Fundamentals of Human Resource Management, 5e (Dessler)
Chapter 11 Pay for Performance and Employee Benefits
1) Which of the following is the most commonly used tool for motivating employees?
A) merchandise incentives
B) recognition programs
C) special events
D) variable pay
2) 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) merit pay
B) variable pay
C) competency-based pay
D) incentive pay
3) 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.
4) 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, best supports the argument that Ryobi should eliminate all
merit raises?
A) Ryobi uses an enterprise incentive management system to automate compensation.
B) Motivation among Ryobi engineers has been improved through social recognition programs.
C) Performance appraisals at Ryobi occur annually, and standards vary from manager to
manager.
D) The commission percentage for Ryobi sales people is based on the ability to meet monthly
quotas.
5) 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, undermines the argument that Ryobi should discontinue all
merit raises?
A) Ryobi managers have noticed significant productivity improvements among employees who
receive merit raises.
B) Ryobi managers have not received significant training about conducting performance
appraisals.
C) Ryobi’s top competitor is considered a high-performance work system within the industry.
D) Ryobi employees have expressed that they would prefer stock options to merit raises.
6) 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 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 types of merit raises are effective for high-performing managers?
C) What organization-wide incentive plans are used by other manufacturing firms?
D) What is the connection between merit pay increases and employee productivity?
7) Which term refers to any plan that ties pay to productivity or profitability?
A) piecework
B) variable pay
C) merit pay
D) overtime pay
8) Workers at a t-shirt shop are paid a sum for each t-shirt they produce. Which incentive plan is
most likely used by the employer?
A) merit pay
B) piecework
C) standard hour
D) variable pay
9) Which term refers to an incentive plan in which a person is paid a sum for each item sold,
with a strict proportionality between results and rewards regardless of output?
A) standard merit pay
B) straight hourly pay
C) straight piecework
D) variable pay
10) Tyrone, a data entry clerk, is paid a basic hourly rate. He receives an extra percentage of his
rate when his productivity is above normal. Which incentive plan is most likely used by Tyrone’s
employer?
A) standard merit pay
B) standard hour plan
C) straight piecework
D) variable pay
11) Angelo, a process engineer with Global Semiconductor, is following a technical path rather
than a management path at the firm. Which of the following has most likely been implemented
by Global Semiconductor?
A) dual-career ladder
B) competency-based pay
C) flexible family benefits
D) social recognition program
12) Every month, Angela, a manager at a manufacturing facility, meets briefly with each of her
subordinates and shows them a graph of their productivity on the assembly line. Which term best
describes Angela’s activity?
A) exit interview
B) social recognition
C) performance feedback
D) performance appraisal
13) An employer would most likely use an enterprise incentive management system to
________.
A) calculate overtime pay
B) automate award programs
C) monitor employee engagement
D) track performance appraisals
14) According to research, which of the following has a significant impact on employee
engagement?
A) performance reviews
B) variable pay plans
C) job design
D) awards
15) Merit raises typically become part of an employee’s base salary.
16) 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? What benefits are you required by law to
provide? What types of discretionary benefits would you make available to all employees?
17) During difficult economic times, employers have to cut costs. What are some strategies for
minimizing the costs associated with employee health care? What no-cost or low-cost methods
are available to employers who want to recognize and reward hard-working employees?
18) In a ________, the executive receives his or her shares only if he or she meets the preset
performance targets.
A) performance-contingent restricted stock plan
B) stock appreciation rights (SARs) plan
C) restricted stock plan
D) phantom stock plan
19) 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) Jefferson incentive system
B) deferred profit-sharing plan
C) gainsharing plan
D) cash plan
20) 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) Jefferson incentive systems
C) deferred profit-sharing plans
D) employee stock ownership plans
21) Which of the following is the primary benefit of employee stock ownership plans?
A) Employees have voting rights in firm decisions.
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.
22) Most gainsharing plans include all of the following features EXCEPT ________.
A) a philosophy of cooperation
B) a focus on individual achievement
C) a sharing of benefits formula
D) an involvement system
23) Which incentive plan is based on a philosophy that managers and employees must cooperate
together?
A) cash plan
B) gainsharing plan
C) deferred profit-sharing plan
D) employee stock ownership plan
24) A(n) ________ plan 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 shared
among employees and the company.
A) stock gain plan
B) merit pay plan
C) gainsharing
D) ESOP
25) A straight salary for salespeople is most appropriate when the main tasks involve ________.
A) selling technical products
B) exceeding sales quotas
C) finding new clients
D) selling real estate
26) What is the primary disadvantage of using the straight salary approach to pay salespeople?
A) relying on annual profits
B) discouraging staff loyalty
C) preventing territory changes
D) failing to link effort with reward
27) What is a disadvantage of straight commission plans?
A) Payments are complicated to calculate.
B) Salespeople spend too much time on servicing.
C) Salespeople neglect selling hard-to-sell products.
D) The company’s fixed sales costs are proportionately high.
28) What is the main benefit of paying salespeople a combination of salary and commission?
A) limiting the firm’s risk of overly high commissions
B) aligning employee goals and company strategy
C) providing simple salary administration
D) clearly linking pay with performance
29) What should be the central focus of a firm’s executive reward packages?
A) employing top-quality management experts
B) accomplishing the firm’s strategic goals
C) ensuring ethical and legal accountability
D) encouraging long-term accountability
30) The Sarbanes-Oxley Act was most likely enacted to ________.
A) provide financial insight
B) decrease the corporate tax rate
C) monitor the distribution of stock shares
D) increase the accountability of top executives
31) According to research, most firms use ________ to motivate the short-term performance of
managers.
A) work-life benefits
B) annual bonuses
C) variable pay
D) training
32) All of the following are factors that influence an annual bonus EXCEPT ________.
A) eligibility
B) commission
C) size of the fund
D) individual performance
33) Which term 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) stock option
B) gainsharing plan
C) multiplier method
D) at-risk variable plan
34) Which of the following would most likely be used by a firm that wants to retain the services
of a top manager for a specified period of time?
A) restricted stock plan
B) golden parachute plan
C) stock appreciation rights
D) performance-contingent restricted stock
35) Marie, a top manager at Levon Marketing, will receive 500 shares of the firm’s stock if the
firm’s sales increase by 5% in the next quarter. Which of the following was Marie most likely
given?
A) phantom stock
B) stock appreciation rights
C) restricted stock plan
D) performance-contingent restricted stock
36) An executive who receives a ________ stock receives units instead of shares of company
stock. The units will be equated to cash in the future if appreciation occurs.
A) phantom
B) restricted
C) premium
D) nonqualified
37) Which term refers to payments a firm makes related to changes in company ownership?
A) pension plan
B) annual bonus
C) golden parachute
D) retirement perks
38) Which of the following involves setting a production standard for a specific work group and
then paying incentives to the group members if they exceed the standard?
A) team incentive plan
B) group profit-sharing plan
C) employee stock ownership plan
D) organization-wide incentive plan
39) What is the most likely reason that firms are implementing group incentive plans?
A) stricter regulations regarding team bonus plans
B) heavy reliance on teams to manage work
C) expected loss of older workers
D) rising cost of health benefits
40) All of the following are examples of organization-wide incentive plans EXCEPT ________.
A) employee stock ownership plans
B) gainsharing plans
C) golden parachute
D) profit sharing
41) Which gainsharing plan involves employees working on a guaranteed piecework basis?
A) current profit-sharing
B) deferred profit-sharing
C) Lincoln incentive system
D) earnings-at-risk pay plan
42) An earnings-at-risk pay plan bases employee pay and bonuses on ________.
A) maximizing organizational performance
B) generating additional long-term sales
C) engaging in strategic objectives
D) achieving departmental goals
43) Broad-based stock option plans are intended to ________.
A) motivate all employees at a firm
B) encourage management retention
C) monitor the decisions of executives
D) distribute earnings to boards of directors
44) Enterprise incentive management software is used by managers to ________.
A) motivate employees to meet and exceed departmental goals
B) quantify correlations between pay and performance
C) select and develop mission-critical employees
D) monitor training and development needs
45) Upon being hired as a marketing representative at Argo Pharmaceuticals, Shelly agreed to
forego 10% of her normal pay if she failed to meet performance goals. In return, Shelly will
receive a 10% bonus if she meets her goals and 13% if she exceeds her goals. In what type of
plan does Shelly most likely participate?
A) earnings-at-risk pay plan
B) variable risk sharing plan
C) at-risk gainsharing plan
D) risk-reward stock plan
46) Which of the following is the LEAST relevant characteristic of an effective incentive plan?
A) Incentives are based on industry standards.
B) Rewards are attractive to targeted employees.
C) Incentives are linked to effort and performance.
D) Goals are specific, achievable, and challenging.
47) Gainsharing plans involve putting some portion of an employee’s weekly pay at risk for the
opportunity to earn incentives if the employee meets or exceeds his or her goals.
48) What are the advantages of employee stock ownership plans?
49) What is a stock option? What are some of the problems associated with rewarding managers
with stock options?
50) The indirect financial and nonfinancial payments employees receive for continuing
employment with the company are called ________.
A) reimbursement
B) employee compensation
C) salary
D) benefits
51) Which of the following benefits is required by federal or state law?
A) disability insurance
B) workers’ compensation
C) paid time off
D) pensions
52) Which of the following terms refers to benefits for time not worked such as unemployment
insurance, vacation and holiday pay, and sick pay?
A) supplemental pay benefits
B) employee assistance
C) financial incentives
D) merit pay