TBChap 013, Recognizing Employee Contributions with Pay PDF

Preview

Summary

Download TBChap 013, Recognizing Employee Contributions with Pay PDF

Description

Chapter 13 Recognizing Employee Contributions with Pay Answer Key

True / False Questions 1.

Incentive pay is specifically designed to energize, direct, or control employees' behavior and is influential because the amount paid is linked to certain predefined behaviors or outcomes. TRUE Along with wages and salaries, many organizations offer incentive pay—that is, pay specifically designed to energize, direct, or control employees' behavior. Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-01 Discuss the connection between incentive pay and employee performance. Level of Difficulty: 1 Easy Topic: Incentive Pay

2.

Under incentive pay, piecework rates are most suited for routine, standardized jobs with output that is easy to measure. TRUE Most jobs, including those of managers, have no physical output, so it is hard to develop an appropriate performance measure. So piecework rates are most suited for very routine, standardized jobs with output that is easy to measure. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 1 Easy Topic: Pay for Individual Performance

3.

A merit pay incentive system is used to attract employees who are more team-oriented. FALSE Organizations with team-based rewards will tend to attract employees who are more teamoriented, while rewards tied to individual performance make an organization more attractive to those who think and act independently, as individuals. Merit pay incentive system is used to reward individual performance. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 2 Medium Topic: Pay for Individual Performance

4.

Standard hour plans are quality-oriented incentives for professional employees. FALSE Standard hour plans are quantity-oriented incentives for production workers. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 1 Easy Topic: Pay for Individual Performance

13-1 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

5.

Merit pay is a system of linking pay increases to ratings on performance appraisals. TRUE Almost all organizations have established a program of merit pay; linking pay increases to ratings on performance appraisals. To make the merit increases consistent, so they will be seen as fair, many merit pay programs use a merit increase grid. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 2 Medium Topic: Pay for Individual Performance

6.

From employers' perspective, an advantage of merit pay is that it is cheap. FALSE A drawback of merit pay, from the employer's standpoint, is that it can quickly become expensive. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 1 Easy Topic: Pay for Individual Performance

7.

As in the case of merit pay, performance bonuses for rewarding individual performance are rolled into an employee's base pay. FALSE Like merit pay, performance bonuses reward individual performance, but bonuses are not rolled into base pay. The employee must re-earn them during each performance period. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 1 Easy Topic: Pay for Individual Performance

8.

Retention bonuses are one-time incentives paid to top managers, engineers, top-performing salespeople, and information technology specialists in exchange for remaining with the company. TRUE Retention bonuses are one-time incentives paid in exchange for remaining with the company to top managers, engineers, top-performing salespeople, and information technology specialists. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-02 Describe how organizations recognize individual performance. Level of Difficulty: 1 Easy Topic: Pay for Individual Performance

9.

The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard. TRUE The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard. To keep this ratio low enough to earn the bonus, workers have to keep labor costs to a minimum and produce as much as possible with that amount of labor. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember 13-2 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Learning Objective: 13-03 Identify ways to recognize group performance. Level of Difficulty: 1 Easy Topic: Pay for Group Performance

10.

Successful gainsharing plans include employee stock ownership plans. FALSE Employee stock ownership plan (ESOP) is an example of an organizational performance incentive plan. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

11.

Group bonuses typically reward the performance of all employees in an organization. FALSE Bonuses for group performance tend to be for smaller work groups. These bonuses reward the members of a group for attaining a specific goal, usually measured in terms of physical output. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-03 Identify ways to recognize group performance. Level of Difficulty: 1 Easy Topic: Pay for Group Performance

12.

Under the team awards type of group incentive, cost savings is excluded as a performance measure. FALSE Team awards are similar to group bonuses, but they are more likely to use a broad range of performance measures, such as cost savings, successful completion of a project, or even meeting deadlines. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-03 Identify ways to recognize group performance. Level of Difficulty: 1 Easy Topic: Pay for Group Performance

13.

Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk. TRUE Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk. Profits and stock price can soar very high very fast, but they can also fall. The result is a great deal of uncertainty about the amount of incentive pay each employee will receive in each period. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

13-3 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

14.

The costs associated with profit sharing increase substantially when the organization experiences financial difficulties. FALSE Profit sharing has the practical advantage of costing less when the organization is experiencing financial difficulties. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

15.

Under profit sharing, payments are a percentage of the organization's profits and become part of the employees' base salary. FALSE Under profit sharing, payments are a percentage of the organization's profits and do not become part of the employees' base salary. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

16.

In larger organizations that have stock ownership plans, the employees may not see a strong link between their actions and the company's stock price. TRUE The drawback of stock ownership as a form of incentive pay is that employees may not see a strong link between their actions and the company's stock price, especially in larger organizations. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

17.

An employee stock ownership plan is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust. TRUE Employee stock ownership plan refers to an arrangement in which the organization distributes shares of stock to all its employees by placing the stock into a trust managed on the employees' behalf. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

18.

Employees should exercise the stock options even if the stock price has decreased. FALSE If the stock price falls, employees do not need to exercise the options. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-04 Explain how organizations link pay to their overall performance. 13-4 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Level of Difficulty: 1 Easy Topic: Pay for Organizational Performance

19.

ESOP denies employees the right to participate in votes by shareholders even if the stock is registered on a national exchange. FALSE Employees have a right to participate in votes by shareholders if the stock is registered on a national exchange, such as the New York Stock Exchange. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Learning Objective: 13-04 Explain how organizations link pay to their overall performance. Level of Difficulty: 2 Medium Topic: Pay for Organizational Performance

20.

A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals. TRUE A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals and used as the basis for awarding incentive pay. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-05 Describe how organizations combine incentive plans in a "balanced scorecard." Level of Difficulty: 1 Easy Topic: Balanced scorecard

21.

Stock options are best suited to motivate day-to-day effort or to attract and retain top individual performers. FALSE Relying heavily on profit sharing or stock ownership may increase cooperation but do little to motivate day-to-day effort or to attract and retain top individual performers. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-05 Describe how organizations combine incentive plans in a "balanced scorecard." Level of Difficulty: 1 Easy Topic: Balanced scorecard

22.

The balanced scorecard helps employees understand the organization's goals and how they can contribute to these goals. TRUE Not only does the balanced scorecard combine the advantages of different incentive-pay plans, it helps employees understand the organization's goals. By communicating the balanced scorecard to employees, the organization shows employees information about what its goals are and what it expects employees to accomplish. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-05 Describe how organizations combine incentive plans in a "balanced scorecard." Level of Difficulty: 1 Easy Topic: Balanced scorecard

13-5 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

23.

An organization should keep information, such as changes made to its incentive plan, confidential from its employees. FALSE Along with empowerment, communicating with employees is important. It demonstrates to employees that the pay plan is fair. It is particularly important to communicate with employees when changing the plan. Employees tend to feel concerned about changes. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-06 Summarize processes that can contribute to the success of incentive programs. Level of Difficulty: 1 Easy Topic: Processes that Make Incentives Work

24.

The balanced-scorecard approach should be avoided while designing executive pay. FALSE The balanced-scorecard approach is useful in designing executive pay. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-07 Discuss issues related to performance-based pay for executives. Level of Difficulty: 1 Easy Topic: Incentive Pay for Executives

25.

Incentive pay for executives lays the groundwork for significant ethical issues. TRUE Incentive pay for executives lays the groundwork for significant ethical issues. When an organization links pay to its stock performance, executives need the ethical backbone to be honest about their company's performance even when dishonesty or clever shading of the truth offers the tempting potential for large earnings. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-07 Discuss issues related to performance-based pay for executives. Level of Difficulty: 1 Easy Topic: Incentive Pay for Executives

Multiple Choice Questions 26.

A pay structure specifically designed to energize, direct, or control employees' behavior is known as:

A. monthly salary. B. wag e. C. incentive pay. D. annual salary. E. fixed pay. Along with wages and salaries, many organizations offer incentive pay—that is, pay specifically designed to energize, direct, or control employees' behavior. AACSB: Analytical Thinking 13-6 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-01 Discuss the connection between incentive pay and employee performance. Level of Difficulty: 1 Easy Topic: Incentive Pay

27.

Vactin Motors, an automobile company, ties individual performance, profits, and other measures of employees' success to a particular form of pay. This form of pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. Which of the following is exemplified in this scenario?

A. Minimum wage B. Overtime pay C. Incentive pay D. Piecework rates E. Bonus payment Incentive pay is the pay specifically designed to energize, direct, or control employees' behavior. Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. Incentive pay is exemplified in this scenario. AACSB: Knowledge Application Accessibility: Keyboard Navigation Blooms: Apply Learning Objective: 13-01 Discuss the connection between incentive pay and employee performance. Level of Difficulty: 3 Hard Topic: Incentive Pay

28.

A feature of an effective incentive pay plan is that it should:

A. have performance measures based on employees' requirements. B. not be provided as a direct percentage of employees' performance. C. encourage group performance and sideline individual achievements. D. be the same for all employees in the organization. E. have performance measures linked to the organization's goals. An effective incentive pay plan should have performance measures that are linked to the organization's goals. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Learning Objective: 13-01 Discuss the connection between incentive pay and employee performance. Level of Difficulty: 2 Medium Topic: Incentive Pay

13-7 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

29.

The many kinds of incentive pay fall into three broad categories: _____

A. incentives linked to individual, group, or organizational performance. B. incentives linked to output, productivity, or quality of a product. C. pay linked to goals, focus, or achievements of an organization. D. pay related to base salary, bonus, and travel allowance. E. incentives obtained in the form of company shares, gift coupons, and trial products. The many kinds of incentive pay fall into three broad categories: incentives linked to individual, group, or organizational performance. Choices from these categories should consider not only their strengths and weaknesses, but also their fit with the organization's goals. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 13-01 Discuss the connection between incentive pay and employee performance. Level of Difficulty: 1 Easy Topic: Incentive Pay

30.

Which of the following is a disadvantage of using incentive plans?

A. The goals of an incentive plan may interfere with other management goals. B. The goals of incentive plans can seldom be linked to particular outcomes or behaviors. C. Incentive plans cannot be used to promote group and organizational performance. D. Incentive plans cause dissatisfaction among the non-performing employees in the organization. E. Incentive plans are not very effective for jobs other than sales and service. An incentive pay designed to support a management goal may interfere with other management goals. If incentive pay is extremely rewarding, employees may focus on only the performance measures rewarded under the plan and ignore measures that are not rewarded. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Learning Objective: 13-01 Discuss the connection between incentive pay and employee performance. Level of Difficulty: 2 Medium Topic: Incentive Pay

13-8 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

31.

In the process of designing incentives, managers should make sure that:

A. all the employees are paid the same amount. B. even the lowest performing employees are rewarded. C. employees focus only on completing the task quickly. D. employe...