Chapter 11 – Rewarding Performance
[QUESTION]
40. All of the following statements are true regarding profit sharing plans EXCEPT:
A) they are often used as a means of reducing turnover.
B) they have been criticized as being remote and unrelated to performance.
C) they were designed to motivate cost savings.
D) the group that saves the most money receives the bonus.
E) they provide long-term incentives.
41. Which of the following is TRUE regarding group incentive plans?
A) Increased interest in PFP has resulted in a declining number of group incentive plans.
B) The use of group plans is particularly effective when cooperation and teamwork are less
essential.
C) Group plans are most useful when tasks are so interrelated that it is difficult to identify a
measure of individual output.
D) There is increasing evidence that group incentives do NOT increase productivity.
E) Individual plans are generally preferable to group plans when tasks are interrelated and
teamwork is essential.
42. The Scanlon Plan:
A) uses standard hours rather than labor costs to determine incentive pay.
B) motivates the worker through rights to stock a fixed price which may be lower than the
current stock market value.
C) is based on incentive pay based on units produced.
D) provides for less employee involvement than the Rucker Plan.
E) provides for a high level of employee participation through labor-management committees.
43. Research on Employee Stock Ownership Plans (ESOPs) shows:
A) ESOPs work better when combined with extensive employee involvement.
B) They have little effect on profitability.
C) Decrease in employee absenteeism under ESOPs.
D) ESOPs work better when the price of the stock is stable.
E) Restricted company flexibility in a competitive environment.
Chapter 11 – Rewarding Performance
[QUESTION]
44. Which of the following statements is FALSE regarding short-term and long-term
incentives?
A) Short-term incentives are usually additional salary rewards that an employee can receive
on a quarterly or yearly basis.
B) Short-term incentives are based on meeting short-run objectives such as a quarterly sales
or a production goal.
C) Long-term rewards focus on future profitability.
D) Stock options are a common short-term incentive.
E) Long-term incentives are usually best for upper-level executives who have a wider area of
discretion in making decisions that affect the firm.
45. Which of the following is not a factor to be considered in designing a gain sharing
program?
A) Potential for employee efforts
B) Organized employee suggestion system
C) Workforce interdependence.
D) Workforce composition.
E) Key organizational factors that affect the pay system
46. As the manager of a sales team, you want to establish a pay for performance system.
Currently they receive 100% commission in the form or cash. You want to diversify the pay
and control the budget while offering value to your staff. Which of the following would you
not consider?
A) Grant stock options for increases in repeat customer business.
B) Offer gift certificates to the gym, owned by the company, for sales above quota.
C) Increase their commission dollars per sale when they sell as a team.
D) Present a trip to the Bahamas, on the company yacht, to the team with the highest sales.
E) Award tickets for the company’s box seats at the local music amphitheatre.
Chapter 11 – Rewarding Performance
[QUESTION]
47. You have announced a pay for performance system, however, your budget is not large
enough to truly differentiate between your top performers and your marginal performers.
What is a possible outcome?
A) You may end up with high turnover among your marginal performers because of perceived
inequity
B) All employees will be more motivated to achieve the new performance goals.
C) Employees will be motivated to work together in teams to increase the likelihood of
rewards.
D) The composition of the workforce will shift to employees who thrive in high-risk
situations.
E) Your top performers will perceive the plan as inequitable and may leave the company
48. A manager on a construction site wants to encourage safety on the job to minimize
accidents. What sort of pay for performance system would you recommend?
A) Increase the employee’s base pay.
B) Introduce a behavioral encouragement plan.
C) Change worker’s pay from base pay to a draw commission plan.
D) Implement a piece rate reward plan.
E) Increase the level of benefits offered to all employees.
49. A current trend is to develop individual pay for performance plans where the incentive
pay is:
A) Based on current performance, and not permanently tied to base pay
B) Linked to an absolute percentage of a the employee’s base pay
C) A variable percentage of the employee’s base pay.
D) A percentage of base pay budgeted a the beginning of the year and provides a permanent
increase to an individual’s salary
E) Determined by the board of directors for all employees, similar to executive compensation.
Chapter 11 – Rewarding Performance
11-12
[QUESTION]
50. Which reward is best suited to the following situation: Production workers making close
to minimum wage; the manager wants to introduce a pay for performance plan that will
increase production numbers. Work is interdependent. Production output is measured daily.
A) Individual bonus based on a percentage of company profits, paid at the end of the year.
B) Group incentive; reward is a grocery store gift certificate of $100 awarded weekly.
C) Merit increase determined annually and typically 1 to 3% of base pay.
D) Individual incentive, reward is two tickets to Disney World awarded at the end of the year.
E) Group incentive; reward is ten cent increase to base pay for the next year’s pay.
Essay Questions
[QUESTION]
51. Compare and contrast the straight piecework and standard hourly rate plan.
Answer: The straight piece work plan is perhaps the simplest of pay-for-performance plans.
[QUESTION]
52. Compare and contrast the Scanlon and IMPROSHARE group incentive plans.
Answer: Both plans have some similarities. First, they are both based on the assumption that
Chapter 11 – Rewarding Performance
11-13
Page: 418-419
Level: Medium
[QUESTION]
53. Discuss some of the reasons for past failures of Pay-For-Performance (PFP) systems.
54. Compare and contrast the three types of individual pay-for-performance plans.
Answer: Merit Pay: Merit pay systems consist of job incumbents being compensated
according to their level of performance as typically measured by performance appraisal.
Chapter 11 – Rewarding Performance
[QUESTION]
55. Discuss the implications for employee stock option plans (ESOPs)
Answer: One review drew the following conclusions and implications for ESOPs.
[QUESTION]
56. What are the three major questions to be answered for designing a PFP system?
Answer: In designing a PFP system, the three major questions to be answered are: (1) Who
[QUESTION]
57. What are the limitations of the individual and group-based pay plans?
58. How is gain sharing plans different from profit sharing?
Chapter 11 – Rewarding Performance
[QUESTION]
59. What are the advantages of Scanlon and Rucker plans over IMPROSHARE?
60. List the factors to be considered in designing a gain-sharing program.