978-0134320540 Chapter 8 Solution Manual

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VII. Discussion Questions and Suggested Answers

8.1. Respond to the following statement: “Pay grades limit a company’s ability to

achieve competitive advantage.” Do you agree? Provide rationale for your

position.

Pay grades group jobs for pay policy application. Human resource (HR) professionals

typically group jobs into pay grades based on similar compensable factors and value.

8.2. Two employees perform the same job, and each received exemplary

performance ratings. Is it fair to give one employee a smaller percentage

merit because his pay falls within the 3rd quartile but give a larger

percentage merit increase to the other because his pay falls within the 1st

quartile? Please explain your answer.

8.3. Describe some ethical dilemmas sales professionals may encounter. How can

sales compensation programs be modified to minimize ethical dilemmas?

Answer to this question can be found in the MyLab

8.4. React to the statement: “Merit pay grids have the potential to undermine

employee motivation.” Please discuss your views.

8.5. Compression represents a serious dysfunction of pay structures. Discuss

some of the major ramifications of compression. Also, discuss how companies

can minimize or avoid these ramifications.

VIII. End of Chapter Case; Instructor Notes, and Questions and Suggested

Student Responses

Case Name: A New Sales Representative

Instructor Notes

This new position is the first outside sales position for UFS and John must carefully

design a compensation package to motivate the Sales Representative to focus his or her

efforts on the appropriate activities. John wants to expand his business and sees two

distinct opportunities to do so. Expanding the business through adding new customers is

one approach, and John also sees an opportunity to expand the business through further

development of relationships with current customers. Both of these activities will take a

great deal of time without promise of immediate sales and the compensation structure

should recognize that requirement. However, as a small business, the company must

closely monitor their salary budget and therefore, connecting at least part of the salary to

actual sales will help ensure that the Sales Representative generates the revenue

necessary to support his or her position.

Suggested Student Responses:

8.6. What are the sales objectives for the new Sales Representative?

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8.7. What role will the compensation design play in motivating the new Sales

Representative?

8.8. What kind of sales incentive plan do you recommend? Why?

Because this position requires providing customer service to current customers, a

IX. Crunch the Numbers! Questions and Suggested Student Responses

Calculating Pay Range Minimums, Maximums, and Pay Range Overlap

8.9. Pay Range A: For a pay range midpoint equal to $47,500, calculate the

minimum and maximum pay values for a 15 percent range spread.

Minimum:

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8.10. Pay Range B: For a pay range midpoint equal to $53,750, calculate the

minimum and maximum pay rates for a 25 percent range spread.

Minimum:

8.11. What is the overlap between pay range A and pay range B

Overlap = 100% x ($50,813.96– $47,777.78)/( $50,813.96 – $44,186.05)

X. Assisted-graded Questions

8-12. How should companies address red circle rates for high performers and low

performers, respectively?

Answer to this question can be found in the MyLab

8-13. Briefly discuss designing job-based pay systems (e.g., merit pay, sales incentive pay)

and person-focused programs. What considerations arise when making a transition

from using a job-based pay system to using a person-focused plan?

8-14. MyManagementLab Only – comprehensive writing assignment for this chapter.

XI. Additional Cases from the MyManagementLab Website; Instructor Notes,

and Questions and Suggested Student Responses

Instructor Notes

Market-competitive pay systems play a significant role in attracting and retaining talented

staff. When setting a pay policy, companies have the option of lagging behind the

Suggested Student Responses:

8.15. Should Docutrend use the same pay policy for all of its open positions?

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Docutrend should not necessarily adopt the same pay policy for all of its open

positions. It is clear that the labor market is more competitive for the software

designers and will likely require a different approach. Carrie must carefully examine

8.16. What pay policy would you recommend? Why?

Docutrend may want to consider establishing a lead policy for paying the software

designers. Because the company’s competitive strategy is a differentiation strategy,

Docutrend needs to recruit talented software designers to ensure that that their

AACSB: Application of knowledge

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