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IX. Discussion Questions and Suggested Answers
1.1. Define compensation.
Compensation represents both the intrinsic and extrinsic rewards employees receive for
1.2. Identify two companies—one that you believe pursues a lowest-cost strategy
and another that pursues a differentiation strategy. Relying on personal
knowledge, company annual reports, or articles in newspapers and business
periodicals, discuss these companies’ competitive strategies.
The cost leadership or lowest-cost strategy focuses on gaining competitive advantage by
being the lowest-cost producer of a product or service within the marketplace, while
selling the product or service at a price advantage relative to the industry average.
Differentiation strategies are used to develop products or services that are unique
from those of competitors. Differentiation strategies can take many forms, including
design or brand image, technology, features, customer service, and price. P&G
Corporation successfully pursues a differentiation strategy based on brand image and
price premiums. The company offers two separate dog food lines—Iams, a
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1.3. Stakeholder expectations pose challenges for compensation professionals. At
times, there may be conflict among the expectations of different stakeholders.
Give two examples and explain how compensation professionals meet their
expectations.
1.4. Are the three main elements of compensation systems—internal consistency,
market competitiveness, and recognizing employee contributions—equally
important, or do you believe that they differ in importance? If different,
which do you believe is most important? Least important? Give your
rationale.
X. End of Chapter Case; Instructor Notes, and Questions and Suggested
Student Responses
Case Name: Competitive Strategy at Sportsman Shoes
Instructor Notes
The human resource planning process follows the company’s strategic planning process.
In this case, the company is shifting from a low-cost strategy to a differentiation strategy.
Under the low-cost strategy, human resource practices focused on controlling costs and
working to hire and retain workers focused on efficiency and productivity. The
differentiation strategy will require some employees with a different skill set. Certain
functions will need high levels of creativity and innovation. Human resource practices
must shift to support these needs by attracting the right talent, and motivating the right
behaviors to produce shoes for the new niche markets.
Questions and Suggested Student Responses:
1.5. Following Sportsman’s shift in competitive strategy, what are some
considerations for the company’s human resource management practices?
1.6. What kind of challenges will Sportsman face specifically in the area of
compensation?
The new hires the company will need to make will create some compensation challenges.
XI. Crunch the Numbers! Questions and Suggested Student Responses
Calculating the Costs of Increasing the Total Compensation Budget at Butcher
Enterprises
1.7. On an average hourly basis, how much does Butcher Enterprises spend on
wages and benefits, respectively, in dollars?
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Butcher Enterprises spends an average of $19 per hour on wages and benefits.
1.8. How much does the company spend on wages and benefits over the course of
one year for 100 office workers? Assume that each worker provides 2,080
hours of service each year.
The number of hours for 100 workers = 100 x 2080 = 208,000. The average
1.9. How much additional money does the company need to match the market
rates for this group of 100 employees?
You must first calculate the total for wages and benefits for market rate which is
XII. Assisted-Graded Questions
1.10. Explain the similarities and differences between merit pay, incentive pay, and
person-focused pay. Explain the role of performance appraisals in merit pay
programs.
Answer to questions can be found in the MyLab
1.11. Discuss how compensation professionals contribute to a firm’s competitive
advantage.
1.12. MyManagementLab Only – comprehensive writing assignment for this
chapter.
XIII. Additional Case from the MyManagementLab Website; Instructor Notes and
Questions and Suggested Student Responses
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Case Name: Is It Time to Hire a Compensation Expert?
Instructor Notes
Organizations are challenged to ensure the right number of staff positions relative to line
Questions and Suggested Student Responses:
1.13. Do you think EasySpa would benefit from hiring a compensation
professional? How?
As the organization plans continued growth, there are many benefits that a compensation
professional can provide. Having compensation expertise can help support other
1.14. How can Jay convince the CEO to hire a compensation professional?
A compensation professional can better structure the company’s compensation by
ensuring pay levels are appropriate through ensuring internal consistency in pay while
keeping pay levels competitive in the marketplace. Further, a compensation professional
may be able to design incentive pay programs to motivate certain groups of employees.
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