group incentive pay plans since members can earn more money. True

False

43. A group performance-based pay plan is superior to an individual plan when production methods and labor mix must change to meet changing pressures. True

False

44. Gain-sharing plans do not to use a historical standard to set productivity standards since environmental conditions can change quickly. True

False

45. A major problem in group incentive plans is that performance targets are not correctly set. True

False

46. Scanlon plans are designed to lower labor costs by lowering the level of a firm's activity. True

False

47. An advantage of group incentives is that it leads to increased line-of-sight. True

False

48. Many variable-pay plans have some form of profit trigger linked to revenue growth or profit margins. True

False

49. Performance plans typically feature corporate performance objectives for a time three years in the future. True

False

50. A combination plan often favored by CEOs who don't like to make payouts when the company loses money is a completely self-funding plan. True

False

Short Answer Questions

51. Discuss the trends that are leading to the increased interest in variable pay.

52. Why do companies prefer merit bonuses over merit pay increases?

53. Discuss the plans that provide for variable incentives linked to a standard expressed as a time period per unit of production.

54. Discuss SVOP.

55. What is the difference between success-sharing plans and risk-sharing plans?

Chapter 10 Pay-for-Performance Plans Answer Key

Multiple Choice Questions

Surveys show the most popular type of variable pay plans are _____.

A. stock option plans B. gainsharing plans C. individual incentive plans D. special recognition plans Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Is a Pay-for-Performance Plan?

Which of the following statements about merit pay is NOT true?

The authors argue that for merit pay to live up to its potential, all of the following should be done EXCEPT _____.

A. using more peer raters than supervisor raters B. improving the accuracy of appraisals C. allocating enough merit money to truly reward performance D. ensuring the size of the merit increase differentiates across performance levels Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Specific Pay-for-Performance Plans: Short Term

Which of the following is NOT true of merit bonuses?

A. They are viewed as less of an entitlement than merit pay. B. They are more expensive than merit pay in the long run. C. Employees dislike them. D. They are thought to be a substitute for merit pay. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Specific Pay-for-Performance Plans: Short Term

Which of the following statements is true of individual spot awards?

Which of the following is NOT true about individual spot awards?

One common feature of all types of incentive plans is:

Which of the following does NOT provide for incentives based on standards that are expressed in terms of time period per unit of production?

A. Gantt plan B. Rowan plan C. Halsey 50-50 method D. Merrick system Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

Paying a dime for every bottle collected and turned into a collection center is an example of a:

A. standard hour plan. B. Merrick system. C. straight piecework system. D. Rowan plan. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Specific Pay-for-Performance Plans: Short Term

10.

The most frequently used incentive system is the:

A. standard hour plan. B. straight piecework system. C. Merrick system. D. Taylor differential piece-rate plan. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

11.

A _____ plan requires division of a task into simple actions and determination of the time required by an average skilled worker to complete each action.

A. standard hour B. Rowan C. Bedeaux D. Merrick Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

12.

An incentive system with three piecework rates is the _____ plan.

A. Taylor B. Gantt C. Halsey 50-50 D. Merrick Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

13.

If you had repair work done on your car, the shop most likely used the _____ plan to pay the mechanic.

A. Bedeaux B. standard hour C. Halsey 50-50 D. straight piecework Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

14.

For any task completed in standard time or less, earnings are pegged at 120 percent of the time saved under the _____ plan.

A. Halsey 50-50 B. Gantt C. Taylor D. Rowan Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

15.

Menthorp Inc. wants to design a variable-pay plan that fosters teamwork and business knowledge of its employees. In order to ensure maximum motivation, Menthorp wants its variable-pay plan to show a clear performance-reward link. Which of the following plans is most suitable for Menthorp?

A. Gain-sharing plan B. Cash profit sharing plan C. Stock ownership plan D. Stock options plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Team Incentive Plans: Types 10-14 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

16.

TreeDen Corp. experiences an increase in employee turnover rate. Upon investigating, it discovers that employees are dissatisfied with the company's pay. Employees cannot see a direct link between their performance and their pay. They are also unhappy about having to pay out of their pockets to obtain grants. In this case, TreeDen is most likely using a _____.

A. stock ownership plan B. cash profit sharing plan C. gain-sharing plan D. team incentive plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Team Incentive Plans: Types

17.

Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants to introduce a variable-pay plan that is easy to understand and does not cost much to administer. Which of the following variable-pay plans is Maxwell most likely to introduce?

A. Balanced scorecard plan B. Gain-sharing plan C. Stock ownership plan D. Cash profit sharing plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Team Incentive Plans: Types

18.

Which of the following is the most commonly used team incentive performance standard?

A. Quality of goods B. Customer satisfaction measures C. Financial performance D. Quality of services Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

19.

When a firm is _____ on business risk, and its outcomes are _____, its performance is more likely to be higher without any incentive plans.

A. variable; certain B. high; uncertain C. low; certain D. low; invariable Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

20.

Which of the following is an advantage of providing stock ownership options as variable pay to employees?

A. It reinforces team identity. B. It is the simplest type of variable-pay plan. C. It defers a portion of taxes to employees. D. It provides a direct pay-performance link. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Team Incentive Plans: Types

21.

_____ have the disadvantage of requiring employees to spend money to obtain their incentive.

A. Cash profit sharing plans B. Balanced scorecard plans C. Stock options plans D. Deferred profit sharing plans Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

22.

Which of the following is an advantage of gain-sharing plans?

A. They are the simplest type of variable-pay plan. B. They allow payouts to occur even if a company's financial performance is poor. C. They are administratively easy to implement. D. They increase employees' knowledge of business. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Team Incentive Plans: Types

23.

Which of the following is a disadvantage of gain-sharing plans?

24.

Which of the following is NOT an advantage of team incentives?

A. Stimulates problem solving B. May better reflect how work is performed C. Easy to set equitable targets for all teams D. Minimizes distinctions between team members Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Team Incentive Plans: Types

25.

All of the following support the use of individual incentives EXCEPT:

A. the independent nature of task accomplishment. B. the high commitment levels of workers to their profession. C. the readily apparent performance standards. D. the presence of a union. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Team Incentive Plans: Types

26.

A team leader with a free-rider problem in his team can most likely maximize the performance of his team by:

A. instructing them to do their best. B. specifying performance levels and due dates. C. assigning tasks only to the top performers in the team. D. punishing free riders who fail to meet standards. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Team Incentive Plans: Types

27.

In gain-sharing plan formulas, _____ are in the numerator and _____ are in the denominator.

A. productivity measures; inputs B. productivity measures; labor inputs C. costs; revenues D. labor inputs; productivity outcomes Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

28.

Components identified as vital to the success of both Scanlon and Rucker plans are:

A. top management support and primary focus on wage incentives. B. a flexible pay out formula and low turnover rates. C. union and top management support. D. a productivity norm and effective worker committees. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Team Incentive Plans: Types

29.

Which of the following is NOT a long-term incentive plan?

A. ESOPs B. Broad-based option plans (BBOPs) C. Improshares D. Performance plans Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

30.

The trend in recent variable-pay design is to combine the best of _____ and _____ plans.

A. individual; group B. gain-sharing; profit-sharing C. Halsey 50-50; Rowan D. balanced scorecard; cash profit sharing Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

True / False Questions

31.

The percentage of companies using some form of variable pay is declining because many employees prefer base wages. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Is a Pay-for-Performance Plan?

32.

Merit pay is a pay-for-performance plan used for more than three-quarters of all exempt, clerical, and administrative employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: What Is a Pay-for-Performance Plan?

33.

High performance ratings are nearly always statistically related to high merit increases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

34.

In the long run, merit bonuses cost employers less than merit pay. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

35.

All incentive plans share an established standard against which worker performance is compared to determine the magnitude of the incentive pay. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

36.

Standard hour plans are better for nonrepetitive jobs requiring numerous skills for completion. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy 10-19 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Topic: Specific Pay-for-Performance Plans: Short Term

37.

A fast and efficient worker would earn more money under a Rowan plan than under a Halsey 50-50. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

38.

The Rowan plan uses a standard that is purposefully set high requiring high performance levels. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

39.

Employees working under individual incentive plans tend to resist the introduction of new technology. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Specific Pay-for-Performance Plans: Short Term

40.

Individual incentives yield higher productivity gains than group incentives. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

41.

The free-rider problem is common in firms using individual incentive plans. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

42.

Unions prefer individual incentive pay plans to group incentive pay plans since members can earn more money. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

43.

A group performance-based pay plan is superior to an individual plan when production methods and labor mix must change to meet changing pressures. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

44.

Gain-sharing plans do not to use a historical standard to set productivity standards since environmental conditions can change quickly. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

45.

A major problem in group incentive plans is that performance targets are not correctly set. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

46.

Scanlon plans are designed to lower labor costs by lowering the level of a firm's activity. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

47.

An advantage of group incentives is that it leads to increased line-of-sight. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

48.

Many variable-pay plans have some form of profit trigger linked to revenue growth or profit margins. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Team Incentive Plans: Types

49.

Performance plans typically feature corporate performance objectives for a time three years in the future. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Explosive Interest in Long-Term Incentive Plans

50.

A combination plan often favored by CEOs who don't like to make payouts when the company loses money is a completely self-funding plan. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Explosive Interest in Long-Term Incentive Plans

Short Answer Questions

51.

Discuss the trends that are leading to the increased interest in variable pay.

The greater interest in variable pay probably can be traced to two trends. First, the increasing competition from foreign producers forces American firms to cut costs and/or increase productivity. Second, today's fast-paced business environment means that workers must be willing to adjust what they do and how they do it. Failure to adapt to new technologies, new work processes, and new work relationships could lead to possible layoffs and terminations. To avoid this scenario, compensation experts are focusing on ways to design reward systems so that workers will be able—and willing—to move quickly into new jobs and new ways of performing old jobs. The ability and incentive to learn these come partially from reward systems that more closely link worker interests with the objectives of the company.

Difficulty: 2 Medium Topic: What Is a Pay-for-Performance Plan?

52.

Why do companies prefer merit bonuses over merit pay increases?

Merit bonuses can be considerably less expensive than merit pay over the long run. Analysis says that over a fixed period, the increase in merit pay will be higher than it is under a merit bonus plan. By giving merit bonuses for several years, a company is essentially freezing base pay. This is why costconscious firms report switching to merit pay. It also should be no surprise that employees aren't particularly fond of merit bonuses.

Difficulty: 2 Medium Topic: Specific Pay-for-Performance Plans: Short Term

53.

Discuss the plans that provide for variable incentives linked to a standard expressed as a time period per unit of production.

In the Halsey 50-50 plan, an allowed time for a task is determined via time study. The savings from completion of a task in less than the standard time are allocated 50-50 (most frequent division) between the worker and the company. The Rowan plan is similar to the Halsey plan in that an employer and employee both share in savings resulting from work completed in less than standard time. The major distinction in this plan, however, is that a worker's bonus increases as the time required to complete the task decreases. The Gantt plan differs from both the Halsey and the Rowan plans in that the standard time for a task is purposely set at a level requiring high effort to complete. Any worker who fails to complete the task in the standard time is guaranteed a preestablished wage.

Difficulty: 2 Medium Topic: Specific Pay-for-Performance Plans: Short Term

54.

Discuss SVOP.

Scanlon plans are designed to lower labor costs without lowering the level of a firm's activity. Incentives are derived as a function of the ratio between labor costs and sales value of production (SVOP). The SVOP includes sales revenue and the value of goods in inventory.

Difficulty: 2 Medium Topic: Team Incentive Plans: Types

55.

What is the difference between success-sharing plans and risk-sharing plans?

In success-sharing plans, employee base wages are constant and variable pay adds on during successful years. If the company does well, you receive a predetermined amount of variable pay. If the company does poorly, you simply forgo any variable pay—there is no reduction in your base pay, though. In a risk-sharing plan, base pay is reduced by some amount relative to the level that would be offered in a success-sharing plan. At-risk plans shift part of the risk of doing business from the company to the employee.

Difficulty: 2 Medium Topic: Team Incentive Plans: Types

Chapter 11 Performance Appraisals

Multiple Choice Questions

Deming's major argument regarding performance appraisals is that:

Telling raters that sometimes the work environment and system affect job performance more than the individual employee's behavior:

A. makes the ratings completely accurate. B. leads to higher ratings. C. has no effect on the ratings. D. leads to lower ratings. 3.

In _____ ranking, raters look at a list of employees, decide who the best employee is, and cross that person's name off the list. From the remaining names, the manager decides who the worst employee is and crosses that name off the list—and so forth.

A. paired-comparison B. straight C. alternation D. forced distribution 4.

Which of the following types of rankings would be least preferred by managers of more than 10-15 employees?

A. Straight ranking B. Alternation ranking C. Paired-comparison ranking D. Forced distribution ranking 11-1 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

A major criticism of standard rating scales is that:

A. raters have different definitions of scale levels. B. raters find them hard to use. C. they are expensive to develop. D. they encourage halo and horns errors. 6.

The most common form of outcomes-based appraisal is:

A. the essay method. B. MBO. C. the performance standards review. D. the BARS. 7.

Which of the following is a negative outcome of the management by objectives method?

A. Increased difficulty of the planning process B. Decrease in superior/subordinate communication C. Increase in performance pressure and stress D. Lack of direction for work units 8.

Which of the following is the best appraisal format in terms of legal defensibility?

A. BARS B. MBO C. Essay format D. Ranking method 9.

The best appraisal format for employee development is:

A. the BARS format. B. the MBO format. C. the essay format. D. the ranking format.

10. _____ is the best appraisal format across the five criteria for evaluating rating formats.

A. Ranking B. MBO C. BARS D. Standard rating scales 11. Which of the following rating formats has the lowest rating errors?

A. Standard rating scales B. BARS C. MBO D. Ranking 12. When a job involves very routine, mechanistic tasks, the most appropriate appraisal format is:

A. BARS. B. MBO. C. standard rating scales. D. alternation ranking. 13. In which of the following jobs is it most appropriate to use behaviorally anchored rating scales?

A. The job of a trainer that requires training new employees every month B. The job of a web designer that requires designing websites according to client expectations C. An assembly line job that requires tightening nuts on an engine D. A client relations job that requires bringing in new clients to a firm 14. In situations where the nature of the task is so uncertain that it may be difficult to specify expected goals, the most appropriate rating format is _____.

A. an MBO format B. a standard rating scale C. a behaviorally anchored rating scale D. an essay format

15. Which of the following is NOT a strength of supervisors as raters?

A. They are knowledgeable about subordinates' jobs. B. Their ratings are immune to halo and leniency errors. C. Supervisors have rating experience. D. They assign work to subordinates. 16. Among peer raters, the most objective evaluations are given by:

A. workers who are friends of the ratees. B. workers who are not close friends with ratees. C. high-performing workers. D. low-performing workers. 17. Which of the following is NOT true regarding self-ratings?

A. They are done by someone who has the most complete knowledge about the ratee's performance. B. They are best used for development. C. They are often used as the first step in the appraisal process. D. They are immune to leniency errors. 18. Subordinate ratings _____.

A. are likely to be inflated if they are not anonymous B. are immune to halo errors C. are immune to horn errors D. are used by 70 percent of all team-style organizations 19. A study of ratings of managers found that approximately only _____ percent of the managers were rated below average.

A. 30 B. 20 C. 10 D. 5

20. A horn error occurs when an employee is:

A. consistently rated higher than deserved. B. given a favorable rating on all job duties based on his or her impressive performance in just one job function. C. downgraded across all performance dimensions because of poor performance on one dimension. D. consistently rated lower than deserved. 21. Last year your performance was not very good and your performance rating was below average, but this year you have done very well by exceeding your performance goals. To your surprise, your boss gives you just an average performance rating. What error has your boss most likely committed?

A. Horn error B. Halo error C. Severity error D. Spillover error 22. During the performance review of her employees, Sarah gives higher ratings to employees from her hometown, Oklahoma, as she believes that people from Oklahoma are hard working and trustworthy. Which of the following rating errors is Sarah exhibiting?

A. Severity error B. Horn error C. Spillover error D. Clone error 23. Jake's new car was dented by his employee, Steve. Ever since then, Jake has been consistently giving lower ratings to Steve during performance reviews to get back at him. Which of the following errors has been exhibited by Jake?

A. Halo error B. Severity error C. Leniency error D. Clone error 24. Which of the following is NOT true regarding performance appraisals?

A. Race has no effect in layoff decisions. B. Males are rated higher than females. C. Raters with traditional stereotypes rate females less accurately. D. Variation in performance affects ratings.

25. Which of the following statements is NOT true?

A. Workers who start out high in performance and then get worse are rated lower than workers who remain consistently low. B. Workers whose performance improves over time are seen as more motivated. C. Workers whose performance is consistently average are rated higher than those who perform better at the end of a rating cycle. D. Workers whose performance varies over time are seen as less motivated. 26. All of the following are categories of rater training EXCEPT _____ training.

A. rater-error B. performance-standard C. behavior modeling D. performance-dimension 27. Teaching raters what constitutes good, average, and poor performance is _____ training.

A. performance-standard B. rater-error C. performance-dimension D. Six-Sigma 28. Which of the following statements is true regarding rater training?

A. Training programs lasting over two hours are less successful than shorter ones. B. Rater-error training is more effective than performance-standard or performance-dimension training. C. Lectures to raters on how to improve ratings are always ineffective. D. Training to reduce halo errors and improve accuracy has been most successful. 29. Which of the following is statements is true of leniency errors?

A. It is the error of consistently rating someone higher than is deserved. B. It is the error of avoiding extremes in ratings across employees. C. It is the error of downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension. D. It is the error of giving better ratings to individuals who are like the rater in behavior and personality.

30. Louie received the highest performance rating and is in the second quartile of his pay range. He received a pay increase of 8 percent. Bart also received the highest performance rating and is in the fourth quartile. Given the way most merit increase grids work, what size of pay increase would you expect Bart to receive?

A. Less than 8 percent B. More than 8 percent C. 8 percent D. There is no relationship between ratings and position in pay range.

True / False Questions

31. The performance of hourly workers is more accurately tied to quantifiable measures than the performance of managerial workers. True

False

32. Employees who are dissatisfied with performance appraisals are less satisfied with their pay. True

False

33. Some experts argue that applying total-quality-management principles to performance appraisals can improve them. True

False

34. The total-quality-management advocates contend that informing raters that the work environment has more influence on performance than individual employee behavior will make the raters' rate lower. True

False

35. Halo error is the error that occurs when an employee is downgraded across all performance dimensions exclusively because of poor performance in one dimension. True

False

36. During performance appraisals, managers tend to focus on either good performance, counterproductive performance, or both. True

False

37. Rankings are more popular among managers than ratings as they are less complex. True

False

38. In contrast to ranking formats, rating formats require raters to evaluate employees on some absolute standard rather than relative to other employees. True

False

39. MBO requires more paperwork than other rating methods and increases both performance pressure and stress. True

False

40. In most Asian cultures, employees do not welcome performance feedback. True

False

41. The behaviorally anchored rating scales are inexpensive to develop but time-consuming to use. True

False

42. MBO is particularly well suited as a basis for administrative decisions such as pay raises. True

False

43. Subordinate ratings are more accurate when they are not anonymous. True

False

44. Supervisors tend to weigh negative attributes more heavily than positive attributes. True

False

45. Keeping a performance diary can help employers defend against discrimination charges stemming from performance ratings. True

False

46. When raters must justify their scoring of subordinates in writing, the rating is less accurate. True

False

47. Performance-standard training provides raters with a standard of comparison or frame of reference for making appraisals. True

False

48. Central tendency errors are the most difficult form of error to eliminate. True

False

49. The central issue involving merit pay is how to get employees to view raises as a reward for performance. True

False

50. For the same level of performance, employees low in a pay range receive higher percentage increases than employees higher in the range. True

False

Short Answer Questions

51. What was Deming's major criticism against performance appraisals?

52. Describe the paired-comparison ranking method.

53. Which is the most popular appraisal method that uses outcomes as a standard?

54. Why is it appropriate to define behavioral expectations only for highly routine tasks?

55. What are the types of pay systems that have low-motivation potential but provide equal increases to all employees regardless of performance?

Chapter 11 Performance Appraisals Answer Key

Multiple Choice Questions

Deming's major argument regarding performance appraisals is that:

A. the work situation is the major determinant of performance. B. performance appraisals reduce teamwork. C. peer ratings are better than supervisor ratings. D. lack of training makes performance appraisals redundant. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Role of Performance Appraisals in Compensation Decisions

Telling raters that sometimes the work environment and system affect job performance more than the individual employee's behavior:

A. makes the ratings completely accurate. B. leads to higher ratings. C. has no effect on the ratings. D. leads to lower ratings. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Role of Performance Appraisals in Compensation Decisions

A. paired-comparison B. straight C. alternation D. forced distribution Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

Which of the following types of rankings would be least preferred by managers of more than 10-15 employees?

A. Straight ranking B. Alternation ranking C. Paired-comparison ranking D. Forced distribution ranking Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

A major criticism of standard rating scales is that:

A. raters have different definitions of scale levels. B. raters find them hard to use. C. they are expensive to develop. D. they encourage halo and horns errors. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

The most common form of outcomes-based appraisal is:

A. the essay method. B. MBO. C. the performance standards review. D. the BARS. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

Which of the following is a negative outcome of the management by objectives method?

A. Increased difficulty of the planning process B. Decrease in superior/subordinate communication C. Increase in performance pressure and stress D. Lack of direction for work units Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

Which of the following is the best appraisal format in terms of legal defensibility?

A. BARS B. MBO C. Essay format D. Ranking method Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

The best appraisal format for employee development is:

A. the BARS format. B. the MBO format. C. the essay format. D. the ranking format. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

10.

_____ is the best appraisal format across the five criteria for evaluating rating formats.

A. Ranking B. MBO C. BARS D. Standard rating scales Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

11.

Which of the following rating formats has the lowest rating errors?

A. Standard rating scales B. BARS C. MBO D. Ranking Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

12.

When a job involves very routine, mechanistic tasks, the most appropriate appraisal format is:

A. BARS. B. MBO. C. standard rating scales. D. alternation ranking. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

13.

In which of the following jobs is it most appropriate to use behaviorally anchored rating scales?

A. The job of a trainer that requires training new employees every month B. The job of a web designer that requires designing websites according to client expectations C. An assembly line job that requires tightening nuts on an engine D. A client relations job that requires bringing in new clients to a firm Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Strategies for Better Understanding and Measuring Job Performance

14.

In situations where the nature of the task is so uncertain that it may be difficult to specify expected goals, the most appropriate rating format is _____.

A. an MBO format B. a standard rating scale C. a behaviorally anchored rating scale D. an essay format Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

15.

Which of the following is NOT a strength of supervisors as raters?

A. They are knowledgeable about subordinates' jobs. B. Their ratings are immune to halo and leniency errors. C. Supervisors have rating experience. D. They assign work to subordinates. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

16.

Among peer raters, the most objective evaluations are given by:

A. workers who are friends of the ratees. B. workers who are not close friends with ratees. C. high-performing workers. D. low-performing workers. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

17.

Which of the following is NOT true regarding self-ratings?

18.

Subordinate ratings _____.

A. are likely to be inflated if they are not anonymous B. are immune to halo errors C. are immune to horn errors D. are used by 70 percent of all team-style organizations Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

19.

A study of ratings of managers found that approximately only _____ percent of the managers were rated below average.

A. 30 B. 20 C. 10 D. 5 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

20.

A horn error occurs when an employee is:

A. consistently rated higher than deserved. B. given a favorable rating on all job duties based on his or her impressive performance in just one job function. C. downgraded across all performance dimensions because of poor performance on one dimension. D. consistently rated lower than deserved. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

21.

Last year your performance was not very good and your performance rating was below average, but this year you have done very well by exceeding your performance goals. To your surprise, your boss gives you just an average performance rating. What error has your boss most likely committed?

A. Horn error B. Halo error C. Severity error D. Spillover error Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Strategies for Better Understanding and Measuring Job Performance

22.

During the performance review of her employees, Sarah gives higher ratings to employees from her hometown, Oklahoma, as she believes that people from Oklahoma are hard working and trustworthy. Which of the following rating errors is Sarah exhibiting?

A. Severity error B. Horn error C. Spillover error D. Clone error Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Strategies for Better Understanding and Measuring Job Performance

23.

Jake's new car was dented by his employee, Steve. Ever since then, Jake has been consistently giving lower ratings to Steve during performance reviews to get back at him. Which of the following errors has been exhibited by Jake?

A. Halo error B. Severity error C. Leniency error D. Clone error Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Strategies for Better Understanding and Measuring Job Performance

24.

Which of the following is NOT true regarding performance appraisals?

A. Race has no effect in layoff decisions. B. Males are rated higher than females. C. Raters with traditional stereotypes rate females less accurately. D. Variation in performance affects ratings. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

25.

Which of the following statements is NOT true?

A. Workers who start out high in performance and then get worse are rated lower than workers who remain consistently low. B. Workers whose performance improves over time are seen as more motivated. C. Workers whose performance is consistently average are rated higher than those who perform better at the end of a rating cycle. D. Workers whose performance varies over time are seen as less motivated. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

26.

All of the following are categories of rater training EXCEPT _____ training.

A. rater-error B. performance-standard C. behavior modeling D. performance-dimension Accessibility: Keyboard Navigation

Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

27.

Teaching raters what constitutes good, average, and poor performance is _____ training.

A. performance-standard B. rater-error C. performance-dimension D. Six-Sigma Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

28.

Which of the following statements is true regarding rater training?

A. Training programs lasting over two hours are less successful than shorter ones. B. Rater-error training is more effective than performance-standard or performance-dimension training. C. Lectures to raters on how to improve ratings are always ineffective. D. Training to reduce halo errors and improve accuracy has been most successful. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

29.

Which of the following is statements is true of leniency errors?

30.

Louie received the highest performance rating and is in the second quartile of his pay range. He received a pay increase of 8 percent. Bart also received the highest performance rating and is in the fourth quartile. Given the way most merit increase grids work, what size of pay increase would you expect Bart to receive?

A. Less than 8 percent B. More than 8 percent C. 8 percent D. There is no relationship between ratings and position in pay range. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Tying Pay to Subjectively Appraised Performance

True / False Questions

31.

The performance of hourly workers is more accurately tied to quantifiable measures than the performance of managerial workers. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Role of Performance Appraisals in Compensation Decisions

32.

Employees who are dissatisfied with performance appraisals are less satisfied with their pay. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Role of Performance Appraisals in Compensation Decisions

33.

Some experts argue that applying total-quality-management principles to performance appraisals can improve them. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Role of Performance Appraisals in Compensation Decisions

34.

The total-quality-management advocates contend that informing raters that the work environment has more influence on performance than individual employee behavior will make the raters' rate lower. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Role of Performance Appraisals in Compensation Decisions

35.

Halo error is the error that occurs when an employee is downgraded across all performance dimensions exclusively because of poor performance in one dimension. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

36.

During performance appraisals, managers tend to focus on either good performance, counterproductive performance, or both. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

37.

Rankings are more popular among managers than ratings as they are less complex. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

38.

In contrast to ranking formats, rating formats require raters to evaluate employees on some absolute standard rather than relative to other employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

39.

MBO requires more paperwork than other rating methods and increases both performance pressure and stress. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

40.

In most Asian cultures, employees do not welcome performance feedback. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

41.

The behaviorally anchored rating scales are inexpensive to develop but time-consuming to use. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

42.

MBO is particularly well suited as a basis for administrative decisions such as pay raises. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

43.

Subordinate ratings are more accurate when they are not anonymous. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

44.

Supervisors tend to weigh negative attributes more heavily than positive attributes. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

45.

Keeping a performance diary can help employers defend against discrimination charges stemming from performance ratings. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

46.

When raters must justify their scoring of subordinates in writing, the rating is less accurate. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

47.

Performance-standard training provides raters with a standard of comparison or frame of reference for making appraisals. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

48.

Central tendency errors are the most difficult form of error to eliminate. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategies for Better Understanding and Measuring Job Performance

49.

The central issue involving merit pay is how to get employees to view raises as a reward for performance. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Tying Pay to Subjectively Appraised Performance

50.

For the same level of performance, employees low in a pay range receive higher percentage increases than employees higher in the range. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Tying Pay to Subjectively Appraised Performance

Short Answer Questions

51.

What was Deming's major criticism against performance appraisals?

Deming contended that the work situation (not the individual) is the major determinant of performance. Variation in performance arises many times because employees don't have the necessary information, technology, or control to adequately perform their jobs. Further, Deming argued, individual work standards and performance ratings rob employees of pride and self-esteem.

Difficulty: 2 Medium Topic: The Role of Performance Appraisals in Compensation Decisions

52.

Describe the paired-comparison ranking method.

The paired-comparison ranking method simplifies the ranking process by forcing raters to make ranking judgments about discrete pairs of people. Each individual is compared separately with all others in the work group. The person who "wins" the most paired comparisons is ranked top in the group, and so on. When the size of the work group goes above 10 to 15 employees, the number of paired comparisons becomes unmanageable.

Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

53.

Which is the most popular appraisal method that uses outcomes as a standard?

The most common appraisal method is Management By Objectives (MBO). As a first step, organization objectives are identified from the strategic plan of the company. Each successively lower level in the organizational hierarchy is charged with identifying work objectives that will support attainment of organizational goals. It should be noted that the emphasis is on outcomes achieved by employees.

Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

54.

Why is it appropriate to define behavioral expectations only for highly routine tasks?

Only for highly routine, mechanistic tasks is it appropriate to specify behavioral expectations. For these routine tasks it is possible to identify the single sequence of appropriate behaviors for accomplishing a goal. Consequently, it is possible to identify behavioral anchors for a performance scale that illustrate varying levels of attainment of the proper sequence of activities. When tasks are less routine, it is more difficult to specify a single sequence of procedures that must be followed to accomplish a goal.

Difficulty: 2 Medium Topic: Strategies for Better Understanding and Measuring Job Performance

55.

What are the types of pay systems that have low-motivation potential but provide equal increases to all employees regardless of performance?

Two types of pay increase guidelines with low-motivation potential provide equal increases to all employees regardless of performance. The first type, a general increase, typically is found in unionized firms. A contract is negotiated that specifies an across-the-board, equal increase for each year of the contract. Similarly, in the second type, across-the-board increases often are linked to cost-of-living changes. When the CPI rises, some companies adjust base pay for all employees to reflect the rising costs.

Difficulty: 2 Medium Topic: Tying Pay to Subjectively Appraised Performance

Chapter 12 The Benefit Determination Process

Multiple Choice Questions

In 1959, benefits were approximately _____ percent of payroll and in 2010 it was approximately _____ percent of payroll.

A. 30; 50 B. 20; 38 C. 25; 30 D. 30; 60 2.

All of the following factors are reasons for the growth of benefits EXCEPT:

A. foreign lawsuits. B. unions. C. cost effectiveness of benefits. D. government impetus. 3.

Which of the following benefits is NOT mandated by state or federal legislation?

A. Workers' compensation B. Work/life balance C. Social security D. Unemployment insurance 4.

Which of the following statements is true of employee benefits?

A. Employers can substitute insurance benefits for job security. B. Group insurance benefits has relatively easy qualification standards. C. Most employee benefits are taxable. D. Many group-based benefits are obtained at a higher rate than could be obtained by employees acting on their own.

The typical employee can recall _____ percent of the benefits he or she receives.

A. almost 50 B. less than 15 C. over 30 D. 40 6.

Surveys show that the most highly valued benefit is:

A. dental coverage. B. life insurance. C. paid vacation and holidays. D. medical insurance. 7.

A survey shows that the majority of employers are responding to increased benefit costs by _____.

A. requiring employees to pay higher deductibles and copays B. laying off employees C. dropping health care plans D. relying on the Patient Protection and Affordable Care Act 8.

The first issue in setting up a benefits package is:

A benefit plan that allocates a set dollar amount to employees and allows them to select benefits is called _____ plan.

A. a select choice B. a no-deductible C. a flexible benefit D. a flat dollar benefit

10. Which of the following is NOT a disadvantage of flexible benefit programs?

A. Administrative burdens and expenses increase. B. Adverse selection of benefits by employees results in increase in costs. C. New benefits are more difficult to introduce. D. Flexible benefits are subject to nondiscrimination requirements in Section 125 of Internal Revenue Code. 11. Which of the following is an advantage of flexible benefit plans?

A. containment of costs of benefits. B. increased understanding of benefits by employees. C. reduced expense of introducing new benefits. D. decreased administrative expenses. 13. If a benefit forecast suggests future cost containment may be difficult, the benefit should:

A. be completely paid for by employees. B. be used on a noncontributory basis. C. not be used. D. be offered to employees only on a cost-sharing basis. 14. DrenchFort Corp. is a small company that pays high wages. As its wages are high, it does not provide any benefits. Recently, it has noticed that its employee turnover has increased, so it decides to provide benefits to retain employees. Which of the following benefits is most likely to reduce turnover?

A. Counseling service B. Early retirement plan C. Medical coverage D. Profit-sharing plan

15. Which of the following is NOT part of the cost-centered approach for deciding to provide a benefit?

A. Checking compliance B. Evaluating competitiveness of current benefits C. Examining employee preferences D. Basing benefits on historical costs 16. The most widely used benefit survey is conducted by:

A. the U.S. Chamber of Commerce. B. Watson-Wyatt. C. the Society for Human Resource Management. D. the American Compensation Association. 17. Various studies have found that only two specific benefits curtailed employee turnover: _____ and _____.

A. vacation days; dental plans B. profit-sharing plans; life insurance C. retirement benefits; paid vacations D. pensions; medical coverage 18. A recent survey shows employees ranking employee benefits _____ in explaining job satisfaction.

A. first B. second C. third D. last 19. How many weeks of leave does Family Medical Leave Act (1993) mandate for all workers at companies that employ 50 or more people?

A. 4 weeks B. 8 weeks C. 12 weeks D. 16 weeks

20. _____ allows employees who have resigned or have been laid off through no fault of their own to continue receiving health coverage under their employer's plan at a cost borne by the employee.

A. Health Maintenance Act (1973) B. FLSA (1938) C. The tax reform of 1982 D. COBRA (1984) 21. The _____ requires individuals to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship.

A. Patient Protection and Affordable Care Act B. Family and Medical Leave Act C. Health Maintenance Organization Act D. Consolidated Omnibus Budget Reconciliation Act 22. One of the most preferred benefits is _____.

A. stock plans B. profit sharing C. shorter working hours D. early retirement 23. _____ are NOT used for determining employee benefit preferences.

A. Demographic data B. Product market share data C. Employee surveys D. Cafeteria-style plans 24. _____ is the most frequently used medium for communicating employee benefits.

A. A notice board B. A seminar C. An employee benefit handbook D. A meeting with the chief executive officer

25. Trumbrella Corp. is a pharmaceuticals company. One of its employees reports that he had an on-the-job injury caused by slippery factory floor that broke his back. When Trumbrella initiates its claims processing, it should first:

A. determine whether the accident happened. B. determine if the employee is eligible for any benefit. C. calculate the payment required to be paid to the employee. D. contact the insurance companies to enquire about the possibility of a joint payment. 26. Which of the following companies uses probationary periods as a cost-containment measure?

A. Alpha Corp. combines the benefits offered for couples who work within the organization B. DLG Corp. excludes its new recruits from benefit coverage until they complete a year C. Kimberly Corp. requires employees in the lowest salary quartile to pay for 20 percent of benefits D. Amethyst Corp. limits its employees to avail coverage for only two dentist visits every six months 27. All of the following are cost-containment practices designed to reduce benefit costs EXCEPT:

A. probationary periods. B. provision of skills development training. C. copay. D. seeking competitive bids for benefit delivery. 28. The biggest cost-containment strategy in recent years is the movement to:

A. benefit limitations. B. HMOs. C. outsourcing. D. higher deductibles. 29. By limiting liability for an employee's hospital stay costs to $200,000, an employer is using a costcontainment measure known as:

A. dual coverage. B. benefit ceiling. C. coinsurance. D. deductible.

30. As part of the efforts to bring down the employee benefits cost to the company, GrindStop Corp. restricts the number of visits to the dentists covered in the dental plan to two per year. Which of the following costcontainment strategies is used by GrindStop?

A. Copay B. Benefit limitation C. Administrative cost containment D. Wellness program

True / False Questions

31. Today, benefits make up about 25 percent of payroll costs. True

False

32. Pension costs are of no concern to employers as the government handles the pension costs. True

False

33. All employee benefits provided by employers are taxable. True

False

34. The favorable tax status granted to many benefits is safe from the threat of recurrent tax reform proposals. True

False

35. A job ad stating generous benefits leads applicants to place higher value on benefits in choosing among jobs. True

False

36. Benefits can be an effective tool to attract and retain employees when the benefits address the needs of a target group. True

False

37. Cost pressure related to increasing diversity of the workforce is one of the reasons companies are offering flexible benefit plans. True

False

38. Flexible benefit plans eliminate the involvement of employees. True

False

39. A disadvantage of flexible benefit programs is that they increase administrative burdens. True

False

40. Employers prefer the noncontributory approach to financing benefits because this allows greater control of costs. True

False

41. A major reason for the proliferating cost of benefit programs is the narrow focus of benefit administrators. True

False

42. If the future cost containment of a benefit may be a problem, the benefit should be offered on a noncontributory basis. True

False

43. The only two benefits shown to reduce turnover are pensions and medical coverage. True

False

44. The Family Medical Leave Act of 1993 mandates 20 weeks of leave for all workers at companies that employ 10 or more people. True

False

45. The Employment Retirement Income Security Act (1974) requires employers to offer some form of pension. True

False

46. According to available evidence, companies can successfully remain nonunion by offering the same benefits as those provided by unionized firms. True

False

47. One of the best strategies for determining external equity is to conduct a benefit survey. True

False

48. Employees' preferences of various benefits can be predicted accurately from demographic data. True

False

49. No strong data exist linking benefits level and employee productivity. True

False

50. Employees prefer using their company's intranet for accessing their benefits information as they do not need to complete lengthy paperwork. True

False

Short Answer Questions

51. What is the role of government impetus in the development of employee benefits?

52. What are the four major administration issues that arise in setting up a benefit package?

53. What are the major disadvantages of a flexible benefits package?

54. What can administrators do to control the increasing benefits costs?

55. What are some of the common cost-containment practices with regard to benefits administration?

Chapter 12 The Benefit Determination Process Answer Key

Multiple Choice Questions

In 1959, benefits were approximately _____ percent of payroll and in 2010 it was approximately _____ percent of payroll.

A. 30; 50 B. 20; 38 C. 25; 30 D. 30; 60 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Why the Growth in Employee Benefits?

All of the following factors are reasons for the growth of benefits EXCEPT:

A. foreign lawsuits. B. unions. C. cost effectiveness of benefits. D. government impetus. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Why the Growth in Employee Benefits?

Which of the following benefits is NOT mandated by state or federal legislation?

A. Workers' compensation B. Work/life balance C. Social security D. Unemployment insurance Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Why the Growth in Employee Benefits?

Which of the following statements is true of employee benefits?

The typical employee can recall _____ percent of the benefits he or she receives.

A. almost 50 B. less than 15 C. over 30 D. 40 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Value of Employee Benefits

Surveys show that the most highly valued benefit is:

A. dental coverage. B. life insurance. C. paid vacation and holidays. D. medical insurance. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Value of Employee Benefits

A survey shows that the majority of employers are responding to increased benefit costs by _____.

A. requiring employees to pay higher deductibles and copays B. laying off employees C. dropping health care plans D. relying on the Patient Protection and Affordable Care Act Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Key Issues in Benefit Planning, Design, and Administration

The first issue in setting up a benefits package is:

A. finding out who should be protected or benefited. B. figuring out how much choice should employees have among benefits. C. determining how benefits should be financed. D. choosing legally defensible benefits. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Key Issues in Benefit Planning, Design, and Administration

A benefit plan that allocates a set dollar amount to employees and allows them to select benefits is called _____ plan.

A. a select choice B. a no-deductible C. a flexible benefit D. a flat dollar benefit Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

10.

Which of the following is NOT a disadvantage of flexible benefit programs?

A. Administrative burdens and expenses increase. B. Adverse selection of benefits by employees results in increase in costs. C. New benefits are more difficult to introduce. D. Flexible benefits are subject to nondiscrimination requirements in Section 125 of Internal Revenue Code. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Key Issues in Benefit Planning, Design, and Administration

11.

Which of the following is an advantage of flexible benefit plans?

A. They require no expenditure from the employers. B. They decrease the administrative burdens for employers. C. They decrease the costs as employees pick only those benefits they will use resulting in the subsequent high benefit utilization. D. They increase the involvement of employees in choosing benefit plans. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Key Issues in Benefit Planning, Design, and Administration 12-13 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12.

All of the following are advantages of flexible benefits EXCEPT:

A. containment of costs of benefits. B. increased understanding of benefits by employees. C. reduced expense of introducing new benefits. D. decreased administrative expenses. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Key Issues in Benefit Planning, Design, and Administration

13.

If a benefit forecast suggests future cost containment may be difficult, the benefit should:

A. be completely paid for by employees. B. be used on a noncontributory basis. C. not be used. D. be offered to employees only on a cost-sharing basis. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Components of a Benefit Plan

14.

DrenchFort Corp. is a small company that pays high wages. As its wages are high, it does not provide any benefits. Recently, it has noticed that its employee turnover has increased, so it decides to provide benefits to retain employees. Which of the following benefits is most likely to reduce turnover?

A. Counseling service B. Early retirement plan C. Medical coverage D. Profit-sharing plan Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Components of a Benefit Plan

15.

Which of the following is NOT part of the cost-centered approach for deciding to provide a benefit?

A. Checking compliance B. Evaluating competitiveness of current benefits C. Examining employee preferences D. Basing benefits on historical costs Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Components of a Benefit Plan 12-14 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

16.

The most widely used benefit survey is conducted by:

A. the U.S. Chamber of Commerce. B. Watson-Wyatt. C. the Society for Human Resource Management. D. the American Compensation Association. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

17.

Various studies have found that only two specific benefits curtailed employee turnover: _____ and _____.

A. vacation days; dental plans B. profit-sharing plans; life insurance C. retirement benefits; paid vacations D. pensions; medical coverage Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

18.

A recent survey shows employees ranking employee benefits _____ in explaining job satisfaction.

A. first B. second C. third D. last Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

19.

How many weeks of leave does Family Medical Leave Act (1993) mandate for all workers at companies that employ 50 or more people?

A. 4 weeks B. 8 weeks C. 12 weeks D. 16 weeks Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan 12-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

20.

_____ allows employees who have resigned or have been laid off through no fault of their own to continue receiving health coverage under their employer's plan at a cost borne by the employee.

A. Health Maintenance Act (1973) B. FLSA (1938) C. The tax reform of 1982 D. COBRA (1984) Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

21.

The _____ requires individuals to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship.

A. Patient Protection and Affordable Care Act B. Family and Medical Leave Act C. Health Maintenance Organization Act D. Consolidated Omnibus Budget Reconciliation Act Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

22.

One of the most preferred benefits is _____.

A. stock plans B. profit sharing C. shorter working hours D. early retirement Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

23.

_____ are NOT used for determining employee benefit preferences.

A. Demographic data B. Product market share data C. Employee surveys D. Cafeteria-style plans Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan 12-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24.

_____ is the most frequently used medium for communicating employee benefits.

A. A notice board B. A seminar C. An employee benefit handbook D. A meeting with the chief executive officer Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering the Benefit Program

25.

Trumbrella Corp. is a pharmaceuticals company. One of its employees reports that he had an on-the-job injury caused by slippery factory floor that broke his back. When Trumbrella initiates its claims processing, it should first:

A. determine whether the accident happened. B. determine if the employee is eligible for any benefit. C. calculate the payment required to be paid to the employee. D. contact the insurance companies to enquire about the possibility of a joint payment. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Administering the Benefit Program

26.

Which of the following companies uses probationary periods as a cost-containment measure?

A. Alpha Corp. combines the benefits offered for couples who work within the organization B. DLG Corp. excludes its new recruits from benefit coverage until they complete a year C. Kimberly Corp. requires employees in the lowest salary quartile to pay for 20 percent of benefits D. Amethyst Corp. limits its employees to avail coverage for only two dentist visits every six months Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Administering the Benefit Program

27.

All of the following are cost-containment practices designed to reduce benefit costs EXCEPT:

A. probationary periods. B. provision of skills development training. C. copay. D. seeking competitive bids for benefit delivery. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Administering the Benefit Program 12-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

28.

The biggest cost-containment strategy in recent years is the movement to:

A. benefit limitations. B. HMOs. C. outsourcing. D. higher deductibles. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering the Benefit Program

29.

By limiting liability for an employee's hospital stay costs to $200,000, an employer is using a costcontainment measure known as:

A. dual coverage. B. benefit ceiling. C. coinsurance. D. deductible. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Administering the Benefit Program

30.

As part of the efforts to bring down the employee benefits cost to the company, GrindStop Corp. restricts the number of visits to the dentists covered in the dental plan to two per year. Which of the following cost-containment strategies is used by GrindStop?

A. Copay B. Benefit limitation C. Administrative cost containment D. Wellness program Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Administering the Benefit Program

True / False Questions

31.

Today, benefits make up about 25 percent of payroll costs. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Why the Growth in Employee Benefits?

32.

Pension costs are of no concern to employers as the government handles the pension costs. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Why the Growth in Employee Benefits?

33.

All employee benefits provided by employers are taxable. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Why the Growth in Employee Benefits?

34.

The favorable tax status granted to many benefits is safe from the threat of recurrent tax reform proposals. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Why the Growth in Employee Benefits?

35.

A job ad stating generous benefits leads applicants to place higher value on benefits in choosing among jobs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Value of Employee Benefits

36.

Benefits can be an effective tool to attract and retain employees when the benefits address the needs of a target group. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

37.

Cost pressure related to increasing diversity of the workforce is one of the reasons companies are offering flexible benefit plans. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

38.

Flexible benefit plans eliminate the involvement of employees. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

39.

A disadvantage of flexible benefit programs is that they increase administrative burdens. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

40.

Employers prefer the noncontributory approach to financing benefits because this allows greater control of costs. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

41.

A major reason for the proliferating cost of benefit programs is the narrow focus of benefit administrators. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

42.

If the future cost containment of a benefit may be a problem, the benefit should be offered on a noncontributory basis. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

43.

The only two benefits shown to reduce turnover are pensions and medical coverage. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

44.

The Family Medical Leave Act of 1993 mandates 20 weeks of leave for all workers at companies that employ 10 or more people. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

45.

The Employment Retirement Income Security Act (1974) requires employers to offer some form of pension. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

46.

According to available evidence, companies can successfully remain nonunion by offering the same benefits as those provided by unionized firms. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

47.

One of the best strategies for determining external equity is to conduct a benefit survey. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

48.

Employees' preferences of various benefits can be predicted accurately from demographic data. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

49.

No strong data exist linking benefits level and employee productivity. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Components of a Benefit Plan

50.

Employees prefer using their company's intranet for accessing their benefits information as they do not need to complete lengthy paperwork. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Administering the Benefit Program

Short Answer Questions

51.

What is the role of government impetus in the development of employee benefits?

Three employee benefits are mandated by either the state or federal government: workers' compensation (state), unemployment insurance (federal), and social security (federal). In addition, most other employee benefits are affected by such laws as the Employee Retirement Income Security Act (ERISA), which affects pension administration, and various sections of the Internal Revenue Code.

Difficulty: 2 Medium Topic: Why the Growth in Employee Benefits?

52.

What are the four major administration issues that arise in setting up a benefit package?

Four major administration issues arise in setting up a benefit package: (1) Who should be protected or benefited? (2) How much choice should employees have among an array of benefits? (3) How should benefits be financed? and (4) Are your benefits legally defensible?

Difficulty: 1 Easy Topic: Key Issues in Benefit Planning, Design, and Administration

53.

What are the major disadvantages of a flexible benefits package?

The major disadvantages of a flexible benefits package are as follows: • Employees make bad choices and find themselves not covered for predictable emergencies. • Administrative burdens and expenses increase. • Adverse selection: Employees pick only benefits they will use; the subsequent high benefit utilization increases its cost. • They are subject to nondiscrimination requirements in Section 125 of the Internal Revenue Code.

Difficulty: 2 Medium Topic: Key Issues in Benefit Planning, Design, and Administration

54.

What can administrators do to control the increasing benefits costs?

To control spiraling benefits costs, administrators should adopt a broader, cost-centered approach. As a first step, this approach would require policy decisions on the level of benefit expenditures acceptable both in the short and the long runs. A cost-centered approach would require that benefit administrators, in cooperation with insurance carriers and armed with published forecasts of anticipated costs for particular benefits, determine the cost commitments for the existing benefit package. Budget dollars not already earmarked may then be allocated to new benefits that best satisfy organizational goals. Factors affecting this decision include an evaluation of benefits offered by other firms and the competitiveness of the existing package. Also important is compliance with various legal requirements as they change over time. Finally, the actual benefit of a new option must be explored in relation to employee preferences.

Difficulty: 2 Medium Topic: Components of a Benefit Plan

55.

What are some of the common cost-containment practices with regard to benefits administration?

Employers are auditing their benefit options for cost containment opportunities. The most prevalent practices include: • Probationary periods—excluding new employees from benefit coverage until some term of employment (e.g., 3 months) is completed. • Benefit limitations—limiting disability income payments to some maximum percentage of income and limiting medical/dental coverage for specific procedures to a certain fixed amount. • Copay—requiring that employees pay a fixed or percentage amount for coverage. • Administrative cost containment—controlling costs through policies such as seeking competitive bids for program delivery.

Difficulty: 2 Medium Topic: Administering the Benefit Program

Chapter 13 Benefit Options

Multiple Choice Questions

Data from WellPoint Inc shows that _____ percent of its 29 million customers account for over 60 percent of its medical costs.

A. 7 B. 17 C. 27 D. 37 2.

Which of the following is NOT a benefit that is required by statutory law?

A. Workers' compensation B. Social Security C. Pension and retirement benefits D. Unemployment compensation 3.

Jennifer is hurt at work while driving a forklift. Her employer claims that she was injured as a result of her careless driving, and therefore she is not eligible for workers' compensation. What will be the outcome of the employer's challenge to her worker's compensation claim?

A. She will likely receive workers' compensation benefits. B. She will get nothing. C. Jennifer and her employer will share the blame and split the costs. D. The employer has the final word in determining Jennifer's eligibility. 4.

Experts attribute the decline in dollar cost of workers' compensation after 2005 relates to:

A. increased variable component of base wage. B. devaluation of the dollar. C. employer safety programs. D. relaxed federal regulations.

_____ relieve an employer's liability when a pre-employment injury combines with a work-related injury to produce a disability greater than that caused by the latter alone.

A. Collateral funds B. Second-injury funds C. Insolvency funds D. Pre-employment funds 6.

Which of the following types of workers are generally NOT covered by workers' compensation?

A. State government employees B. Private sector employees C. Railroad workers D. Farm workers 7.

The rising costs of Social Security have been covered by:

A. increases in the maximum earnings base and the rate at which that base is taxed. B. reduction in Social Security benefits by providing market-driven options. C. progressive reduction in the coverage. D. welfare grants and annual supplements from Congress. 8.

Which of the following is a benefit under Social Security?

A. Lump-sum death payments B. Job security C. Work/life balance D. Overtime pay 9.

Which of the following benefits is a federally administered program?

A. Workers' compensation B. Social Security C. Job security D. Occupational Safety and Health Act

10. For an employee to gain lifetime coverage under Social Security, they must have worked for _____ quarters during which they were covered by the Act.

A. 20 B. 30 C. 40 D. 10 11. In the majority of the states, unemployment insurance is financed exclusively by:

A. joint contributions by employee unions. B. the philanthropy of co-workers. C. federal, state, and employee contributions. D. employers that pay federal and state unemployment insurance. 12. Steve has a small company with 12 employees. One of his employees, Larry, has been laid off because his work has been outsourced. Larry had health coverage through Steve's company and wants to continue that coverage. According to COBRA, how long can Larry continue his coverage through Steve's company after being laid off?

A. 36 months B. 24 months C. 18 months D. 0 months 13. _____ is designed to lessen an employer's ability to deny coverage to an employee for a preexisting condition.

A. COBRA B. OSHA C. HIPPA D. FMLA 14. Michael was laid off by his company owing to budget cuts. Before being laid off, he earned $1,000 per week. If he has been receiving unemployment insurance benefits for 26 weeks, which of the following statements is true in this scenario?

A. Michael can continue to avail unemployment benefits for another 26 weeks. B. Michael is eligible for $1,000 per week if he can show that he has been earnestly searching for jobs. C. Michael is no longer eligible for unemployment benefits. D. Michael will now only be eligible for 20 percent of his previous income as unemployment benefits.

15. Today, _____ percent of the workers participate in the pension plan coverage provided by their employers.

A. 98 B. 12 C. 28 D. 53 16. The majority of defined benefit plans calculate average earnings over the last _____ years of service for a prospective retiree.

A. 2 to 4 B. 3 to 5 C. 6 to 8 D. 7 to 9 17. In a _____ plan, an employer agrees to provide a specific level of retirement pension, which is expressed as either a fixed dollar or a percentage-of-earnings amount that may vary (increase) with years of seniority in the company.

A. defined benefit B. noncontributory benefit C. 401(k) D. shared benefit 18. Which of the following is a feature of defined contribution plans?

A. They are faster to vest than defined benefit plans. B. They are characterized by high contribution rates. C. They are less portable than defined benefit plans. D. They are fully funded by employers. 19. Which of the following is a hybrid of defined benefit and defined contribution plans?

A. 401(k) plan B. Employee stock ownership plan C. Cash balance plan D. Profit-sharing plan

20. Jacob, an 18-year-old, has been working at HoldVille Corp. for over a year. If HoldVille offers full vesting after one year, which of the following statements is true?

A. Jacob is eligible for full pension as he has worked for over a year at HoldVille. B. Jacob is not eligible for pension as he is not over 21. C. Jacob is eligible for 20 percent of his pension if he has dependents. D. Jacob is not eligible for a pension if he quits of his own volition. 21. Maxford Corp. offers full vesting after two years. However, it does not offer portability of pension to its employees. Which of the following statements is true in this scenario?

A. Employees of Maxford will receive 20 percent of their pension if they quit after one year. B. Maxford does not have to provide vested benefits to employees who quit before six months. C. Employees of Maxford who quit can have their pension benefits transferred to the new employer. D. Maxford does not have to provide vested benefits if employees quit of their own volition after two years. 22. An employer experiencing high turnover and seeking to reduce pension cost is likely to prefer:

A. full vesting after three years. B. full vesting after six years. C. full vesting after seven years. D. partial vesting after two years. 23. What is the first question that should be asked when determining the amount of retirement income an employer should provide?

A. Should Social Security payments be factored in when considering the level of income an employee should have during retirement? B. How should seniority be factored into the payout formula? C. What level of retirement compensation would the employer like to set as a target, expressed in relation to pre-retirement earnings? D. Should other postretirement income sources be integrated with the pension payment? 24. An employee who changes jobs four or more times during his or her career will likely receive a pension approximately _____ as that of an employee whose working career is spent with one employer, assuming that both employees have the same starting salary and receive annual increases equal to inflation rate.

A. twice as large B. the same size C. one-fourth the size D. half the size

25. Roughly _____ of all employees have access to paid life insurance.

A. three-fourths B. half C. one-third D. a quarter 26. A health maintenance organization (HMO) pulls together a group of providers willing to provide services at an agreed upon rate in exchange for employers:

A. limiting employees to these providers for health services. B. paying 30 percent of employee salary to the HMO. C. laying off all contingent workers who are not eligible for insurance. D. providing free child care assistance to employees. 27. A _____ plan is a hybrid health plan combining the benefits of HMO and _____.

A. point-of-service; preferred provider organization B. POS; Blue Cross C. managed care; POS D. consolidated health; PPO 28. Some level of dental coverage is provided by about _____ percent of all employers with above 500 employees.

A. 30 B. 60 C. 11 D. 85 29. Almost _____ percent of the companies offering child care assistance to employees also offer elder care assistance.

A. 10 B. 30 C. 50 D. 90

30. Contingent workers receive _____ benefits than regular workers; contingent workers' benefits cost _____ for employers than it does for regular workers.

A. more; less B. fewer; more C. more; more D. fewer; less

True / False Questions

31. A McKinsey survey of CEOs found nearly 90 percent believe benefits are very important for attracting and retaining employees. True

False

32. Worker's compensation costs have been declining since 2005 due in part to employer safety programs. True

False

33. Workers' compensation is covered by federal laws. True

False

34. The Social Security Act has been designed and amended to provide a foundation of basic financial security for American workers and their families. True

False

35. A major problem with Social Security is a rising number of retirees without a corresponding increase in the number of contributors. True

False

36. Medicare is not part of Social Security. True

False

37. Jim was a full-time student for four years, but he could not find a job after graduating. Jim is eligible to collect unemployment insurance. True

False

38. Employers who have frequent layoffs pay higher tax rates than those with few layoffs. True

False

39. An eligible unemployed person may now collect unemployment insurance benefits for 36 weeks in most states. True

False

40. All employers with less than 20 employees must comply with the Consolidated Omnibus Budget Reconciliation Act. True

False

41. Most employers prefer defined contribution pension plans to defined benefit plans. True

False

42. Employees prefer defined contribution (DC) plans over defined benefit plans because DC plans tend to vest faster. True

False

43. A 401(k) is an example of a defined benefit plan. True

False

44. A qualified deferred compensation plan offers tax advantages to employers. True

False

45. Employees are the sole contributors to their cash balance plans. True

False

46. An individual retirement account is a tax-favored retirement savings plan that individuals can establish themselves. True

False

47. The Employee Retirement Income Security Act states that employers must offer a retirement plan to their employees if they work for at least 1,250 hours per year. True

False

48. Vesting refers to the length of time an employee must work for an employer before he or she is entitled to employer payments made into a pension plan. True

False

49. Under the Economic Growth and Tax Reconciliation Act of 2001, employers have three hundred vesting schedule options. True

False

50. The Pension Benefit Guarantee Corporation guarantees payment of vested benefits to employees formerly covered by terminated pension plans. True

False

Short Answer Questions

51. What is the central challenge of Social Security payments? How are they tackled?

52. What are the eligibility requirements for unemployment insurance?

53. What is the purpose of the HIPAA?

54. What is a cash balance plan?

55. Explain vesting and portability.

Chapter 13 Benefit Options Answer Key

Multiple Choice Questions

Data from WellPoint Inc shows that _____ percent of its 29 million customers account for over 60 percent of its medical costs.

A. 7 B. 17 C. 27 D. 37 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Legally Required Benefits

Which of the following is NOT a benefit that is required by statutory law?

A. Workers' compensation B. Social Security C. Pension and retirement benefits D. Unemployment compensation Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

Experts attribute the decline in dollar cost of workers' compensation after 2005 relates to:

A. increased variable component of base wage. B. devaluation of the dollar. C. employer safety programs. D. relaxed federal regulations. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Legally Required Benefits

_____ relieve an employer's liability when a pre-employment injury combines with a work-related injury to produce a disability greater than that caused by the latter alone.

A. Collateral funds B. Second-injury funds C. Insolvency funds D. Pre-employment funds Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

Which of the following types of workers are generally NOT covered by workers' compensation?

A. State government employees B. Private sector employees C. Railroad workers D. Farm workers Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

The rising costs of Social Security have been covered by:

Which of the following is a benefit under Social Security?

A. Lump-sum death payments B. Job security C. Work/life balance D. Overtime pay Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

Which of the following benefits is a federally administered program?

A. Workers' compensation B. Social Security C. Job security D. Occupational Safety and Health Act Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

10.

For an employee to gain lifetime coverage under Social Security, they must have worked for _____ quarters during which they were covered by the Act.

A. 20 B. 30 C. 40 D. 10 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Legally Required Benefits

11.

In the majority of the states, unemployment insurance is financed exclusively by:

12.

Steve has a small company with 12 employees. One of his employees, Larry, has been laid off because his work has been outsourced. Larry had health coverage through Steve's company and wants to continue that coverage. According to COBRA, how long can Larry continue his coverage through Steve's company after being laid off?

A. 36 months B. 24 months C. 18 months D. 0 months Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Legally Required Benefits

13.

_____ is designed to lessen an employer's ability to deny coverage to an employee for a preexisting condition.

A. COBRA B. OSHA C. HIPPA D. FMLA Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

14.

Michael was laid off by his company owing to budget cuts. Before being laid off, he earned $1,000 per week. If he has been receiving unemployment insurance benefits for 26 weeks, which of the following statements is true in this scenario?

15.

Today, _____ percent of the workers participate in the pension plan coverage provided by their employers.

A. 98 B. 12 C. 28 D. 53 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

16.

The majority of defined benefit plans calculate average earnings over the last _____ years of service for a prospective retiree.

A. 2 to 4 B. 3 to 5 C. 6 to 8 D. 7 to 9 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

17.

In a _____ plan, an employer agrees to provide a specific level of retirement pension, which is expressed as either a fixed dollar or a percentage-of-earnings amount that may vary (increase) with years of seniority in the company.

A. defined benefit B. noncontributory benefit C. 401(k) D. shared benefit Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

18.

Which of the following is a feature of defined contribution plans?

Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

19.

Which of the following is a hybrid of defined benefit and defined contribution plans?

A. 401(k) plan B. Employee stock ownership plan C. Cash balance plan D. Profit-sharing plan Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

20.

Jacob, an 18-year-old, has been working at HoldVille Corp. for over a year. If HoldVille offers full vesting after one year, which of the following statements is true?

A. Jacob is eligible for full pension as he has worked for over a year at HoldVille. B. Jacob is not eligible for pension as he is not over 21. C. Jacob is eligible for 20 percent of his pension if he has dependents. D. Jacob is not eligible for a pension if he quits of his own volition. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Retirement and Savings Plan Payments

21.

Maxford Corp. offers full vesting after two years. However, it does not offer portability of pension to its employees. Which of the following statements is true in this scenario?

A. Employees of Maxford will receive 20 percent of their pension if they quit after one year. B. Maxford does not have to provide vested benefits to employees who quit before six months. C. Employees of Maxford who quit can have their pension benefits transferred to the new employer. D. Maxford does not have to provide vested benefits if employees quit of their own volition after two years. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Retirement and Savings Plan Payments

22.

An employer experiencing high turnover and seeking to reduce pension cost is likely to prefer:

A. full vesting after three years. B. full vesting after six years. C. full vesting after seven years. D. partial vesting after two years. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

23.

What is the first question that should be asked when determining the amount of retirement income an employer should provide?

A. Should Social Security payments be factored in when considering the level of income an employee should have during retirement? B. How should seniority be factored into the payout formula? C. What level of retirement compensation would the employer like to set as a target, expressed in relation to pre-retirement earnings? D. Should other postretirement income sources be integrated with the pension payment? Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

24.

An employee who changes jobs four or more times during his or her career will likely receive a pension approximately _____ as that of an employee whose working career is spent with one employer, assuming that both employees have the same starting salary and receive annual increases equal to inflation rate.

A. twice as large B. the same size C. one-fourth the size D. half the size Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

25.

Roughly _____ of all employees have access to paid life insurance.

A. three-fourths B. half C. one-third D. a quarter Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Life Insurance

26.

A health maintenance organization (HMO) pulls together a group of providers willing to provide services at an agreed upon rate in exchange for employers:

A. limiting employees to these providers for health services. B. paying 30 percent of employee salary to the HMO. C. laying off all contingent workers who are not eligible for insurance. D. providing free child care assistance to employees. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Medical and Medically Related Payments

27.

A _____ plan is a hybrid health plan combining the benefits of HMO and _____.

A. point-of-service; preferred provider organization B. POS; Blue Cross C. managed care; POS D. consolidated health; PPO Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Medical and Medically Related Payments

28.

Some level of dental coverage is provided by about _____ percent of all employers with above 500 employees.

A. 30 B. 60 C. 11 D. 85 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Medical and Medically Related Payments

29.

Almost _____ percent of the companies offering child care assistance to employees also offer elder care assistance.

A. 10 B. 30 C. 50 D. 90 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Miscellaneous Benefits

30.

Contingent workers receive _____ benefits than regular workers; contingent workers' benefits cost _____ for employers than it does for regular workers.

A. more; less B. fewer; more C. more; more D. fewer; less Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Benefits for Contingent Workers

True / False Questions

31.

A McKinsey survey of CEOs found nearly 90 percent believe benefits are very important for attracting and retaining employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

32.

Worker's compensation costs have been declining since 2005 due in part to employer safety programs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

33.

Workers' compensation is covered by federal laws. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

34.

The Social Security Act has been designed and amended to provide a foundation of basic financial security for American workers and their families. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

35.

A major problem with Social Security is a rising number of retirees without a corresponding increase in the number of contributors. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

36.

Medicare is not part of Social Security. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

37.

Jim was a full-time student for four years, but he could not find a job after graduating. Jim is eligible to collect unemployment insurance. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

38.

Employers who have frequent layoffs pay higher tax rates than those with few layoffs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

39.

An eligible unemployed person may now collect unemployment insurance benefits for 36 weeks in most states. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

40.

All employers with less than 20 employees must comply with the Consolidated Omnibus Budget Reconciliation Act. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Legally Required Benefits

41.

Most employers prefer defined contribution pension plans to defined benefit plans. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

42.

Employees prefer defined contribution (DC) plans over defined benefit plans because DC plans tend to vest faster. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

43.

A 401(k) is an example of a defined benefit plan. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

44.

A qualified deferred compensation plan offers tax advantages to employers. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

45.

Employees are the sole contributors to their cash balance plans. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

46.

An individual retirement account is a tax-favored retirement savings plan that individuals can establish themselves. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

47.

The Employee Retirement Income Security Act states that employers must offer a retirement plan to their employees if they work for at least 1,250 hours per year. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

48.

Vesting refers to the length of time an employee must work for an employer before he or she is entitled to employer payments made into a pension plan. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

49.

Under the Economic Growth and Tax Reconciliation Act of 2001, employers have three hundred vesting schedule options. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

50.

The Pension Benefit Guarantee Corporation guarantees payment of vested benefits to employees formerly covered by terminated pension plans. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Retirement and Savings Plan Payments

Short Answer Questions

51.

What is the central challenge of Social Security payments? How are they tackled?

The money to pay Social Security benefits comes from the Social Security contributions made by employees, their employers, and self-employed people during working years. As contributions are paid in each year, they are immediately used to pay for the benefits to current beneficiaries. Herein lies a major problem with Social Security. While the number of retired workers continues to rise, no corresponding increase in the number of contributors to Social Security has offset the costs. To maintain solvency, there has been a dramatic increase in both the maximum earnings base and the rate at which that base is taxed.

Difficulty: 2 Medium Topic: Legally Required Benefits

52.

What are the eligibility requirements for unemployment insurance?

All workers except a few agricultural and domestic workers are currently covered by unemployment insurance (UI) laws. The eligibility requirements to receive benefits are as follows: • You must meet the state requirements for wages earned or time worked during an established (one year) period of time referred to as a "base period." • You must be determined to be unemployed through no fault of your own [determined under state law], and meet other eligibility requirements of state law.

Difficulty: 2 Medium Topic: Legally Required Benefits

53.

What is the purpose of the HIPAA?

The 1996 Health Insurance Portability and Accountability Act (HIPAA) is designed to (1) lessen an employer's ability to deny coverage for a preexisting condition and (2) prohibit discrimination on the basis of health-related status.

Difficulty: 1 Easy Topic: Legally Required Benefits

54.

What is a cash balance plan?

Cash balance plans are defined benefit plans that look like a defined contribution plan. Employees have a hypothetical account (like a 401[k]) into which is deposited what is typically a percentage of annual compensation. The dollar amount grows both from contributions by the employer and from some predetermined interest rate.

Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

55.

Explain vesting and portability.

Vesting refers to the length of time an employee must work for an employer before he or she is entitled to employer payments made into the pension plan. Portability refers to the issue of transferring pension benefits of employees moving to new organizations.

Difficulty: 2 Medium Topic: Retirement and Savings Plan Payments

Chapter 14 Compensation of Special Groups

Multiple Choice Questions

In which of the following situations would the engineering jobs be most likely treated as a special compensation group?

A. Mechanical engineers employed by a large city corporation B. Computer engineers employed at a software firm C. Biomolecular engineers employed at a farm equipment manufacturer D. Acoustical engineers at a waste disposal company 2.

Executives, supervisors, and sales staff often receive special compensation treatment because _____.

A. these jobs face conflicting demands B. these jobs are exempt under FLSA C. recruitment and retention are always difficult for these jobs D. these jobs are covered under the Sarbanes-Oxley Act 3.

All of the following EXCEPT _____ would be considered a special compensation group.

A. sales staff B. contingent workers C. unpaid interns D. professional employees 4.

The biggest trend in supervisory pay centers on _____.

A. increased use of variable pay B. payment of wages that equal subordinate pay C. paying a wage that is above the highest paid superior D. payment of higher wages without benefits

The differential between supervisors' base pay and their highest paid subordinate is typically _____ percent.

A. 0 to 5 B. 5 to 30 C. 30 to 50 D. 50 to 90 6.

The _____ component of executive compensation has grown the most since 2012.

A. long-term incentives B. bonus C. short-term incentives D. base salary 7.

Annual bonuses often play a major role in executive compensation and are primarily designed to _____.

A. motivate better short-term performance B. reduce overtime pay C. decrease pay differentials between supervisors and subordinates D. increase employee turnover 8.

Which of the following is NOT a reason for the recent decline in the use of stock options in executive pay?

A. There has been a growing pressure to expense stock options in annual reports. B. In a falling market, stock options are underwater—the market price is below the exercise price. C. Financial Accounting Standard Number 313 raises the cost of using stock options. D. Stock options do not pay for executive performance. 9.

A(n) _____ awards cash or stock if specific goals are achieved.

A. nonqualified stock option B. incentive stock option C. restricted stock plan D. performance share plan

10. A(n) _____ awards cash or stock that is determined by an increase in stock price at a fixed future date.

A. phantom stock plan B. incentive stock option C. restricted stock plan D. nonqualified stock option 11. Nonqualified stock options require _____.

A. purchase of stock at a stipulated price, not conforming with the Internal Revenue Code B. cash or stock award to be determined by an increase in stock price at a fixed future date C. cash or stock award to be determined by an increase in stock price during any time chosen in the option period D. grant of stock at a reduced price with the condition that it may not be sold before a specified date 12. At the time it is granted, which of the following has no tax implications for an executive?

A. Phantom stock plans B. Incentive stock options C. Stock appreciation rights D. Performance share/unit plans 13. Which of the following is NOT one of the clauses relating to the benefits employers can provide executives?

A. Benefit plans must cover 80 percent of employees. B. Benefit plans must be determinable. C. Benefit plans must meet specific vesting requirements. D. Average value of benefits for low-paid employees must be at least 90 percent of that for highly paid employees. 14. Which of the following is the most popular executive perk offered by most companies?

A. Executive physicals B. Payment of club dues C. Family spousal travel D. Corporate housing

15. A useful tool for determining the true worth of an entire executive compensation package is _____.

A. the program evaluation and review technique (PERT) B. a tally sheet C. a Gantt chart D. the graphical evaluation and review technique (GERT) 16. The _____ theory argues that executive pay rises to maintain the same relative relationship with the salaries of lower-level employees.

A. economic approach B. team production C. social comparison D. agency 17. Today, top executive pay is more than _____ times the pay of the average worker.

A. 1,500 B. 2,000 C. 900 D. 300 18. A recent article analyzing the results from over 100 executive pay studies shows that the best predictor of executive pay, by far, is _____.

A. firm size B. the number of insiders on the board of directors C. the industry in which the firm operates D. firm performance 19. The most common approach to motivating executives to make decisions that are in the best interests of stockholders is _____.

20. In recent years, some firms have tried to deal with the plateau effect and also accommodate the different career motivations of mature scientists and engineers through a(n) _____.

A. individual-career ladder B. alternative career path C. military-style career ladder D. dual-career ladder 21. _____ curve expresses the relationship between years since last degree, performance, and salary.

A. The Phillips B. The marginal productivity C. A tenure D. A maturity 22. Popular stereotypes of salespeople characterize them as being heavily motivated by _____.

A. financial compensation B. personal growth and job security C. recognition and appreciation D. promotional opportunities 23. If improved account retention became a major focus of attention, the performance measure stressed would be _____.

A. gross margin on sales or price per unit B. percentage account erosion C. a volume measure D. a customer satisfaction index 24. When designing a sales compensation plan, it should be kept in mind that:

A. salespeople rank recognition as their number-one motivator. B. salespeople under an incentive system will view customer service as an imposition. C. compensation systems are independent of the nature of a product or service. D. commissions for sales volume reduces the incentive to sell.

25. Leah, the CEO of SteadyResults Corp., feels that she is underpaid, so she hires a compensation consultant to survey actual competitors of the company. According to agency theory, if SteadyResults performs poorly, her salary will most likely:

A. remain the same as CEO salary is based only on performance. B. be withheld and paid at a later date as the company is doing poorly. C. be increased in order to retain her. D. remain the same as the company is doing poorly. 26. Hannah is the CEO of JF Corp., a steel manufacturing company. She finds that the market is exhibiting the signs of a maturing market. She wants to revise the compensation package for her sales employee to adapt to the changing market conditions. In this case, Hannah is most likely to:

A. increase base pay. B. provide a commission-based incentive plan. C. provide incentives based on new customer generation. D. include a significant incentive component. 27. NaxWell Corp. sells a smart wristband that, apart from monitoring heart rate and blood pressure, also reminds users to stand and walk every half hour. As part of its promotional efforts, a celebrity starts wearing the wristband, thereby increasing its popularity and ease of sale. Which of the following is most likely to happen?

A. NaxWell will set lower sales targets for its employees. B. NaxWell is likely to increase base salaries and decrease incentives. C. NaxWell is likely to lower its executive compensation in order to increase stock price. D. NaxWell will hire only contingent workers. 28. With easily sold products:

A. companies prefer a more aggressive sales force. B. the base compensation tends to be more important. C. the incentives provided in the form of commissions tend to be more important. D. companies tend to set lower sales targets. 29. Working through a temporary-help agency usually means:

30. Which of the following is NOT a reason for companies to hire contingent workers?

A. Contingent workers help save costs. B. Employees who accept the idea of bounded careers view contingent status as part of a fast-track developmental sequence. C. Such employment offers added flexibility to employers. D. Companies hire contingent workers as a way to insulate themselves in a volatile economy.

True / False Questions

31. Engineers in almost all companies are treated as special compensation cases due to their education and training. True

False

32. Contingent workers are usually considered candidates for special compensation. True

False

33. Members of boards of directors are not categorized as candidates for special compensation. True

False

34. The most popular method of providing special compensation to supervisors is by paying overtime. True

False

35. Compensation committees of boards of directors typically set executive salaries. True

False

36. The most recent trend in executive compensation is an increased use of stock options. True

False

37. Incentive stock options may be deducted as a company expense. True

False

38. ERISA and the tax code specify that the average value of benefits for low-paid employees must be at least 75 percent of those of highly paid employees. True

False

39. The 1993 Revenue Reconciliation Act limited employer deductions for executive compensation to $1 million and capped the amount of executive compensation used in computing contributions to and benefits from qualified retirement plans. True

False

40. The best predictor of CEO pay is performance of the company. True

False

41. In most cases, when a compensation consultant is called in to review the salary of a chief executive officer, regardless of how well the company is performing, the CEO's pay is raised. True

False

42. Organizations rely very heavily on external market data in pricing scientists' and engineers' base pay. True

False

43. Unlike executives, scientists and engineers are less likely to receive lavish athletic facilities and large offices. True

False

44. A trend in sales force compensation is linking sales force compensation to customer satisfaction measures. True

False

45. In maturing markets, companies focus both on performance-based pay tied to customer satisfaction and on greater. True

False

46. Compensation packages for salespeople must be competitive because salespeople tend to compare their pay with competitors. True

False

47. In a recession environment, companies need to react to the decreasing level of sales by rewarding top-level performers that achieve high levels of sales despite the economic downturn. True

False

48. Independent contractors always earn less than their permanently employed counterparts. True

False

49. Independent contractors generally are less expensive for employers as they receive no benefits. True

False

50. At least for high-skilled contingent workers, it is increasingly popular to view careers as a series of opportunities to acquire valuable increments in knowledge and skills. True

False

Short Answer Questions

51. Who are special groups? What are the characteristics that special groups share?

52. List the basic components of most executive compensation packages.

53. Explain any one element of an executive compensation package in detail.

54. What is a tally sheet and what is it used for?

55. Describe how executives ensure themselves high compensation.

Chapter 14 Compensation of Special Groups Answer Key

Multiple Choice Questions

In which of the following situations would the engineering jobs be most likely treated as a special compensation group?

Executives, supervisors, and sales staff often receive special compensation treatment because _____.

A. these jobs face conflicting demands B. these jobs are exempt under FLSA C. recruitment and retention are always difficult for these jobs D. these jobs are covered under the Sarbanes-Oxley Act Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Who Are Special Groups?

All of the following EXCEPT _____ would be considered a special compensation group.

A. sales staff B. contingent workers C. unpaid interns D. professional employees Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

The biggest trend in supervisory pay centers on _____.

A. increased use of variable pay B. payment of wages that equal subordinate pay C. paying a wage that is above the highest paid superior D. payment of higher wages without benefits Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

The differential between supervisors' base pay and their highest paid subordinate is typically _____ percent.

A. 0 to 5 B. 5 to 30 C. 30 to 50 D. 50 to 90 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

The _____ component of executive compensation has grown the most since 2012.

A. long-term incentives B. bonus C. short-term incentives D. base salary Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

Annual bonuses often play a major role in executive compensation and are primarily designed to _____.

A. motivate better short-term performance B. reduce overtime pay C. decrease pay differentials between supervisors and subordinates D. increase employee turnover Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

Which of the following is NOT a reason for the recent decline in the use of stock options in executive pay?

A(n) _____ awards cash or stock if specific goals are achieved.

A. nonqualified stock option B. incentive stock option C. restricted stock plan D. performance share plan Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

10.

A(n) _____ awards cash or stock that is determined by an increase in stock price at a fixed future date.

A. phantom stock plan B. incentive stock option C. restricted stock plan D. nonqualified stock option Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

11.

Nonqualified stock options require _____.

A. purchase of stock at a stipulated price, not conforming with the Internal Revenue Code B. cash or stock award to be determined by an increase in stock price at a fixed future date C. cash or stock award to be determined by an increase in stock price during any time chosen in the option period D. grant of stock at a reduced price with the condition that it may not be sold before a specified date Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

12.

At the time it is granted, which of the following has no tax implications for an executive?

A. Phantom stock plans B. Incentive stock options C. Stock appreciation rights D. Performance share/unit plans Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

13.

Which of the following is NOT one of the clauses relating to the benefits employers can provide executives?

A. Benefit plans must cover 80 percent of employees. B. Benefit plans must be determinable. C. Benefit plans must meet specific vesting requirements. D. Average value of benefits for low-paid employees must be at least 90 percent of that for highly paid employees. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

14.

Which of the following is the most popular executive perk offered by most companies?

A. Executive physicals B. Payment of club dues C. Family spousal travel D. Corporate housing Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

15.

A useful tool for determining the true worth of an entire executive compensation package is _____.

A. the program evaluation and review technique (PERT) B. a tally sheet C. a Gantt chart D. the graphical evaluation and review technique (GERT) Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

16.

The _____ theory argues that executive pay rises to maintain the same relative relationship with the salaries of lower-level employees.

A. economic approach B. team production C. social comparison D. agency Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

17.

Today, top executive pay is more than _____ times the pay of the average worker.

A. 1,500 B. 2,000 C. 900 D. 300 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

18.

A recent article analyzing the results from over 100 executive pay studies shows that the best predictor of executive pay, by far, is _____.

A. firm size B. the number of insiders on the board of directors C. the industry in which the firm operates D. firm performance Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

19.

The most common approach to motivating executives to make decisions that are in the best interests of stockholders is _____.

A. high base salaries with few bonuses B. average base salaries with significant firm performance bonuses C. a long-term incentive plan using stock options D. average base salary with performance-based perks Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups 14-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

20.

In recent years, some firms have tried to deal with the plateau effect and also accommodate the different career motivations of mature scientists and engineers through a(n) _____.

A. individual-career ladder B. alternative career path C. military-style career ladder D. dual-career ladder Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

21.

_____ curve expresses the relationship between years since last degree, performance, and salary.

A. The Phillips B. The marginal productivity C. A tenure D. A maturity Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

22.

Popular stereotypes of salespeople characterize them as being heavily motivated by _____.

A. financial compensation B. personal growth and job security C. recognition and appreciation D. promotional opportunities Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

23.

If improved account retention became a major focus of attention, the performance measure stressed would be _____.

A. gross margin on sales or price per unit B. percentage account erosion C. a volume measure D. a customer satisfaction index Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups 14-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24.

When designing a sales compensation plan, it should be kept in mind that:

25.

Leah, the CEO of SteadyResults Corp., feels that she is underpaid, so she hires a compensation consultant to survey actual competitors of the company. According to agency theory, if SteadyResults performs poorly, her salary will most likely:

A. remain the same as CEO salary is based only on performance. B. be withheld and paid at a later date as the company is doing poorly. C. be increased in order to retain her. D. remain the same as the company is doing poorly. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Compensation Strategy for Special Groups

26.

Hannah is the CEO of JF Corp., a steel manufacturing company. She finds that the market is exhibiting the signs of a maturing market. She wants to revise the compensation package for her sales employee to adapt to the changing market conditions. In this case, Hannah is most likely to:

A. increase base pay. B. provide a commission-based incentive plan. C. provide incentives based on new customer generation. D. include a significant incentive component. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Compensation Strategy for Special Groups

27.

NaxWell Corp. sells a smart wristband that, apart from monitoring heart rate and blood pressure, also reminds users to stand and walk every half hour. As part of its promotional efforts, a celebrity starts wearing the wristband, thereby increasing its popularity and ease of sale. Which of the following is most likely to happen?

28.

With easily sold products:

A. companies prefer a more aggressive sales force. B. the base compensation tends to be more important. C. the incentives provided in the form of commissions tend to be more important. D. companies tend to set lower sales targets. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

29.

Working through a temporary-help agency usually means:

A. high recognition for the work done. B. lower work stress in comparison to permanent employees. C. higher benefits in comparison to permanent employees. D. low pay in administrative or day labor positions. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

30.

Which of the following is NOT a reason for companies to hire contingent workers?

Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

True / False Questions

31.

Engineers in almost all companies are treated as special compensation cases due to their education and training. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Who Are Special Groups?

32.

Contingent workers are usually considered candidates for special compensation. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

33.

Members of boards of directors are not categorized as candidates for special compensation. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

34.

The most popular method of providing special compensation to supervisors is by paying overtime. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

35.

Compensation committees of boards of directors typically set executive salaries. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

36.

The most recent trend in executive compensation is an increased use of stock options. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

37.

Incentive stock options may be deducted as a company expense. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

38.

ERISA and the tax code specify that the average value of benefits for low-paid employees must be at least 75 percent of those of highly paid employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

39.

The 1993 Revenue Reconciliation Act limited employer deductions for executive compensation to $1 million and capped the amount of executive compensation used in computing contributions to and benefits from qualified retirement plans. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

40.

The best predictor of CEO pay is performance of the company. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

41.

In most cases, when a compensation consultant is called in to review the salary of a chief executive officer, regardless of how well the company is performing, the CEO's pay is raised. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

42.

Organizations rely very heavily on external market data in pricing scientists' and engineers' base pay. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

43.

Unlike executives, scientists and engineers are less likely to receive lavish athletic facilities and large offices. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

44.

A trend in sales force compensation is linking sales force compensation to customer satisfaction measures. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

45.

In maturing markets, companies focus both on performance-based pay tied to customer satisfaction and on greater. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

46.

Compensation packages for salespeople must be competitive because salespeople tend to compare their pay with competitors. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

47.

In a recession environment, companies need to react to the decreasing level of sales by rewarding toplevel performers that achieve high levels of sales despite the economic downturn. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

48.

Independent contractors always earn less than their permanently employed counterparts. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

49.

Independent contractors generally are less expensive for employers as they receive no benefits. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

50.

At least for high-skilled contingent workers, it is increasingly popular to view careers as a series of opportunities to acquire valuable increments in knowledge and skills. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

Short Answer Questions

51.

Who are special groups? What are the characteristics that special groups share?

Special treatment, either in the form of add-on packages not received by other employees or in the form of compensation components entirely unique in the organization, tends to focus on a few specific groups. The text argues that special groups share two characteristics. First, special groups tend to be strategically important to the company. If they don't succeed at their jobs, success for the whole organization is in jeopardy. Second, their positions tend to have built-in conflict, conflict that arises because different factions place incompatible demands on members of the group.

Difficulty: 2 Medium Topic: Who Are Special Groups?

52.

List the basic components of most executive compensation packages.

There are five basic elements of most executive compensation packages: (1) base salary, (2) short-term (annual) incentives or bonuses, (3) long-term incentives and capital appreciation plans, (4) employee benefits, and (5) perquisites.

Difficulty: 1 Easy Topic: Compensation Strategy for Special Groups

53.

Explain any one element of an executive compensation package in detail.

Base Salary: Although formalized job evaluation still plays an occasional role in determining executive base pay, other sources are much more important. Particularly important is the opinion of a compensation committee, composed usually of the company's board of directors or a subset of the board. Frequently, the compensation committee will take over some of the data analysis tasks previously performed by the chief personnel officer, even going so far as to analyze salary survey data and performance records for executives of comparably sized firms. One empirical study suggests the most common approach of executive compensation committees is to identify major competitors and set the CEO's compensation at a level between the best and worst of these comparison groups.

Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

54.

What is a tally sheet and what is it used for?

Recently, companies have begun to capture the true value of an entire compensation package, using a simple tool called a tally sheet. A tally sheet gives a comprehensive view on the true value of executive compensation. It is a simple concept: Tally up the value of base salary, annual incentives, long-term incentives, benefits, and perks. Part of this process includes estimating the current value of stock options (using something called the Black-Scholes model), stock appreciation rights, vested and unvested pensions, and payouts upon termination. Experts argue that a tally sheet gives board members a single figure that they can then debate over: Is this competitive? Does performance justify this amount?

Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

55.

Describe how executives ensure themselves high compensation.

Agency theory incorporates the political motivations that are an inevitable part of the corporate world. Sometimes, CEOs make decisions that are not in the economic best interest of the firm and its shareholders. One variant on this view suggests that the normal behavior of a CEO is self-protective. CEOs will make decisions to solidify their positions and to maximize the rewards they personally receive. As evidence of this self-motivated behavior, consider the following description of how executives ensure themselves high compensation: 1. If the CEO is truly underpaid: A compensation consultant is hired to survey actual competitors of the company. The consultant reports to the board of directors that the CEO is truly underpaid. Salary is increased to a competitive or higher level. 2. If the CEO is not underpaid and the company is doing well: A compensation consultant is hired. Specific companies are recommended to the consultant as appropriate for surveying. The companies tend to be selected because they are on the top end in terms of executive compensation. The consultant reports back to the board that its CEO appears to be underpaid. Salary is increased. 3. If the CEO is not underpaid and the company is doing poorly: A compensation consultant is hired. The CEO laments with the consultant that wages are so low for top management that there is a fear that good people will start leaving the company and going to competitors. The result is that the consultant recommends a wage increase to avoid future turnover.

Difficulty: 2 Medium Topic: Compensation Strategy for Special Groups

Chapter 15 Union Role in Wage and Salary Administration

Multiple Choice Questions 1.

Which of the following statements regarding unions is NOT true?

A. Union membership has fallen from approximately 20 percent to 11 percent since 1983. B. Unions peaked in the 1950s and 1960s. C. Since 1997, there has been a consistent 2 percent annual decrease in certification elections decided in favor of unionization. D. Since 1997, the number of union certification elections for firms has declined. 2.

Which of the following is NOT one of the popular explanations for the decline of union memberships?

A. Workers do not view unions as a solution to their problems. B. Management resistance to unions has increased. C. The intensity of union organizing efforts has become less. D. Growing industries are most heavily unionized, while declining industries are less so. 3.

Company A and Company B are in the same industry, but Company A is unionized and Company B is not. Therefore, _____.

A. it can be argued with assurance that any wage differences between the two firms are due to the presence of the union in Company A and the absence of the union in Company B B. it is difficult to argue with assurance that wage differences between the two firms are attributable to the presence of the union, although the possibility exists C. Company B has to form a union to compete with Company A D. any wage differences between the two firms can never be attributed to the presence of the union in Company A 4.

A study of unions in 114 companies concluded that _____.

A. the impact of unions on wages is lesser during recession B. the union-nonunion gap is the greatest during strong economies C. unions make a difference in wages across all studies and time periods D. unions are not responsible for any differences in wages

When compared to the impact of unions during periods of strong economies, the impact of unions during periods of higher unemployment is _____.

A. unknown B. the same C. smaller D. larger 6.

The largest gains in wages for public sector employees are reported for _____.

A. teachers' unions B. firefighters C. telecommunication unions D. postal services 7.

Union employees in the public sector earn, on average, about _____ more than their nonunion counterparts.

A. 40 percent B. 5 percent C. 14 percent D. 22 percent 8.

Research indicates that the presence of a union adds about _____ to employee benefits.

A. 5 to 15 percent B. 20 to 25 percent C. 30 to 40 percent D. 50 percent 9.

In a(n) _____ pay plan, a contract is negotiated which specifies that employees hired after a given target date will receive lower wages than their higher-seniority peers working on the same or similar jobs.

A. skill-based B. efficiency-based C. one-tier D. two-tier 10. Basically a phenomenon of the union sector, two-tier wage structures differentiate pay based upon the _____.

A. type of work B. hiring date C. place of work D. length of contract, if applicable

11. The phenomenon where the nonunion management continues to enjoy the freedom from union "interference" in decision making, and the workers receive the rewards already obtained by their unionized counterparts is known as _____.

A. automatic progression B. the spillover effect C. experience differential D. the equal mirror effect 12. MaxTrain Corp. recognizes that its competitor GlasWell Corp., which is unionized, offers higher wages and benefits. To avoid unionization demands from its workers, MaxTrain decides to offer the same wages and benefits to its employees as GlasWell. Which of the following phenomena is exemplified in this case?

A. The sorting effect B. The halo effect C. The leniency effect D. The spillover effect 13. Which of the following statements about single rates is true?

A. Single rates are usually specified for workers within a particular job classification. B. Single-rate agreements differentiate wages on the basis of seniority. C. Single rates are only specified for workers employed by a firm in different geographic areas. D. Single-rate agreements differentiate wages on the basis of merit. 14. _____ is movement through the wage ranges where seniority is specified as the basis of the movement.

A. Length-of-stay progression B. Automatic progression C. Merit differential D. Performance differential 15. Wage adjustments in multiyear contracts may be specified through all of the following ways EXCEPT _____.

A. cost-of-living adjustments B. deferred wage increases C. reopener clauses D. turnover clauses 16. A deferred wage increase _____.

A. specifies that wages will be renegotiated at a specified time B. specifies that such nonwage items as pension and benefits will be renegotiated under certain conditions C. is negotiated at the time of initial contract negotiations with the timing and amount specified in the contract D. involves periodic adjustments based typically on changes in the consumer price index 15-3 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

17. Which of the following involves periodic adjustments based typically on changes in the consumer price index?

A. A COLA clause B. A deferred wage increase C. A reopener clause D. An annual improvement adjustment 18. In the negotiation stage of a multiyear wage contract, Mark, the manager of SifCo Corp., specifies that changes will be made to the wage based on the changes in the consumer price index and mentions the effective dates of adjustment. Which of the following types of clauses has Mark introduced in the contract?

A. Halo clause B. Spillover clause C. Escalator clause D. Reopener clause 19. Which of the following is the most likely reason for most unions to insist on group-based performance measures with equal payouts to members?

A. It enables employees to learn new skills. B. It cuts down on strife and internal quarrels. C. It encourages individual differences. D. It causes a leniency effect. 20. The CEO of BoardCom Inc., James, negotiates a new union contract with the union leader. If James wants to reduce expenses and keep the union happy, which of the following suggestions is most likely to be helpful?

A. Introduce merit increases based on individual-based performance. B. Provide lump-sum awards in exchange for merit pay increases. C. Introduce a gain-sharing plan that substitutes wages. D. Provide a 20 percent increase to base wages. 21. Increased global competition has caused unions to:

A. demand higher base wages than their international counterparts. B. become more receptive to alternate reward systems that link pay to performance. C. accept less variable pay in exchange for higher base pay. D. demand increases in product prices to cover for increased wage costs. 22. _____ are one-time cash payments to employees that are not added to an employee's base wages.

A. Relational returns B. Merit increases C. Lump-sum awards D. Cost-of-living increases 15-4 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

23. For the past 10 years, a stable _____ of all major collective bargaining agreements in the private sector have contained a provision for lump-sum payouts.

A. three-fourths B. one-half C. one-quarter D. one-third 24. Which of the following plans gives employees part ownership in the company?

A. ESOPs B. Pay-for-knowledge plans C. Gain-sharing plans D. Profit-sharing plans 25. Which of the following actions is most likely to be favored by unions?

A. Increasing the pricing of products to cover for increases in wages B. Substituting wages with gain-sharing plans C. Making each individual worker more expendable to the firm D. Introducing lump-sum awards 26. Pay-for-knowledge plans do all of the following EXCEPT _____.

A. make employees less expendable to their firms B. increase the probability of work being subcontracted out to nonunion organizations C. make each individual employee more valuable D. pay employees more for learning a variety of different jobs or skills 27. Which of the following is a reason for unions favoring gain-sharing plans?

A. Increased peer pressure to perform B. Increased involvement with job activities C. Increased flexibility in moving employees quickly into high-demand areas D. Increased clarity in bonus calculations 28. Which of the following is a reason for unions opposing gain-sharing plans?

A. Reduced job security B. Decreased peer pressure to perform C. Decreased feeling of achievement or contributing to the organization D. Reduced need for jobs due to increased productivity

29. Which of the following is true regarding a gain-sharing plan?

A. It prevents union members from sharing the wealth. B. It creates difficulty in maintaining employment levels in marginal organizations. C. It becomes ineffective when union members participate in plan development. D. Not all unions would be in favor of this type of plan. 30. With gain-sharing plans, the most common union strategy is to _____.

True / False Questions 31. A study shows that a 10 percent rise in import share has the effect of lowering the union wage differential by approximately 2 percent. True

False

32. Unions respond relatively rapidly to wage increases during inflationary periods. True

False

33. Voluntary benefits account for nearly 37 percent of the total compensation package for unionized workers. True

False

34. In a two-tier wage system, employees hired after a specific date are placed in a higher wage scale than those hired prior to that date. True

False

35. Lower-tier employees in a two-tier pay plan, those hired after the contract is ratified, receive wages 50 to 80 percent lower than employees in the higher tier. True

False

36. The vast majority of contracts specify that a job is to be compensated on an hourly basis. True

False

37. Many contracts specify a premium be paid above the worker's base wage for working nonstandard shifts. True

False

38. Most contracts recognize that jobs in the same occupations should receive different wage rates. True

False

39. Single rates are not usually specified for workers within a particular job classification. True

False

40. Moving employees through pay ranges using merit increases is more popular than automatic progression. True

False

41. In automatic progression, seniority is used as the basis for movement through the job classifications. True

False

42. Few contracts specify special rates for part-time and temporary employees. True

False

43. A deferred wage increase is negotiated at the time of initial contract negotiations. True

False

44. A reopener clause specifies that wages will be renegotiated at a specified time or under certain conditions. True

False

45. About 60 percent of all U.S. collective bargaining agreements permit some alternative reward system that links pay to performance. True

False

46. Lump-sum awards are added to base wages. True

False

47. Lump-sum awards are typically given because they are less costly to the employer than merit increases. True

False

48. An alternative strategy for organizations hurt by intense competition is to control base wages in exchange for giving employees part ownership in the company. True

False

49. There are numerous possible costs and benefits to union members for agreeing to a gain-sharing plan. True

False

50. Introduction of a gain-sharing plan is particularly effective when union members participate in plan development. True

False

Short Answer Questions 51. What are the reasons for the decline in unionization?

52. What is the spillover effect?

53. What is meant by automatic progression?

54. Briefly summarize lump-sum awards and ESOPs.

55. Briefly describe gain-sharing plans.

Chapter 15 Union Role in Wage and Salary Administration Answer Key

Multiple Choice Questions 1.

Which of the following statements regarding unions is NOT true?

Which of the following is NOT one of the popular explanations for the decline of union memberships?

Company A and Company B are in the same industry, but Company A is unionized and Company B is not. Therefore, _____.

A study of unions in 114 companies concluded that _____.

When compared to the impact of unions during periods of strong economies, the impact of unions during periods of higher unemployment is _____.

A. unknown B. the same C. smaller D. larger Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

The largest gains in wages for public sector employees are reported for _____.

A. teachers' unions B. firefighters C. telecommunication unions D. postal services Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

Union employees in the public sector earn, on average, about _____ more than their nonunion counterparts.

A. 40 percent B. 5 percent C. 14 percent D. 22 percent Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

Research indicates that the presence of a union adds about _____ to employee benefits.

A. 5 to 15 percent B. 20 to 25 percent C. 30 to 40 percent D. 50 percent Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

A. skill-based B. efficiency-based C. one-tier D. two-tier Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

10.

Basically a phenomenon of the union sector, two-tier wage structures differentiate pay based upon the _____.

A. type of work B. hiring date C. place of work D. length of contract, if applicable Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

11.

The phenomenon where the nonunion management continues to enjoy the freedom from union "interference" in decision making, and the workers receive the rewards already obtained by their unionized counterparts is known as _____.

A. automatic progression B. the spillover effect C. experience differential D. the equal mirror effect Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

12.

MaxTrain Corp. recognizes that its competitor GlasWell Corp., which is unionized, offers higher wages and benefits. To avoid unionization demands from its workers, MaxTrain decides to offer the same wages and benefits to its employees as GlasWell. Which of the following phenomena is exemplified in this case?

A. The sorting effect B. The halo effect C. The leniency effect D. The spillover effect Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: The Impact of Unions in Wage Determination

13.

Which of the following statements about single rates is true?

A. Single rates are usually specified for workers within a particular job classification. B. Single-rate agreements differentiate wages on the basis of seniority. C. Single rates are only specified for workers employed by a firm in different geographic areas. D. Single-rate agreements differentiate wages on the basis of merit. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

14.

_____ is movement through the wage ranges where seniority is specified as the basis of the movement.

A. Length-of-stay progression B. Automatic progression C. Merit differential D. Performance differential Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

15.

Wage adjustments in multiyear contracts may be specified through all of the following ways EXCEPT _____.

A. cost-of-living adjustments B. deferred wage increases C. reopener clauses D. turnover clauses Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

16.

A deferred wage increase _____.

A. specifies that wages will be renegotiated at a specified time B. specifies that such nonwage items as pension and benefits will be renegotiated under certain conditions C. is negotiated at the time of initial contract negotiations with the timing and amount specified in the contract D. involves periodic adjustments based typically on changes in the consumer price index Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

17.

Which of the following involves periodic adjustments based typically on changes in the consumer price index?

A. A COLA clause B. A deferred wage increase C. A reopener clause D. An annual improvement adjustment Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

18.

In the negotiation stage of a multiyear wage contract, Mark, the manager of SifCo Corp., specifies that changes will be made to the wage based on the changes in the consumer price index and mentions the effective dates of adjustment. Which of the following types of clauses has Mark introduced in the contract?

A. Halo clause B. Spillover clause C. Escalator clause D. Reopener clause Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: The Impact of Unions in Wage Determination

19.

Which of the following is the most likely reason for most unions to insist on group-based performance measures with equal payouts to members?

A. It enables employees to learn new skills. B. It cuts down on strife and internal quarrels. C. It encourages individual differences. D. It causes a leniency effect. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

20.

The CEO of BoardCom Inc., James, negotiates a new union contract with the union leader. If James wants to reduce expenses and keep the union happy, which of the following suggestions is most likely to be helpful?

A. Introduce merit increases based on individual-based performance. B. Provide lump-sum awards in exchange for merit pay increases. C. Introduce a gain-sharing plan that substitutes wages. D. Provide a 20 percent increase to base wages. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Unions and Alternative Reward Systems

21.

Increased global competition has caused unions to:

A. demand higher base wages than their international counterparts. B. become more receptive to alternate reward systems that link pay to performance. C. accept less variable pay in exchange for higher base pay. D. demand increases in product prices to cover for increased wage costs. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

22.

_____ are one-time cash payments to employees that are not added to an employee's base wages.

A. Relational returns B. Merit increases C. Lump-sum awards D. Cost-of-living increases Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

23.

For the past 10 years, a stable _____ of all major collective bargaining agreements in the private sector have contained a provision for lump-sum payouts.

A. three-fourths B. one-half C. one-quarter D. one-third Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

24.

Which of the following plans gives employees part ownership in the company?

A. ESOPs B. Pay-for-knowledge plans C. Gain-sharing plans D. Profit-sharing plans Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

25.

Which of the following actions is most likely to be favored by unions?

A. Increasing the pricing of products to cover for increases in wages B. Substituting wages with gain-sharing plans C. Making each individual worker more expendable to the firm D. Introducing lump-sum awards Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

26.

Pay-for-knowledge plans do all of the following EXCEPT _____.

A. make employees less expendable to their firms B. increase the probability of work being subcontracted out to nonunion organizations C. make each individual employee more valuable D. pay employees more for learning a variety of different jobs or skills Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

27.

Which of the following is a reason for unions favoring gain-sharing plans?

A. Increased peer pressure to perform B. Increased involvement with job activities C. Increased flexibility in moving employees quickly into high-demand areas D. Increased clarity in bonus calculations Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

28.

Which of the following is a reason for unions opposing gain-sharing plans?

A. Reduced job security B. Decreased peer pressure to perform C. Decreased feeling of achievement or contributing to the organization D. Reduced need for jobs due to increased productivity Accessibility: Keyboard Navigation 15-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

29.

Which of the following is true regarding a gain-sharing plan?

A. It prevents union members from sharing the wealth. B. It creates difficulty in maintaining employment levels in marginal organizations. C. It becomes ineffective when union members participate in plan development. D. Not all unions would be in favor of this type of plan. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

30.

With gain-sharing plans, the most common union strategy is to _____.

A. delay taking a stand until real benefits are more apparent B. be very enthusiastic C. have direct opposition to the plans as soon as they are suggested by the management D. have no concern for the plans Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

True / False Questions 31.

A study shows that a 10 percent rise in import share has the effect of lowering the union wage differential by approximately 2 percent. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

32.

Unions respond relatively rapidly to wage increases during inflationary periods. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

33.

Voluntary benefits account for nearly 37 percent of the total compensation package for unionized workers. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

34.

In a two-tier wage system, employees hired after a specific date are placed in a higher wage scale than those hired prior to that date. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

35.

Lower-tier employees in a two-tier pay plan, those hired after the contract is ratified, receive wages 50 to 80 percent lower than employees in the higher tier. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

36.

The vast majority of contracts specify that a job is to be compensated on an hourly basis. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

37.

Many contracts specify a premium be paid above the worker's base wage for working nonstandard shifts. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

38.

Most contracts recognize that jobs in the same occupations should receive different wage rates. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

39.

Single rates are not usually specified for workers within a particular job classification. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

40.

Moving employees through pay ranges using merit increases is more popular than automatic progression. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

41.

In automatic progression, seniority is used as the basis for movement through the job classifications. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

42.

Few contracts specify special rates for part-time and temporary employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Impact of Unions in Wage Determination

43.

A deferred wage increase is negotiated at the time of initial contract negotiations. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

44.

A reopener clause specifies that wages will be renegotiated at a specified time or under certain conditions. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

45.

About 60 percent of all U.S. collective bargaining agreements permit some alternative reward system that links pay to performance. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

46.

Lump-sum awards are added to base wages. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

47.

Lump-sum awards are typically given because they are less costly to the employer than merit increases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

48.

An alternative strategy for organizations hurt by intense competition is to control base wages in exchange for giving employees part ownership in the company. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

49.

There are numerous possible costs and benefits to union members for agreeing to a gain-sharing plan. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

50.

Introduction of a gain-sharing plan is particularly effective when union members participate in plan development. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Unions and Alternative Reward Systems

Short Answer Questions 51.

What are the reasons for the decline in unionization?

Four popular explanations are usually offered for the decline in unionization: (1) The structure of American industry is changing, and declining industries are most heavily unionized, while growing industries are less so. (2) Unionization may be declining because workers do not view unions as a solution to their problems. (3) There has been reduced intensity of union organizing efforts. (4) Management is taking an increasingly hard stance against unions in general and union demands in particular.

Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

52.

What is the spillover effect?

Although union wage settlements have declined in recent years, the impact of unions would be understated without understanding the spillover effect. Specifically, employers seek to avoid unionization by offering workers the wages, benefits, and working conditions won in rival unionized firms. The nonunion management continues to enjoy the freedom from union "interference" in decision making, and the workers receive the spillover of rewards already obtained by their unionized counterparts. Several studies document the existence of this phenomenon, although smaller as union power diminishes, providing further evidence of the continuing role played by unions in wage determination.

Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

53.

What is meant by automatic progression?

The vast majority of contracts specify seniority as the basis for movement through the wage range. Automatic progression is an appropriate name for this type of movement through the wage range, with the contract frequently specifying the time interval between movements. This type of progression is most appropriate when the necessary job skills are within the grasp of most employees. Denial of a raise is rare and frequently is accompanied by the right of the union to grieve the decision.

Difficulty: 2 Medium Topic: The Impact of Unions in Wage Determination

54.

Briefly summarize lump-sum awards and ESOPs.

Lump-Sum Awards: Lump-sum awards are one-time cash payments to employees that are not added to an employee's base wages. These awards are typically given in lieu of merit increases, which are more costly to the employer. This higher cost results both because merit increases are added on to base wages and because several employee benefits are figured as a percentage of base wages. Lump-sum payments are a reality of union contracts. For the past 10 years, a stable one-third of all major collective bargaining agreements in the private sector have contained a provision for lump-sum payouts. Employee Stock Ownership Plans (ESOPs): An alternative strategy for organizations hurt by intense competition is to control base wages in exchange for giving employees part ownership in the company.

Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

55.

Briefly describe gain-sharing plans.

Gain-sharing plans are designed to align workers and management in efforts to streamline operations and cut costs. Any cost savings resulting from employees' working more efficiently are split between the organization and the workers. Openness in sharing financial and production data, key elements of putting a gain-sharing plan in place, are important in building trust between the two parties. While unions are not always enthusiastic about gain sharing, they rarely directly oppose it, at least initially. Rather, the most common union strategy is to delay taking a stand until real costs and benefits are more apparent. There are numerous possible costs and benefits to union members for agreeing to a gain-sharing plan. Until the plan is actually implemented, though, it is unclear what the impact will be in any particular firm.

Difficulty: 2 Medium Topic: Unions and Alternative Reward Systems

Chapter 16 International Pay Systems

Multiple Choice Questions 1.

_____ is an example of a country with a highly decentralized approach to pay setting with higher wage flexibility.

A. Sweden B. Germany C. Belgium D. The United States of America 2.

According to Hofstede's cultural dimensions, in Malaysia and Mexico, where there is high power distance, _____ pay structures are appropriate.

A. equitable B. hierarchical C. egalitarian D. parallel 3.

KayLeaf Inc. wants to set up a unit in China. To facilitate this, it sends its manager to China to gather information. Which of the following is most likely to be a suggestion from its manager?

A. Use a hierarchical pay structure as there is high power distance in China. B. Use individual spot awards rather than stock options in the pay mix as the people in China have a longterm orientation. C. Use incentives linked to individual performance as China has a collectivistic culture. D. Have a rigid structure as the people in China have the highest level of uncertainty avoidance. 4.

Uncertainty avoidance is _____.

A. the distribution of emotional roles between the genders B. the extent to which a culture programs its members to accept delayed gratification of their material needs C. the extent to which the less powerful members of organizations accept and expect that power is distributed unequally D. the extent to which a culture programs its members to feel either uncomfortable or comfortable in unstructured situations

Individualism is _____.

A. the degree to which people are supposed to look after themselves or remain integrated into groups, usually around the family B. the distribution of emotional roles between the genders C. the extent to which a culture programs individuals to accept delayed gratification of their emotional needs D. the extent to which a culture programs individuals to feel either uncomfortable or comfortable in unstructured situations 6.

Which of the following countries has the highest number of people in the workforce belonging to unions?

A. Japan B. Sweden C. Italy D. South Korea 7.

Which of the following statements about ownership and financial markets is true?

A. In the United States, corporate ownership and access to capital is far more concentrated than in most other countries. B. Ninety percent of American households own stock in companies either directly or indirectly through mutual funds and pension funds. C. Recent tax law changes in many countries have made stock options more attractive, but limited ownership of many companies remains the rule. D. Large conglomerates in Germany link performance bonuses to increased shareholder value as it is the most effective pay system. 8.

The degree of discretion managers have to make total compensation a strategic tool is referred to as _____.

A. managerial accountability B. democratic accountability C. managerial autonomy D. managerial liability 9.

In the comparison of the pay systems of two well-known Japanese companies Toyota and Toshiba, Toyota _____.

A. places greater emphasis on external market rates B. places lesser emphasis on individual-based merit pay C. uses far more levels in its structure D. places lesser emphasis on individual-based performance pay

10. Traditionally, Japan's employment relationships were supported by _____.

A. lifetime security within the company B. performance-based pay systems alone C. centralized unions representing workers across several companies within an industry D. performance-based promotion systems alone 11. Which of the following is a factor determining base pay in the Japanese traditional national system?

A. Job evaluation B. Career category C. Market pricing D. Specific job title 12. Bonuses paid in Japan are _____.

A. additional pay equivalent to two weeks of annual salary B. typically paid once a year C. not an expectable additional payment D. not necessarily related to performance 13. Which of the following is NOT true of the tariff agreements in Germany?

A. Small organizations use them as guidelines. B. Managerial jobs are covered by the agreements. C. Job evaluation methods are part of the agreements. D. Tariff agreements are different for each industrial sector. 14. In Japan, internal alignment based on _____ is far more important than other factors.

A. skills B. jobs C. accountabilities D. seniority 15. Slow growth and competition has led Japanese companies to

16. Which of the following statements about evolution and change in the traditional German model is true?

A. Nearly one in 10 German adults owns stock. B. High birth rates are pushing up the costs of the social support system. C. A relatively flexible labor market means that employers are finding it easier to move to other EU countries. D. Many of the changes in Germany are the result of global competitive pressures and technological changes. 17. A(n) _____ approach to compensation involves designing a total pay system at headquarters and applying it globally.

A. delayered B. inpatriate C. localizer D. exporter 18. A Japanese citizen working for Toyota in Georgetown, Kentucky, is a _____.

A. host-country national B. third-country national C. parent-country national D. local country national 19. An Indian citizen working for a Japanese company in India is a _____.

A. foreign country national B. third-country national C. parent-country national D. local country national 20. A Korean citizen working for Toshiba, a Japanese company, in Canada is a _____.

A. host-country national B. third-country national C. parent-country national D. local country national 21. Which of the following is true of hiring LCNs?

A. Companies incur relocation expenses and other substantial expenses associated with the use of LCNs. B. Companies have to be concerned about LCNs' adapting to the local culture. C. Only rarely do organizations decide that hiring LCNs is appropriate. D. Employment of LCNs satisfies nationalistic demands for hiring locals.

22. KYZ Inc., a U.S. firm, sends its manager, Ryan, to London to manage its operations there. Ryan's salary is still based on the U.S pay system, however KYZ offers him a lump-sum payment to offset the additional standards-of-living expense in London. In this case, which of the following approaches to expatriate compensation is used by KYZ?

A. The cafeteria approach B. The localization approach C. The local plus approach D. The balance sheet approach 23. The base salary plus incentives for expatriates is usually determined by _____.

A. job evaluation B. market pay C. competitors' pay level in the host country D. international pay schedules 24. When taxes are deducted from employees' earnings up to the same amount of taxes they would pay had they remained in their home country, it is known as _____.

A. expat tax B. tax equalization C. compensatory tax D. tax protection 25. Which of the following approaches seeks to ensure that employees on overseas assignments have the same spending power as they would in their home country?

A. The assets-liability approach B. The balance sheet approach C. The compensatory tax approach D. The income statement approach 26. Which of the following statements is true of the localization approach to expatriate compensation?

A. It is more expensive than the balance sheet approach regardless of the location. B. It ties salary to the host country's salary scales. C. It ties salary to the home country's salary scales. D. It ensures that the expatriate's pay is equalized without the need for relocation bonuses.

27. MayFly Inc., a firm headquartered in Paris, France, sends one of its employees to Frankfurt, Germany and Barcelona, Spain to manage its operations in these cities. The employee would be required to alternate between the two cities every six months. Mayfly offers only a moving expense on top of the base pay as the employee would be moving only within the European Union countries. Which of the following approaches to expatriate compensation is exemplified in this situation?

A. Modified balance sheet approach B. Localization approach C. Local plus approach D. Lump-sum/cafeteria approach 28. Which of the following ties salary to a region?

A. The cafeteria approach B. The localization approach C. The modified balance sheet approach D. The lump-sum approach 29. _____ sets salaries according to the home-country system and simply offers employees lump sums of money to offset differences in standards of living.

A. The modified balance sheet approach B. The localization approach C. The cafeteria approach D. The balance sheet approach 30. Which of the following is NOT true of expatriates?

A. 68 percent of expatriates do not know what their jobs will be when they return home. B. Only five percent of expatriates believe their company values their overseas experience. C. 11 percent are promoted when they return. D. 49 percent of U.S. expatriates are women.

True / False Questions 31. Understanding international compensation begins with recognizing differences and similarities and figuring out how to best manage them. True

False

32. Evidence indicates that MNCs are influenced by both the institutional pressures in their home country and in the local context. True

False

33. Companies in the United States, United Kingdom, and some central European countries are most likely to have centralized wage bargaining. True

False

34. Neither works councils nor co-determination are legally required in the United States and are quite rare. True

False

35. In Malaysia and Mexico, egalitarian pay structures fit best with the culture. True

False

36. A study of both U.S. and Slovenian MBAs found that risk taking was higher among Slovenians. True

False

37. The country with the highest unionization rate in Europe is France, where 90 percent of workers are union members. True

False

38. Unionization rates are higher in Europe than in Asia. True

False

39. In China, while state-owned enterprises employ two-thirds of all workers, wholly privately owned enterprises, joint ventures with foreign companies, and WOFEs account for half of all profits. True

False

40. Generally, it is difficult to compare total compensation of a U.S. firm with a foreign competitor. True

False

41. It is easier and less complex to compare living costs across countries than total compensation. True

False

42. Japanese pay systems are more person-based than job-based. True

False

43. Japanese pay systems typically emphasize pay based upon competitors' market rates rather than internal alignment. True

False

44. Base pay for a Japanese employee is usually not based on job evaluation or market pricing. True

False

45. Since the Japanese system is so seniority-based, labor costs decrease as the average age of the workforce increases. True

False

46. According to the Japan Institute of Labour, for most employees bonuses are variable pay that help control the employer's cash flow and labor costs. True

False

47. In Germany, an employee's pay is affected by his or her age. True

False

48. Only 5 percent of U.S. expatriates believe their company values their overseas experience. True

False

49. Approximately 20 percent of expats leave their company within a year of their return to the U.S. True

False

50. 77 percent of expats have less disposable income when they return home from overseas assignments. True

False

Short Answer Questions 51. Briefly summarize the degree to which the social contract constrains the employment relationship in organizations with an example.

52. Explain the dimensions of national cultural attributes proposed by Hofstede.

53. How do the differences in the ownership and financing of companies around the world impact international pay?

54. Distinguish between parent-country nationals, local-country nationals, and third-country nationals with examples.

55. What is the balance sheet approach? What is its objective?

Chapter 16 International Pay Systems Answer Key

Multiple Choice Questions 1.

_____ is an example of a country with a highly decentralized approach to pay setting with higher wage felxibility.

A. Sweden B. Germany C. Belgium D. The United States of America Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Social Contract

According to Hofstede's cultural dimensions, in Malaysia and Mexico, where there is high power distance, _____ pay structures are appropriate.

A. equitable B. hierarchical C. egalitarian D. parallel Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Culture

KayLeaf Inc. wants to set up a unit in China. To facilitate this, it sends its manager to China to gather information. Which of the following is most likely to be a suggestion from its manager?

A. Use a hierarchical pay structure as there is high power distance in China. B. Use individual spot awards rather than stock options in the pay mix as the people in China have a long-term orientation. C. Use incentives linked to individual performance as China has a collectivistic culture. D. Have a rigid structure as the people in China have the highest level of uncertainty avoidance. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Culture

Uncertainty avoidance is _____.

Individualism is _____.

Which of the following countries has the highest number of people in the workforce belonging to unions?

A. Japan B. Sweden C. Italy D. South Korea Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Trade Unions and Employee Involvement

Which of the following statements about ownership and financial markets is true?

Topic: Ownership and Financial Markets

The degree of discretion managers have to make total compensation a strategic tool is referred to as _____.

A. managerial accountability B. democratic accountability C. managerial autonomy D. managerial liability Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managerial Autonomy

In the comparison of the pay systems of two well-known Japanese companies Toyota and Toshiba, Toyota _____.

10.

Traditionally, Japan's employment relationships were supported by _____.

A. lifetime security within the company B. performance-based pay systems alone C. centralized unions representing workers across several companies within an industry D. performance-based promotion systems alone Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: National Systems: Comparative Mind-Set

11.

Which of the following is a factor determining base pay in the Japanese traditional national system?

A. Job evaluation B. Career category C. Market pricing D. Specific job title Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

12.

Bonuses paid in Japan are _____.

A. additional pay equivalent to two weeks of annual salary B. typically paid once a year C. not an expectable additional payment D. not necessarily related to performance Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: National Systems: Comparative Mind-Set

13.

Which of the following is NOT true of the tariff agreements in Germany?

A. Small organizations use them as guidelines. B. Managerial jobs are covered by the agreements. C. Job evaluation methods are part of the agreements. D. Tariff agreements are different for each industrial sector. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: National Systems: Comparative Mind-Set

14.

In Japan, internal alignment based on _____ is far more important than other factors.

A. skills B. jobs C. accountabilities D. seniority Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

15.

Slow growth and competition has led Japanese companies to

A. use more performance-based pay. B. focus on maintaining lifetime employment rather than long-time employment. C. switch over to seniority-based pay. D. offer benefits such as gyms, dating services, and exotic vacations. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: National Systems: Comparative Mind-Set

16.

Which of the following statements about evolution and change in the traditional German model is true?

A. Nearly one in 10 German adults owns stock. B. High birth rates are pushing up the costs of the social support system. C. A relatively flexible labor market means that employers are finding it easier to move to other EU countries. D. Many of the changes in Germany are the result of global competitive pressures and technological changes. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: National Systems: Comparative Mind-Set

17.

A(n) _____ approach to compensation involves designing a total pay system at headquarters and applying it globally.

A. delayered B. inpatriate C. localizer D. exporter Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Strategic Market Mind-Set

18.

A Japanese citizen working for Toyota in Georgetown, Kentucky, is a _____.

A. host-country national B. third-country national C. parent-country national D. local country national Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

19.

An Indian citizen working for a Japanese company in India is a _____.

A. foreign country national B. third-country national C. parent-country national D. local country national Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

20.

A Korean citizen working for Toshiba, a Japanese company, in Canada is a _____.

A. host-country national B. third-country national C. parent-country national D. local country national Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

21.

Which of the following is true of hiring LCNs?

22.

KYZ Inc., a U.S. firm, sends its manager, Ryan, to London to manage its operations there. Ryan's salary is still based on the U.S pay system, however KYZ offers him a lump-sum payment to offset the additional standards-of-living expense in London. In this case, which of the following approaches to expatriate compensation is used by KYZ?

A. The cafeteria approach B. The localization approach C. The local plus approach D. The balance sheet approach Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Expatriate Pay

23.

The base salary plus incentives for expatriates is usually determined by _____.

A. job evaluation B. market pay C. competitors' pay level in the host country D. international pay schedules Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

24.

When taxes are deducted from employees' earnings up to the same amount of taxes they would pay had they remained in their home country, it is known as _____.

A. expat tax B. tax equalization C. compensatory tax D. tax protection Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

25.

Which of the following approaches seeks to ensure that employees on overseas assignments have the same spending power as they would in their home country?

A. The assets-liability approach B. The balance sheet approach C. The compensatory tax approach D. The income statement approach Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

26.

Which of the following statements is true of the localization approach to expatriate compensation?

27.

MayFly Inc., a firm headquartered in Paris, France, sends one of its employees to Frankfurt, Germany and Barcelona, Spain to manage its operations in these cities. The employee would be required to alternate between the two cities every six months. Mayfly offers only a moving expense on top of the base pay as the employee would be moving only within the European Union countries. Which of the following approaches to expatriate compensation is exemplified in this situation?

A. Modified balance sheet approach B. Localization approach C. Local plus approach D. Lump-sum/cafeteria approach Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Expatriate Pay

28.

Which of the following ties salary to a region?

A. The cafeteria approach B. The localization approach C. The modified balance sheet approach D. The lump-sum approach Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

29.

_____ sets salaries according to the home-country system and simply offers employees lump sums of money to offset differences in standards of living.

A. The modified balance sheet approach B. The localization approach C. The cafeteria approach D. The balance sheet approach Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

30.

Which of the following is NOT true of expatriates?

True / False Questions 31.

Understanding international compensation begins with recognizing differences and similarities and figuring out how to best manage them. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Global Context

32.

Evidence indicates that MNCs are influenced by both the institutional pressures in their home country and in the local context. TRUE Accessibility: Keyboard Navigation 16-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 1 Easy Topic: The Global Context

33.

Companies in the United States, United Kingdom, and some central European countries are most likely to have centralized wage bargaining. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Social Contract

34.

Neither works councils nor co-determination are legally required in the United States and are quite rare. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Social Contract

35.

In Malaysia and Mexico, egalitarian pay structures fit best with the culture. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Culture

36.

A study of both U.S. and Slovenian MBAs found that risk taking was higher among Slovenians. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Culture

37.

The country with the highest unionization rate in Europe is France, where 90 percent of workers are union members. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Trade Unions and Employee Involvement

38.

Unionization rates are higher in Europe than in Asia. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Trade Unions and Employee Involvement

39.

In China, while state-owned enterprises employ two-thirds of all workers, wholly privately owned enterprises, joint ventures with foreign companies, and WOFEs account for half of all profits. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Ownership and Financial Markets

40.

Generally, it is difficult to compare total compensation of a U.S. firm with a foreign competitor. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Comparing Costs

41.

It is easier and less complex to compare living costs across countries than total compensation. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Comparing Costs

42.

Japanese pay systems are more person-based than job-based. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

43.

Japanese pay systems typically emphasize pay based upon competitors' market rates rather than internal alignment. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

44.

Base pay for a Japanese employee is usually not based on job evaluation or market pricing. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

45.

Since the Japanese system is so seniority-based, labor costs decrease as the average age of the workforce increases. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

46.

According to the Japan Institute of Labour, for most employees bonuses are variable pay that help control the employer's cash flow and labor costs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

47.

In Germany, an employee's pay is affected by his or her age. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: National Systems: Comparative Mind-Set

48.

Only 5 percent of U.S. expatriates believe their company values their overseas experience. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

49.

Approximately 20 percent of expats leave their company within a year of their return to the U.S. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

50.

77 percent of expats have less disposable income when they return home from overseas assignments. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Expatriate Pay

Short Answer Questions

51.

Briefly summarize the degree to which the social contract constrains the employment relationship in organizations with an example.

Viewed as part of the social contract, the employment relationship is more than an exchange between an individual and an employer. It includes the government, all enterprise owners, and all employees. Understanding how to manage employee compensation in any country requires an understanding of the social contract in that country. Changing employee compensation systems require changing the expectations of parties to the social contract. The social contract evolves over time, sometimes very quickly. Compared to many countries, the United States government has traditionally played a relatively modest role in the employment relationship. However, that role has recently greatly expanded, at least in two key sectors of the U.S. economy: automobiles and financial services. Consider that Chrysler and General Motors (GM) have recently gone through bankruptcy and when they exit, their major shareholders will be the United Automobile Workers (UAW) union and the U.S. government. At the new GM, the U.S. government will have a 60 percent ownership stake, the UAW 17.5 percent, and the Canadian government 12 percent. In the case of Chrysler, the UAW will have a 55 percent ownership stake, the U.S. government 8 percent, and the Canadian government 2 percent. Finally, Fiat, the Italian carmaker, will have a 20 to 35 percent ownership stake. In summary, the social contract in the United States, known for the small role of government and the lack of a tripartite relationship between government, employees, and employers, has done a rapid "about face," at least in two of its major industries. While this government involvement and tripartism is seen as temporary, the question is whether this model will become the norm in the United States for handling future crises of this sort.

Difficulty: 2 Medium Topic: The Social Contract

52.

Explain the dimensions of national cultural attributes proposed by Hofstede.

The five national culture dimensions proposed by Hofstede are power distance, individualismcollectivism, uncertainty avoidance, long-term-short-term orientation, and masculinity-femininity. Power distance: The extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally. Uncertainty avoidance: The extent to which a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are unknown, surprising, and different from usual and societies differ in the degree to which they try to control the uncontrollable. Individualism versus its opposite, collectivism: It is the degree to which individuals are supposed to look after themselves or remain integrated into groups, usually around the family. Masculinity versus femininity: This refers to the distribution of emotional roles between the genders; it opposes 'tough' masculine to 'tender' feminine societies. Masculine societies emphasize assertiveness, performance, and competition. Long-term versus short-term orientation: This refers to the extent to which a culture programs its members to accept delayed gratification of their material, social, and emotional needs.

Difficulty: 2 Medium Topic: Culture

53.

How do the differences in the ownership and financing of companies around the world impact international pay?

Ownership and financing of companies differ widely around the world. These differences are important to international pay. In the United States, corporate ownership and access to capital is far less concentrated than in most other countries. Fifty percent of American households own stock in companies either directly or indirectly through mutual funds and pension funds. Direct stock ownership is only a few mouse clicks away. In Korea, six conglomerates control a significant portion of the Korean economy, and the six are closely linked with specific families. In Germany, the national Bundesbank and a small number of other influential banks have ownership interests in most major companies. These patterns of ownership make certain types of pay systems almost nonsensical because ownership in the companies is not readily available for individual investors. The most vivid illustrations of the importance of ownership occur in China and in eastern Europe, where a variety of forms are emerging. While state-owned enterprises still employ two-thirds of all workers in China, township enterprises, wholly privately owned enterprises, joint ventures with foreign companies, and wholly owned foreign enterprises account for 50 percent of the profits. Chinese employees switching from government-owned enterprises to these newer organizations find that both the pay and the employer expectations are substantially different. Individuals attracted to work in these various enterprises have different values and expectations. One study found that those working for local or town-owned enterprises prefer more performance-based pay than those working in federal-owned enterprises. Many families find it makes sense to have one wage earner working at a safe but lowpaying government enterprise and another wage earner working at a private enterprise where expectations and pay are high. So it is clear that ownership differences may influence what forms of pay make sense. It is very misleading to assume that every place is like home.

Difficulty: 2 Medium Topic: Ownership and Financial Markets

54.

Distinguish between parent-country nationals, local-country nationals, and third-country nationals with examples.

Employees temporarily working and living in a foreign country are called expatriates. One key decision for companies is the degree of reliance on expatriates relative to local employees. • Expatriates who are citizens of the employer's parent or home country and living and working in another country (e.g., a Japanese citizen working for Toshiba in Toronto) are called parent-country nationals (PCNs). • Expatriates who are citizens of neither the employer's parent country nor the foreign country where they are living and working (e.g., a German citizen working for Toshiba in Toronto) are called thirdcountry nationals (TCNs). • Local country nationals (LCNs) are citizens of a foreign country where the parent employer operates (e.g., a Canadian citizen working for Toshiba in Toronto).

Difficulty: 2 Medium Topic: Expatriate Pay

55.

What is the balance sheet approach? What is its objective?

Most North American, European, and Japanese global firms combine all the elements of expatriate pay in a balance sheet approach. The name stems from accounting, where credits and debits must balance. It is based on the premise that employees on overseas assignments should have the same spending power as they would in their home country. Therefore, the home country is the standard for all payments. The objective is to: 1. Ensure mobility of people to global assignments as cost-effectively as feasible. 2. Ensure that expatriates neither gain nor lose financially. 3. Minimize adjustments required of expatriates and their dependents.

Difficulty: 2 Medium Topic: Expatriate Pay

Chapter 17 Government and Legal Issues in Compensation

Multiple Choice Questions 1.

The executive branch of the federal government _____.

A. enforces laws through agencies and its other bodies B. passes new laws C. interprets laws and considers their constitutionality D. changes existing laws 2.

The _____ Act extends the prevailing-wage concept to manufacturers or suppliers of goods for government contracts.

A. Sarbanes-Oxley B. Walsh-Healey Public Contracts C. Fair Labor Standards D. Davis-Bacon 3.

The Davis-Bacon Act _____.

A. states that income from most stock plans need not be included in calculating overtime pay B. increases the burden of proof on employers to rebut some discrimination claims C. requires that mechanics and laborers on public construction projects be paid the prevailing wage in an area D. extends the prevailing-wage concept to manufacturers or suppliers of goods for government contracts 4.

Under the _____ Act, executives cannot retain bonuses or profits from selling company stock if they mislead the public regarding their company's financial condition.

A. Worker Economic Opportunity B. Davis-Bacon C. Walsh-Healey D. Sarbanes-Oxley

Which of the following is NOT a provision of the Fair Labor Standards Act of 1938?

The Worker Economic Opportunity Act _____.

A. states that income from most stock plans need not be included in calculating overtime pay B. requires the value of all employee stock options to be expensed at estimates of fair value on financial statements C. gives SEC the authority to grant shareholders proxy access to nominate directors D. extends SEC pay disclosure requirements to highly paid executives 7.

Under the _____, employers can be liable for current pay differences that are a result of discrimination that occurred many years earlier.

A. Sarbanes-Oxley Act B. Lilly Ledbetter Fair Pay Act C. Equal Pay Act D. Fair Labor Standards Act 8.

Which of the following includes a provision that requires public companies to set policies to allow executive compensation to be taken back if it was based on inaccurate financial statements that did not comply with accounting standards?

Which of the following is a test that must be met to qualify for the administrative employee exemption?

A. The employee must be compensated on a salary or fee basis at a rate not less than $455 per week. B. The employee's primary duty must be performance of manual work. C. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent. D. The employee must have the authority to hire or fire other employees. 10. Which of the following groups can qualify for the exemptions under the Fair Labor Standards Act of 1938?

A. Computer employees B. Police and other first responders C. Paramedics D. Fire fighters 17-2 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

11. The _____ specifies the number of breaks that must be provided in an eight-hour workday.

A. Portal-to-Portal Act B. Occupational Safety and Health Administration legislation C. Walsh-Healey Public Contracts legislation D. Equal Pay Act 12. Susan works in a sterile laboratory that requires her to scrub and put on protective clothing. Which of the following acts determines whether she should be paid for this time?

A. The Fair Labor Standards Act B. The Occupational Safety and Health Administration legislation C. The Portal-to-Portal Act D. The Health Care Workers Protection Act 13. Which of the following regarding child labor is NOT true?

A. Persons under 18 cannot work in hazardous jobs such as logging and meat packing. B. Persons under 16 cannot be employed in jobs involving interstate commerce except for nonhazardous work for a parent or guardian. C. The ILO finds that child labor is increasing on a global basis. D. The highest rates of child labor are in sub-Saharan Africa. 14. The highest rates of child labor are in _____.

A. China B. India C. Latin America D. sub-Saharan Africa 15. Who among the following has violated the Fair Labor Standards Act of 1938?

A. Rachel, who pays all her workers a minimum wage of $13 B. Sally, who does not consider time her employees spend travelling to work as compensable time C. Jeremy, who employs his 16-year-old cousin in his meat-packing plant D. Randy, who employs his 17-year-old son in his stationery store as a cashier 16. An early study of the effects of the living wage law in Los Angeles found all of the following EXCEPT that _____.

A. 7,735 of the employees covered by the law received an average wage increase of 20 percent B. 1 percent of covered jobs were lost C. a higher proportion of new hires were female D. turnover and absenteeism declined

17. Prevailing-wage laws _____.

A. set pay for work done to produce goods and services contracted by the state government B. specify that a government-defined prevailing wage is the maximum wage that must be paid for work done on covered government projects C. give contractors the right to drive down wages using their size D. were passed in response to conditions on projects such as the construction of the Hoover Dam during the Depression 18. Denial of jobs, promotions, or training opportunities to qualified women or minorities are examples of _____.

A. access discrimination B. valuation discrimination C. treatment discrimination D. hostile environment 19. _____ is defined by the Department of Labor as the experience, training, education, and ability as measured by the performance requirements of a particular job.

A. Effort B. Skill C. Responsibility D. Working condition 20. Meltrop Corp. employs two store clerks, Sam and Stella. Stella sues Meltrop claiming unequal pay as she earns $500 a week less than Sam does despite doing the same work as Sam. Which of the following is most likely to be the result of the litigation?

A. Meltrop will win the litigation as blue-collar workers are exempt from the Equal Pay Act. B. Meltrop will win the litigation if it can prove that Stella is Sam's senior. C. Meltrop will lose the litigation as it has committed access discrimination. D. Meltrop will lose the litigation as it has committed valuation discrimination. 21. The ADEA _____.

A. prohibits discrimination on the basis of sex, race, or color B. was amended in 1990 to include the Older Workers Benefit Protection Act C. was amended in 2011 to ensure that workers get two months' notice before termination D. prohibits discrimination on the basis of national origin in any employment condition

22. In which of the following types of cases is the focus on the discriminatory consequences rather than the intent to discriminate?

A. Disparate treatment B. Access discrimination C. Disparate impact D. Valuation discrimination 23. MNTX University requires that all its female professors score higher than the male professors in their appraisal rating to qualify for a pay bonus as there are more female professors than male professors in the university. Which of the following statements is true in this case?

A. MNTX is liable for access discrimination against women. B. MNTX is liable for disparate treatment of women. C. MNTX's pay policy is legal as educational institutions are exempt under the Equal Pay Act. D. MNTX's pay policy is legal as its intention is to reduce the overall costs of the company and not to discriminate. 24. _____ prohibits discrimination on the basis of race, color, religion, sex, or national origin.

A. Executive Order 11452 B. The FMLA C. Executive Order 11246 D. The Rehabilitation Act 25. The agency that conducts reviews and seeks remedies where insufficient compliance to Executive Order 11246 is found is the _____.

A. OSHA B. EEOC C. OFCCP D. FCSS 26. Regarding pay differences for different jobs, _____.

A. courts continue to rely on the use of employer opinion surveys to justify differences B. the courts favor reliance on the use of statistical models C. court decisions have been inconclusive D. courts continue to uphold the use of market data to justify differences

27. The determination of pay discrimination on jobs of dissimilar content requires a standard that allows jobs of dissimilar content to be declared comparable and that allows pay differences for jobs that are not comparable. This standard is _____.

A. job evaluation B. comparable worth analysis C. disparate impact analysis D. point factor market comparison 28. Which of the following is NOT one of the steps in establishing a comparable-worth pay plan?

A. Adopt a single gender neutral point job evaluation plan for all jobs within a unit. B. All jobs with equal job evaluation points should be paid the same. C. Identify the percentages of male and female employees in each job group. D. Base the wage-to-job evaluation point ratio on the wages paid for female-dominated jobs. 29. _____ has produced more comparable-worth pay increases than any other approach.

A. Integrative bargaining B. Win-win bargaining C. Interest-based bargaining D. Collective bargaining 30. Which of the following statements regarding wage differences in industries and firms is NOT true?

A. Wages of men in large firms are 54 percent higher than wages of men in small firms. B. Hispanic men are concentrated in construction and service firms. C. Female employment is more heavily concentrated in large firms. D. The pay premium associated with changing jobs is enjoyed primarily by white males.

True / False Questions 31. Legislation does not always achieve what it intends nor intend what it achieves. True

False

32. While government affects the supply of labor through legislation, it has no effect on the demand for labor. True

False

33. The Mental Health Act of 1997 requires that mental illness be covered to the same extent that other medical conditions are covered. True

False

34. All employees are covered by the Fair Labor Standards Act of 1938 and its amendments without exemptions. True

False

35. If federal and state minimum wage laws cover the same job, workers should be paid at or above the higher rate. True

False

36. As the lowest rates paid in the software, chemical, oil, and pharmaceutical industries are already well above minimum, any legislation to increase minimum wage would have little direct impact on them. True

False

37. One objective of the overtime provision of FLSA is to share available work by making the hiring of additional workers a less costly option than the scheduling of overtime for current employees. True

False

38. A GAO study found that 9 of 10 cases brought by GAO undercover agents posing as workers were mishandled by the Wage and Hour division of the Labor Department. True

False

39. A government-defined prevailing wage is the minimum wage that must be paid for work done on covered government projects or purchases. True

False

40. Prevailing wages protect foreign workers working as registered nurses. True

False

41. The two types of discrimination recognized by law are valuation discrimination and access discrimination. True

False

42. In the Schultz v. Wheaton Glass case, the Supreme Court ruled that for jobs to receive equal pay, they do not have to be identical but substantially equal. True

False

43. Of the four affirmative defenses for unequal pay for equal work, "a factor other than sex" has prompted the most court cases. True

False

44. Pay differences for equal work may be justified for demonstrably business-related reasons. True

False

45. Disparate treatment occurs when a seemingly neutral employment practice disproportionately excludes a protected group from employment opportunities. True

False

46. The key to a comparable-worth system is a single job evaluation plan for jobs with dissimilar content. True

False

47. Women's median annual earnings compared to men's has changed from about 60 percent to 78 percent from 1980 to 2013. True

False

48. The gender wage gap is moderate for recent college graduates and decreases as the cohort ages. True

False

49. A higher proportion of women are employed by small firms compared to large firms. True

False

50. The gender pay gap is common across countries and is smaller in some countries than the U.S. True

False

Short Answer Questions 51. Distinguish between access discrimination and valuation discrimination.

52. What are the definitions of skill, effort, responsibility, and working conditions according to the Department of Labor? What are the conditions that must be met for an employer to support a claim of unequal work?

53. Compare and contrast disparate treatment and disparate impact.

54. What are the four basic steps in establishing a comparable-worth plan?

55. What are the sources of earnings gaps?

Chapter 17 Government and Legal Issues in Compensation Answer Key

Multiple Choice Questions 1.

The executive branch of the federal government _____.

A. enforces laws through agencies and its other bodies B. passes new laws C. interprets laws and considers their constitutionality D. changes existing laws Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Government as Part of the Employment Relationship

The _____ Act extends the prevailing-wage concept to manufacturers or suppliers of goods for government contracts.

A. Sarbanes-Oxley B. Walsh-Healey Public Contracts C. Fair Labor Standards D. Davis-Bacon Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

The Davis-Bacon Act _____.

Under the _____ Act, executives cannot retain bonuses or profits from selling company stock if they mislead the public regarding their company's financial condition.

A. Worker Economic Opportunity B. Davis-Bacon C. Walsh-Healey D. Sarbanes-Oxley Accessibility: Keyboard Navigation 17-10 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

Which of the following is NOT a provision of the Fair Labor Standards Act of 1938?

A. It requires that employers provide 15 weeks of medical leave to employees. B. It sets minimum wage standards. C. It prohibits child labor. D. It requires payment at one-and-a-half times the standard for working more than 40 hours per week. Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

The Worker Economic Opportunity Act _____.

Under the _____, employers can be liable for current pay differences that are a result of discrimination that occurred many years earlier.

A. Sarbanes-Oxley Act B. Lilly Ledbetter Fair Pay Act C. Equal Pay Act D. Fair Labor Standards Act Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

A. The American Recovery and Reinvestment Act (ARRA) B. The Troubled Asset Relief Program (TARP) C. The Financial Accounting Standards Board Statement 123 R D. The Dodd-Frank Wall Street Reform and Consumer Protection Act Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

Which of the following is a test that must be met to qualify for the administrative employee exemption?

A. The employee must be compensated on a salary or fee basis at a rate not less than $455 per week. B. The employee's primary duty must be performance of manual work. C. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent. D. The employee must have the authority to hire or fire other employees. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Fair Labor Standards Act of 1938

10.

Which of the following groups can qualify for the exemptions under the Fair Labor Standards Act of 1938?

A. Computer employees B. Police and other first responders C. Paramedics D. Fire fighters Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

11.

The _____ specifies the number of breaks that must be provided in an eight-hour workday.

A. Portal-to-Portal Act B. Occupational Safety and Health Administration legislation C. Walsh-Healey Public Contracts legislation D. Equal Pay Act Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

12.

Susan works in a sterile laboratory that requires her to scrub and put on protective clothing. Which of the following acts determines whether she should be paid for this time?

A. The Fair Labor Standards Act B. The Occupational Safety and Health Administration legislation C. The Portal-to-Portal Act D. The Health Care Workers Protection Act Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Fair Labor Standards Act of 1938

13.

Which of the following regarding child labor is NOT true?

14.

The highest rates of child labor are in _____.

A. China B. India C. Latin America D. sub-Saharan Africa Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

15.

Who among the following has violated the Fair Labor Standards Act of 1938?

A. Rachel, who pays all her workers a minimum wage of $13 B. Sally, who does not consider time her employees spend travelling to work as compensable time C. Jeremy, who employs his 16-year-old cousin in his meat-packing plant D. Randy, who employs his 17-year-old son in his stationery store as a cashier Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Fair Labor Standards Act of 1938

16.

An early study of the effects of the living wage law in Los Angeles found all of the following EXCEPT that _____.

17.

Prevailing-wage laws _____.

A. set pay for work done to produce goods and services contracted by the state government B. specify that a government-defined prevailing wage is the maximum wage that must be paid for work done on covered government projects C. give contractors the right to drive down wages using their size D. were passed in response to conditions on projects such as the construction of the Hoover Dam during the Depression Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Prevailing Wage Laws

18.

Denial of jobs, promotions, or training opportunities to qualified women or minorities are examples of _____.

A. access discrimination B. valuation discrimination C. treatment discrimination D. hostile environment Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Pay Discrimination: What Is It?

19.

_____ is defined by the Department of Labor as the experience, training, education, and ability as measured by the performance requirements of a particular job.

A. Effort B. Skill C. Responsibility D. Working condition Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Equal Pay Act

20.

Meltrop Corp. employs two store clerks, Sam and Stella. Stella sues Meltrop claiming unequal pay as she earns $500 a week less than Sam does despite doing the same work as Sam. Which of the following is most likely to be the result of the litigation?

21.

The ADEA _____.

22.

In which of the following types of cases is the focus on the discriminatory consequences rather than the intent to discriminate?

A. Disparate treatment B. Access discrimination C. Disparate impact D. Valuation discrimination Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Title VII of the Civil Rights Act of 1964 and Related Laws

23.

MNTX University requires that all its female professors score higher than the male professors in their appraisal rating to qualify for a pay bonus as there are more female professors than male professors in the university. Which of the following statements is true in this case?

A. MNTX is liable for access discrimination against women. B. MNTX is liable for disparate treatment of women. C. MNTX's pay policy is legal as educational institutions are exempt under the Equal Pay Act. D. MNTX's pay policy is legal as its intention is to reduce the overall costs of the company and not to discriminate. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Title VII of the Civil Rights Act of 1964 and Related Laws

24.

_____ prohibits discrimination on the basis of race, color, religion, sex, or national origin.

A. Executive Order 11452 B. The FMLA C. Executive Order 11246 D. The Rehabilitation Act Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Executive Order 11246

25.

The agency that conducts reviews and seeks remedies where insufficient compliance to Executive Order 11246 is found is the _____.

A. OSHA B. EEOC C. OFCCP D. FCSS Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Executive Order 11246

26.

Regarding pay differences for different jobs, _____.

27.

The determination of pay discrimination on jobs of dissimilar content requires a standard that allows jobs of dissimilar content to be declared comparable and that allows pay differences for jobs that are not comparable. This standard is _____.

A. job evaluation B. comparable worth analysis C. disparate impact analysis D. point factor market comparison Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Pay Discrimination and Dissimilar Jobs

28.

Which of the following is NOT one of the steps in establishing a comparable-worth pay plan?

A. Adopt a single gender neutral point job evaluation plan for all jobs within a unit. B. All jobs with equal job evaluation points should be paid the same. C. Identify the percentages of male and female employees in each job group. D. Base the wage-to-job evaluation point ratio on the wages paid for female-dominated jobs. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Pay Discrimination and Dissimilar Jobs

29.

_____ has produced more comparable-worth pay increases than any other approach.

A. Integrative bargaining B. Win-win bargaining C. Interest-based bargaining D. Collective bargaining Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Pay Discrimination and Dissimilar Jobs

30.

Which of the following statements regarding wage differences in industries and firms is NOT true?

True / False Questions 31.

Legislation does not always achieve what it intends nor intend what it achieves. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

32.

While government affects the supply of labor through legislation, it has no effect on the demand for labor. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

33.

The Mental Health Act of 1997 requires that mental illness be covered to the same extent that other medical conditions are covered. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Government as Part of the Employment Relationship

34.

All employees are covered by the Fair Labor Standards Act of 1938 and its amendments without exemptions. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

35.

If federal and state minimum wage laws cover the same job, workers should be paid at or above the higher rate. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

36.

As the lowest rates paid in the software, chemical, oil, and pharmaceutical industries are already well above minimum, any legislation to increase minimum wage would have little direct impact on them. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

37.

One objective of the overtime provision of FLSA is to share available work by making the hiring of additional workers a less costly option than the scheduling of overtime for current employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

38.

A GAO study found that 9 of 10 cases brought by GAO undercover agents posing as workers were mishandled by the Wage and Hour division of the Labor Department. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Fair Labor Standards Act of 1938

39.

A government-defined prevailing wage is the minimum wage that must be paid for work done on covered government projects or purchases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Prevailing Wage Laws

40.

Prevailing wages protect foreign workers working as registered nurses. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Prevailing Wage Laws 17-18 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

41.

The two types of discrimination recognized by law are valuation discrimination and access discrimination. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Pay Discrimination: What Is It?

42.

In the Schultz v. Wheaton Glass case, the Supreme Court ruled that for jobs to receive equal pay, they do not have to be identical but substantially equal. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Equal Pay Act

43.

Of the four affirmative defenses for unequal pay for equal work, "a factor other than sex" has prompted the most court cases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Equal Pay Act

44.

Pay differences for equal work may be justified for demonstrably business-related reasons. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: The Equal Pay Act

45.

Disparate treatment occurs when a seemingly neutral employment practice disproportionately excludes a protected group from employment opportunities. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Title VII of the Civil Rights Act of 1964 and Related Laws

46.

The key to a comparable-worth system is a single job evaluation plan for jobs with dissimilar content. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Pay Discrimination and Dissimilar Jobs

47.

Women's median annual earnings compared to men's has changed from about 60 percent to 78 percent from 1980 to 2013. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Earnings Gaps

48.

The gender wage gap is moderate for recent college graduates and decreases as the cohort ages. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Earnings Gaps

49.

A higher proportion of women are employed by small firms compared to large firms. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Earnings Gaps

50.

The gender pay gap is common across countries and is smaller in some countries than the U.S. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Earnings Gaps

Short Answer Questions 51.

Distinguish between access discrimination and valuation discrimination.

The law recognizes two types of discrimination: access discrimination and valuation discrimination. The charges of discrimination and reverse discrimination that most often make the news involve access discrimination: the denial of particular jobs, promotions, or training opportunities to qualified women or minorities. A second legally recognized interpretation of discrimination is valuation discrimination, which looks at the pay women and minorities receive for the jobs they perform. The Equal Pay Act makes it clear that it is discriminatory to pay women less than males when they are performing equal work. This definition of pay discrimination hinges on the standard of equal pay for equal work. Many believe that this definition of valuation discrimination does not go far enough. They believe that valuation discrimination can also occur when men and women hold entirely different jobs.

Difficulty: 2 Medium Topic: Pay Discrimination: What Is It?

52.

What are the definitions of skill, effort, responsibility, and working conditions according to the Department of Labor? What are the conditions that must be met for an employer to support a claim of unequal work?

The Department of Labor provides these definitions of the four factors. 1. Skill: Experience, training, education, and ability as measured by the performance requirements of a particular job. 2. Effort: Mental or physical—the degree of effort (not type of effort) actually expended in the performance of a job. 3. Responsibility: The degree of accountability required in the performance of a job. 4. Working conditions: The physical surroundings and hazards of a job, including dimensions such as inside versus outside work, heat, cold, and poor ventilation. Guidelines to clarify these definitions have evolved through court decisions. For an employer to support a claim of unequal work, the following conditions must be met: 1. The effort/skill/responsibility must be substantially greater in one of the jobs compared. 2. The tasks involving the extra effort/skill/responsibility must consume a significant amount of time for all employees whose additional wages are in question. 3. The extra effort/skill/responsibility must have a value commensurate with the questioned pay differential (as determined by the employer's own evaluation). Time of day (e.g., working a night shift) does not constitute dissimilar working conditions. However, if a differential for working at night is paid, it must be separated from the base wage for the job.

Difficulty: 2 Medium Topic: The Equal Pay Act

53.

Compare and contrast disparate treatment and disparate impact.

Court cases have established two theories of discrimination behavior under Title VII: (1) disparate treatment and (2) disparate impact. Disparate treatment: Disparate or unequal treatment applies different standards to different employees: For example, asking women but not men if they plan to have children. In Japan, for example, women college students continue to report that recruiters ask them different questions than are asked of male college students. The mere fact of unequal treatment may be taken as evidence of the employer's intention to discriminate under U.S. law. Disparate impact: Practices that have a differential effect on members of protected groups are illegal, unless the differences are work-related. Under disparate impact, whether or not the employer intended to discriminate is irrelevant. A personnel decision can, on its face, seem neutral, but if its results are unequal, the employer must demonstrate that the decision is work-related. The two standards of discrimination—disparate treatment versus disparate impact—remain difficult to apply to pay issues, since pay differences are legal for dissimilar work. It is still not clear what constitutes pay discrimination in dissimilar jobs in the United States.

Difficulty: 2 Medium Topic: Title VII of the Civil Rights Act of 1964 and Related Laws

54.

What are the four basic steps in establishing a comparable-worth plan?

Establishing a comparable-worth plan typically involves the following four basic steps: 1. Adopt a single gender neutral point job evaluation plan for all jobs within a unit. If employees are unionized, separate plans have been prepared for each bargaining unit and take precedence over previous agreements. The key to a comparable-worth system is a single job evaluation plan for jobs with dissimilar content. 2. All jobs with equal job evaluation results should be paid the same. Although each factor in the job evaluation may not be equal, if the total points are equal, the wage rates must also be equal. 3. Identify the percentages of male and female employees in each job group. A job group is defined as a group of positions with similar duties and responsibilities that require similar qualifications, are filled by similar recruiting procedures, and are paid under the same pay schedule. Typically, a femaledominated job group is defined as having 60 percent or more female incumbents; a male-dominated job group has 70 percent or more male incumbents. 4. The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs since they are presumed to be the best estimate of nondiscriminatory wages.

Difficulty: 2 Medium Topic: Pay Discrimination and Dissimilar Jobs

55.

What are the sources of earnings gaps?

Some of the more important sources of earnings gaps include the following: • Work/occupation differences • Work-related behavior • Labor market conditions • Firm/industry differences • Union differences • Discrimination Considerable research has examined the factors that are the central sources of the wage differences between men and women and the racial/ethnic groups. The issue, especially any proposed remedies, continues to generate research and debate. The primary sources contributing to the gender gap differ from the primary sources for the race/ethnic gaps. It appears that differences in the work/occupation and differences in work-related behaviors are central to understanding the remaining gender wage gaps. In contrast, differences in qualifications, especially educational levels and work-related experience as well as differences in occupations, are important sources of the gaps for both blacks and Hispanics compared to white men.

Difficulty: 2 Medium Topic: Earnings Gaps

Chapter 18 Management: Making It Work

Multiple Choice Questions 1.

Which of the following is NOT a likely consequence of a highly decentralized pay system?

Total compensation in many organizations makes up at least _____ percent of operating expenses.

A. 20 B. 30 C. 40 D. 50 3.

The average company match for 401(k) retirement plan is _____ cents on the dollar up to 6 percent of pay.

A. 50 B. 40 C. 30 D. 20 4.

A major advantage of a _____ is that it reduces benefits costs, something that the other cost-cutting options ordinarily do not achieve.

A. reduction in work hours B. furlough C. pay cut D. reduction in force 5.

All of the following are adverse effects of layoffs EXCEPT _____.

A. decreased unemployment insurance tax rates B. unrealized productivity C. lower morale D. lower financial gains than expected

The _____ often comes into play if organizations target reductions among higher paid employees because higher paid employees also tend to be older employees.

A. WHO B. FMLA C. OSHA D. ADEA 7.

Which of the following is NOT a potential problem with headcount reductions?

A. Regulatory requirements make it difficult to make targeted cuts. B. Workforce reductions, especially if not handled well, can harm employee relations. C. Organizations that make greater involuntary workforce reductions also experience greater voluntary turnover. D. RIFs are very costly in tangible terms in the long run due to decreases in unemployment insurance tax rate. 8.

The percentage increase in average pay that is expected for an organizational unit or company is called _____.

A. a decentralized budget B. a bottoms-up budget C. a planned pay-level rise D. the current year's rise 9.

_____ is the budgetary approach that begins with an estimate from the highest ranking executives of the pay increase budget for an entire organization.

A. Bottom-up budgeting B. Top-down budgeting C. Managerial plan D. Executive estimate budgeting 10. If financially troubled employers have NOT been able to maintain competitive market positions, the conventional response has been to _____.

A. increase the rate of reduction in average pay by controlling adjustments in base pay B. decrease employees' copays and deductibles for benefits C. increase base wages but not variable pay D. reduce employment 11. The denominator for calculating the current year's pay rise is _____.

A. average pay at the beginning of the year B. average pay at the end of the year C. average number of employees during the year D. average employment level 18-2 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12. The _____ recognizes the fact that when people leave an organization, they typically are replaced by employees who earn a lower wage.

A. productivity effect B. conflict effect C. turnover effect D. morale effect 13. HoldDesk Inc. has an annual labor cost of $3,000,000. It has a turnover rate of 10 percent and a planned average increase of 5 percent. The turnover effect is _____.

A. $10,000 B. $45,000 C. $15,000 D. $30,000 14. Changes in wages in labor markets are measured _____.

A. using the producer price index B. using the modified balance sheet approach C. through pay surveys D. by examining the personal expenditure of each employee 15. Which of the following is a measure of changes in prices of goods and services in the product and service markets over time?

A. Producer price survey B. Product market competitor wage survey C. Labor market competitor wage survey D. Consumer price index 16. If Philadelphia has a CPI of 165 and Houston has a CPI of 145, and if both cities started with bases of 100, it means that _____.

A. prices have risen faster in Philadelphia since the base year than in Houston B. it essentially costs more to live in Philadelphia than in Houston C. it costs less to live in Houston than in Philadelphia D. pay in Philadelphia is, on average, 20 percent higher than in Houston 17. When employees are paid more than the maximum of their pay grade, these rates are called _____ rates.

A. red circle B. yellow circle C. blue circle D. green triangle

18. The compa-ratio reflects the _____.

A. rate paid for satisfactory performance B. relationship of actual salaries to the midpoint of the going rates in the market C. maximum value of red circle rates D. relationship of the average actual salary in each range to the midpoint of the range 19. A compa-ratio less than 1 means that, on average, _____.

A. employees are senior employees B. the turnover rate of the organization is low C. employees are high performers D. employees in a range are paid below the midpoint 20. GronLan Inc., a company with a majority of workers with high seniority, decides to hire 1,000 college graduates to meet the sudden productivity requirements generated by a growth in the market. Which of the following statements is most likely to be happen in this situation?

A. The compa-ratio of the company will become greater than one. B. The average pay actually paid by the company will fall below its range midpoint. C. The salary range midpoint of the company will become lesser than the compa-ratio. D. The number of employees being paid red circle rates will increase. 21. MerTon Inc. decides to reduce labor costs by using exit incentives to encourage some of its senior, highearning members to leave the organization. It replaces the employees who quit with new employees and pays them low wages. Which of the following statements is most likely true in this scenario?

A. The number of employees being paid red circle rates will increase. B. The salary range midpoint of the company is lesser than the compa-ratio. C. The salary range midpoint of the company is higher than the actual salary paid. D. The compa-ratio of the company is greater than one. 22. According to one study, only _____ of organizations actually calculate the cost and value added by their pay programs.

A. three-fourths B. one-fourth C. one-half D. one-third 23. Which of the following statements about anchoring/framing is true?

A. It states that initial data strongly affect decisions/beliefs. B. It is the reluctance to accept evidence that contradicts existing beliefs. C. It refers to the tendency to follow fashions in programs/techniques. D. It states that people discover patterns in random events.

24. The Web page for the compensation society is _____.

A. Society for Human Resource Management B. American Compensation Association C. International Compensation and Benefits Society D. WorldatWork 25. _____, designed for employees or managers, explain compensation policies and practices, answer frequently asked questions, and explain how these systems affect their pay.

A. Communication portals B. Enterprise resource planning systems C. Cafeteria plans D. Content delivery networks 26. _____, a software package, allows workers to make health-care choices, allocate savings to 401(k)s or other savings vehicles, and access vacation schedules.

A. Manager self-service B. Employee self-service C. A cafeteria plan D. An enterprise resource planning system 27. A management strategy of giving separate organization units the responsibility to design and administer their own compensation systems is _____.

A. known as a centralized strategy B. known as a decentralized strategy C. the best approach to design D. rarely done in today's organizations 28. Which of the following is the basic question to ask to improve quality and ensure that value is added by each technique and at each stage in the compensation system?

A. Who should do the activity? B. How should the technique be redesigned? C. Does each specific activity directly contribute to our objectives? D. Should the activity be done in-house, or can others do it more effectively? 29. The major potential advantage of outsourcing is _____.

A. increased turnover rate B. increased compa-ratio C. increased absenteeism D. increased cost savings

30. Replacing merit grids with _____ eliminates the link between the pay increase and the employees' salary position in the range and performance rating.

A. bands B. skill- or competency-based plans C. job evaluation plans D. bonuses

True / False Questions 31. In a totally decentralized pay system, employees are likely to be treated unequally and unfairly. True

False

32. A major advantage of a reduction in force is that it reduces benefits costs. True

False

33. Exit incentives is likely to result in the loss of high-performing employees. True

False

34. Many employers achieve flexibility and control employment costs by utilizing contingent workers rather than expanding and contracting the core workforce. True

False

35. Rather than define employment as hours of work, number of employees is often used. True

False

36. In the past two decades, the average variable pay budget has increased. True

False

37. The CPI accurately reflects an individual employee's cost of living. True

False

38. Changes in the CPI indicate whether prices have increased more or less rapidly in an area since the base period. True

False

39. An individual employee cannot earn more pay than the maximum of the pay grade of their current job. True

False

40. If red circle rates become common throughout an organization, then the design of the ranges and the evaluation of the jobs should be reexamined. True

False

41. Broad bands provide managers greater discretion in pay for their subordinates compared to a grade-range design. True

False

42. A compa-ratio is the average actual pay divided by the midpoint of the pay grade. True

False

43. A compa-ratio greater than 1 means that, on average, the rates exceed the intended policy. True

False

44. Generally, organizations have increased their use of variable pay relative to traditional base pay increases. True

False

45. Pay policies are more open in the public sector than in the private sector. True

False

46. Less than 10 percent of compensation professionals strongly agree that employees know their own pay range and the one above them. True

False

47. Over half of the employees in the private sector work in companies with open pay policies. True

False

48. A key reason to communicate pay information is that the goodwill engendered by the act of being open about pay may affect perceptions of pay equity. True

False

49. If a pay system is not based upon work-related or business-related logic, it is probably best to not conduct a formal compensation communication program. True

False

50. The most important components of a pay communication program are the business-related and workrelated rationales on which the pay systems are based. True

False

Short Answer Questions

51. What are the potential problems associated with headcount reductions?

52. What is the top-down method of budgeting?

53. What is the turnover effect? Explain how it is calculated with an example.

54. What is the consumer price index (CPI)? Explain with an example.

55. Briefly summarize compa-ratios.

Chapter 18 Management: Making It Work Answer Key

Multiple Choice Questions 1.

Which of the following is NOT a likely consequence of a highly decentralized pay system?

A. Financial malfeasance is completely eliminated. B. Pay rates for the same work could be inconsistent. C. Managers could use pay to motivate their own objectives. D. Employees are likely to be treated unfairly. Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs and Revenues

Total compensation in many organizations makes up at least _____ percent of operating expenses.

A. 20 B. 30 C. 40 D. 50 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs and Revenues

The average company match for 401(k) retirement plan is _____ cents on the dollar up to 6 percent of pay.

A. 50 B. 40 C. 30 D. 20 Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs and Revenues

A major advantage of a _____ is that it reduces benefits costs, something that the other cost-cutting options ordinarily do not achieve.

A. reduction in work hours B. furlough C. pay cut D. reduction in force Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs

All of the following are adverse effects of layoffs EXCEPT _____.

A. decreased unemployment insurance tax rates B. unrealized productivity C. lower morale D. lower financial gains than expected Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs

The _____ often comes into play if organizations target reductions among higher paid employees because higher paid employees also tend to be older employees.

A. WHO B. FMLA C. OSHA D. ADEA Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

Which of the following is NOT a potential problem with headcount reductions?

The percentage increase in average pay that is expected for an organizational unit or company is called _____.

A. a decentralized budget B. a bottoms-up budget C. a planned pay-level rise D. the current year's rise Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

_____ is the budgetary approach that begins with an estimate from the highest ranking executives of the pay increase budget for an entire organization.

A. Bottom-up budgeting B. Top-down budgeting C. Managerial plan D. Executive estimate budgeting Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

10.

If financially troubled employers have NOT been able to maintain competitive market positions, the conventional response has been to _____.

A. increase the rate of reduction in average pay by controlling adjustments in base pay B. decrease employees' copays and deductibles for benefits C. increase base wages but not variable pay D. reduce employment Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs

11.

The denominator for calculating the current year's pay rise is _____.

A. average pay at the beginning of the year B. average pay at the end of the year C. average number of employees during the year D. average employment level Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

12.

The _____ recognizes the fact that when people leave an organization, they typically are replaced by employees who earn a lower wage.

A. productivity effect B. conflict effect C. turnover effect D. morale effect Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

13.

HoldDesk Inc. has an annual labor cost of $3,000,000. It has a turnover rate of 10 percent and a planned average increase of 5 percent. The turnover effect is _____.

A. $10,000 B. $45,000 C. $15,000 D. $30,000 Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Managing Labor Costs

14.

Changes in wages in labor markets are measured _____.

A. using the producer price index B. using the modified balance sheet approach C. through pay surveys D. by examining the personal expenditure of each employee Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

15.

Which of the following is a measure of changes in prices of goods and services in the product and service markets over time?

A. Producer price survey B. Product market competitor wage survey C. Labor market competitor wage survey D. Consumer price index Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

16.

If Philadelphia has a CPI of 165 and Houston has a CPI of 145, and if both cities started with bases of 100, it means that _____.

A. prices have risen faster in Philadelphia since the base year than in Houston B. it essentially costs more to live in Philadelphia than in Houston C. it costs less to live in Houston than in Philadelphia D. pay in Philadelphia is, on average, 20 percent higher than in Houston Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs

17.

When employees are paid more than the maximum of their pay grade, these rates are called _____ rates.

A. red circle B. yellow circle C. blue circle D. green triangle Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

18.

The compa-ratio reflects the _____.

A. rate paid for satisfactory performance B. relationship of actual salaries to the midpoint of the going rates in the market C. maximum value of red circle rates D. relationship of the average actual salary in each range to the midpoint of the range Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs

19.

A compa-ratio less than 1 means that, on average, _____.

A. employees are senior employees B. the turnover rate of the organization is low C. employees are high performers D. employees in a range are paid below the midpoint Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Managing Labor Costs

20.

GronLan Inc., a company with a majority of workers with high seniority, decides to hire 1,000 college graduates to meet the sudden productivity requirements generated by a growth in the market. Which of the following statements is most likely to be happen in this situation?

21.

MerTon Inc. decides to reduce labor costs by using exit incentives to encourage some of its senior, highearning members to leave the organization. It replaces the employees who quit with new employees and pays them low wages. Which of the following statements is most likely true in this scenario?

A. The number of employees being paid red circle rates will increase. B. The salary range midpoint of the company is lesser than the compa-ratio. C. The salary range midpoint of the company is higher than the actual salary paid. D. The compa-ratio of the company is greater than one. Accessibility: Keyboard Navigation Difficulty: 3 Hard Topic: Managing Labor Costs

22.

According to one study, only _____ of organizations actually calculate the cost and value added by their pay programs.

A. three-fourths B. one-fourth C. one-half D. one-third Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Revenues

23.

Which of the following statements about anchoring/framing is true?

24.

The Web page for the compensation society is _____.

A. Society for Human Resource Management B. American Compensation Association C. International Compensation and Benefits Society D. WorldatWork Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structuring the Compensation Function and its Roles

25.

_____, designed for employees or managers, explain compensation policies and practices, answer frequently asked questions, and explain how these systems affect their pay.

A. Communication portals B. Enterprise resource planning systems C. Cafeteria plans D. Content delivery networks Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structuring the Compensation Function and its Roles

26.

_____, a software package, allows workers to make health-care choices, allocate savings to 401(k)s or other savings vehicles, and access vacation schedules.

A. Manager self-service B. Employee self-service C. A cafeteria plan D. An enterprise resource planning system Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structuring the Compensation Function and its Roles

27.

A management strategy of giving separate organization units the responsibility to design and administer their own compensation systems is _____.

A. known as a centralized strategy B. known as a decentralized strategy C. the best approach to design D. rarely done in today's organizations Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structuring the Compensation Function and its Roles

28.

Which of the following is the basic question to ask to improve quality and ensure that value is added by each technique and at each stage in the compensation system?

A. Who should do the activity? B. How should the technique be redesigned? C. Does each specific activity directly contribute to our objectives? D. Should the activity be done in-house, or can others do it more effectively? Accessibility: Keyboard Navigation Difficulty: 2 Medium Topic: Structuring the Compensation Function and its Roles

29.

The major potential advantage of outsourcing is _____.

A. increased turnover rate B. increased compa-ratio C. increased absenteeism D. increased cost savings Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structuring the Compensation Function and its Roles

30.

Replacing merit grids with _____ eliminates the link between the pay increase and the employees' salary position in the range and performance rating.

A. bands B. skill- or competency-based plans C. job evaluation plans D. bonuses Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Structuring the Compensation Function and its Roles

True / False Questions 31.

In a totally decentralized pay system, employees are likely to be treated unequally and unfairly. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs and Revenues

32.

A major advantage of a reduction in force is that it reduces benefits costs. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs and Revenues

33.

Exit incentives is likely to result in the loss of high-performing employees. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs and Revenues

34.

Many employers achieve flexibility and control employment costs by utilizing contingent workers rather than expanding and contracting the core workforce. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs and Revenues

35.

Rather than define employment as hours of work, number of employees is often used. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs and Revenues

36.

In the past two decades, the average variable pay budget has increased. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs and Revenues

37.

The CPI accurately reflects an individual employee's cost of living. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

38.

Changes in the CPI indicate whether prices have increased more or less rapidly in an area since the base period. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

39.

An individual employee cannot earn more pay than the maximum of the pay grade of their current job. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

40.

If red circle rates become common throughout an organization, then the design of the ranges and the evaluation of the jobs should be reexamined. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

41.

Broad bands provide managers greater discretion in pay for their subordinates compared to a graderange design. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

42.

A compa-ratio is the average actual pay divided by the midpoint of the pay grade. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

43.

A compa-ratio greater than 1 means that, on average, the rates exceed the intended policy. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

44.

Generally, organizations have increased their use of variable pay relative to traditional base pay increases. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Managing Labor Costs

45.

Pay policies are more open in the public sector than in the private sector. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Communication: Managing the Message

46.

Less than 10 percent of compensation professionals strongly agree that employees know their own pay range and the one above them. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Communication: Managing the Message

47.

Over half of the employees in the private sector work in companies with open pay policies. FALSE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Communication: Managing the Message

48.

A key reason to communicate pay information is that the goodwill engendered by the act of being open about pay may affect perceptions of pay equity. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Communication: Managing the Message

49.

If a pay system is not based upon work-related or business-related logic, it is probably best to not conduct a formal compensation communication program. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Communication: Managing the Message

50.

The most important components of a pay communication program are the business-related and workrelated rationales on which the pay systems are based. TRUE Accessibility: Keyboard Navigation Difficulty: 1 Easy Topic: Communication: Managing the Message

Short Answer Questions 51.

What are the potential problems associated with headcount reductions?

Several potential problems can occur with headcount reductions. First, regulatory requirements make it difficult to make targeted cuts. Second, workforce reductions, especially if not handled well, can harm employee relations. Third, organizations that make greater (involuntary) workforce reductions also experience greater voluntary turnover. Fourth, RIFs, while reducing costs over time, are very costly in tangible terms up front due to increases in unemployment insurance tax rates, disruption of work processes and serving customers, and administrative costs of handling exits. Fifth, some companies have learned to run so lean, and have controlled hiring so successfully, that there may be little room to cut headcount. Finally, where cuts can be made, if the cuts are too deep, an organization will be poorly positioned to generate revenue if business picks up again.

Difficulty: 2 Medium Topic: Managing Labor Costs and Revenues

52.

What is the top-down method of budgeting?

Top-down budgeting begins with an estimate from top management of the pay increase budget for the entire organization. Once the total budget is determined, it is then allocated to each manager, who plans how to distribute it among subordinates. There are many approaches to top-down budgeting. A typical one, planned pay-level rise, is simply the percentage increase in average pay for the unit that is planned to occur. Several factors influence the decision on how much to increase the average pay level for the next period: how much the average level was increased this period, ability to pay, competitive market pressures, turnover effects, and cost of living.

Difficulty: 2 Medium Topic: Managing Labor Costs

53.

What is the turnover effect? Explain how it is calculated with an example.

The turnover effect recognizes the fact that when people leave (through layoffs, quitting, retiring), they typically are replaced by employees who earn a lower wage. The turnover effect can be calculated as annual turnover multiplied by the planned average increase. For example, assume that an organization whose labor costs equal $1 million a year has a turnover rate of 15 percent and a planned average increase of 6 percent. The turnover effect is .15 × .06 = 0.9%, or $9,000 (.009 × $1,000,000). So instead of budgeting an additional $60,000 to fund a 6 percent increase, only $51,000 is needed. The turnover effect will also reduce benefit costs linked to base pay, such as pensions.

Difficulty: 2 Medium Topic: Managing Labor Costs

54.

What is the consumer price index (CPI)? Explain with an example.

Many people refer to the CPI as a cost-of-living index, and many employers choose, as a matter of pay policy or in response to union pressures, to tie wages to it. However, the CPI does not necessarily reflect an individual employee's cost of living. Instead, it measures changes in prices over time. Changes in the CPI indicate whether prices have increased more or less rapidly in an area since the base period. For example, a CPI of 110 in Philadelphia and 140 in Atlanta does not necessarily mean that it costs more to live in Atlanta. It does mean that prices have risen faster in Atlanta since the base year than they have in Philadelphia, since both cities started with bases of 100.

Difficulty: 2 Medium Topic: Managing Labor Costs

55.

Briefly summarize compa-ratios.

Range midpoints reflect the pay policy line of the employer in relationship to external competition. To assess how managers actually pay employees in relation to the midpoint, an index called a compa-ratio is often calculated: Compa-ratio = average rate actual paid/range midpoint. A compa-ratio of less than 1 means that, on average, employees in a range are paid below the midpoint. That is, managers are paying less than the intended policy. There may be several valid reasons for such a situation. The majority of employees may be new or recent hires; they may be poor performers; or promotion may be so rapid that few employees stay in the job long enough to get into the high end of the range. A compa-ratio greater than 1 means that, on average, the rates exceed the intended policy. The reasons for this are the reverse of those mentioned above: a majority of workers with high seniority, high performance, low turnover, few new hires, or low promotion rates. Compa-ratios may be calculated for individual employees, for each range, for organization units, or for functions.

Difficulty: 2 Medium Topic: Managing Labor Costs