Question 1

Robert is paid by the number of bicycle tires he attaches to wheel rims.If he attaches more than his daily quota of tires,he receives 75 cents extra per tire over the quota.Robert is paid under a ____ system.

Accepted Answer

A)  pro-rated bonus 
B)  differential piece-rate 
C)  straight piece-rate 
D)  commission

Question 2

An effect of variable pay plans is that ____ incentives increase the competition among individual employees.

Accepted Answer

A)  profit-sharing 
B)  individual 
C)  work team 
D)  organizational

Question 3

Max is studying the new pay-for-performance incentive plan.Max realizes that under the new standards if he continues his normal rate of production,which takes a steady effort over the work day with few "slack" times where he can rest,he can continue to earn what he earns now.But if he puts forward maximum effort all day long,which will leave him physically and mentally exhausted by the end of the day,he can earn an extra $10 a day before taxes.Max's current pay is about $30 an hour.Max is making enough money that he is saving for a home down payment..Which of the statements is most likely to be TRUE?

Accepted Answer

A)  Max is likely to continue to exert his typical effort. 
B)  No incentive pay system is likely to motivate higher effort from Max. 
C)  If this incentive plan is not effective in motivating extra effort from Max, he is a low-motivation employee whose departure from the firm would be functional. 
D)  Max is likely to exert maximum effort every day in order to earn this production incentive.

Question 4

Caroline works on a design team that develops costumes for historically-based and fantasy movies.The team's designs are executed by professional seamstresses and tailors.Caroline's

Accepted Answer

A)  job would be suited for individual pay for performance because one can objectively judge the artistic merits of the costumes. 
B)  individual performance can be isolated and measured separately from her team members' contributions. 
C)  job would not be suited for pay for performance because the quality of the work product of the team is mostly based on subjective judgment. 
D)  individual performance can be measured by the number of design drawings she produces, and her pay could effectively be tied to this number.

Question 5

Gainsharing plans are considered successful if they "self-liquidate,' meaning that all the gains from increased employee productivity are distributed to the employees.

Accepted Answer

A) True 
 B)False

Question 6

In a true pay-for-performance system,which of the following employees would qualify for incentive reward?

Accepted Answer

A)  Jack has met his sales quota even though he was hospitalized for appendicitis during the year. 
B)  Otto manages to meet the minimum required sales on his store location despite the fact that the business building next door, where he receives most of his customer traffic, has closed. 
C)  Charlene performs up to expectations as a science teacher at a magnet high school. 
D)  Chris brings in 20 percent more new clients for the branch bank than is required.

Question 7

What is the usual composition of the compensation committee?

Accepted Answer

A)  a subgroup of the Board of Directors including officers of the firm 
B)  a subgroup of the Board of Directors who are not officers of the firm 
C)  executives from other companies who serve on a committee that is separate from the Board of Directors, but which reports to it 
D)  compensation consultants and the head of HR

Question 8

James is a sales representative for a large international import/export firm.For the past three years James has received an annual bonus,the maximum possible,between $75,000 and $90,000 because he met his sales targets.This year,James is planning on using his bonus to buy a new sports car,so he and his wife have been test driving cars.Which of the following statements is most likely to be TRUE?

Accepted Answer

A)  We can be fairly certain that James has exerted intense discretionary effort in the last four years. 
B)  The actual dollar amount of the bonus is less important to James than its "prestige" effect. 
C)  The bonuses paid out by this company are excessive. 
D)  The company has created an entitlement culture and James will be upset if he does not get a large bonus..

Question 9

One of the major differences between individual incentives and group incentives is that

Accepted Answer

A)  individual incentives are more likely to be monetary whereas group incentives are more likely to be non-monetary. 
B)  group incentives carry high "trophy" value for the members who receive them. 
C)  incentives for group members tend to be allocated equitably whereas individual incentives tend to be allocated equally among employees. 
D)  group incentives place social pressure on group members whereas individual incentives do not.

Question 10

What factors will contribute to a successful variable pay plan?

Accepted Answer

The answer of What factors will contribute to a successful...

Question 11

You have been hired as the new director of compensation for a large organization.The existing pay-for-performance system consists of annual bonuses for managerial and professional employees.The system has not been reviewed for over five years.In your review,all of the following would be high-priority focuses of your review EXCEPT

Accepted Answer

A)  Do employees understand how their bonuses are calculated? 
B)  Do the bonuses link individual performance with organizational objectives? 
C)  Is the existing bonus system typical in the industry? 
D)  Are performance measures realistic?

Question 12

How does executive compensation differ from the compensation packages provided for other employees in the organization? Describe some of the incentives available for executives.

Accepted Answer

The answer of How does executive compensation differ from the...

Question 13

Which of the following statements is FALSE?

Accepted Answer

A)  Research has shown little relationship between CEO stock options and firm performance. 
B)  The Sarbanes-Oxley Act was motivated by abuse of stock options by top executives. 
C)  Even at the level of CEO, it is necessary to have formal, measurable performance targets in order for a discretionary bonus system to be effective. 
D)  Perquisites are becoming less-widely used because most of them are now taxed as income to the executive.

Question 14

CEO performance is meaningfully measured only if financial objectives such as return on investment are considered.Non-financial measures are too easily manipulated to accurately reflect CEO performance.

Accepted Answer

A) True 
 B)False

Question 15

Some form of individual performance incentive is appropriate for every organization.

Accepted Answer

A) True 
 B)False

Question 16

After working five years as a service coordinator at BlueBottle Enterprises,Mandy has developed some timesaving shortcuts that allow her to process a higher volume of work than the other service coordinators.If Mandy would train her co-workers in her techniques,the entire department could be more efficient.The performance incentive system that would be LEAST likely to encourage Mandy to share her expertise with her co-workers would be a/an

Accepted Answer

A)  individual-level incentive system. 
B)  team-based incentive system. 
C)  organization-level incentive system. 
D)  gain-sharing plan.

Question 17

All of the following are common measures of sales effectiveness EXCEPT

Accepted Answer

A)  sales relative to quota. 
B)  sales staff satisfaction. 
C)  increase in average sale. 
D)  account retention.

Question 18

Technically,ESOPs are considered employee incentive systems even though the funds are not received by the employee until years or decades after the individual's efforts.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is FALSE?

Accepted Answer

A)  Differential piece-rate is easily adapted for production processes or services where high quality is of paramount importance. 
B)  Return on investment metrics can be applied to analyze pay-for-performance systems. 
C)  In jobs where individual employees have little control over the outcomes of their work performance incentives would be dysfunctional. 
D)  An assumption of variable pay systems is that some jobs contribute more to organizational success than do other jobs.

Question 20

A medium-sized law firm every year distributes a bonus to its employees,from clerks to partners,based on the fees it has earned on the cases it has won.Even though every employee has not worked on every case,the senior partners of the law firm feel that such a bonus motivates employees to cooperate with one another and assist each other in times of high work loads.This is a type of ____ incentive.

Accepted Answer

A)  group 
B)  team 
C)  individual 
D)  organizational

Exam 12: Incentive Plans and Executive Compensation

Robert is paid by the number of bicycle tires he attaches to wheel rims.If he attaches more than his daily quota of tires,he receives 75 cents extra per tire over the quota.Robert is paid under a ____ system.

An effect of variable pay plans is that ____ incentives increase the competition among individual employees.

Caroline works on a design team that develops costumes for historically-based and fantasy movies.The team's designs are executed by professional seamstresses and tailors.Caroline's

Gainsharing plans are considered successful if they "self-liquidate,' meaning that all the gains from increased employee productivity are distributed to the employees.

In a true pay-for-performance system,which of the following employees would qualify for incentive reward?

What is the usual composition of the compensation committee?

One of the major differences between individual incentives and group incentives is that

What factors will contribute to a successful variable pay plan?

How does executive compensation differ from the compensation packages provided for other employees in the organization? Describe some of the incentives available for executives.

Which of the following statements is FALSE?

CEO performance is meaningfully measured only if financial objectives such as return on investment are considered.Non-financial measures are too easily manipulated to accurately reflect CEO performance.

Some form of individual performance incentive is appropriate for every organization.

All of the following are common measures of sales effectiveness EXCEPT

Technically,ESOPs are considered employee incentive systems even though the funds are not received by the employee until years or decades after the individual's efforts.

Which of the following statements is FALSE?