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VIII. Discussion Questions and Suggested Answers
4.1. Indicate whether you agree or disagree with the following statement:
“Individual incentive plans are less preferable than group incentives and
companywide incentives.”
Answer to this question can be found in the MyLab
4.2. There is currently a tendency among business professionals to endorse the
use of incentive pay plans. Identify two jobs for which individual incentive
pay is appropriate and two jobs for which individual incentive pay is
inappropriate. Be sure to include your justification.
Two jobs in which individual incentive pay is appropriate are occupations that have to do
with production or sales, such as a salesman or an ice cream factory worker. Occupations
4.3. Critics of profit sharing plans maintain that these plans do not motivate
employees to perform at higher levels. Under what conditions are profit
sharing plans not likely to motivate employees?
Answer to this question can be found in the MyLab
4.4. Unlike individual incentive programs, group and companywide incentive
programs reward individuals based on the group and companywide
performance standards, respectively. Under group and companywide
incentive programs, it is possible for poor performers to benefit without
making substantial contributions to group or company goals. What can
companies do to ensure that poor performers do not benefit?
Companies can do several things to ensure that poor performers do not benefit from
4.5. Opponents of incentive pay programs argue that these programs manipulate
employees more than seniority and merit pay programs. Discuss your views
of this statement.
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Answers will vary greatly based on the student’s position and point of view. Opponents
of incentive pay may discuss the relative size of incentive payments compared to merit or
IX. End of Chapter Case; Instructor Notes, and Questions and Suggested
Student Responses
Case Name: Individual or Team Reward?
Instructor Notes
Companies often consider incentive pay plans to reward employees for their
performance. A well-designed incentive pay plan can help a company achieve objectives
Suggested Student Responses:
4.6. What are some advantages of offering an individual piece-rate pay plan to
the furniture builders at Metropolitan Furniture?
Answer to this question can be found in the MyLab
4.7. What are some advantages of offering a team-based incentive pay plan?
The team-based incentive may eliminate concerns that an individual incentive
program could bring such as one worker refusing to help out another worker in order
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programs.
AACSB: Analytical thinking
4.8. What do you think Sally should do?
Student responses will vary. Those in support of an individual incentive program
should emphasize higher individual productivity and improved retention of top
X. Crunch the Numbers! Questions and Suggested Student Responses
Calculating Piecework Pay Awards
4.9. Calculate the worker’s total earnings for his shift.
The worker starts with a base of $4.50 per hour. The employee then receives $0.75 per
garment for each stitched garment over the 15 piecework standard.
Hour Number of Garments
above Standard
Incentive Pay Total Pay for the Hour
One 10 $7.50 $12.00
Two 0 0 $4.50
Total pay for the shift: $64.50
Learning Objective: 4-3. Summarize five types of individual incentive pay plans.
AACSB: Application of knowledge
4.10. How many dollars did the garment worker earn in incentive payments?
Total incentive pay: $37.50
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Learning Objective: 4-3. Summarize five types of individual incentive pay plans.
AACSB: Application of knowledge
4.11. On the following day, the garment worker completed a six-hour shift, but did
not exceed the standard at any time during this shift. How much did he earn
for the day?
XI. Assisted-graded Questions
4.12. How can incentive pay systems, when properly applied, contribute to
companies meeting the goals of lowest cost and differentiation strategies?
4.13. Considering our discussion of employee roles in strategic compensation
(Chapter 1), how can companies explain employees’ contributions to
company profits? How would the conversation go with administrative staff
members compared to sales professionals?
Answer to this question can be found in the MyLab
4.14. MyManagementLab Only – comprehensive writing assignment for this
chapter
VIII. Additional Case from the MyManagementLab Website; Instructor Notes,
and Questions and Suggested Student Responses
Case Name: Merit Increases at Diverse Prints
Instructor Notes
A well-designed merit pay program should recognize employee performance and adjust
employee pay accordingly. If a company has an effective performance appraisal process
Suggested Student Responses:
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4.15. Do you think the company should offer merit pay increases? Why or why
not?
Students may argue for or against the merit increase. Those arguing for the merit
increases may suggest that while the program may not have its desired effect this
year, it may be more appropriate to continue with merit pay increases as they will
likely return to appropriate levels next year. It may be easier to explain to
4.16. If the company chooses not to offer the merit pay increases, how should they
approach explaining the decision to the employees?
It is important for the company to clearly explain why the company is not offering
the merit pay increases. The employees should be aware of the company’s
downturn, and the temporary elimination of the merit pay increases should be
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