Sample/practice exam 2018, questions and answers PDF

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Scott A. Snell, George W. Bohlander - Managing Human Resources test bank...

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CHAPTER 10—PAY-FOR-PERFORMANCE: INCENTIVE REWARDS TRUE/FALSE 1. Historically, incentive plans have NOT been a major element of strategic compensation management. ANS: F

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REF: p. 436

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2. The performance “threshold” in incentive plans is the name given to the amount of the award. ANS: F

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REF: p. 438

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3. Incentive plans can create an organizational environment of "shared commitment" since individuals contribute to organizational success. ANS: T

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REF: p. 438

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4. Meshing compensation and organizational objectives helps employees assume ownership of their jobs, improve effort, and improve performance. ANS: T

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REF: p. 438

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5. More than 80 percent of companies globally are offering variable pay programs. ANS: T

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REF: p. 436

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6. For incentive plans to work effectively, employees must see a clear connection between the incentive payments they receive and their performance. ANS: T

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REF: p. 439

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7. Management must be careful to ensure that incentive payments are viewed as both a reward and an entitlement. ANS: F

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REF: p. 439

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8. Incentive plans may fail because employees have little ability to affect performance standards. ANS: T

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REF: p. 439

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9. Incentive plans based on productivity can reduce labor costs. ANS: T

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REF: p. 442

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10. For incentive plans to be successful, one of the most critical requirements is that managers be willing to grant incentives based on differences in individuals, teams, or organizational criteria. ANS: T

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REF: p. 443

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11. Organizational goals can impact choice of incentive plans. ANS: T

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REF: p. 443

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12. Employees receive a specified payment for each unit produced under a straight piecework program. ANS: T

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REF: p. 443

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13. Differential piece rate plans guarantee employees at least a base pay. ANS: F

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REF: p. 443

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14. Under a differential piece rate plan, employees whose performance (i.e., production) exceeds the standard amount of output receive a higher rate for all of their work than the rate paid to those who have not exceeded the standard amount. ANS: T

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REF: p. 443

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15. Under a straight piecework plan, five minutes is the standard time to produce one unit. The employee's hourly rate is $7.50. The piece rate is $1.50 per unit. ANS: F

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REF: p. 443

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16. Major advantages of piecework systems are that the wage payment is simple to compute and the organization can predict labor costs with reasonable accuracy. ANS: T PTS: 1 OBJ: 10-2 TYPE: K | 10-2 TYPE: U

REF: p. 443

17. Fixed pay is more flexible than variable pay. ANS: F

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REF: p. 437

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18. Piecework may be inappropriate where technology changes are frequent. ANS: T

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REF: p. 444

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19. Generally, a bonus plan does NOT become part of base pay. ANS: T

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REF: p. 445

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20. The standard hour plan provides a monetary bonus for completing work in less than the specified time. ANS: F PTS: 1 OBJ: 10-2 TYPE: U | 10-2 TYPE: A

REF: p. 444

21. Standard hour plans are based on specific production standards set for individual jobs. ANS: F

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REF: p. 444

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22. Standard hour plans are popular in service departments in automobile dealerships. ANS: T

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REF: p. 444

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REF: p. 445

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23. A bonus is supplemental to base wages. ANS: T

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24. Spot bonuses are usually provided for some employee effort that is not directly tied to an established performance standard. ANS: T

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REF: p. 445

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25. Merit raises may be perpetuated year after year even if performance declines. ANS: T

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REF: p. 446

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26. Unlike a bonus, a merit raise may be perpetuated year after year even when performance declines. ANS: T

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REF: p. 446

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27. Merit pay plans have been criticized because the merit increase may not be sufficient to raise all employees’ base pay. ANS: T

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REF: p. 446

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28. Employees may not believe that their compensation is tied to effort and performance and may not be able to differentiate between merit pay and other types of pay increases. ANS: T

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REF: p. 446

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29. Research clearly shows that noncash incentive awards are most effective as motivators when the award is combined with a meaningful employee recognition program. ANS: T

PTS: 1

REF: p. 448

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30. The operation of a merit pay plan depends on the effectiveness of the performance appraisal system. ANS: T PTS: 1 OBJ: 10-3 TYPE: K | 10-3 TYPE: U

REF: p. 446

31. Under a Scanlon or Improshare program, psychological ownership can play a stronger role in employee performance than financial ownership. ANS: T

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REF: p. 454

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32. Under an employee stock ownership plan, employees do not actually buy shares in an ESOP. ANS: T

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REF: p. 457

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33. Generally, ESOPs are more likely to serve their intended purposes in privately held companies than in publicly held ones. ANS: F

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REF: p. 458

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34. Sales incentives can be affected by external factors beyond the salespersons control. ANS: T

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REF: p. 448

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35. An advantage of using a straight salary plan to compensate sales employees is that employees can be paid for performing only sales effort.

ANS: F

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REF: p. 449

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36. Under a straight commission plan, compensation is based entirely on a percentage of sales. ANS: T

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REF: p. 449

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37. The percentage of cash compensation paid out in commissions is called a draw. ANS: F

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REF: p. 449

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38. Under a straight commission plan sales people may be allowed a salary draw. ANS: T

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REF: p. 449

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39. An analysis of executive salaries shows that the largest portion of executive pay is received in longterm incentive rewards and bonuses. ANS: T

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REF: p. 460

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40. Straight commission plans may induce salespeople to grant price concessions. ANS: T PTS: 1 OBJ: 10-4 TYPE: K | 10-4 TYPE: U

REF: p. 450

41. Executive-base salaries represent between 10-20 percent of total annual compensation. ANS: F

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REF: p. 460

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42. Annual bonuses represent the main element of executive short-term incentives. ANS: T

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REF: p. 461

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43. The principal reason guiding executive stock options as an incentive is for senior managers to have a significant stake in the success of the business. ANS: T

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REF: p. 461

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44. Stock options are rights attached to the achievement of specific organizational objectives. ANS: F

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REF: p. 461

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45. A major criticism of short-term incentives for executives is that they place too much emphasis on short-term performance, which may lead to neglect of longer-term considerations such as research and development. ANS: T

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REF: p. 461

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46. Perquisites are special benefits given to executive employees. ANS: T

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REF: pp. 462-463

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47. Compensation committees justify large executive salaries and bonuses in part because good executive talent is in high demand.

ANS: T

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REF: p. 463

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48. Team bonuses may be paid out equally to each team member, in proportion to their base pay, or in proportion to their relative contribution to the team. ANS: T

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REF: p. 451

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49. Gainsharing plans are designed to increase employee job satisfaction and improve customer awareness. ANS: F

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REF: p. 451

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50. The idea behind the Scanlon Plan is that employees should not only offer ideas to improve productivity, but should also be rewarded for those ideas. ANS: T

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REF: p. 453

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51. The incentive payout under the Scanlon Plan is based upon increases in the sales volume of the organization's products. ANS: F

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REF: p. 453

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52. Improshare plans promote interaction and support between management and employees. ANS: T

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REF: p. 454

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53. Enterprise incentive plans allow all organizational members to participate in the plan's payout. ANS: T

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REF: p. 454

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54. In most profit-sharing plans, about 20 to 25 percent of net profits are shared with employees. ANS: T

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REF: p. 455

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55. A weakness of profit-sharing plans is that employees do not have total control over the profitability of the organization. ANS: T

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REF: p. 456

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56. Because profit-sharing plans often fail to pay off for several years in a row, they can have limited motivational value. ANS: T

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REF: p. 456

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57. Stock options have become popular in service organizations, but have lost favor in manufacturing firms. ANS: F

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REF: p. 456

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58. Because of failing popularity and media scandal, most experts advocate abolition of stock options. ANS: F

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REF: p. 456

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59. By using ESOPs, employers can provide retirement benefits for their employees at a relatively low cost. ANS: T

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REF: pp. 456-458

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60. Employers use stock ownership incentive plans to increase employee "ownership" in the company. ANS: T

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REF: p. 457

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61. ESOPs have been criticized because the pensioner can become dependent on the stock price. ANS: T

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REF: p. 458

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62. Employees are comfortable with ESOPs because the federally established Pension Benefit Guaranty Corporation guarantees them. ANS: F

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REF: p. 458

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MULTIPLE CHOICE 1. The performance threshold in incentive pay programs is: a. piecework b. a minimum level an employee must reach in order to qualify for variable pay c. an organizational objective that signifies profitability d. an entitlement program ANS: B

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REF: p. 438

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2. Contemporary reasons given by organizations for implementing incentive plans are: a. to improve or maintain high levels of productivity. b. to focus employee efforts on specific performance targets. c. to link compensation rewards to the achievement of results. d. all of the above. ANS: D

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REF: p. 438

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REF: p. 454

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3. Enterprise incentive plans include: a. Scanlon Plan b. Rucker Plan c. Stock options d. Sales incentives ANS: C

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4. More than _____ of companies globally are offering variable pay programs. a. 20 percent b. 40 percent c. 60 percent d. 80 percent ANS: D

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5. Group incentive plans include: a. Standard hour plan

REF: p. 436

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b. Improshare c. Stock options d. Sales incentives ANS: B

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REF: p. 437

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REF: p. 437

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6. Enterprise incentive plans include: a. Scanlon plans b. stock options c. executive incentive plans d. bonuses ANS: B

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7. A study of 20,000 employees found that ____ of “high potential” employees planned to leave their company by the end of 2010 due to perceived pay inequity. a. 27 percent b. 38 percent c. 47 percent d. 58 percent ANS: A

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REF: p. 437

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8. Which of the following is NOT an advantage of an incentive pay program? a. Incentives focus employee efforts on specific performance targets. b. Incentives are a way to increase equity and justice in an organization. c. Incentive payouts are fixed costs linked to the achievement of results. d. Incentives are a means to reward or attract top performers when salary budgets are low. ANS: C

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REF: p. 438

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9. Studies have shown that variable pay plans may not achieve their proposed objectives or lead to organizational improvements due to each of the following, EXCEPT: a. incentive plans sometimes fail to satisfy employee expectations for pay gains b. taxes are often a demotivator c. management may have failed to give adequate attention to the design and implementation of the plan d. employees may have little ability to affect performance standards ANS: B

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REF: p. 439

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10. When setting performance measures for incentive systems, we can say that the best measures are: a. quantitative, simple to understand, and show a clear relationship to improved performance. b. qualitative, flexible, and create competition between employees. c. those that allow employers to "ratchet up" standards and base rewards on qualitative standards. d. those that reduce administrative costs, determine rewards based only on quantity, and reward only exceptional employees. ANS: A

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REF: p. 441

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11. According to Sammer, which of the following is NOT a characteristic of a successful incentive plan? a. Identify important organizational metrics that encourage employee behavior. b. Involve employees. Incentive programs should seem fair to employees. c. Payout formulas should be technically detailed, quantitative and extremely thorough to

prove that management took significant effort to create the plan d. Establish a clear link between performance and payout. ANS: C

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REF: p. 439

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12. One word, _____, describes the design of individual incentive plans a. motivation b. comprehensiveness c. flexibility d. consistency ANS: C

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REF: p. 443

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13. When employees receive a certain rate for each unit produced, they are working under which incentive plan? a. differential piece rate b. standard piece rate c. straight piecework d. individual rate pay ANS: C

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REF: p. 443

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14. When employees receive a higher rate of pay for all of their work if production exceeds a standard level of output, they are working under which incentive plan? a. differential piece rate b. standard piece rate c. exception bonus rate d. individual rate pay ANS: A

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REF: p. 443

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15. The standard time for producing one unit of work in a job paying $12.75 per hour was set at twelve minutes. The piece rate would be ____ per unit a. $1.95 b. $2.55 c. $2.95 d. $3.15 ANS: B

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REF: p. 444

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16. A study on bonus vs. actual pay raises showed that improving one’s pay through merit increases by 1 percent would increase future performance by ___ percent. a. 2 b. 5 c. 8 d. 10 ANS: A

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REF: p. 445

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17. Research shows that a merit increase in the range of _____ is necessary to serve as a pay motivator. a. 3 to 5 percent b. 7 to 9 percent c. 11 to 13 percent d. 15 to 17 percent ANS: B

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REF: p. 446

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18. Rate busting refers to: a. increased productivity b. an increase in output that results in the disapproval of fellow employees c. setting incentive performance standards d. decreased productivity ANS: B PTS: 1 OBJ: 10-2 TYPE: K | 10-2 TYPE: U

REF: p. 444

19. Piecework is appropriate when: a. technology changes are frequent b. quality is more important than quantity c. productivity standards are difficult to develop d. the job is fairly standardized ANS: D PTS: 1 OBJ: 10-2 TYPE: K | 10-2 TYPE: U

REF: p. 443

20. If employees' pay is based not on the actual amount of time it takes them to complete a job but instead on a predetermined amount of time for completing the job, which incentive plan are they working under? a. piece-rate plan b. standard hour plan c. time division plan d. completion pay system ANS: B

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REF: p. 444

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21. An incentive given for a special employee contribution not directly tied to a performance standard is: a. a piece rate plan b. a differential piece rate c. merit pay d. a spot bonus ANS: D

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REF: p. 445

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22. An appropriate reward for a consumer service representative who worked long hours to fill a new customer’s large order is: a. a piece rate b. a differential piece rate c. merit pay d. a spot bonus ANS: D

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REF: p. 445

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23. Research shows that a merit increase in the range of ____ percent is necessary to serve as a ...