Question 1

Group incentive plans suffer from what is called the__________ where at least one person doesn't carry his or her share of the load.

Accepted Answer

A) self-serving bias 
B) halo effect 
C) free rider problem 
D) bandwagon effect 
E) moral hazard problem 
A) self-serving bias 
B) halo effect 
C) free rider problem 
D) bandwagon effect 
E) moral hazard problem C

Question 2

How is perceived fairness of a formula a key element in designing a gain-sharing plan?

Accepted Answer

One way to ensure that a gain-sharing plan is perceived as fair is to let employees vote on whether implementation should go forward. This and union participation in program design are two elements in plan success.

Question 3

Explain the "free-rider" problem associated with group compensation systems.

Accepted Answer

Group compensation systems suffer from what is called the "free-rider" problem where at least one person doesn't carry his or her share of the load. Top-performing employees quickly grow disenchanted with having to carry free riders and leave.

Question 4

Discuss three possible explanations for extremely high levels of CEO compensation.

Accepted Answer

One approach to explaining why executive

Question 5

An individual incentive payment plan can be described as:

Accepted Answer

A) a pay for some objective, pre-established level of performance 
B) an increase in base pay based on an employee's seniority 
C) a pay increase given to employees for unexpected exceptional performance on a special project 
D) a lump sum payment to an employee based on organizational performance 
E) a form of pay determined by group level performance 
A) a pay for some objective, pre-established level of performance 
B) an increase in base pay based on an employee's seniority 
C) a pay increase given to employees for unexpected exceptional performance on a special project 
D) a lump sum payment to an employee based on organizational performance 
E) a form of pay determined by group level performance

Question 6

Which of the following is a disadvantage of profit sharing?

Accepted Answer

A) Most profit sharing plans involve high administrative costs. 
B) Most profit sharing plans are highly sophisticated and hence not easily understood by employees. 
C) Most employees don't feel their jobs have a direct impact on profits. 
D) Most employees are not concerned about the profitability of their organizations. 
E) Most employees are unwilling to learn about financial measures and the business factors that influence them. 
A) Most profit sharing plans involve high administrative costs. 
B) Most profit sharing plans are highly sophisticated and hence not easily understood by employees. 
C) Most employees don't feel their jobs have a direct impact on profits. 
D) Most employees are not concerned about the profitability of their organizations. 
E) Most employees are unwilling to learn about financial measures and the business factors that influence them.

Question 7

Stock options are valuable when they have exercise prices higher than the current market value.

Accepted Answer

A) True 
 B)False

Question 8

According to the agency theory approach to understanding CEO compensation:

Accepted Answer

A) the worth of a CEO should correspond closely to some measure of company success, such as profitability or sales 
B) executives should not be allowed to own stock options 
C) executive compensation should be regulated and monitored by government agencies 
D) executive compensation should be designed to ensure that executives have the best interests of stockholders in mind when they make decisions 
E) executive salaries bear a consistent relative relationship to the compensation of lower-level employees 
A) the worth of a CEO should correspond closely to some measure of company success, such as profitability or sales 
B) executives should not be allowed to own stock options 
C) executive compensation should be regulated and monitored by government agencies 
D) executive compensation should be designed to ensure that executives have the best interests of stockholders in mind when they make decisions 
E) executive salaries bear a consistent relative relationship to the compensation of lower-level employees

Question 9

What are executive perquisites?

Accepted Answer

Perquisites, or "perks," are designed to

Question 10

Which of the following is a problem with group compensation systems?

Accepted Answer

A) There is very little room for variation in designing group incentive plans. 
B) At least one person in the group does not carry his or her share of the load. 
C) Team membership constantly changes as teams are eager to share their star performers and take on new employees. 
D) If teams are defined at a very narrow level, much of the motivational impact of incentives is lost. 
E) Group incentive plans are often too simplistic and do not accurately reflect the efforts of the group. 
A) There is very little room for variation in designing group incentive plans. 
B) At least one person in the group does not carry his or her share of the load. 
C) Team membership constantly changes as teams are eager to share their star performers and take on new employees. 
D) If teams are defined at a very narrow level, much of the motivational impact of incentives is lost. 
E) Group incentive plans are often too simplistic and do not accurately reflect the efforts of the group.

Question 11

Which of the following is a disadvantage of individualized incentive plans?

Accepted Answer

A) more direct supervision is required to maintain reasonable levels of output 
B) earnings of workers are reduced 
C) costing and budgetary control are impeded 
D) levels of mistrust between managers and workers are elevated 
E) production costs are raised 
A) more direct supervision is required to maintain reasonable levels of output 
B) earnings of workers are reduced 
C) costing and budgetary control are impeded 
D) levels of mistrust between managers and workers are elevated 
E) production costs are raised

Question 12

Over the long run for employers, merit pay is an inexpensive and efficient method of compensation.

Accepted Answer

A) True 
 B)False

Question 13

What are dual career tracks?

Accepted Answer

Dual career tracks provide two different

Question 14

One disadvantage of individual incentive plans is that more direct supervision is required to ensure productivity increases.

Accepted Answer

A) True 
 B)False

Question 15

Lump-sum bonuses are:

Accepted Answer

A) viewed more as an entitlement than merit pay 
B) more expensive than merit pay over the long run 
C) awarded for exceptional performance on special projects 
D) focused on providing consistent increments in base pay through the year 
E) end-of-year bonuses that do not build into base pay 
A) viewed more as an entitlement than merit pay 
B) more expensive than merit pay over the long run 
C) awarded for exceptional performance on special projects 
D) focused on providing consistent increments in base pay through the year 
E) end-of-year bonuses that do not build into base pay

Question 16

Discuss the key elements in designing a gain-sharing plan.

Accepted Answer

The following issues are key elements in

Question 17

Improshare is a profit-sharing plan that is easy to administer and to communicate.

Accepted Answer

A) True 
 B)False

Question 18

Maturity curves reflect the relationship between scientist/engineer compensation and years of experience in the labour market.

Accepted Answer

A) True 
 B)False

Question 19

What is the primary focus of a merit pay system?

Accepted Answer

A) to reward employees for exceptional performance on special projects 
B) to reward employees for not being fired 
C) to provide end-of-year bonuses that do not build into base pay 
D) to offer a uniform merit increase to all employees across performance levels 
E) to link increases in base pay to how employees are rated on a subjective performance evaluation 
A) to reward employees for exceptional performance on special projects 
B) to reward employees for not being fired 
C) to provide end-of-year bonuses that do not build into base pay 
D) to offer a uniform merit increase to all employees across performance levels 
E) to link increases in base pay to how employees are rated on a subjective performance evaluation

Question 20

Historically, ___________ have been the most widely used performance indicator for group incentive plans.

Accepted Answer

A) capability-focused measures 
B) financial measures 
C) customer-focused measures 
D) internal process-focused measures 
E) resource utilization measures 
A) capability-focused measures 
B) financial measures 
C) customer-focused measures 
D) internal process-focused measures 
E) resource utilization measures

Group incentive plans suffer from what is called the__________ where at least one person doesn't carry his or her share of the load.

How is perceived fairness of a formula a key element in designing a gain-sharing plan?

Explain the "free-rider" problem associated with group compensation systems.

Discuss three possible explanations for extremely high levels of CEO compensation.

An individual incentive payment plan can be described as:

Which of the following is a disadvantage of profit sharing?

Stock options are valuable when they have exercise prices higher than the current market value.

According to the agency theory approach to understanding CEO compensation:

What are executive perquisites?

Which of the following is a problem with group compensation systems?

Which of the following is a disadvantage of individualized incentive plans?

Over the long run for employers, merit pay is an inexpensive and efficient method of compensation.

What are dual career tracks?

One disadvantage of individual incentive plans is that more direct supervision is required to ensure productivity increases.

Lump-sum bonuses are:

Discuss the key elements in designing a gain-sharing plan.

Improshare is a profit-sharing plan that is easy to administer and to communicate.

Maturity curves reflect the relationship between scientist/engineer compensation and years of experience in the labour market.

What is the primary focus of a merit pay system?

Historically, ___________ have been the most widely used performance indicator for group incentive plans.

Strategy: the Totality of Decisions

Defining Internal Alignment

Job Analysis

Job-Based Structures and Job Evaluation

Person-Based Pay Structures

Defining Competitiveness

Designing Pay Levels, Pay Mix, and Pay Structures

Employee Benefits

Pay for Performance: Performance Appraisal and Plan Design

The Role of Governments and Unions in Compensation

Compensation Budgets and Administration

Filters

Exam 11: Pay-For-Performance Plans

Group incentive plans suffer from what is called the__________ where at least one person doesn't carry his or her share of the load.

How is perceived fairness of a formula a key element in designing a gain-sharing plan?

Explain the "free-rider" problem associated with group compensation systems.

Discuss three possible explanations for extremely high levels of CEO compensation.

An individual incentive payment plan can be described as:

Which of the following is a disadvantage of profit sharing?

Stock options are valuable when they have exercise prices higher than the current market value.

According to the agency theory approach to understanding CEO compensation:

What are executive perquisites?

Which of the following is a problem with group compensation systems?

Which of the following is a disadvantage of individualized incentive plans?

Over the long run for employers, merit pay is an inexpensive and efficient method of compensation.

What are dual career tracks?

One disadvantage of individual incentive plans is that more direct supervision is required to ensure productivity increases.

Lump-sum bonuses are:

Discuss the key elements in designing a gain-sharing plan.

Improshare is a profit-sharing plan that is easy to administer and to communicate.

Maturity curves reflect the relationship between scientist/engineer compensation and years of experience in the labour market.

What is the primary focus of a merit pay system?

Historically, ___________ have been the most widely used performance indicator for group incentive plans.

Strategy: the Totality of Decisions

Defining Internal Alignment

Job Analysis

Job-Based Structures and Job Evaluation

Person-Based Pay Structures

Defining Competitiveness

Designing Pay Levels, Pay Mix, and Pay Structures

Employee Benefits

Pay for Performance: Performance Appraisal and Plan Design

The Role of Governments and Unions in Compensation

Compensation Budgets and Administration

Filters