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76) Which of the following statements is true of the Rowan plan?
A) It an individual incentive plan that motivates top managers and professionals to focus
on long-term organization objectives.
B) In this plan, the standard time for a task is purposely set at a level requiring high
effort to complete.
C) It is an individual incentive plan that provides for variable incentives as a function of
a standard expressed as time period per unit of production.
D) In this plan, a worker’s bonus remains constant irrespective of the time required to
complete a task.
77) One common feature of all types of incentive plans is:
A) an established standard of performance that is used to determine the magnitude of the
incentive pay.
B) a sharing contract between the employees and employers, which stipulates that the
losses incurred by the companies will be shared by both employees and employers.
C) an established formula that specifies the maximum percentage of base pay allocated
as incentives.
D) a risk-sharing plan that increases pay depending upon the turnover rate of a
company.
78) Which of the following is an individual incentive plan?
A) A balanced scorecard system
B) A stock ownership plan
C) A gain-sharing plan
D) A straight piecework system
79) Paying a dime for every bottle collected and turned to a collection center is an example
of:
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A) a standard hour plan.
B) the Merrick system.
C) a straight piecework system.
D) the Rowan plan.
80) The most frequently implemented incentive system is:
A) a standard hour plan.
B) a straight piecework system.
C) the Merrick system.
D) the Taylor differential piece-rate plan.
81) ________ requires division of a task into simple actions and determination of the time
required by an average skilled worker to complete each action.
A) A standard hour plan
B) The Rowan plan
C) A Bedeaux plan
D) The Merrick plan
82) An incentive system with three piecework rates is the
A) Taylor plan.
B) Gantt plan.
C) Rowan plan.
D) Merrick plan.
83) If you had repair work done on your car, the shop most likely used ________ to pay the
mechanic.
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A) a Bedeaux plan
B) a standard hour plan
C) the Halsey 50–50 method
D) a straight piecework plan
84) For any task completed in standard time or less, earnings are pegged at 120 percent of the
time saved under the
A) Merrick plan.
B) Gantt plan.
C) Taylor plan.
D) Rowan plan.
85) Menthorp, Inc. wants to design a variable pay plan that fosters teamwork and increases
the business knowledge of its employees. In order to ensure maximum motivation, Menthorp
wants its variable pay plan to show a clear performance-reward link. Which of the following
plans is most suitable for Menthorp?
A) A gain-sharing plan
B) The Rowan plan
C) A stock ownership plan
D) The Merrick plan
86) TreeDen Corp. experiences an increase in its employee turnover rate. Upon investigating,
it discovers that employees are dissatisfied with the company’s pay. Employees cannot see a
direct link between their performance and their pay. They are also unhappy about having to pay
out of their pockets to obtain grants. In this case, TreeDen is most likely using a
A) stock ownership plan.
B) cash profit-sharing plan.
C) gain-sharing plan.
D) team incentive plan.
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87) Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants
to introduce a variable pay plan that is easy to understand and does not cost much to administer.
Which of the following variable pay plans is Maxwell most likely to introduce?
A) A balanced scorecard plan
B) A gain-sharing plan
C) A stock ownership plan
D) A cash profit-sharing plan
88) Which of the following is the most commonly used team incentive performance
standard?
A) Quality of goods
B) Productivity improvements
C) Financial performance
D) Quality of services
89) Horizon Inc. wants its employees to focus on organizational as well as individual goals. It
also wants to motivate its employees to contribute toward increasing the company’s shareholder
value. It has implemented a variable pay plan that links incentive payouts to the company’s
financial targets. Horizon believes that this plan would help it clearly communicate its priorities
to its employees. However, the downside of this plan is that the employees receive reduced
payouts if the company’s financial targets are not fulfilled. Which of the following variable pay
plans is Horizon most likely using?
A) The Rowan plan
B) A balanced scorecard plan
C) A stock ownership plan
D) The Merrick plan
90) Which of the following is an advantage of providing stock ownership as variable pay to
employees?
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A) It reinforces team identity.
B) It is the simplest type of variable pay plan.
C) It defers a portion of taxes to employees.
D) It provides a direct pay-performance link.
91) ________ have indirect pay–performance links and require employees to put up money to
exercise grants.
A) Bedeaux plans
B) Balanced scorecard plans
C) Stock options plans
D) Merit pay plans
92) Which of the following is an advantage of gain-sharing plans?
A) They are the simplest type of variable pay plan.
B) They prevent payouts if a company’s financial performance is poor.
C) They are administratively easy to implement.
D) They increase employees’ knowledge of business.
93) Which of the following is a disadvantage of gain-sharing plans?
A) Payouts can occur even if a company’s financial performance is poor.
B) Pay-performance links are indirect.
C) Employees are required to put up money to exercise grants.
D) Mandatory stock ownership required by gain-sharing plans can increase turnover
rates.
94) Which of the following is an advantage of team incentives?
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A) They are effective in stimulating ideas and problem solving.
B) They are administratively easy to implement.
C) They can easily set equitable targets for all teams.
D) They are effective in isolating the impact of a team.
95) Which of the following is a disadvantage of team incentives?
A) They fail to reflect how work is performed.
B) They maximize distinctions between team members.
C) They are ineffective in stimulating ideas and problem solving.
D) They are administratively complex to implement.
96) A team leader with a free-rider problem in his team can most likely maximize the
performance of his team by:
A) instructing the team to do their best.
B) specifying performance levels and due dates.
C) assigning tasks only to the top performers in the team.
D) punishing free riders who fail to meet standards.
97) In gain-sharing plan formulas,
A) productivity measures are in the numerator and revenues are in the denominator.
B) productivity measures are in the numerator and labor inputs are in the denominator.
C) costs are in the numerator and revenues are in the denominator.
D) labor inputs are in the numerator and productivity outcomes are in the denominator.
98) Components identified as vital to the success of both Scanlon and Rucker plans are:
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A) top management support and primary focus on wage incentives.
B) a flexible payout formula and low turnover rates.
C) union and top management support.
D) a productivity norm and effective worker committees.
99) Which of the following are an example of a long-term incentive plan?
A) Merit bonuses
B) Performance plans
C) Bedeaux plans
D) Spot awards
100) The trend in recent variable-pay design is to combine the best of
A) individual and group incentive plans.
B) gain-sharing and profit-sharing plans.
C) the Halsey and Rowan plans.
D) balanced scorecard and cash profit-sharing plans.
SHORT ANSWER. Write the word or phrase that best completes each statement or
answers the question.
101) Discuss the trends that are leading to the increased interest in variable pay.
102) Why do companies prefer merit bonuses over merit pay increases?
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103) Discuss the plans that provide for variable incentives linked to a standard expressed as a
time period per unit of production.
104) Briefly explain the concept of sales value of production (SVOP).
105) What is the difference between success-sharing plans and risk-sharing plans?
106) Discuss the trends that are leading to the increased interest in variable pay.
107) Why do companies prefer merit bonuses over merit pay increases?
108) Discuss the plans that provide for variable incentives linked to a standard expressed as a
time period per unit of production.
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109) Briefly explain the concept of sales value of production (SVOP).
110) What is the difference between success-sharing plans and risk-sharing plans?
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Answer Key
Test name: chapter 10
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