Study Notes

Compensation Plan - University of Phoenix
A good compensation plan must include both aspects, financial and nonfinancial of
a rewarding system where financial rewards, or a pay system, "assign a monetary
value to each job in the organization (a base rate) and an orderly procedure for
increasing the base rate (e.g., based on merit, inflation, or some combination of the
two)" (Cascio, 2005, p. 425). Also, "a properly designed Pay for Performance (PFP)
Program enables companies to reduce their cost of labor while increasing the
average take home pay of their workforce" (Jensen, 2009). On the other hand we
also will offer nonfinancial systems that will cover indirect aspects such as benefits,
professional and personal development. We want to give our "sales staff a reason to
get out there and sell, sell, sell" (Ward).
"Rewards bridge the gap between organizational objectives and individual

expectations and aspirations. To be effective, organizational reward systems should
provide four things: (1) a sufficient level of rewards to fulfill basic needs, (2) equity
with the external labor market, (3) equity within the organization, and (4) treatment
of each member of the organization in terms of his or her individual needs" (Cascio,
2005, p. 419).
New compensation plan"Pay systems are designed to attract, retain, and motivate
employees" (Cascio, 2005, p. 419)The new compensation plan will be based in a
performance system. "If business takes off, more pay goes to workers. If it doesn't,
the company is not locked into high fixed costs of labor. 417" This system was
chosen since meets the company strategy of growth and objectives and "such
variable-pay systems almost guarantee cost control. 417 (Cascio, 2005, p. 417)"
and a well planed recognition system adds to the compensation plan to offset a
higher level of discouragement found in a competitive selling environment and also
"can be used to express...
Side A
1
2
Side B
A frame of mind in which
employees mistrust senior
management's intentions,
doubt its competence,...
A system for providing both
Trust gap
Organizational reward
10
11
12
13
14
financial and non financial

rewards; includes anything an
employee...
The human resource
management function that
deals with every type of
reward that individuals...
The component of an
organizational reward system
that includes direct payments,
such as salary,...
The component of an
organizational reward system
that includes everything in a
work environment...
Determination of whether or
not pay rates are fair in terms
of the relative worth of
individuals...
"Fairness" in the wages paid
by an organization, in terms of
competitive market rates
outside...
In a pay system,the relative
size of pay differentials
among different segments of
the workforce ...
A written summary of task
requirements for a particular
job
Common job characteristics
that an organization is willing
to pay for, such as skill,...
Assessment of the relative
worth of jobs to a firm
Jobs that are characterized by
stable tasks and stable job
specifications; also known as
key...
Determined by which jobs to
survey and which markets are
relevant for each job,
considering...
A pay system that uses a
direct market-pricing
system
Compensation
Financial rewards
Non-financial rewards
Internal equity
External equity
Balance
Job description
Compensable factors
Job evaluations
Benchmark jobs
Relevant labor market

Market-based pay system
15
16
17
18
approach for all of a firm's

jobs
A pay system under which
workers are paid on the basis
of the number of jobs they are
capable...
A narrowing of the ratios of
pay between jobs or pay
grades in a firm's pay
structure
One-time supplements, tied to
levels of job performance and
to the base pay of employees,
including...
Pay systems, most commonly
applied to exempt
employees , under which
employees receive
permanent...
Competency-based pay
system
Pay compression
Incentives
Merit-pay systems
today organizations are relying more True

on the expertise and initiative of
employees.
The principle of shared information is False
part of the implementation of a
command and control organizational
system.
Connencting rewards to
True
organizational performance
generally ensures fairness,and tends
to focus on the employees of the
organization.
Status differences perpetuate
colaboration and teamwork.
False
Adjustments in work design and

technologies are particularly
important to establish a clear
performance-reward linkage.
True
Most high-performance work

systems begin with recuirtment and
selection practives that are very
selective.
True
Training, a critical component of high True

performance work systems, helps to
increase knowledge, facilitate
learning and enhance information
sharing.
Most high-performance work
True
systems focus their training efforts
on ensuring that employees have the
skills necessary to assume a greater
degree of responsibility.
Cross-training employees facilitates
teamwork and cooperation, and
helps employees identify trouble
spots that cut across several jobs.
True
the compensation package is not

significant for high performance
work system to succeed, as HPWSs
generally forcus on knowledge
development and information
sharing.
False
Skill-based pay systems are

particularly appropriate for
organizations that hope to increase
the sharing of information across
employees.
True
Because of its complexity, skill-based False

pay is sedom used in high
performance work systems.
Open pay systems create a more
egalitarian environment.
True
When the elements of the work

system complement and reinforce
one another, internal fit is achieved.
True
In a work system with a high degree False

of internal fit, adjusting one HR
practice is not likely to substantially
impact the other componenets of the
work system.
The HR scorecard helps managers

assess the strategic alignment of
their work systems.
True
To successfully implement highperformance work systems,

managers should emphasize the
strategic importance of the change
effort.
True
One of the best ways to

communicate the business needs to
employees is to show then the gap
between today's current
performance and capabilities and
where the organization needs to be
in the future to be successful.
True
To support the principle of sharing

information, it is critical that
managers encourage open dialogue
and communication at all levels of
the organization.
True
Involving union memebers only after False

the design process and
implementation plan has been
completed helps build a bridge
toward employee buy-in.
In a union environment, organization False
power in negotiating is the key
criterion for successfully
implementing high-performance
work systems.
Formal commitments between
management and unions to jointly
implement high-performance work
systems serve to institutionalize the
relationship so that it keeps goind
even if key champions leave.
True
To successfully implement a highTrue

performance work system, managers
should try to implement all facets of
the change at once.
The top-down approach to work
system implementation ensures
False
employee accceptance and

commitment.
High-performance work systems
True
need to be periodically evaluated in
terms of organizational priorities and
initiatives.
Once implemented, a process audit
is used to determine whether the
high-performance work system has
been profitable.
False
In evaluating a high-performance
work system, it is important to
consider the changing nature of
competition.
True
Employees skills, knowledge, and

abilities that are not equally
available to all organizations are
difficult to imitate.
False
High-performance work systems that True

are designed around team processes
and capabilities that cannot be
transported, duplicated, or copied by
rival firms are said to be difficult to
imitate,
The philosophies, principles, and
techniques that underlie highperformance work systems are only
appropriate for large organizations.
False
Which of the following statements

captures the fundamental logic of
high-performance work systems?
All the HR practices work in

complementary fashion to create
synergy.
In addition to addressing competitive developing high technologies and

challenges, it is important that
processes.
organizations address all of the
following employee concerns except:
Which of the following priniciples are shared information
critical for the success of
empowerment and involvment
initiatives in organizations?
Which of the following principles
shared information
typifies a shift way from mentality of
command and control in

organizations?
The number of jobs requiring little
decreasing; increasing
knowledge and skills is _____ and the
number of jobs requiring greater
knowledge and skills is _______, in
recent years.
To be successful in today's
competitive environment, many
organizations must rely ______ on
employee knowledge.
more
To invest in employee knowledge

development, all of the following HR
practices would be appropriate
except:
evaluating employees based on task

performance.
All of the following benefits are

realized by aligning employee
rewards with performance except:
employees will pursue outcomes that

are beneficial to only themselves.
Connecting rewards to organizational fairness and focuses employees on

performance ensures:
the organization
Lincoln Electric has been long
recognized for its efforts in:
linking pay and performance
Creating an egalitarian environment increased levels of turnover and

is associated with all of the following absenteeism
except:
Work environments in which
collacoration and teamwork are
encourages and status and power
differences are diminished is known
as:
an egalitarian environment
Egalitarian work environments

reduce or eliminate _______, ehile
increasing or improving_______.
status and power differences,

collaboration and teamwork
Which of the following is not a typical standardization

method of increasing the powet of
employees?
High-perfomance work system
frequently begin with:
looking at how work is designed.
All of the following benefirs are

realized be redesigning work around
it standardizes employees' skills
key business processes except:

Studies indicate that performance
and satisfaction are higher when
organizations:
combine work flow design with HR

practices that encourage
development and involvement
Many high-performance work

systems begin with highly directive
recruitment and selection practices
In high-performance organizations,
training is undertaken in order for
employees to:
assume greater responsibility
In high-performance work systems,

time management skills
training efforts tend to focus on all of
the following except:
Organizations that wished to
emphasize teamwork involvement
and continuous improvement would
promote which type of training?
cross-training
One of the primary benefits of cross- cross-training helps employees

training employees is that:
identify trouble spots that cut across
several jobs
To create a more flexible pool of
employees, managers should:
rely on skill-based pay structures
Which of the following compendation hourly based pay systems

systems does not focus employee
efforts on outcomes that are
beneficial to both themselves and
the organization as a whole?
______ is a pool of money employees
can spend on capital improvements
if the company meets profitability
goals.
intracapital
The role of managers and

supervisors in high-performance
work systems has:
changed substantially
communication systems should

employee background and personal
provide accurare information
data
regarding all of the following except:
The richest communication occurs:
face to face
To achieve internal fit, organizations

should use the following HR
practices together except:
morale testing
What type of fit describes highperformance work system that

completment and reinforce one
another?
internal fit
To achieve external fit, organizations other HR components

must first analyze all of the following
except:
What type of fit describes highperformance work system that
support the organization's goals and
strategies?
external fit
Efforts to design high-performance

work system in line with external fit
issues such as competitive
challenges and company values:
focus the design on strategic

priorities
The HR scorecard is used to

diagnose:
internal and external fit
Employment stability, team-based

behaviors, and strategy-focused
behaviors are used as part of an HR
scorecard to assess:
workforce deliverables
Which of the following is not a critical relying upon a narrow chain of

factor that can make or break a high- communication with the managers
performance work systems?
who are responsible for
implementation
One of the best ways to help
employees see the need for change
is to:
show a gap between the present and

future
The ASTD council on highfailure to provide an adequest

performance work systems noted
communication system
that _______ is the most frequent
mistake that companies make during
implementation.
Within a high-performance work
system, which type of labormanagement relationship is least
likely to prove effective?
an adversarial relationship
Which of the following is not a

tangible symbol of commitment
between labor and management?
good-faith negotiations
Building commitment to high-
an ongoing activity
performance work system is:

The most appropriate method to
implement a high performance work
system is:
an integrated top-down and bottomup approach
Regardless of the time available to

implement a high-performance work
system, the use of _____ helps keep
everyone on track and prevents the
system from bogging down.
a transition structure
The evaluation process of

implementation should involve the
following issues except:
Are employees treated more fairly so

that power differences are minimal?
All of the following are results from

using high-performance work
systems except:
lower employee involvment
In order for organization to achieve a generic

sustainable competitve advantage
through people, they must develop
competencies in their employees
that are all of the following except:
To enhance the degree of rareness in are not equally available in the labor
employee skill and abilities,
market
organizations should develop
that:
To attain a sustainable competitve
advantage through people,
organization should develop
that:
are designed around unique team

processes
Which of the following fundamental none of the above

principles of high-performance work
systems do small-sized employers
tend to have difficulty implementing?
Which of the following would not
relying upon outsourcing
support a high-performance work
arrangements to attract high-quality
system in a small-sized organization? employees
https://www.coursehero.com/file/8877981/133152012-HRM-531-Final-ExamAnswers/
1. Which question should not be important in evaluating the value of training?

Was the cost of training within the budget?
Is the change due to training?
Is the change positive related to organizational goals?
Did change occur?
2. For organizations, _________ is an indirect cost associated with downsizing
administrative processing
an increase in the unemployment tax rate
outplacement
severance pay
3. Employee demotions usually involve
a reduction in pay but no loss of opportunity, status, or privilege
a decrease in status and privilege but no loss of opportunity or pay
an increase in pay and more responsibility
a cut in pay, status, privilege, or opportunity
4. Hard quotas
represent a mandate to hire or promote specific numbers or proportions of women or
minority group members
systematically favor women and minorities in hiring and promotion decisions
are a commitment to treat all races and sexes equally in all decisions about hiring,
promotion, and pay
are a concerted effort by the organization to actively expand the pool of applicants so that
no one is excluded because of past or present discrimination
5. Because practical considerations make job tryouts for all candidates infeasible, it is
necessary to __________ the relative level of job performance for each candidate on the
basis of available information
accept
predict
abandon
assign
6. _____ analysis is the level of analysis that focuses on employees specifically
Employee
Operations
Environmental
Individual
7. Title VII of the _____________ states that top executives in companies receiving
government support can retract bonuses, retention awards, or incentives paid to the top five
senior executive officers or the next 20 most highly compensated employees based on
corporate information that is later found to be inaccurate
Equal Pay Act (1963)
SarbanesOxley Act (2002)

Pay for Performance Act (2009)
American Recovery and Reinvestment Act (2009)
8. Which is not a quality of Generation Y?
A blurring of the lines between work and leisure time while on the job
The constant need for stimulation/entertainment
Inability to handle numerous projects
Short attention spans
9. This made extensive changes to the Employee Retirement Income Security
Act(ERISA) of 1974 that governs employer-sponsored, qualified (for tax deferral)
retirement-benefit plans
Short-Term Disability laws
The Pension Protection Act (PPA) of 2006
Short-Term Severance Pay laws
Employer Cost Shifting laws
10. When companies discover they can communicate better with their customers through
employees who are similar to their customers, those companies then realize they have
increased their _____ diversity.
external
secondary
primary
internal
11. Mary arrives at her new job. Before she can begin actually doing the work, she must
complete a series of activities including role playing and virtual reality interactions. What
type of training method does Marys new employer use?
Organizational development
Information presentation
On-the-job training
Simulation
12. If employers fail to check closely enough on a prospective employee who then commits
a crime in the course of performing his or her job duties, they can be held liable for
loss of consortium
quid pro quo
hostile environment
negligent hiring
13. _____ proceeds from an oral warning to a written warning to a suspension to dismissal.
Due process
Progressive discipline
Procedural justice
Positive discipline
14. Which of the following is a distinctive feature of the U.S. system compared with other
countries?
All agreements are of unlimited duration
Low union dues and small union staffs
Wages set by arbitration councils
Exclusive representation
15. If objective performance data are available, which of the following is the best strategy to
use?
MBO
summated rating scales
work planning and review
BARS
16. _____ implies that appraisal systems are easy for managers and employees to
understand and use.
Acceptability
Sensitivity
Practicality
Reliability
17. Training that results in ______ is costly because of the cost of training (which proved to
be useless) and the cost of hampered performance.
negative transfer of training
applicability of training
reinforcement of training
simulation of training
18. A _____ occurs when parties are unable to move further toward settlement.
mediation
grievance
bargaining impasse
lockout
19. In _____, workers have been fired for refusing to quit smoking, for living with someone
without being married, drinking a competitors product, motorcycling, and other legal
activities outside of work.
defamation
constructive discharge
lifestyle discrimination
invasion of privacy
20. Organizations periodically turn to _________ to meet demands for talent broughtabout
by business growth and a desire for fresh ideas, or to replace employees who leave.
former employees
outside labor markets
entry-level employees
their subsidiaries
21. ________________ include everything in a work environment that enhances a workers
sense of self-respect and esteem by others.
Internal pay objectives
General business strategies
Nonfinancial rewards
Social responsibilities
22. The Civil Rights Act of 1991 offered what for victims of unintentional discrimination?
Monetary damages and jury trials
Race-norming
Adverse impact
Affirmative action
23. Properly designed incentive programs work because they are based on two wellaccepted psychological principles: (1) increased motivation improves performance and (2)
control-based compensation
the Scanlon plan
the Rucker plan
recognition is a major factor in motivation
24. ___________ is the process where managers provide feedback to the employees
regarding their past and present job performance proficiency, as well as a basis for
improving performance in the future.
Selection
Recruiting
Placement
Performance management
25. When conduction a performance feedback discussion, active listening requires
verbal communications only
interruptions to get your point across
summarizing your key points
summarizing what was said and what was agreed to
26. What can affirmative action assist organizations in achieving that diversity initiatives
cannot?
Maximizing workforce commitment
Correcting specific problems of the past
Maximizing creativity
Increased productivity
27. In determining the competitiveness of benefits, senior management tends to focus
mainly on
value
cost
security
worth
28. What is our countrys income maintenance program?
ERISA (1974)
Social Security
PPA (2006), 401(k)
COBRA (1985)
29. ____________ is the biggest hurdle to overcome in a pay-for-performance plan.
Salary cap performance level
Compensation equation
Inflation
Merit-pay increases
30. To avoid legal difficulties related to performance appraisals and enhance credibility in
court, employers should
present only the employees perspective

present only the managers perspective
have friends testify
document appraisal ratings and reason for termination
1._____ proceeds from an oral warning to a written warning to a suspension to

dismissal.
Positive discipline
Progressive discipline
Procedural justice
Due process
2. Which question should not be important in evaluating the value of training?
Was the cost of training within the budget?

Did change occur?
Is the change due to training?
Is the change positive related to organizational goals?
Click here to download HRM 531 Final Exam Answers
3.________________ include everything in a work environment that enhances a
workers sense of self-respect and esteem by others.
4. Because practical considerations make job tryouts for all candidates infeasible,
it is necessary to __________ the relative level of job performance for each
candidate on the basis of available information.
assign
accept
abandon
predict
Want to check out the complete paper..?? Visit HRM 531 Week 1
5. Which of the following is a distinctive feature of the U.S. system compared with
other countries?
All agreements are of unlimited duration

Low union dues and small union staffs
Exclusive representation
Wages set by arbitration councils

6._____ implies that appraisal systems are easy for managers and employees to
understand and use.
Reliability
Sensitivity
Acceptability
Practicality
7._____ analysis is the level of analysis that focuses on employees specifically.
Environmental
Individual
Employee
Operations
To download the complete paper click HRM 531 Week 2
8. What can affirmative action assist organizations in achieving that diversity
initiatives cannot?
Maximizing creativity
Increased productivity
Correcting specific problems of the past
Maximizing workforce commitment
9. Title VII of the _____________ states that top executives in companies receiving
government support can retract bonuses, retention awards, or incentives paid to
the top five senior executive officers or the next 20 most highly compensated
employees based on corporate information that is later found to be inaccurate.
American Recovery and Reinvestment Act (2009)

10. Which is not a quality of Generation Y?
Short attention spans

The constant need for stimulation/entertainment
A blurring of the lines between work and leisure time while on the job
Inability to handle numerous projects
Want to see the complete Quiz or Knowledge Check..?? Click HRM 531 Week 4 quiz
11. When conducting a performance feedback discussion, active listening requires
Interruptions to get your point across.

Verbal communications only.
Summarizing your key points.
Summarizing what was said and what was agreed to.
12. Training that results in ______ is costly because of the cost of training (which
proved to be useless) and the cost of hampered performance.
simulation of training
applicability of training
reinforcement of training
negative transfer of training
Want to see the complete Quiz or Knowledge Check..?? Click HRM 531 Week 6
Knowledge Check
13. Employee demotions usually involve
A reduction in pay but no loss of opportunity, status, or privilege.

A decrease in status and privilege but no loss of opportunity or pay.
An increase in pay and more responsibility.
A cut in pay, status, privilege, or opportunity.
14. What is our countrys income maintenance program?
PPA (2006), 401(k)

ERISA (1974)
COBRA (1985)
Social Security
15. For organizations, _________ is an indirect cost associated with downsizing.
an increase in the unemployment tax rate

administrative processing
severance pay
outplacement
16. ____________ is the biggest hurdle to overcome in a pay-for-performance plan.
Merit-pay increases
Inflation
Salary cap performance level
Compensation equation
Click here to download Complete Answers of HRM 531 Week 6 Complete
17. To avoid legal difficulties related to performance appraisals and enhance
credibility in court, employers should
Present only the employees perspective.

Have friends testify.
Present only the managers perspective.
Document appraisal ratings and reason for termination.
18.___________ is the process where managers provide feedback to the employees
regarding their past and present job performance proficiency, as well as a basis
for improving performance in the future.
Performance management
Selection
Placement
Recruiting
19. If objective performance data are available, which of the following is the best
strategy to use?
MBO
BARS
Click here to download HRM 531 Individual Assignments
20. In _____, workers have been fired for refusing to quit smoking, for living with
someone without being married, drinking a competitors product, motorcycling,
and other legal activities outside of work.
lifestyle discrimination
invasion of privacy
defamation
21. Organizations periodically turn to _________ to meet demands for talent brought
about by business growth and a desire for fresh ideas, or to replace
employees
who leave.
their subsidiaries
former employees
22. This made extensive changes to the Employee Retirement Income Security Act
(ERISA) of 1974 that governs employer-sponsored, qualified (for tax deferral)
retirement-benefit plans.
The Pension Protection Act (PPA) of 2006

Short-Term Severance Pay laws
Employer Cost Shifting laws
Short-Term Disability laws
23. The Civil Rights Act of 1991 offered what for victims of unintentional
discrimination?
Race-norming
Affirmative action
Adverse impact
24. When companies discover they can communicate better with their customers
through employees who are similar to their customers, those companies then
realize they have increased their _____ diversity.
external
internal
primary
secondary
25. In determining the competitiveness of benefits, senior management tends to
focus mainly on
worth
value
security
cost
Want to download the Questions..?? Click HRM 531 Final Exam Questions
26. If employers fail to check closely enough on a prospective employee who then
commits a crime in the course of performing his or her job duties, they can be
held liable for
Loss of consortium.
Negligent hiring.
Hostile environment.
Quid pro quo.
27. Properly designed incentive programs work because they are based on two
well-accepted psychological principles: (1) increased motivation improves
performance and (2)

the Rucker plan
the Scanlon plan
28. Hard quotas
Are a concerted effort by the organization to actively expand the pool of applicants
so that no one is excluded because of past or present discrimination?

Systematically favor women and minorities in hiring and promotion decisions.
Are a commitment to treat all races and sexes equally in all decisions about hiring,
promotion, and pay?

Represent a mandate to hire or promote specific numbers or proportions of women or
minority group members.
Want to see the complete Assignments..?? Click HRM 531 Week 3 Individual
Assignments
29. Mary arrives at her new job. Before she can begin actually doing the work, she
must complete a series of activities including role playing and virtual reality
interactions. What type of training method does Marys new employer use?
Simulation
On-the-job training
30. A _____ occurs when parties are unable to move further toward settlement.
lockout
grievance
bargaining impasse
mediation
security
cost
worth
N.
4. In determining the competitiveness of
benefits, senior management tends to focus
mainly on
value.
Answer:N
You said:You gave no answer
3.
Sensitivity
Acceptability
E.
10 _____ implies that appraisal systems are
easy for managers and employees to
understand and use.
Practicality
Reliability.
Answer:E
4.
Operations
B.
11 _____ analysis is the level of analysis
that focuses on employees specifically.
Individual
Environmental
Employee.
Answer:B
5.
28. Organizations periodically turn to
_________ to meet demands for talent
brought about by business growth and a
desire for fresh ideas, or to replace
employees who leave.
M.
27 Mary arrives at her new job. Before she
can begin actually doing the work, she must
complete a series of activities including role
playing and virtual reality interactions. What
type of training method does Marys new
employer use?
Simulation
former employees
their subsidiaries.
On-the-job training
Answer:M
6.
present only the managers perspective
have friends testify
F.
7. To avoid legal difficulties related to
performance appraisals and enhance
credibility in court, employers should
present only the employees perspective

document appraisal ratings and reason for
termination.
Answer:F
7.
a decrease in status and privilege but no
loss of opportunity or pay
O.
8. Employee demotions usually involve.
a cut in pay, status, privilege, or

opportunity
an increase in pay and more responsibility
a reduction in pay but no loss of
opportunity, status, or privilege.
Answer:O
8.
. predict
assign
D.
2. Because practical considerations make
job tryouts for all candidates infeasible, it is
necessary to __________ the relative level
of job performance for each candidate on
the basis of available information
http://www.homeworkmarket.com/content/hr
m-531-final-exam-new-2014
abandon
accept.
Answer:D
9.
30 The Civil Rights Act of 1991 offered what
for victims of unintentional discrimination?
Race-norming
P.
29 ________________ include everything in
a work environment that enhances a
workers sense of self-respect and esteem
by others.
Adverse impact
Affirmative action.
Answer:P
10.
I.
3. In _____, workers have been fired for
refusing to quit smoking, for living with
someone without being married, drinking a
competitors product, motorcycling, and
other legal activities outside of work.
invasion of privacy
defamation
lifestyle discrimination.
Answer:I
11.
BARS
J.
9. If objective performance data are
available, which of the following is the best
strategy to use?

MBO.
Answer:J
12.
verbal communications only
summarizing what was said and what was
agreed to
interruptions to get your point across
summarizing your key points.
H.
1. When conduction a performance
feedback discussion, active listening
requires:
Answer:H
13.
the Rucker plan
C.
6. Properly designed incentive programs
work because they are based on two wellaccepted psychological principles: (1)
increased motivation improves performance
and (2) \
the Scanlon plan
Answer:C
14.
............
A.
.............
Answer:A
15.
secondary
G.
5. When companies discover they can
communicate better with their customers
through employees who are similar to their
customers, those companies then realize
they have increased their _____ diversity.
internal
primary
external.
Answer:G
16.
26 Title VII of the _____________ states
that top executives in companies receiving
L.
25. For organizations, _________ is an
indirect cost associated with downsizing.
government support can retract bonuses,

retention awards, or incentives paid to the
top five senior executive officers or the next
20 most highly compensated employees
based on corporate information that is later
found to be inaccurate.
an increase in the unemployment tax rate.

severance pay
outplacement
administrative processing .

American Recovery and Reinvestment Act
(2009)
Answer:L
1) Distrust, disrespect, and animosity pertain to which component of indirect costs

associated with mismanaged organizational stress?
A. Quality of work relations
B. Participation and membership
C. Performance on the job
D. Communication breakdowns
2) Inventory shrinkages and accidents pertain to which component of direct costs associated
with mismanaged organizational stress?
A. Employee conflict
B. Performance on the job
C. Loss of vitality
D. Communication breakdowns
3) Thousands of equal-pay lawsuits have been filed, predominantly by ___________ since
the Equal Pay Act of 1963 was passed
A. women
B. African Americans
C. the elderly
D. Americans with disabilities
4) What term refers to those actions appropriate to overcome the effects of past or present
policies, practices, or other barriers to equal employment opportunity?
A. Reparation
B. Emancipation
C. Desegregation
D. Affirmative action
5) In the employment context, _______________ can be viewed broadly as giving an unfair
advantage or disadvantage to the members of a particular group in comparison with the
members of other groups
A. ethnocentrism
B. discrimination
C. seniority system
D. race norming
6) Thousands of equal-pay suits have been filed, predominantly by ___________ since the
Equal Pay Act of 1963 was passed
A. women
B. African Americans
C. the elderly
D. Americans with disabilities
7) Which of the following observations is correct?
A. Diversity is problem focused, and affirmative action is opportunity focused
B. Diversity is government initiated, and affirmative action is voluntary
C. Diversity is proactive, and affirmative action is reactive
D. Diversity is quantitative, and affirmative action is qualitative
8) Which of the following would you associate with managing diversity?
A. Government initiated
B. Assumes integration
C. Internally focused
D. Quantitative
9) To be the worlds best quick-service restaurant is an example of what?
A. Organizational charter
B. Standard operating procedure
C. Code of ethics
D. Vision statement
10) _________ is a job analysis method that lists tasks or behaviors and involves workers
rating each task or behavior in terms of whether or not it is performed. If the task is
performed, workers also rate the frequency, importance, level of difficulty, and relationship
to overall performance
A. Job performance
B. Structured questionnaires
C. Interviews
D. Critical incidents
11) Recruitment begins by specifying _____, which are the typical results of job analysis
and workforce planning activities
A. human resource requirements
B. strategic imperatives
C. succession plans
D. affirmative action candidates
12) The step following recruitment is _____, which is basically a rapid, rough selection
process
A. an orientation
B. an initial screening
C. a suspension
D. a workforce plan
13) During the _____ stage, it is most important to select the managers who can develop
stable management systems to preserve the gains achieved during the embryonic stage
A. mature
B. high-growth
C. aging
D. embryonic
14) Increasing an individuals employability outside the company simultaneously increases
his or her job security and desire to stay with the current employer. What is this known as?
A. Training paradox
B. Pygmalion effect
C. Distributed practice
D. Massed practice
15) Which is a characteristic of the most effective training practices?
A. Training starts at the bottom of the organization
B. Training is part of the corporate culture
C. Training is evaluated by checking participant reactions

D. Little time is spent assessing training needs
16) Which analysis is helpful in determining the special needs of a particular group, such as
older workers, women, or managers at different levels?
A. Individual
B. Operations
C. Demographic
D. Organization
17) Providing adequate resources to get a job done right and on time, and paying careful
attention to selecting employees, are parts of
A. employee welfare
B. grievance management
C. performance appraisal
D. performance facilitation
18) This can be thought of as a compass that indicates a persons actual direction as well as
a persons desired direction.
A. Management by objectives
B. Forced distribution
C. Central tendency
D. Performance management
19) What would you call a meeting that is typically done once a year to identify and discuss
job-relevant strengths and weaknesses of individuals or work teams?
A. performance appraisal
B. performance facilitation
C. performance encouragement
D. performance standard
20) When managing careers, what should organizations do?
A. Plan for shorter employment relationships
B. Focus primarily on employee needs and aspirations
C. Allow employees to structure work assignments
D. Focus on and recognize career stages that employees go through
21) A sequence of positions occupied by a person during the course of a lifetime is
characteristic of what type of career?
A. Subjective
B. Objective
C. Specific
D. General
22) In the new world of career management, the primary goal is to provide which of the
following for employees?
A. Rising aspirations
B. Executive ranking
C. Psychological success
D. Time off when they need it
23) At a broad level, _____ includes anything an employee values and desires that an
employer is able and willing to offer in exchange for employee contributions
A. a competency-based pay system
B. an employee stock ownership plan
C. an organizational reward system
D. a merit-pay method
24) This benefit, tied mostly to profitability and promising better job security, but not
guaranteeing it, is at the center of the evolving bonus system
A. Contribution-based pay
B. Competency-based pay
C. Skill-based pay
D. Flexible pay
25) Financial rewards include direct payments plus indirect payments in the form of what?
A. Individual equity
B. Corporate compensation
C. Spot awards
D. Employee benefits
26) Which law offers full coverage for retirees, dependent survivors, and disabled persons
insured by 40 quarters of payroll taxes on their past earnings or earnings of heads of
households?
A. Federal Unemployment Tax Act
B. Social Security Act
C. Workers compensation
D. Employee Retirement Income Security Act
27) Plans are known as _____ when the employees share in the cost of the premiums
A. share-based
B. contributory
C. distributive
D. peer participating
28) Which type of justice refers to the quality of interpersonal treatment that employees
receive in their everyday work?
A. Interactional
B. Informational
C. Distributive
D. Blind
29) Procedural justice affects citizenship behaviors by influencing employees perceptions of
_____, the extent to which the organization values employees general contributions and
cares for their well being.
A. due process
B. management accessibility
C. indirect compensation
D. organizational support
30) When companies discover they can communicate better with their customers through
employees who are similar to their customers, those companies then realize they have
increased their _____ diversity.
A. primary
B. secondary
C. internal
D. external
1) Frederick Taylor referred to the tendency of employees to work at the slowest pace possible
and to produce at the minimum acceptable level as ________.
A) social loafing
B) systematic soldiering
C) human nature
D) group shift
E) group norms
Answer: B
Explanation: Frederick Taylor popularized using financial incentives in the late 1800s. As a
supervisory employee of the Midvale Steel Company, Taylor was concerned with what he called
"systematic soldiering"the tendency of employees to work at the slowest pace possible and to
produce at the minimum acceptable level.
Diff: 1
Page Ref: 434
Chapter: 12
Objective: 1
Skill: Concept
2) Which of the following terms refers to financial rewards paid to workers whose production
exceeds some predetermined standard?
A) indirect financial payments
B) merit payments
C) hardship allowance
D) financial incentives
E) human capital
Answer: D
Explanation: Financial incentives are financial rewards paid to workers whose production
exceeds some predetermined standard. Indirect financial payments are a type of employee
compensation that includes health benefits.
Diff: 1
Page Ref: 434
Chapter: 12
Objective: 1
Skill: Concept
3) A management approach based on improving work methods through observation and analysis
is known as ________.
A) strategic management
B) scientific management
C) management process
D) management by objectives
E) performance management
Answer: B
Explanation: Frederick Taylor spearheaded the scientific management movement, a management
approach that emphasized improving work methods through observation and analysis. Taylor
also popularized the use of incentive pay as a way to reward employees who produced over
standard.
Diff: 1
Page Ref: 434
Chapter: 12
Objective: 1
Skill: Concept
4) Who proposed a two-factor theory that explains how motivator factors relate to satisfaction
and hygiene factors relate to dissatisfaction?
A) Frederick Taylor
B) Abraham Maslow
C) Frederick Herzberg
D) David McClelland
E) Edward Deci
Answer: C
Explanation: Herzberg says the factors ("hygienes") that satisfy lower-level needs are different
from those ("motivators") that satisfy or partially satisfy higher-level needs.
Diff: 1
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
5) Which of the following is a true statement about Herzberg's Hygiene-Motivator theory?
A) Highly motivated workers rely equally on lower-level and higher-level needs.
B) Assigning workers to teams can eliminate job-associated stress and frustration.
C) Providing employees with feedback and challenge satisfies their lower-level needs.
D) Managers can create a self-motivated workforce by providing feedback and recognition.
E) Managers can best motivate employees by adding more hygienes like incentives to the job.
Answer: D
Explanation: Instead of relying on lower-level hygienes, says Herzberg, managers interested in
creating a self-motivated workforce should emphasize "job content" or motivator factors.
Managers do this by enriching workers' jobs so that the jobs are more challenging, and by
providing feedback and recognition.
Diff: 3
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
6) According to Herzberg's Hygiene-Motivator theory, which of the following factors will most
likely satisfy employees' higher-level needs?
A) working conditions
B) base salary
C) achievement
D) incentive pay
E) co-worker relationships
Answer: C
Explanation: Feedback, recognition, challenging work, and achievement help satisfy a worker's
higher-level needs. Working conditions, salary, and incentives address a workers' lower-level
needs.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
7) Which of the following found that extrinsic rewards could detract from an employee's intrinsic
motivation ?
A) Frederick Taylor
B) Abraham Maslow
D) David McClelland
E) Edward Deci
Answer: E
Explanation: Psychologist Edward Deci's work highlights a potential downside to relying too
heavily on extrinsic rewards: They may backfire. Deci found that extrinsic rewards could at
times actually detract from the person's intrinsic motivation. Herzberg's work indicates that it is
more effective to satisfy an employee's higher-level rather than lower-level needs.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
8) Rebecca's manager wants to acknowledge her outstanding service record for the past quarter.
The manager decides to give Rebecca a bonus of $1000 as a reward. According to Edward Deci,
which of the following will most likely occur as a result?
A) The bonus will encourage Rebecca to work harder than before.
B) The bonus will detract from Rebecca's inner desire to work hard.
C) The bonus will increase Rebecca's loyalty to her employer and her satisfaction.
D) Rebecca's bonus will satisfy her higher-level needs and increase her motivation.
E) Rebecca will feel inadequate because the bonus fails to address hygiene factors.
Answer: B
Explanation: Psychologist Edward Deci's work highlights a potential downside to relying too
heavily
on extrinsic rewards: They may backfire. Deci found that extrinsic rewards could at times
actually detract from the person's intrinsic motivation. Herzberg's work indicates that it is more
effective to satisfy an employee's higher-level rather than lower-level needs.
Diff: 3
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Application
9) According to Victor Vroom, expectancy could also be referred to as the ________.
A) probability that effort will lead to success
B) relationship between performance and reward
C) perceived value a person attaches to a reward
D) employer's strategy for motivating employees
E) likely compensation for successful performance
Answer: A
Explanation: Vroom says a person's motivation to exert effort depends on the person's
expectancy that his or her effort will lead to performance; instrumentality, or the perceived
connection between successful performance and actually obtaining the rewards; and valence,
which represents the perceived value the person attaches to the reward.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
10) The perceived relationship between successful performance and obtaining the reward is
referred to by Vroom as ________.
A) instrumentality
B) probability
C) valence
D) expectancy
E) optimism
Answer: A
Explanation: Instrumentality is the perceived connection (if any) between successful
performance and actually obtaining the rewards. Valence represents the perceived value the
person attaches to the reward.
Diff: 1
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
11) In Vroom's theory of motivation, motivation is equal to E * I * V, where E represents
________.
A) existence
B) extrinsic motivation
C) expectancy
D) esteem
E) energy
Answer: C
Explanation: In Vroom's theory, motivation is thus a product of three things: Motivation = (E I
V), where, of course, E represents expectancy, I instrumentality, and V valence. If E or
I or V is zero or inconsequential, there will be no motivation.
Diff: 2
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
12) In Vroom's theory of motivation, motivation is equal to E * I * V, where I represents
________.
A) intrinsic needs
B) internalization
C) instrumentality
D) imperative action
E) incentives
Answer: C
V), where, of course, E represents expectancy, I instrumentality, and V valence. If E or
I or V is zero or inconsequential, there will be no motivation.
Diff: 2
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
13) In Vroom's theory of motivation, which of the following terms refers to the perceived value a
person attaches to a reward?
A) piecework
B) valence
C) instrumentality
D) expectancy
E) variable pay
Answer: B
Explanation: Valence represents the perceived value the person attaches to the reward.
Instrumentality is the perceived connection (if any) between successful performance and actually
obtaining the rewards.
Diff: 2
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
14) According to Vroom's theory, when managers design incentive plans they should do all of the
following EXCEPT ________.
A) focus on behavior modification methods
B) make incentive plans easy to understand
C) consider individual employee preferences
D) provide training and support to employees
E) boost the confidence level of employees
Answer: A
Explanation: Vroom's theory has implications for how managers design incentive plans.
Managers must ensure that their employees have the skills to do the job, and believe they can do
the job. Thus training, job descriptions, and confidence building and support are important in
using incentives. Managers should also create easy to understand incentive plans. Managers
should take into account individual employee preferences. Skinner addressed behavior
modification methods rather than Vroom.
Diff: 3
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
15) Behavior modification is based upon the principles of rewards and punishments advanced by
________.
A) Frederick Taylor
B) Abraham Maslow
D) B.F. Skinner
E) Edward Deci
Answer: D
Explanation: Psychologist B. F. Skinner's findings provide the foundation for much of what we
know about incentives. Managers apply Skinner's principles by using behavior modification.
Diff: 1
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
16) Which of the following terms refers to changing behavior through rewards or punishments
that are contingent on performance?
A) intermittent pay
B) behavior modification
C) personal development
D) instrumentality
E) internal motivation
Answer: B
Explanation: Managers apply Skinner's principles by using behavior modification. Behavior
modification means changing behavior through rewards or punishments that are
contingent on performance
Diff: 1
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
17) Which of the following is NOT a basic tenet of behavior modification?
A) Behavior that leads to rewards tends to be repeated.
B) Behavior that appears to lead to punishment tends not to be repeated.
C) Properly scheduled rewards can be used to encourage some behaviors.
D) Properly scheduled punishments can be used to minimize some behaviors.
E) Employees must understand the link between rewards,punishments, and behavior.
Answer: E
Explanation: For managers, behavior modification boils down to following two main principles:
(1) That behavior that appears to lead to a positive consequence (reward) tends to be repeated,
while behavior that appears to lead to a negative consequence (punishment) tends not to be
repeated; and (2) that, therefore, managers can get someone to change his or her behavior by
providing the properly scheduled rewards (or punishment).
Diff: 3
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
18) Which of the following terms refers to an incentive plan that ties a group's pay to the firm's
profitability?
A) piecework
B) variable pay
C) pay-for-performance
D) merit pay
E) sales commissions
Answer: B
Explanation: Traditionally, all incentive plans are pay-for-performance plans. They all tie
employees' pay to the employees' performance. Variable pay is more specific: It is usually an
incentive plan that ties a team's pay to some measure of the firm's overall profitability.
Diff: 1
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
19) Under the Fair Labor Standards Act, which of the following would NOT be included in
overtime pay computations?
A) attendance bonus
B) bonus for new hires
C) Christmas bonus
D) efficiency bonus
E) union contract bonus
Answer: C
Explanation: Christmas bonuses are not based on hours worked and may be excluded from
overtime pay calculations. Other types of incentive pay must be included according to the Fair
Labor Standards Act (FLSA). Bonuses to include in overtime pay computations include those
promised to newly hired employees; those provided for in union contracts; those announced to
induce employees to work more efficiently; and those for attendance.
Diff: 2
Page Ref: 436-437
Chapter: 12
Objective: 1
Skill: Concept
20) What type of pay plan is being used when workers are paid a sum for each unit they
produce?
A) base pay
B) competency-based pay
C) job-based pay
D) piecework
E) bonus
Answer: D
Explanation: Piecework is the oldest and still most popular individual incentive plan. Here you
pay the worker a sum (called a piece rate) for each unit he or she produces.
Diff: 1
Page Ref: 437
Chapter: 12
Objective: 2
Skill: Concept
21) Which of the following terms refers to an incentive plan in which a person is paid a sum for
each item he or she makes or sells, with a strict proportionality between results and rewards?
A) merit pay
B) variable pay
C) straight piecework
D) straight hourly pay
E) standard hour plan
Answer: C
Explanation: Piecework generally implies straight piecework, which entails a strict
proportionality between results and rewards regardless of output. However, some piecework
plans allow for sharing productivity gains between employer and worker.
Diff: 1
Page Ref: 437
Chapter: 12
Objective: 2
Skill: Concept
22) In which of the following do workers receive a basic hourly rate plus a premium equal to the
percent by which their performance exceeds the standard?
A) piecework
B) variable pay
C) straight piecework
D) standard hour plan
E) standard piecework
Answer: D
Explanation: The standard hour plan is a plan by which a worker is paid a basic hourly rate but is
paid an extra percentage of his or her rate for production exceeding the standard per hour or per
day. It is similar to piecework payment but based on a percent premium.
Diff: 1
Page Ref: 437
Chapter: 12
Objective: 2
Skill: Concept
23) All of the following are disadvantages associated with piecework plans EXCEPT that
workers ________.
A) resist attempts to modify production standards
B) focus on production quantity instead of quality
C) view the plans as unfair and complicated
D) dislike new technology or processes
E) resist changing from job to job
Answer: C
Explanation: Piecework plans are understandable, appear equitable in principle, and can be
powerful incentives, since rewards are proportionate to performance. However, workers on
piecework may resist attempts to revise production standards, downplay quality, or resist
switching from job to job. Attempts to introduce new technology or processes may also trigger
resistance.
Diff: 3
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
24) Which of the following is the primary advantage of piecework plans?
A) powerful incentive to workers
B) encourages worker flexibility
C) workers earn efficiency bonuses
D) firms save on overtime wages
E) entices independent contractors
Answer: A
Explanation: Piecework plans are understandable, appear equitable in principle, and can be
powerful
incentives, since rewards are proportionate to performance.
Diff: 3
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
25) Which of the following terms refers to any salary increase the firm awards to an individual
employee based on his or her individual performance?
A) competency-based pay
B) variable pay
C) merit pay
D) base pay
E) piecework
Answer: C
Explanation: Merit pay is any salary increase the firm awards to an individual employee based
on his or her individual performance. It is different from a bonus in that it usually becomes part
of the employee's base salary, whereas a bonus is a one-time payment.
Diff: 1
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
26) How does merit pay differ from a bonus?

A) Merit pay becomes part of an employee's base pay, but a bonus does not.
B) A bonus becomes part of an employee's base pay, but merit pay does not.
C) Merit pay is linked to individual performance, while a bonus is linked to profits.
D) A bonus is linked to individual performance, while merit pay is linked to profits.
E) Merit pay is limited to a single, lump payment, and a bonus is spread out over a year.
Answer: A
Explanation: Merit pay is any salary increase the firm awards to an individual employee based
on his or her individual performance. It is different from a bonus in that it usually becomes part
of the employee's base salary, whereas a bonus is a one-time payment.
Diff: 3
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
27) Studies indicate that in order for merit pay to be most effective, it should be linked to
________.
A) company profits
B) annual base salary
C) employee overtime
D) employee performance
E) awards and bonuses
Answer: D
Explanation: Merit raises are more likely to be effective if they are linked to performance, which
involves establishing effective appraisal procedures. Merit pay linked to company profits or
employees' salaries, overtime, or awards are less likely to be effective incentives.
Diff: 2
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
28) Ryobi is a large, international power tool manufacturer that develops affordable, high-quality
products, such as drills, circular saws, and routers, for both homeowners and craftspeople. As the
company continues to grow, its top executives want to ensure that employees are appropriately
paid for their performance and that financial incentives are both fair and effective. Currently, the
firm provides merit raises based on performance appraisals; however, executives are considering
changing the current incentive plan.
Which of the following, if true, supports the argument that Ryobi should eliminate all merit
raises?
A) Performance appraisals at Ryobi occur annually, and standards vary from manager to
manager.
B) Ryobi employees have the option of accepting lump-sum raises or traditional merit raises.
C) Motivation among Ryobi engineers has been improved through social recognition programs.
D) Ryobi recently began using an enterprise incentive management system to automate
compensation.
E) The commission percentage for Ryobi sales people is based on the ability to meet monthly
quotas.
Answer: A
Explanation: In order for merit raises to be effective, performance appraisals need to be
consistent and fair. Social recognition programs, the distribution method of a merit raise,
monthly sales quotas, and enterprise management systems are less relevant to the decision.
Diff: 3
Page Ref: 438
AACSB: Analytic Skills
Chapter: 12
Objective: 2
Skill: Critical Thinking
products,
such as drills, circular saws, and routers, for both homeowners and craftspeople. As the
Which of the following, if true, undermines the argument that Ryobi should discontinue all merit
raises?
A) Ryobi employees have expressed that they would prefer stock options to merit raises.
B) Ryobi's top competitor is considered a high-performance work system within the industry.
C) Ryobi managers have not received significant training about conducting performance
appraisals.
D) Ryobi managers have noticed significant productivity improvements among employees who
receive merit raises.
E) Ryobi's top executives receive a combination of base salary and stock options to encourage
them to focus on the firm's strategic goals.
Answer: D
Explanation: If Ryobi managers have noticed productivity improvements among employees who
receive merit raises, then the system is most likely effective and should not be discontinued.
Choices A and C support the decision to discontinue merit raises. Choices B and E are irrelevant.
Diff: 3
Page Ref: 438
Chapter: 12
Objective: 2
products,
such as drills, circular saws, and routers, for both homeowners and craftspeople. As the
Which of the following questions is most relevant to the decision by Ryobi executives to
discontinue all merit raises?
A) What are the guidelines for implementing a gainsharing plan?
B) What is the link between merit pay and motivation according to Deci?
C) What type of merit raises are effective for high-performing managers?
D) What organization wide incentive plans are used by other manufacturing firms?
E) What is the connection between merit pay increases and employee productivity?
Answer: E
Explanation: In order for merit raises to be effective, there should be a clear and consistent
connection between productivity and merit pay. Choice C is incorrect because there are not types
of merit raises. Choice B is incorrect because Deci asserted that extrinsic rewards detracted from
a worker's intrinsic motivation.
Diff: 3
Page Ref: 438
Chapter: 12
Objective: 2
31) Which of the following is the most commonly used reward for motivating employees?
A) individual travel
B) recognition programs
C) training programs
D) variable pay
E) special events
Answer: B
Explanation: Surveys find that firms most frequently use employee recognition programs to
motivate employees. Travel, training, variable pay, and special events are used less frequently.
Diff: 2
Page Ref: 440
Chapter: 12
Objective: 2
Skill: Concept
32) Craig is a line manager at a paper supply company. All of the following are methods that
Craig should most likely implement to motivate his subordinates EXCEPT ________.
A) creating specific, challenging goals
B) recognizing an employee's contribution
C) encouraging workers to earn overtime pay
D) gaining agreement on goals with employees
E) using positive reinforcement on a daily basis
Answer: C
Explanation: The best option for motivating employees is to make sure the employee has a
doable goal and that he or she agrees with that. Next, recognizing an employee's contribution is a
powerful motivation tool. Finally, managers can use social recognition as daily positive
reinforcement. Encouraging overtime is less likely to motivate employees.
Diff: 3
Page Ref: 440
Chapter: 12
Objective: 2
Skill: Application
33) Enterprise incentive management systems enable firms to ________.
A) compare corporate incentive programs
B) accurately calculate sales commissions
C) manage performance appraisals for incentive purposes
D) efficiently administer employee incentive programs
E) create a matrix of merit awards and incentive options
Answer: D
Explanation: Incentive programs can be expensive and complicated to administer. As one
solution, vendors provide enterprise incentive management (EIM) systems. These automate the
planning, analysis, and management of incentive compensation plans.
Diff: 3
Page Ref: 441
AACSB: Use of IT
Chapter: 12
Objective: 2
Skill: Concept
34) A straight salary is most appropriate when a salesperson's primary duties involve ________.
A) servicing small accounts
B) finding new clients
C) meeting sales quotas
D) pushing hard-to-sell items
E) fostering relationships with customers
Answer: B
Explanation: Some firms pay salespeople fixed salaries , which makes sense when the main task
involves prospecting (finding new clients) or account servicing (such as participating in trade
shows). Meeting with clients and selling difficult items should be paid with commissions.
Diff: 2
Page Ref: 441
Chapter: 12
Objective: 3
Skill: Concept
35) Using a straight salary to compensate salespeople is most likely ineffective because it
________.
A) discourages sales flexibility
B) lacks connection to performance
C) makes it too easy to switch territories
D) is not linked to product training
E) depends on company profits
Answer: B
Explanation: The straight salary approach makes it easier to switch territories or to reassign
salespeople, and it can foster sales staff loyalty. The main disadvantage is that straight salary can
demotivate potentially high-performing salespeople.
Diff: 3
Page Ref: 441
Chapter: 12
Objective: 3
Skill: Concept
36) All of the following are disadvantages of straight commission plans EXCEPT ________.
A) salespeople avoid pushing hard-to-sell items
B) salespeople fail to service small accounts
C) payments are complicated to calculate
D) significant variations in pay exist
E) pay depends on skill and economy
Answer: C
Explanation: Straight commission plans are easy to understand and compute. However,
salespeople tend to focus on making the sale and on high-volume items, and may neglect
nonselling duties like servicing small accounts, cultivating dedicated customers, and pushing
hard-to-sell items. Wide variations in pay may occur; this can make some feel the plan is
inequitable. In addition, salespersons' pay may be excessive in boom times and low in
recessions., and if the person hasn't the sales skills, commissions won't produce sales.
Diff: 3
Page Ref: 442
Chapter: 12
Objective: 3
Skill: Concept
37) Which of the following is the primary advantage of using a combination of salary and
commission as compensation for salespeople?
A) provides a guaranteed minimum salary
B) all freedom of work activities
C) facilitates territory rotation
D) completely links to performance
E) offers simple administration
Answer: A
Explanation: The main advantage of combination plans is that they offer salespeople a floor to
their earnings. However, such plans are usually complicated and difficult to administer, and only
the commission percentage is linked to performance.
Diff: 3
Page Ref: 442
Chapter: 12
Objective: 3
Skill: Concept
38) Edward is the new sales manager at Wilson Auto Mart. The previous sales manager set
commission rates informally without considering how much each sale covered expenses. As a
result, Wilson Auto Mart barely breaks even on each car sale once commissions are paid. Edward
wants to motivate his sales force but avoid having excessive commissions.
All of the following questions are relevant to developing an effective sales compensation plan
EXCEPT ________.
A) What percentage of Wilson's sales force achieves its sales quota each month?
B) How much time does each Wilson salesperson spend with qualified prospects?
C) What are the motivation and skill levels of Wilson sales team members?
D) What is the average annual bonus received by Wilson's CEO?
E) What is Wilson's desired profit for each car sale?
Answer: D
Explanation: Questions about sales quotas, profit, motivation, skill levels, and time spent with
likely customers are relevant to developing an effective sales compensation plan. The annual
bonus received by Wilson's CEO is not directly relevant to motivating the sales team.
Diff: 3
Page Ref: 442-444
Chapter: 12
Objective: 3
39) Edward is the new sales manager at Wilson Auto Mart. The previous sales manager set
commission rates informally without considering how much each sale covered expenses. As a
result, Wilson Auto Mart barely breaks even on each car sale once commissions are paid. Edward
wants to motivate his sales force but avoid having excessive commissions.
Which of the following, if true, supports the argument that Edward should pay his sales team a
combination of salary plus commission?
A) Wilson Auto Mart's sales team consists of high-performing, experienced salespeople.
B) Wilson Auto Mart has successfully implemented a "one price no hassle" pricing program.
C) Each Wilson Auto Mart sales person is encouraged to sell at least ten vehicles each month.
D) Wilson Auto Mart salespeople are primarily asked to find new clients and service current
accounts.
E) Encouraging staff loyalty is the primary goal of Wilson Auto Mart, where turnover is very
low.
Answer: B
Explanation: The transition to salary plus bonus reflects the growing emphasis among car dealers
on "one price no hassle" pricing, and the desire on the part of more dealers to make the purchase
process less tense. A combination of salary and commission is appropriate for Wilson's no-hassle
pricing plan. High-performing salespeople would prefer straight commissions, while a straight
salary is better when salespeople only need to prospect or service accounts.
Diff: 3
Page Ref: 442-444
Chapter: 12
Objective: 3
40) Which of the following terms refers to the right to purchase a stated number of shares of a
company stock at today's price at some time in the future?
A) at-risk variable plan
B) multiplier method
C) stock option
D) gainsharing plan
E) split-award plan
Answer: C
Explanation: A stock option is the right to purchase a specific number of shares of company
stock at a specific price during a specific period. The assumption is that the price of the stock
will go up.
Diff: 1
Page Ref: 447
Chapter: 12
Objective: 4
Skill: Concept
41) With which of the following can an executive not profit until the stock makes significant
gains?
A) performance share
B) indexed options
C) phantom stock
D) restricted stock
E) premium priced options
Answer: E
Explanation: With premium priced options, the exercise price is higher than the stock's closing
price
on the date of the grant, so the executive can't profit from the options until the stock makes
significant gains.
Diff: 1
Page Ref: 448
Chapter: 12
Objective: 4
Skill: Concept
42) With a ________, an executive receives units instead of shares of company stock. In the
future, the executive receives cash equal to the appreciation of the units owned.
A) nonqualified stock option
B) premium priced option
C) performance achievement plan
D) phantom stock plan
E) restricted stock plan
Answer: D
Explanation: Under phantom stock plans, executives receive not shares but "units" that are
similar to shares of company stock. Then at some future time, they receive value (usually in
cash) equal to the appreciation of the "phantom" stock they own.
Diff: 1
Page Ref: 448
Chapter: 12
Objective: 4
Skill: Concept
43) Which term refers to payments companies make in connection with a change in ownership or
control of a company?
A) pension
B) golden parachute
C) retirement bonus
D) consulting fee
E) stock option
Answer: B
Explanation: Golden parachutes are extraordinary payments companies make to executives in
connection with a change in ownership or control of a company. For example, a company's
golden parachute clause might state that, with a change in ownership of the firm, the executive
would receive a one-time payment of $2 million.
Diff: 1
Page Ref: 448
Chapter: 12
Objective: 4
Skill: Concept
44) All of the following are advantages of team incentive plans EXCEPT that ________.
A) jealousy is reduced
B) wage equity is guaranteed
C) team planning is reinforced
D) problem solving is encouraged
E) collaboration is encouraged
Answer: B
Explanation: The benefits of team incentive plans include reduced jealousy and increased team
planning, problem solving, and collaboration. The primary problem relates to inequity in
financial compensation because everyone is paid equally but does not work equally.
Diff: 3
Page Ref: 449-450
Chapter: 12
Objective: 5
Skill: Concept
45) What type of profit-sharing plan involves the firm simply distributing a percentage of profits
as profit shares to employees at regular intervals?
A) current profit-sharing
B) Lincoln incentive system
C) Jefferson incentive system
D) deferred profit-sharing plan
E) employee stock ownership plan
Answer: A
Explanation: There are several types of profit-sharing plans. With current profit-sharing or cash
plans, employees share in a portion of the employer's profits quarterly or annually. In cash plans,
the firm simply distributes a percentage of profits (usually 15% to 20%) as profit shares to
employees at regular intervals.
Diff: 1
Page Ref: 450-451
Chapter: 12
Objective: 5
Skill: Concept
46) Tanner's employer puts a predetermined portion of profits into a trust account for Tanner's
retirement. Which of the following is most likely the type of profit-sharing plan used by Tanner's
employer?
A) deferred profit-sharing plan
D) cash plan
E) gainsharing plan
Answer: A
Explanation: With deferred profit-sharing plans, the employer puts cash awards into trust
accounts for the employees' retirement. Here the employer generally distributes the awards based
on a percentage of the employee's salary, or some measure of the employee's contribution to
company profits.
Diff: 2
Page Ref: 451
Chapter: 12
Objective: 5
Skill: Application
47) Which profit-sharing plan provides tax advantages for employees by postponing income
taxes, often until the employee retires?
A) cash plan
Answer: D
Explanation: With deferred profit-sharing plans, the employer puts cash awards into trust
accounts for the employees' retirement. Here the employer generally distributes the awards based
on a percentage of the employee's salary, or some measure of the employee's contribution to
company profits. There is a tax advantage, since employees' income taxes on the distributions are
deferred, often until the employee retires.
Diff: 2
Page Ref: 451
Chapter: 12
Objective: 5
Skill: Concept
48) The Scanlon plan includes all of the following features EXCEPT ________.
A) a philosophy of cooperation
B) competence
C) identity
D) an involvement system
E) a focus on individual achievement
Answer: E
Explanation: The five features of the Scanlon plan include a philosophy of cooperation, identity,
competence, an involvement system, and a sharing of benefits formula. The plan does not call for
focusing on individual achievement.
Diff: 2
Page Ref: 451
Chapter: 12
Objective: 5
Skill: Concept
49) Which incentive plan is based on a philosophy that managers and employees must cooperate
together?
A) cash plan
C) Scanlon plan
Answer: C
Explanation: The Scanlon plan is based on a philosophy of cooperation. This philosophy
assumes that managers and workers must rid themselves of the "us" and "them" attitudes that
normally inhibit employees from developing a sense of ownership in the company.
Diff: 1
Page Ref: 451
Chapter: 12
Objective: 5
Skill: Concept
50) Which of the following best explains identity in regards to the Scanlon plan?
A) philosophy of cooperation among employees
B) clear articulation of the company mission
C) high level of competence from all employees
D) improvement suggestions from employees
E) corporate-wide benefits and savings
Answer: B
Explanation: One feature of the Scanlon plan is identity. Identity means that in order to focus
employee involvement, the company must articulate its mission or purpose, and employees must
understand how the business operates in terms of customers, prices, and costs.
Diff: 2
Page Ref: 451
Chapter: 12
Objective: 5
Skill: Concept
51) Competence in the Scanlon plan refers to a focus on ________.

A) cooperation
B) corporate vision
C) employee competence
D) significant improvements
E) shared benefits
Answer: C
Explanation: Competence is a third basic feature of the Scanlon plan. The program, say three
experts,
"explicitly recognizes that a Scanlon plan demands a high level of competence from
employees at all levels." This suggests careful selection and training.
Diff: 1
Page Ref: 451
Chapter: 12
Objective: 5
Skill: Concept
52) The Scanlon plan is an early version of a ________ plan, an incentive plan that engages
employees in a common effort to achieve productivity objectives.
A) performance achievement
B) golden parachute
C) gainsharing
D) restricted stock
E) variable pay
Answer: C
Explanation: The Scanlon plan is one early version of a gainsharing plan. Gainsharing is an
incentive plan that engages many or all employees in a common effort to achieve a company's
productivity objectives, with any resulting cost-savings gains shared among employees and the
company.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
53) Gainsharing is an incentive plan that ________.

A) uses a trust to hold stock in individual employee accounts and distributes it to employees
upon retirement
B) engages employees in a common effort to achieve a company's productivity objectives with
any resulting cost-savings gains shared among employees and the company
C) contributes company shares of its own stock or cash to be used to purchase company stock to
a trust established to purchase shares of the firm's stock for employees
D) provides tax advantages for employees by deferring income taxes, often until the employee
retires
E) involves the firm regularly distributing a percentage of profits as profit shares to employees
Answer: B
Explanation: Gainsharing is an incentive plan that engages many or all employees in a common
effort to achieve a company's productivity objectives, with any resulting cost-savings gains
shared among employees and the company. Choice C describes ESOPs, and Choice E refers to
cash profit-sharing.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
54) Which of the following is NOT a type of gainsharing plan?
A) Improshare
B) Lincoln
C) Scanlon
D) Rucker
E) Roth
Answer: E
Explanation: In addition to the Scanlon plan, other popular gainsharing plans include the
Lincoln, Rucker, and Improshare plans. Roth is not a type of gainsharing plan.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
55) What type of profit-sharing plan involves the firm distributing total annual profits each year
among employees based on their merit rating?
A) cash plan
Answer: B
Explanation: In one version of the Lincoln incentive system, first instituted at the Lincoln
Electric Company of Ohio, employees work on a guaranteed piecework basis. The company
distributes total annual profits (less taxes, 6% dividends to stockholders, and a reserve) each year
among employees based on their merit rating.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
56) The Lincoln incentive system is an incentive plan that ________.
A) uses a trust to hold stock in individual employee accounts and distributes it to employees
upon retirement
B) engages many or all employees in a common effort to achieve a company's productivity
objectives with any resulting cost-savings gains shared among employees and the company
C) contributes company shares of its own stock or cash to be used to purchase company stock to
a trust established to purchase shares of the firm's stock for employees
D) provides tax advantages for employees by deferring income taxes, often until the employee
retires
E) involves the firm distributing total annual profits each year among employees based on their
merit rating
Answer: E
Explanation: In one version of the Lincoln incentive system, first instituted at the Lincoln
Electric Company of Ohio, employees work on a guaranteed piecework basis. The company
distributes total annual profits each year among employees based on their merit rating.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
57) Which of the following terms refers to plans that put some portion of the employee's weekly
pay at risk, subject to the firm's meeting its financial goals?
A) at-risk variable pay plan
B) at-risk incentive plan
C) variable risk sharing plan
D) at-risk gainsharing plan
E) employee at-risk plan
Answer: A
Explanation: At-risk variable pay plans are plans that put some portion of the employee's weekly,
monthly, or yearly pay at risk. If employees meet or exceed their goals, they earn back not only
the portion of their pay that was at risk, but also an incentive. If they fail to meet their goals, they
forego some of the pay they would normally earn.
Diff: 1
Page Ref: 452-453
Chapter: 12
Objective: 5
Skill: Concept
58) Heidi works for a computer firm that offers an incentive plan to its employees. Heidi's
employer divides the value added for the period by total payroll expenses to determine employee
bonuses. Which of the following incentive plans is most likely used by Heidi's employer?
A) employee stock ownership plan
C) Scanlon plan
D) Rucker plan
E) Improshare plan
Answer: D
Explanation: The Rucker plan uses a value-added formula to determine employee bonuses. The
Scanlon formula divides payroll expenses by total sales. With the Improshare plan, the bonus
depends on the difference between how many labor hours the company should have used for the
period, compared with how many it actually used.
Diff: 3
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Application
59) The first step in implementing a gainsharing plan is to ________.
A) choose specific performance measures
B) decide on a funding formula
C) decide how often to pay bonuses
D) establish general plan objectives
E) develop an involvement system
Answer: D
Explanation: The first step in implementing a gainsharing plan is to establish general plan
objectives like lowering labor costs. The second step is choosing specific performance measures.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
60) Jack is in the process of implementing a gainsharing plan for his firm. He has already
determined that the plan's objectives will be to lower labor costs. What is the next step that Jack
needs to take?
A) choose specific performance measures
B) decide on a funding formula
C) decide how often to pay bonuses
D) select the form of payment
E) develop an involvement system
Answer: A
Explanation: After establishing general plan objectives, Jack needs to choose specific
performance measures. Choices B, C, D, and E are additional steps in the process.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Application
61) When developing the involvement system for a gainsharing plan, which of the following is
NOT a commonly used element?
A) steering committees
B) update meetings
C) employee mediations
D) suggestion systems
E) problem-solving teams
Answer: C
Explanation: Developing the involvement system is the seventh step in implementing a
gainsharing plan. The most commonly used elements include steering committees, update
meetings, suggestion systems, and problem-solving teams. Employee mediations are not used.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
62) What is the most common form of payment in gainsharing plans?
A) common stock
B) vacation time
C) preferred stock
D) promotions
E) cash
Answer: E
Explanation: Cash is the most common form of payment with gainsharing plans, but common
stock is occasionally used.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
63) How often do most firms tend to compute financial performance measures used in
gainsharing plans?
A) weekly
B) monthly
C) quarterly
D) bi-annually
E) annually
Answer: E
Explanation: Firms tend to pay based on financial performance measures annually and on labor
productivity measures quarterly or monthly.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
64) What type of gainsharing plan determines employee bonuses by dividing payroll expenses by
total sales?
A) Lincoln
B) Rucker
C) Improshare
D) Scanlon
E) Skinner
Answer: D
Explanation: The Scanlon formula divides payroll expenses by total sales (or, sometimes, by
total sales plus increases in inventory). The Rucker plan uses a value-added formula. With the
Lincoln incentive system, employees work on a guaranteed piecework basis.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
65) With which type of gainsharing plan bases employee bonuses on the difference between the
number of labor hours a firm should have used with the number of labor hours actually used
during a specific period?
A) Lincoln
B) Rucker
C) Improshare
D) Scanlon
E) Vroom
Answer: C
Explanation: With the Improshare plan, the bonus depends on the difference between how many
labor hours the company should have used for the period, compared with how many it actually
used. The Scanlon formula divides payroll expenses by total sales.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
66) Company-wide plans in which a corporation contributes shares of its own stock to a trust
established to purchase shares of the firm's stocks for employees are known as ________.
A) cash plans
B) Lincoln incentive systems
C) Jefferson incentive systems
D) deferred profit-sharing plans
E) employee stock ownership plans
Answer: E
Explanation: Employee stock ownership plans (ESOPs) are company-wide plans in which the
employer contributes shares of its own stock to a trust established to purchase shares of the firm's
stock for employees. The firm generally makes these contributions annually in proportion to total
employee compensation, with a limit of 15% of compensation.
Diff: 1
Page Ref: 453
Chapter: 12
Objective: 5
Skill: Concept
67) Which of the following is the primary benefit of employee stock ownership plans?
A) Firms are able to implement the plans with minimal costs and complications.
B) Firms pay distribution taxes for employees prior to retirement.
C) Firms may borrow against employee stock held in trust.
D) Employees are able to diversify their investments.
E) Employees have voting rights in firm decisions.
Answer: C
Explanation: The main reason that ESOPs are popular is that a firm gets a tax deduction equal to
the fair market value of the shares it transfers to the trustee and can claim an income tax
deduction for dividends paid on ESOP-owned stock. Employees are taxed when they receive a
distribution from the trust., usually at retirement.
Diff: 3
Page Ref: 453
Chapter: 12
Objective: 5
Skill: Concept
68) Research indicates that employee stock ownership plans may ________.
A) encourage employees to retire too early
B) place firms at greater risk for employee lawsuits
C) increase employee commitment and motivation
D) encourage transparency within global organizations
E) improve communication between employees and employers
Answer: C
Explanation: Research suggests that ESOPs do encourage employees to develop a sense of
ownership in and commitment to the firm. For the plans to be effective, firms must be
responsible for their funds.
Diff: 3
Page Ref: 453
Chapter: 12
Objective: 5
Skill: Concept
69) In which of the following situations would it be LEAST appropriate to use an incentive plan?
A) Work flow is regular.
B) Delays rarely occur.
C) The job is standardized
D) Employees are unskilled but motivated.
E) A link exists between employee effort and output.
Answer: D
Explanation: Incentive plans are effective and appropriate when motivation (and not ability) is
the problem. They are also appropriate when there is a clear relationship between employee
effort and quantity or quality of output, the job is standardized, the work flow is regular., and
delays are few or consistent.
Diff: 3
Page Ref: 454
Chapter: 12
Objective: 6
Skill: Concept
70) All of the following are essential in order for incentive plans to be effective EXCEPT
________.
A) incentives appear to be logical
B) incentives are linked to behaviors
C) rewards are attractive to employees
D) standards are clear and complete
E) employee motivation is an issue
Answer: A
Explanation: Effective incentive plans link employee behaviors with incentives, offer attractive
rewards, and establish clear standards. Motivation rather than skill should be the primary
problem. Incentives that seem logical may not be contributing to performance, so it is important
to gather evidence and analyze the long-term effects of the plan.
Diff: 3
Page Ref: 454-455
Chapter: 12
Objective: 6
Skill: Concept
71) Robert Katz popularized the use of financial incentives for workers whose production
exceeds some predetermined standard.
Answer: FALSE
Explanation: Frederick Taylor popularized the use of financial incentives in the late 1800s.
Diff: 1
Page Ref: 434
Chapter: 12
Objective: 1
Skill: Concept
72) Most firms link employees' pay to performance because financial incentives are extremely
successful at motivating employees to perform above required standards.
Answer: FALSE
Explanation: Studies suggest that employees don't see a strong connection between pay and
performance, and their performance is not particularly influenced by the company's incentive
plan. About 83% of companies with such programs say their programs are only somewhat
successful or
not successful at all.
Diff: 2
Page Ref: 434
Chapter: 12
Objective: 1
Skill: Concept
73) According to Maslow's theory, a manager will not be able to motivate an employee with
challenging tasks if the employee does not make enough money to pay for basic necessities.
Answer: TRUE
Explanation: Maslow's theory has many practical implications. For example, insecure
employees won't be as concerned with doing jobs that might be "beneath them"; and, don't try to
motivate someone with more challenging work if he or she doesn't earn enough to pay the bills.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
74) In Herzberg's Hygiene-Motivator theory, working conditions are motivator factors, and
challenging assignments are hygiene factors.
Answer: FALSE
Explanation: Hygiene factors are factors outside the job itself, such as working conditions,
salary, and incentive pay. Motivator factors include challenging tasks, feedback, and recognition.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
75) Herzberg's Hygiene-Motivator theory is based on Maslow's hierarchy of needs.
Answer: TRUE
Explanation: Frederick Herzberg said the best way to motivate someone is to organize the job so
that doing it provides the feedback and challenge that helps satisfy the person's "higher-level"
needs for things like accomplishment and recognition. Satisfying "lower level" needs for things
like better pay and working conditions just keeps the person from becoming dissatisfied.
Herzberg's theory is based on Maslow's hierarchy of needs.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
76) According to Herzberg's motivation theory, good working conditions will prevent
dissatisfaction but will not lead to feelings of satisfaction.
Answer: TRUE
Explanation: Frederick Herzberg said the best way to motivate someone is to organize the job so
that doing
it provides the feedback and challenge that helps satisfy the person's "higher-level" needs for
things like accomplishment and recognition. Satisfying "lower level" needs for things like better
pay and working conditions just keeps the person from becoming dissatisfied.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
77) The work of Edward Deci suggests that managers should primarily rely on extrinsic rewards
to motivate employees.
Answer: FALSE
Explanation: Psychologist Edward Deci's work highlights another potential downside to relying
too heavily on extrinsic rewards: They may backfire. Deci found that extrinsic rewards could at
times actually detract from the person's intrinsic motivation.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
78) Vroom's expectancy theory observes that people will not pursue rewards that they find
unattractive or where their chances of success are very low.
Answer: TRUE
Explanation: An important motivational fact is that, in general, people won't pursue rewards
they find unattractive, or where the odds of success are very low. Psychologist Victor Vroom's
expectancy motivation theory echoes these common sense observations.
Diff: 2
Page Ref: 435
Chapter: 12
Objective: 1
Skill: Concept
79) According to Vroom's theory, if expectancy, instrumentality, or valence is equal to zero, there
will be no employee motivation.
Answer: TRUE
V), where E represents expectancy, I instrumentality, and V valence. If E or I or V is zero or
inconsequential, there will be no motivation.
Diff: 2
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
80) Behavior modification is based on the idea that people will repeat behavior for which they
are punished.
Answer: FALSE
Explanation: According to Skinner's theory, behavior that appears to lead to a positive
consequence (reward) tends to be repeated, while behavior that appears to lead to a negative
consequence (punishment) tends not to be repeated.
Diff: 1
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
81) Behavior modification principles can be useful to managers who seek to change employee
behavior through rewards or punishments linked to performance.
Answer: TRUE
Explanation: Behavior modification means changing behavior through rewards or punishments
that are contingent on performance. Managers apply Skinner's principles of behavior
modification when overseeing employees.
Diff: 1
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
82) If an employee earns an incentive in the form of a prize or cash award, the value of the award
is not included when calculating the employee's overtime pay.
Answer: FALSE
Explanation: Under the Fair Labor Standards Act, if the performance-based pay is in the form of
a prize
or cash award, the employer generally must include the value of that award when calculating
the worker's overtime pay for that pay period.
Diff: 2
Page Ref: 436
Chapter: 12
Objective: 1
Skill: Concept
83) The complicated nature of piecework makes it an unpopular individual incentive plan among
employers.
Answer: FALSE
Explanation: Piecework is the oldest and still most popular individual incentive plan. The
straightforward plan requires an employer to pay the worker a sum (called a piece rate) for each
unit he or she produces.
Diff: 2
Page Ref: 437
Chapter: 12
Objective: 2
Skill: Concept
84) The standard hour plan is like the piece rate plan except instead of getting a rate per piece,
the employee gets a premium equal to the percent by which his or her performance exceeds the
standard.
Answer: TRUE
Explanation: The standard hour plan is a plan by which a worker is paid a basic hourly rate but
is paid an extra percentage of his or her rate for production exceeding the standard per hour or
per day. It is similar to piecework payment but based on a percent premium.
Diff: 1
Page Ref: 437
Chapter: 12
Objective: 2
Skill: Concept
85) With a standard hour plan, employers do not need to recalculate piece rates when changes are
made to the hourly pay rate.
Answer: TRUE
Explanation: Some firms find that expressing the incentive in percentages reduces the workers'
tendency to link their production standard to pay (thus making the standard easier to change). It
also eliminates the need to recalculate piece rates whenever hourly wage rates are changed.
Diff: 2
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
86) Employers are shifting away from piecework in many industries due to the incentive plan's
poor reputation.
Answer: TRUE
Explanation: In the garment industry and other industries, the term piecework has a dreadful
reputation because the hourly pay didn't always fulfill the Wage and Hour Act's minimum wage
requirements. For these and other reasons, more employers are moving to other plans.
Diff: 2
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
87) All merit raises become part of an employee's base salary.
Answer: TRUE
Explanation: A merit raise is any salary increase the firm awards to an individual employee
based on his or her individual performance. It usually becomes part of the employee's base
salary.
Diff: 2
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
88) According to the FLSA, merit pay can only be given to exempt, nonmanagement employees
at a company.
Answer: FALSE
Explanation: Although the term merit pay can apply to the incentive raises given to any
employeeexempt or nonexempt, office or factory, management or nonmanagementthe term
is more often used for white-collar employees and particularly professional, office, and clerical
employees.
Diff: 2
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Concept
89) Lump sum merit increases can be a more significant motivator than traditional merit pay
because the amount seems greater when received all at once.
Answer: TRUE
Explanation: Lump-sum merit increases can also be more dramatic motivators than a traditional
merit raise. For example, a 5% lump-sum merit payment to a $30,000 employee is $1,500 cash,
as opposed to a traditional weekly merit payout of $29 for 52 weeks.
Diff: 1
Page Ref: 439
Chapter: 12
Objective: 2
Skill: Concept
90) Straight commission plans are attractive to high-performing salespeople.
Answer: TRUE
Explanation: Commission plans tend to attract high-performing salespeople who see that effort
clearly produces rewards.
Diff: 1
Page Ref: 442
Chapter: 12
Objective: 3
Skill: Concept
91) Annual bonus plans are long-term incentives, and stock options are short-term incentives.
Answer: FALSE
Explanation: Most firms have annual bonus plans aimed at motivating managers' short-term
performance. Short-term bonuses can easily result in plus or minus adjustments of 25% or more
to total pay. Stock options are a type of long-term incentive.
Diff: 2
Page Ref: 445, 447
Chapter: 12
Objective: 4
Skill: Concept
92) Cash, stock, stock options, stock appreciation rights, and phantom stock are known as
"golden handcuffs" because they are long-term incentives for executives.
Answer: TRUE
Explanation: Long-term incentives are also "golden handcuffs"they motivate executives to
stay with the company by letting them accumulate capital that they can only cash in after a
certain number of years. Popular long-term incentives include cash, stock, stock options, stock
appreciation rights, and phantom stock.
Diff: 2
Page Ref: 447
Chapter: 12
Objective: 4
Skill: Concept
93) Experts assert that stock options encourage executives to take dangerous risks and are to
blame for many corporate scandals.
Answer: TRUE
Explanation: Many blame stock options for contributing to corporate scandals, in which
executives allegedly manipulated the dates they received their options to maximize their returns.
Options may also encourage executives to take perilous risks in pursuit of higher, short-term
profits.
Diff: 2
Page Ref: 447
Chapter: 12
Objective: 4
Skill: Concept
94) Stock appreciation rights allow the recipient to buy the stock or take any appreciation in the
stock price in cash, stock, or a combination of the two.
Answer: TRUE
Explanation: Stock appreciation rights permit the recipient to exercise the stock option (by
buying the stock) or to take any appreciation in the stock price in cash, stock, or some
combination of these.
Diff: 2
Page Ref: 448
Chapter: 12
Objective: 4
Skill: Concept
95) Studies suggest that team incentive plans enhance productivity because the work load is
equally distributed among team members, which fosters cooperation.
Answer: FALSE
Explanation: Most large employers use team incentive plans, but studies suggest they are
counterproductive. Inequity is the issue because usually a few people do the work but everyone
shares the reward.
Diff: 2
Page Ref: 450
Chapter: 12
Objective: 5
Skill: Concept
96) The Scanlon plan is a type of gainsharing plan.

Answer: TRUE
Explanation: The Scanlon plan is one early version of a gainsharing plan. Gainsharing is an
incentive plan that engages many or all employees in a common effort to achieve a company's
productivity objectives, with any resulting cost-savings gains shared among employees and the
company.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
97) Common stock is the most common payment form used in gainsharing plans.
Answer: FALSE
Explanation: Cash is the most common payment form, but sometimes common stock is offered.
Diff: 2
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Concept
98) Research suggests that employee stock ownership plans discourage employees from
developing a sense of ownership in and commitment to the firm, which is why the programs are
decreasing in popularity.
Answer: FALSE
Explanation: Research suggests that ESOPs encourage employees to develop a sense of
ownership in and commitment to the firm.
Diff: 1
Page Ref: 453
Chapter: 12
Objective: 5
Skill: Concept
99) In order for a firm to have an effective incentive plan, there should be a clear relationship
between employee effort and quantity or quality of output.
Answer: TRUE
Explanation: It makes sense to use an incentive plan when there is a clear relationship between
employee effort and the quantity or quality of output.
Diff: 2
Page Ref: 454
Chapter: 12
Objective: 6
Skill: Concept
100) An effective incentive plan involves gathering evidence and evaluating the long-term
effects on employee performance.
Answer: TRUE
Explanation: In order to have an effective incentive plan, firms should gather evidence and
analyze the effects of the incentive plan over time. Such analysis will ascertain whether the plan
is influencing the measures that a firm intended to improve through the incentive plan.
Diff: 1
Page Ref: 455
Chapter: 12
Objective: 6
Skill: Concept
101) Briefly describe Vroom's theory and its three components. How can managers use Vroom's
theory as they develop effective incentive plans?
Answer: Vroom states that a person's motivation to exert some level of effort or specific
behavior is a function of three things: valence, instrumentality, and expectancy. Valence is the
perceived value the person attaches to the reward. Instrumentality is the perceived relationship
between successful performance and obtaining the reward. Expectancy is the probability that
performance of the behavior or exertion of the effort will result in achieving the desired reward.
Motivation is equal to E * I * V. Victor Vroom would say there should be a clear link between
effort and performance, and between performance and reward, and that the reward must be
attractive to the employee.
Diff: 3
Page Ref: 435-436, 454-455
AACSB: Reflective Thinking
Chapter: 12
Objective: 1, 6
Skill: Synthesis
102) Explain the advantages and disadvantages of using piecework as a pay plan?
Answer: Piecework plans appear equitable in principle and can be powerful as an incentive,
because rewards are proportionate to performance. Employees may resist attempts to revise
production standards even if the change is justified. Employees could focus on output and be less
willing to focus on quality standards or switching tasks since both could result in lower output.
Attempts to introduce new technology could be resisted for the same reason.
Diff: 2
Page Ref: 438
Chapter: 12
Objective: 2
Skill: Application
103) Employers may award merit pay as traditional merit increases that increase an employee's
base pay or as a lump sum merit raise. Explain the pros and cons of these two choices.
Answer: Traditional merit increases are cumulative but most lump sum merit raises are not. For
employees receiving traditional merit increases, raises in subsequent years are based on the new
higher amount. With lump sum merit raises, payroll expenses can be minimized over time while
still offering an incentive. Further, the lump sum amount may seem more impressive to
employees because it is a large amount paid at one time. First instance, a lump sum merit
payment of $1500 may seem more desirable than a traditional weekly merit payout of $29 for 52
weeks.
Diff: 2
Page Ref: 438-439
Chapter: 12
Objective: 2
Skill: Application
104) You are the CEO of Blue Bay Motor Boat Company, a mid-size firm that manufactures
speed boats. What incentive plan would you implement for the firm's engineers? What incentive
plan would you implement for the firm's managers?
Answer: Stock options, bonuses, and profit sharing would be appropriate for the engineers.
Recognition-based awards and nonfinancial incentives would most likely encourage engineers to
work hard as well. For executives, stock options, performance shares, stock plans, and golden
parachutes are useful long-term incentives. Annual bonuses are useful in motivating the shortterm performance of managers.
Diff: 3
Page Ref: 439-440,
Chapter: 12
Objective: 2, 4
Skill: Synthesis
105) Sometimes managers need to reinforce positive behavior but cannot turn to a cash incentive
to do so. Identify at least five positive reinforcement rewards that a manager could use on a dayto-day basis to reward employees. What does research suggest about the impact of financial and
nonfinancial incentives on employees?
Answer: There is a long list possible such as to provide more challenging work assignments,
autonomy, making work more fun, job rotation, encouraging learning and continuous
improvement, providing encouragement, giving complements, allowing employees to set their
own goals, expressing appreciation in front of others, sending a note of thanks, giving an
employee of the month award, providing a bigger or nicer desk or office. Research indicates that
both the financial and nonfinancial incentives improve employee and store performance. For
example, store profits rose 30% for those units where managers used financial rewards. Store
profits rose 36% for those units where managers used nonfinancial rewards. During the same 9month period, drive through
times decreased 19% for the financial incentives group, and 25% for the nonfinancial incentives
groups. Turnover improved 13% for the financial incentives group, and 10% for the nonfinancial
incentives group.
Diff: 3
Page Ref: 440-441, 454
Chapter: 12
Objective: 2, 6
Skill: Synthesis
106) You are the manager of large used car retailer, and sales are sluggish. What incentive plan
would be best for motivating your sales team? What steps should you take to ensure that your
incentive plan is effective?
Answer: Most companies pay salespeople a combination of salary and commissions, usually
with a sizable salary component. An incentive mix of about 70% base salary/30% incentive
seems typical; this cushions the salesperson's downside risk (of earning nothing), while limiting
the risk that the commissions could get out of hand from the firm's point of view. Combination
plans give salespeople a floor to their earnings, let the company specify what services the salary
component is for (such as servicing current accounts), and still provide an incentive for superior
performance. When developing the incentive plan, you need to first determine if it makes more
sense to use
an incentive plan. Next, you should link the incentive with your strategy, make sure the program
is motivational, set complete standards, and be scientific by gathering evidence and analyzing the
effects of the plan. .
Diff: 3
Page Ref: 442, 454-455
Chapter: 12
Objective: 3, 6
Skill: Synthesis
107) What is the Sarbanes-Oxley Act? How does it affect incentive plans? Do you support the
legislation? Why or why not?
Answer: The Sarbanes-Oxley Act of 2002 affects how employers formulate their executive
incentive programs. Congress passed Sarbanes-Oxley to inject a higher level of responsibility
into executives' and board members' decisions. It makes them personally liable for violating their
fiduciary responsibilities to their shareholders. The act also requires CEOs and CFOs of a public
company to repay any bonuses, incentives, or equity-based compensation received from the
company during the 12-month period following the issuance of a financial statement that the
company must restate due to material noncompliance with a financial reporting requirement
stemming from misconduct.
Diff: 2
Page Ref: 445
Chapter: 12
Objective: 4
108) In a brief essay, discuss the difference between annual bonuses for employees and
gainsharing plans.
Answer: Most firms have annual bonus plans aimed at motivating managers' short term
performance. Short-term bonuses can easily result in plus or minus adjustments of 25% or more
to total pay. Three factors influence one's bonus: eligibility, fund size, and individual
performance. Gainsharing is an incentive plan that engages many or all employees in a common
effort to achieve a company's productivity objectives, with any resulting cost-savings gains
shared among employees and the company.
Diff: 3
Page Ref: 445, 452
Chapter: 12
Objective: 4, 5
Skill: Synthesis
109) Explain the advantages of employee stock ownership plans.
Answer: The company that offers the ESOP receives a tax deduction equal to the fair market
value of the shares that are transferred to the trustee and can claim an income tax deduction for
dividends paid on ESOP-owned stock. Employees aren't taxed until they receive a distribution
from the trust, usually at retirement when the tax rate is lower. The Employee Retirement Income
Security Act allows a firm to borrow against employee stock held in trust and then repay the loan
in pretax rather than after-tax dollars. ESOPs also help shareholders of closely held corporations
to diversify their assets by placing some of their own shares of the company's stock into the
ESOP trust and purchasing other marketable securities for themselves in their place. ESOPs also
encourage employees to develop a sense of ownership in and commitment to the firm. They
provide increased financial incentives, create a sense of ownership, and help to build teamwork
Diff: 3
Page Ref: 453
Chapter: 12
Objective: 5
Skill: Application
110) List the basic steps in implementing a gainsharing plan.
Answer: The steps are as follows.
Establish general plan objectives
Choose specific performance measures
Decide on a funding formula
Decide on a method for dividing and distributing the employees' share of the gains
Choose the form of payment
Decide how often to pay bonuses
Develop the involvement system
Diff: 3
Page Ref: 452
Chapter: 12
Objective: 5
Skill: Application

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Compensation Plan - University of Phoenix

"Rewards bridge the gap between organizational objectives and individual

financial and non financial

Relevant labor market

approach for all of a firm's

today organizations are relying more True

Adjustments in work design and

Most high-performance work

Training, a critical component of high True

the compensation package is not

Skill-based pay systems are

Because of its complexity, skill-based False

When the elements of the work

In a work system with a high degree False

The HR scorecard helps managers

To successfully implement highperformance work systems,

One of the best ways to

To support the principle of sharing

Involving union memebers only after False

To successfully implement a highTrue

employee accceptance and

Employees skills, knowledge, and

High-performance work systems that True

Which of the following statements

All the HR practices work in

In addition to addressing competitive developing high technologies and

command and control in

To invest in employee knowledge

evaluating employees based on task

All of the following benefits are

employees will pursue outcomes that

Connecting rewards to organizational fairness and focuses employees on

linking pay and performance

Creating an egalitarian environment increased levels of turnover and

Egalitarian work environments

status and power differences,

Which of the following is not a typical standardization

looking at how work is designed.

All of the following benefirs are

it standardizes employees' skills

key business processes except:

combine work flow design with HR

Many high-performance work

recruitment and selection practices

assume greater responsibility

In high-performance work systems,

One of the primary benefits of cross- cross-training helps employees

rely on skill-based pay structures

Which of the following compendation hourly based pay systems

The role of managers and

communication systems should

To achieve internal fit, organizations

What type of fit describes highperformance work system that

To achieve external fit, organizations other HR components

Efforts to design high-performance

focus the design on strategic

The HR scorecard is used to

internal and external fit

Employment stability, team-based

Which of the following is not a critical relying upon a narrow chain of

show a gap between the present and

The ASTD council on highfailure to provide an adequest

Which of the following is not a

Building commitment to high-