Lussier, Human Resources Management 3e
SAGE Publishing, 2019
Sample Answers
Chapter 12: Incentive Pay
Answers to Applying the Concept Exercises
Applying the Concept 12-1: Individual Incentives
Identify each statement by placing the letter of its advantage or disadvantage on the line next
to it.
Advantages
a. Easy to evaluate individual employees
b. Ability to match rewards to employee desires
c. Promotes the link between performance and results
d. May motivate less productive employees to work harder
Disadvantages
e. Many jobs have no direct output
f. May motivate undesirable employee behaviors
g. Record-keeping burden is high
h. May not fit organizational culture
1. The HR staff offered me a few different gifts for my top performance, but I took the cash.
2. The old compensation system without incentives was easier. Now I have to keep track of
everyone’s performance.
3. The new incentive system will be easy for me because all my employees are sales reps and
we already keep track of each sale.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
4. I just do the minimum required for my job. If I want more compensation, I will just have to
produce more to earn more.
5. I’m a new high school teacher, and I’m very concerned about how the administration will
assess my teaching in order to award tenure.
E. Many jobs have no direct physical output. It is difficult to measure teaching performance.
Applying the Concept 12-2: Group Incentives
Identify each statement by its group advantage or disadvantage.
Advantages
a. Promotes better teamwork
b. Broadens individual outlook
c. Requires less supervision
d. Is easier to develop than individual incentive programs
Disadvantages
e. Social loafing can occur
f. Individual output may be discounted
g. Outstanding performers may slacken efforts
h. Group infighting may arise
6. What happened? Latoya and Katie used to get along so well. Now they are constantly
bickering.
7. Katrina, you are not being fair to the rest of us by not doing your fair share of the work.
E. Social loafing can occur. The employee is not working up to the level of the others.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
8. Now that we use a team-based process, the manager doesn’t check up on us like she used
to.
10. I know I’m the best, but none of the department members work very hard, so why should
I?
Applying the Concept 12-3: Individual Incentive Options
Place the letter of the individual incentive on the line next to the scenario illustrating it.
a. bonus
b. commissions
c. merit pay
d. piecework
e. standard hour
f. nonmonetary awards
g. praise
11. I’m an auto mechanic at a dealership, and we have a set amount of time to complete each
type of repair work. I complete a job before the stated time so that I can go on to the next car
and get paid extra for being faster than the average guy.
12. I just sold that top-of-the-line BMW M3. I can’t wait to get my pay this week.
13. I’m the top producer in the entire department, so I will get an extra raise for high
performance this year.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
14. The boss had me come to the front of the room at the annual meeting to get a plaque for 5
15. The boss just thanked me for getting a shipment that was behind schedule out on time
today.
Applying the Concept 12-4: Group Incentive Options
Place the letter of the group incentive option on the line next to the matching description.
a. profit sharing
b. gainsharing
c. ESOP
d. stock options
e. stock purchasing
16. Our group incentive option gives us a bonus at the end of the year based on how
profitable we were for the year.
17. Our group incentive option plan allows me to get stock and put it in my retirement
account without paying anything for it.
18. Our group incentive option plan worked like this. The manager told us that if we could
cut cost in our department by 5%, as a group we would get 5% of the savings to the company
distributed evenly among us.
19. Our group incentive option allows me to buy company stock for 10% less than the market
value.
E. Stock Purchasing. If you buy the stock, you have purchased it.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
20. Our group incentive option plan allows me to buy $50 shares of the company stock for
only $13 apiece next year.
Applying the Concept 12-5: Effective Incentives
Identify each statement by the guideline it is violating using the letters (a) to (l) in Exhibit
12-6. You should read the explanations of each guideline before completing this application.
21. I went to the meeting to find out about the new incentive system, but I didn’t understand
what they were talking about.
22. I understand that if the price of the stock goes up next year, I can buy stock at today’s
lower price. But I don’t see how my delivering mail can make any difference in the price of
the stock.
23. What’s the incentive for me? Management gets great bonuses every year and we do all
the work and they don’t give us anything.
B. Incentives for all—managerial and non-managerial employees. In the situation managers
get bonuses but employees don’t.
24. How can we know if we are the best company in the sporting goods industry?
25. This system isn’t fair to me. I was the top performer but Sam, who didn’t even meet his
quota, got the same bonus.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
Answers to Skill Builder Exercises
Skill Builder 12-1 Ideas and Answers
Calculating Individual Incentives
1. Bonus. $46,000 7% = $3,220 bonus. (2) $3,220/$46,000 = 0.07 or 7% as stated in
the problem.
2. Commission. (1) $168,000 5% = $8,400 + $116,000 5% = $5,800 = $14,200 (2) –
$10,000 = $4,200 (3) 12 = $50,400.
Skill Builder 12-2: Developing a Compensation Plan with an Incentive
There is no one correct answer, but here are some possible answers.
1. Wage, salary, or incentive pay (commissions, piecework, or standard hour).
Sales staff. They are commonly paid a small salary with the focus on commissions.
2. Incentives
Recognition and other non-monetary incentives. It is common to have some type of display
that lists how many cars each person is selling. There can be a salesperson of the month and a
mechanic of the month. As the owner manager, you should be giving lots of free praise for a
job well done to all 10 of your employees.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
Merit Pay. In such a small business, merit pay will most likely not be much of a motivator.
ESOP, Stock Options, Stock Purchase Plans. As a sole proprietorship, there is no stock, so
you would have to change the form of ownership to a corporation to offer any of these
options. With a “small” dealership, this is not too likely.
3. Executive Compensation Package
Skill Builder 12-3: Giving Praise
Total Time (15–20 min)
My traditional students often do not need all 15 min for the procedure; people with work
experience may use the full 15 min and you can use the conclusion, apply it, and sharing
sections for 5 min.
Lussier, Human Resources Management 3e
SAGE Publishing, 2019
Break the class into groups of 4–6. One at a time, have each student in the group give the
praise.
1. Explain the situation.
2. Select a group member to receive the praise.
4. Integration. The group provides the giver of praise feedback on how he or she did:
Step 1. Was the praise very specific and descriptive? Did the giver look the employee in the
eye?
Conclusion
Lead a class discussion and/or make concluding remarks. I just remind them of the
importance of giving praise in both their personal and professional lives.
Apply It
You can have students answer these questions; it is better if they write them down. What did
I learn from this exercise? How will I use this knowledge in the future? When will I practice
giving praise?