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1. Historically, incentive plans have not been a major element of strategic compensation management.
a.
True
b.
False
2. The performance threshold in incentive plans is the name given to the amount awarded to an employer.
a.
True
b.
False
3. Incentive plans can create an organizational environment of shared commitment since individuals contribute to
organizational success.
a.
True
b.
False
4. Meshing compensation and organizational objectives help employees assume ownership of their jobs, thereby
improving their effort and overall job performance.
a.
True
b.
False
5. More than 80 percent of companies globally are offering variable pay programs.
a.
True
b.
False
6. For incentive plans to work effectively, employees must see a clear connection between the incentive payments they
receive and their performance.
a.
True
b.
False
7. Management must be careful to ensure that incentive payments are viewed as both a reward and an entitlement.
a.
True
b.
False
8. Incentive plans may fail because employees have little ability to affect performance standards.
a.
True
b.
False
9. Incentive plans based on productivity can reduce labor costs.
a.
True
b.
False
10. Organizational goals can impact choice of incentive plans.
a.
True
b.
False
11. Employees receive a specified payment for each unit produced under a straight piecework program.
a.
True
b.
False
12. Under a differential piece rate, employees whose production performance exceeds the standard output receive a higher
rate for all of their work than the rate paid to those who do not exceed the standard.
a.
True
b.
False
13. Under a straight piecework plan, if five minutes is the standard time to produce one unit and the employee's hourly
rate is $7.50. The piece rate is $1.50 per unit.
a.
True
b.
False
14. Major advantages of piecework systems are that the wage payment is simple to compute, and an organization can
predict labor costs with reasonable accuracy.
a.
True
b.
False
15. Fixed pay is more flexible than variable pay.
a.
True
b.
False
16. Piecework may be inappropriate where technology changes are frequent.
a.
True
b.
False
17. Generally, a bonus plan does not become part of an employee's base pay.
a.
True
b.
False
18. The standard hour plan provides bonus payment for completing work in less than the specified time.
a.
True
b.
False
19. Standard hour plans are based on specific production standards set for individual jobs.
a.
True
b.
False
20. Standard hour plans are popular in service departments in automobile dealerships.
a.
True
b.
False
21. A bonus is an incentive payment that is supplemental to base wages.
a.
True
b.
False
22. A spot bonus is usually given for some employee effort that is not directly tied to an established performance standard.
a.
True
b.
False
23. Unlike a bonus, a merit raise may be perpetuated year after year even when performance declines.
a.
True
b.
False
24. Merit pay plans have been criticized because the merit increase may not be sufficient to raise all employees’ base pay.
a.
True
b.
False
25. Employees may not believe that their compensation is tied to effort and performance, and they may not be able to
differentiate between merit pay and other types of pay increases.
a.
True
b.
False
26. Research clearly shows that noncash incentive awards are most effective as motivators when the award is combined
with a meaningful employee recognition program.
a.
True
b.
False
27. The operation of a merit pay plan depends on the effectiveness of the performance appraisal system.
a.
True
b.
False
28. Under the Scanlon plan or Improshare program, psychological ownership can play a stronger role than financial
ownership in employee performance.
a.
True
b.
False
29. Employees do not actually buy shares in an employee stock exchange plan.
a.
True
b.
False
30. Generally, an employee stock ownership plan is more likely to serve its intended purposes in privately held companies
than in publicly held ones.
a.
True
b.
False
31. Sales incentives can be affected by external factors beyond a salesperson's control.
a.
True
b.
False
32. An advantage of using a straight salary plan to compensate sales employees is that employees are paid for performing
only sales effort.
a.
True
b.
False
33. Under a straight commission plan, compensation is based entirely on a percentage of sales.
a.
True
b.
False
34. The percentage of cash compensation paid out in commissions is called a draw.
a.
True
b.
False
35. Under a straight commission plan, sales people may be allowed a salary draw.
a.
True
b.
False
36. An analysis of executive salaries shows that the largest portion of executive pay is received in long-term incentive
rewards and bonuses.
a.
True
b.
False
37. Executive-base salaries represent between 10 and 20 percent of total annual compensation.
a.
True
b.
False
38. Straight commission plans may induce salespeople to grant price concessions.
a.
True
b.
False
39. Annual bonuses represent the main element of executive short-term incentives.
a.
True
b.
False
40. The principal reason guiding executive stock options as an incentive is for senior managers to have a significant stake
in the success of a business.
a.
True
b.
False
41. Stock options are rights attached to the achievement of specific organizational objectives.
a.
True
b.
False
42. A major criticism of short-term incentives for executives is that they place too much emphasis on short-term
performance, which may lead to negligence of long-term survival and growth objectives.
a.
True
b.
False
43. Perquisites are special nonmonetary benefits given to executive employees.
a.
True
b.
False
44. Compensation committees justify large executive salaries and bonuses in part because good executive talent is in high
demand.
a.
True
b.
False
45. Team bonuses may be paid out equally to each team member, in proportion to their base pay, or in proportion to their
relative contribution to the team.
a.
True
b.
False
46. Gainsharing plans are designed to increase employee job satisfaction and improve customer awareness.
a.
True
b.
False
47. The idea behind the Scanlon Plan is that employees should offer ideas to improve productivity and, in turn, be
rewarded for those ideas.
a.
True
b.
False
48. The incentive payout under the Scanlon Plan is based upon increases in the sales volume of an organization's products.
a.
True
b.
False
49. Improshare plans promote interaction and support between management and employees.
a.
True
b.
False
50. Enterprise incentive plans allow all organizational members to participate in the plan's payout.
a.
True
b.
False
51. In most profit-sharing plans, about 20 to 25 percent of net profits are shared with employees.
a.
True
b.
False
52. A weakness of profit-sharing plans is that employees do not have total control over the profitability of an organization.
a.
True
b.
False
53. Profit-sharing plans have limited motivational value as payments are only made once a year or deferred until
retirement.
a.
True
b.
False
54. Stock options have become popular in service organizations but have lost favor in manufacturing firms.
a.
True
b.
False
55. Most experts advocate abolition of stock options due to their failing popularity and media scandals.
a.
True
b.
False
56. By using employee stock ownership plans, employers can provide retirement benefits for their employees at a
relatively low cost.
a.
True
b.
False
57. Employers use stock ownership incentive plans to increase employee ownership in the company.
a.
True
b.
False
58. ESOPs have been criticized because a pensioner can become dependent on the stock price.
a.
True
b.
False
59. Employees are comfortable with the employee stock ownership plan because the federally established Pension Benefit
Guaranty Corporation guarantees them their contribution to the plan.
a.
True
b.
False
60. The performance threshold in incentive pay programs is:
a.
the minimum level an employee must reach in order to qualify for fixed pay.
b.
the minimum level an employee must reach in order to qualify for variable pay.
c.
an organizational objective that signifies profitability.
d.
a customized incentive plan which measures employee output and rewards exceptional employee performance.
61. Contemporary reasons given by organizations for implementing incentive plans are:
a.
improving or maintaining high levels of productivity.
b.
focusing employee efforts on specific performance targets.
c.
linking compensation rewards to the achievement of results.
d.
all of the above.
62. Enterprise incentive plans include:
a.
the Scanlon Plan.
b.
the Rucker Plan.
c.
stock options.
d.
sales incentives.
63. More than _____ of companies globally are offering variable pay programs.
a.
20 percent
b.
40 percent
c.
60 percent
d.
80 percent
64. Group incentive plans include:
a.
straight salary plan.
b.
Improshare.
c.
straight commission plan.
d.
sales incentives.
65. Which of the following is NOT an advantage of an incentive pay program?
a.
Incentives focus employee efforts on specific performance targets.
b.
Incentives are a way to increase equity and justice in an organization.
c.
Incentives are a way to distribute success among those not responsible for producing that success.
d.
Incentives are a means to reward or attract top performers when salary budgets are low.
66. Which of the following is NOT a reason for variable pay plans to not achieve their proposed objectives or lead to
organizational improvements?
a.
Failure of incentive plans to satisfy employee expectations for pay gains
b.
Employment of employee and management committees to gain cost-reduction improvements
c.
Failure of management in giving adequate attention to the design and implementation of a plan
d.
Reduced liability of employees in affecting performance standards
67. When setting performance measures for incentive systems, we can say that the best measures are those that:
a.
are quantitative, simple to understand, and show a clear relationship to improved performance.
b.
are qualitative, flexible, and create competition between employees.
c.
allow employers to "ratchet up" standards and base rewards on qualitative standards.
d.
reduce administrative costs, determine rewards based only on quantity, and reward only exceptional
employees.
68. According to Sammer, which of the following is NOT a characteristic of a successful incentive plan?
a.
Identify important organizational metrics that encourage employee behavior.
b.
Involve employees and have incentive programs that seem fair to employees.
c.
Find technically detailed, quantitative, and extremely thorough payout formulas.
d.
Establish a clear link between performance and payout.
69. _____ describes the design of individual incentive plans.
a.
Motivation
b.
Comprehensiveness
c.
Flexibility
d.
Consistency
70. When employees receive a certain rate for each unit produced, they are working under the _____ incentive plan.
a.
differential piece rate
b.
standard piece rate
c.
straight piecework
d.
individual rate pay
71. When employees receive a higher rate of pay for all of their work and production exceeds a standard level of output,
they are working under the _____ incentive plan.
a.
differential piece rate
b.
standard piece rate
c.
exception bonus rate
d.
individual rate pay
72. The standard time for producing one unit of work in a job paying $12.75 per hour was set at twelve minutes. The piece
rate would be ____ per unit.
