Chapter 6
Appraising and Rewarding Performance
1. Base pay, performance rewards, and profit sharing are the incentive foundation of a complete
pay program.
2. In the Herzberg model, pay is viewed primarily as a hygiene factor.
3. With regard to instrumentality, employees are sure that additional performance will lead to
additional pay.
4. The break-even point is the point at which costs and rewards are equal for a certain level of
expected performance.
5. Intrinsic job rewards tend to be less immediately satisfying than pay.
6. In addition to the complexities involved in applying various motivational models,
compensation management is also complicated by the need to comply with a wide range of
federal and state laws.
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written consent of McGraw-Hill Education.
Ans: True
Page: 153–154
Difficulty: Easy
7. Appraisal systems are necessary for proper management and for employee development.
8. Behaviorally anchored rating scale help reduce a manager’s tendency to focus on attitudes,
personality, and quirks of an employee and shift the emphasis toward productive behaviors.
9. During self-appraisals, some poor performers tend to attribute their problems to situational
factors around them, and a few will rate themselves too leniently.
10. The process of systematically gathering data on a person’s skills, abilities, and behaviors
from a variety of sources is known as self-appraisal.
11. The appraisal process can be emotional because the manager’s role calls for critical
perspective, while the employee’s desire to save face easily leads to defensiveness.
12. Ability and effort are situational attributions.
13. The perceptual set states that people tend to perceive what they expect to perceive.
14. A formal appraisal system encourages managers to do more analytical and constructive
thinking about their employees.
15. The basic idea of an economic incentive system is to induce a high level of individual,
group, or organizational performance.
16. In a piece rate incentive, pay is determined by the amount of output.
17. The main reason for the use of wage incentives is to increase employee loyalty.
18. The system that distributes to employees some portion of the profits of business, either
immediately or deferred to a later date is called rate setting.
19. One difficulty of profit sharing is that employees must wait for their reward, and this lengthy
delay diminishes its impact.
20. In the context of the disadvantages associated with skill-based pay, some employees may
qualify themselves for skill areas that they are unlikely to use, causing the organization to pay
them higher rates.
1. _____ is a component of the incentive foundation of a complete pay program.
A) Seniority pay
B) Performance reward
C) Unemployment compensation
D) Overtime
2. Money has an economic value as a medium of exchange for allocation of economic resources,
but it is also a _____ medium of exchange.
A) psychological
B) virtual
C) social
D) symbolic
3. Which of the following components of a pay program is NOT an example of a nonwork
reward?
A) Vacations
B) Seniority increase
C) Unemployment compensation
D) Pensions
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written consent of McGraw-Hill Education.
Difficulty: Easy
4. Which of the following pay program components is NOT an example of a noneconomic
program that may supplement an organization’s complete pay program?
A) Comp time
B) On-site day care
C) Profit sharing
D) Wellness-promotion programs
5. Which of the following concepts explained in the expectancy theory means that if money is to
act as a strong motivator, an employee must want more of it?
A) Motivation
B) Valence
C) Drive
D) Instrumentality
6. According to behavior modification principles, when employees see a direct connection
between _____, instrumentality is high.
A) performance and reward
B) seniority and promotions
C) motivation and expectancy
D) extrinsic satisfaction and intrinsic reward
7. Which of the following combinations creates a desirable instrumentality condition?
A) High level of performance, low level of economic reward
B) Low level of performance, high level of economic reward
C) High level of performance, moderate level of economic reward
D) Low level of performance, low level of economic reward
8. _____ is the process similar to the break-even analysis in which the employee identifies and
compares personal costs and rewards to determine the point at which they are approximately
equal.
A) Cost behavior modification
B) Appraisal philosophy
C) 360-degree feedback
D) Cost-reward comparison
9. In the context of compensation management complying with federal and state laws, the _____
affects employers who are engaged in interstate commerce and most employees of federal, state,
and local governments.
A) Equal Pay Act of 1963
B) Sherman Antitrust Act
C) Patriot Act of 2001
D) Enforcement Act of 1870
10. Which of the following is NOT a part of the performance appraisal process?
A) Sharing performance information with the employee
B) Searching for ways to improve employee performance
C) Assessing company goals and objectives
D) Evaluating employee performance
11. Modern appraisal philosophy emphasizes _____ and future goals.
A) current seniority
B) past evaluations
C) employee deficiencies
D) present performance
12. Which of the following is the final step in the management by objectives cycle?
A) Objective setting
B) Periodic reviews
C) Action planning
D) Annual evaluation
13. Which of the following hallmarks of the modern appraisal philosophy states that the effort
put forth by employees must result in the attainment of desired outcomes?
A) Performance orientation
B) Focus on goals or objectives
C) Mutual goal setting between supervisor and employee
D) Clarification of behavioral expectations
14. _____ is the hallmark of modern appraisal philosophy that can help employees fine-tune
their performance better if they know how they are doing in the eyes of the organization.
A) Management goal setting
B) Clarification of behavioral expectations
C) An extensive feedback system
D) Performance orientation
15. Which of the following statements holds true for performance feedback?
A) It should seldom point the way toward goals or newly targeted actions.
B) The manner of feedback presentation does not have a significant impact on the employees’
performance.
C) It leads to both improved performance and improved attitudes—if handled properly by the
manager.
D) It should rely on subjective opinions and references rather than on objective data.
16. A(n) _____ is the process of systematically gathering data on a person’s skills, abilities, and
behaviors from a variety of sources—the manager, peers, subordinates, and even customers or
clients.
A) appraisal interview
B) survey
C) 360-degree feedback
D) balanced scorecard
17. _____ is the process by which people interpret and assign causes for their own and others’
behavior.
A) Motivation
B) Attribution
C) Valence
D) Feedback
18. _____ is an example of a situational attribution.
A) Great effort
B) Poor ability
C) Task difficulty
D) All of the above
19. In general, people tend to exhibit a _____, claiming undue credit for their success and
minimizing their own responsibility for problems.
A) fundamental attribution bias
B) perceptual set
C) self-fulfilling prophecy
D) self-serving bias
20. The concept of perceptual set enables us to witness the power of the _____.
A) fundamental attribution bias
B) Pareto principle
C) self-fulfilling prophecy
D) self-serving bias
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written consent of McGraw-Hill Education.
Page: 161
Difficulty: Easy
21. With the Galatea effect, high expectations by employees themselves lead to _____.
A) high performance
B) frustration
C) self-doubt
D) behavioral bias
22. Which of the following is an objective of an economic incentive system?
A) Facilitating recruitment
B) Retention of good employees
C) Satisfying key employee needs
D) All of the above
23. Peter was awarded a bonus for meeting the sales target set by his company for the first
quarter of 2013. Which of the following incentive measures has the company used to reward
Peter?
A) Amount of output
B) Quality of output
C) Success in reaching goals
D) Cost efficiency
24. Which of the following is a disadvantage of incentives linking pay with performance?
A) Narrowness of performance criteria
B) Weakening of instrumentality beliefs
C) System leniency
D) All of the above
25. Which of the following statements is true of a wage incentive system that operates
successfully?
A) It results in an increase in labor costs per unit of production.
B) It results in employees being satisfied from a job well done.
C) It merely provides economic rewards.
D) It discourages cooperation between workers.
26. _____ is the problem associated with wage incentives that occurs when employees are able
to reach standard output with less than reasonable levels of effort.
A) Output restriction
B) Rate setting
C) Loose rate
D) Groupthink
27. Which of the following statements holds true for profit sharing?
A) This plan generally works well for slow-growing organizations.
B) Some workers prefer this plan since profits are normally predictable.
C) Employees must wait for their reward, and this lengthy delay diminishes its impact.
D) Profits are directly related to an employee’s effort on the job.
28. A _____ encourages employee suggestions, provides an incentive for coordination and
teamwork, and promotes improved communication.
A) skill-based pay system
B) profit-sharing plan
C) piece rate system
D) gain-sharing plan
29. _____ provide an organization with a highly flexible workforce that can fill in when
someone is absent.
A) Skill-based pay systems
B) Profit-sharing plans
C) Piece rate systems
D) Gain-sharing plans
30. Which of the following factors does NOT contribute to the success of a gain-sharing plan?
A) Moderately small size of the business unit
B) Existence of controllable cost areas
C) Relative stability of the business
D) Lack of receptiveness to employee participation
1. Explain the concept of valence of money.
2. Who does the Equal Pay Act of 1963 affect, and what does the law demand?
3. Explain the importance of mutual goal setting between supervisor and employee. Mention at
least two employee desires that make mutual goal setting important.
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written consent of McGraw-Hill Education.
that people will work harder for goals or objectives that they have participated in setting.
Employees desire to perform a worthwhile task, share in a group effort, share in setting their
objectives, share in the rewards of their efforts, and continue personal growth.
Page: 156
Difficulty: Medium
4. What are the problems encountered in the self-appraisal process?
5. Explain the concept of self-fulfilling prophecy.
6. When is a fundamental attribution bias exhibited?
7. With regard to performance management, list the ways in which employee performance can
be managed and improved.
8. How do wage incentives make a supervisor’s job more complex?
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written consent of McGraw-Hill Education.
familiar with the system so that they can explain it to the employees. The system’s complexity
may increase the chance of error and contribute to more employee dissatisfaction. Relationships
are compounded, and supervisors are required to resolve different expectations from higher
management, rate setters, workers, and unions.
Page: 167
Difficulty: Medium
9. Give a brief description of a gain-sharing plan.
10. Explain the disadvantages of the skill-based pay system.