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VII. Discussion Questions and Suggested Answers
3-1. Human capital theory has been advanced as a rationale underlying seniority
pay. Identify two individuals you know who have performed the same job for
at least 2 years. Ask them to describe the changes in knowledge and skills
they experienced from the time they assumed their jobs to the present.
Discuss your findings with the class.
3-2. Subjective performance evaluations are subject to several rater errors, which
makes objective measures seem a better alternative. Discuss when subjective
performance evaluations might be better (or more feasible) than objective
ratings.
3.3. Consider a summer job that you have held. Write a detailed job description
for that job. Then, develop a behaviorally anchored rating scale (BARS) that
can be used to evaluate an individual who performs that job in the future.
BARS are based on the critical incident technique. Scales are developed in the same
fashion with one exception. For the CIT, a critical incident would be written as “the
Learning Objective: 3-3. Explore a variety of performance appraisal methods.
AACSB: Application of knowledge
3.4. This chapter indicates that merit pay plans appear to be the most common
form of compensation in the United States. Although widely used, these
systems are not suitable for all kinds of jobs. Based on your knowledge of
merit pay systems, identify at least three jobs for which merit pay is
inappropriate. Be sure to provide your rationale given the information in this
chapter.
Temporary workers do jobs that are not well suited for merit pay because there is no long
term opportunity to measure performance. Repetitive assembly line work is not well
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3.5. Select three distinct jobs of your choice. Go to the Occupational Information
Network (O*NET), http://onetonline.org. Review the major tasks for each
job. Then, for each job, identify what you believe is the most appropriate
performance appraisal method. Based on your choices, sketch a performance
appraisal instrument. Discuss the rationale for your choice of performance
appraisal methods.
Students should identify three different jobs from O*NET and select the major tasks to
understand the type of appraisal method that is appropriate. The different methods
VII. End of Chapter Case; Instructor Notes, and Questions and Suggested
Student Responses
Case Name: Appraising Performance at Precision
Instructor Notes
A merit pay program provides employees with an annual pay increase that is awarded
based on the individual employee’s performance. In order for the program to work
effectively, the company must have the ability to measure employee performance.
Suggested Student Responses:
3.6. What are some problems with Precision’s performance appraisal process
that might cause challenges for Jackson to implement a merit pay program?
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Answer to this question can be found in the MyLab
3.7. What changes do you recommend Precision make to the performance
appraisal process to align it with a merit pay program?
The company most likely should design an entirely new process. They should start with
job analysis that leads to well defined job descriptions and performance expectations for
VIII. Crunch the Numbers! Questions and Suggested Student Responses
Costs of Longevity and Merit Pay
3.8. Under a merit pay system, calculate Anne’s salary based on a 7 percent
annual increase through the year 2020. For John, apply a 3 percent annual
increase rate. What are their adjusted salaries for each year?
Anne’s salary in 2015 was $50,000
John’s salary in 2015 was $35,000
Year Anne (7% annual increase) $ John (3% annual increase) $
2016 53,500.00 36,050.00
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3.9. Let’s assume that both employees have reached the maximum pay rates for
their jobs in 2015. Under a longevity pay system, calculate the annual
longevity payments for each employee through the year 2020. Using a 5
percent rate for each, what will the annual increases amount to? What will
their base pay rates be at the end of 2020?
Under a longevity pay system, the employee receives an annual payment that is not added
into base pay.
3-10. Under a merit pay system scenario, let’s assume the goal is to provide Anne
and John with the same annual pay increases as measured in dollars, just for
2016. It’s been determined that Anne’s annual increase rate will be 5 percent.
What should the rate be for John? After applying the increase amounts, what
will Anne’s and John’s new salaries be at the end of 2016?
Anne’s increase in 2016 will be 5% of $50,000 = $2,500. Her new salary in 2016 will be
$52,500.
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IX. Assisted-graded Questions
3.11. A company of 15 employees has recently decided to overhaul its performance
appraisal system. Which plan would be most appropriate for the company to
adopt? Why?
3.12. Using the principles of seniority pay and merit pay, explain whether you
believe it makes sense to apply both programs simultaneously.
3.13. MyManagementLab Only – comprehensive writing assignment for this
chapter.
X. Additional Case from the MyManagementLab Website; Instructor Notes,
and Questions and Suggested Student Responses
Case Name: Pay Overtime or Hire More Staff?
Instructor Notes
Under the Fair Labor Standards Act (FLSA), employers are required to pay overtime pay
to non-exempt workers for hours worked in excess of 40 hours in one workweek. Part of
Suggested Student Responses:
3.14. What are some factors that Heidi should consider as she determines whether
or not she should hire an additional worker?
Heidi needs to understand the company’s long-term workload expectations.
Sometimes paying overtime is more cost efficient than hiring additional workers.
Students may actually do some calculations in determining the response to this
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should also consider the other fixed costs of hiring a new employee including
benefits.
AACSB: Application of knowledge
3.15. Based on the information provided, do you think Heidi should hire an
additional worker?
If each of the twenty-five workers works just 8 hours of overtime each month, the
company is paying nearly $6,000 per month in overtime pay. Hiring one additional
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