Strategic Compensation in Canada 6th Edition by Richard Long – Test Bank

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

Indicate whether the statement is true or false.

1. All things being equal, goal-sharing programs are thought to be less motivational than gain-sharing programs.

a. True

b. False

2. Profit-sharing plans can reduce the need for employee supervision.

a. True

b. False

3. Sales commissions are usually appropriate in situations where individual sales people exercise significant

independence.

a. True

b. False

4. The three main types of employee stock plans are: stock bonus plans, stock purchase plans, and stock option plans.

a. True

b. False

5. One of the problems with gain-sharing plans is that they do not encourage employee participation.

a. True

b. False

6. The current distribution profit-sharing plan is sometimes called a “cash plan.”

a. True

b. False

7. The central issue associated with attendance incentives is the notion that these programs treat only the symptoms while

ignoring the underlying issues that cause absenteeism in the first place.

a. True

b. False

8. Employee stock plans are often used by companies using a classical management strategy

a. True

b. False

9. Unions generally oppose profit-sharing plans on the basis of potential manipulation of profits by management and the

uncertainty associated with profit sharing when compared with base pay.

a. True

b. False

10. Piece rates have experienced high discontinuation rates.

a. True

b. False

Indicate the answer choice that best completes the statement or answers the question.11. As the owner of a real estate firm with multi-office operations, you provide a bonus to all sales personnel in the

highest-producing office each month. What type of performance pay plan are you using?

a. goal-sharing

b. competitive bonus

c. pooled performance

d. group commissions

12. Which statement best explains why, despite their motivational potential, piece rate systems often do not motivate

maximum effort?

a. Work group norms define acceptable rates of production.

b. Piece rates are used in conjunction with base pay.

c. Workers may be tempted to cut corners on quality.

d. Workers are more concerned with production than

safety.

13. In the public sector, what is one factor that should be considered when designing merit pay?

a. role of consultants

b. role of unions

c. pay mix with profit sharing

d. pay mix with stock options

14. Which of the following is NOT a suitable condition for merit pay?

a. Individual performance varies.

b. Performance is not controllable by the

individual.

c. Individual performance can be separated out.

d. Undesirable side effects are readily manageable.

15. John works for an aerospace company selling satellites to communication companies. He receives a set percentage of

the overall sale price of the satellite in the form of compensation. He does not receive a fixed salary or benefits. Which

term best describes John’s compensation plan?

a. hybrid commission plan

b. leverage commission plan

c. percentage commission

plan

d. straight commission plan

16. John’s employer decides to provide him with regular advances against his future commissions as a way to smooth out

John’s income. Which term best describes the pay plan used by John’s employer?

a. sales stipend system

b. draw system

c. pay advance system

d. security income

17. What do employees receive under an employee stock bonus plan?

a. shares at no cost to themselves

b. cash value of phantom shares

c. a bonus equivalent to the increase in their share value

d. free financial advice on stocks18. From an employer’s point of view, what is the most attractive feature of properly designed gain-sharing plans?

a. The plans are self-funding.

b. Positive work group norms develop.

c. The need for supervisory control is reduced.

d. Employees monitor each other’s

performance.

19. Which of the following is an organizational-level pay performance plan?

a. goal-sharing plans

b. merit-pay plans

c. special-purpose incentive pay

plans

d. profit-sharing plans

20. As a human resource specialist, you have been asked by your organization to lead a discussion on the merits of using

internal promotions as a main reward mechanism. Which point would you most likely NOT raise?

a. They are an expensive process, as promotions are typically associated with pay

increases.

b. They often carry both intrinsic and extrinsic rewards.

c. They recognize contributions made by strong performers.

d. They are often seen as a key motivation tool for employees.

21. A publicly traded Canadian corporation provides employees with one year of continuous service and the opportunity

to place 6% of their pre-tax income in a plan that may be invested in the company’s stock. Furthermore, the company

matches the shares by 50% up to a limit of 4% of the employees’ pre-tax income. From the perspective of the employee,

what are the potential drawbacks of participating in this program?

a. Administrative costs associated with these plans are normally very high.

b. It is extremely difficult for an employee to determine the performance of their

stock.

c. They pose too much of a tax burden.

d. If the company does poorly, your job and savings may be at risk.

22. You work for a company that assembles plastic toys. Generally speaking, employees working at similar assembly

plants receive $15.00 per hour. Internal corporate data indicate that the average worker should be able to assemble 20 toys

per hour. Your organization has made a strategic decision to pay assembly line workers on the basis of their output. What

is the piece rate you are contemplating paying your assembly line workers?

a. $300.00 per day

b. $1.33 per toy

c. $0.75 per toy

d. $150.00 per day

23. Which of the following would NOT be an ideal scenario in which to consider using a piece rate plan?

a. Quality standards can be monitored effectively.

b. Significant teamwork is needed to complete a particular

task.

c. Each unit of production can be easily measured.

d. Tasks tend to be fairly static over time.24. One of the problems with merit raises is the risk of providing a long-term future reward for a short-term past

performance. What is one way to address this problem while maintaining the performance appraisal system?

a. Replace merit raises with merit bonuses.

b. Use stock options instead of merit

raises.

c. Use a team to assess performance.

d. Outsource merit systems.

25. Which statement best describes how North American employees view merit raises?

a. They are viewed as not promoting employee–employer relationships.

b. They are viewed with significant scepticism by employees.

c. They are not viewed in a positive light because of the objective nature of performance

reviews.

d. They are viewed in a positive light by unionized employees.

26. Which are the main types of profit sharing plans?

a. current assessment plan, deferred plan, and blended plan

b. deferred plan, cash plan, and group plan

c. combination plan, deferred plan, and current distribution plan

d. current distribution plan, combination plan, and employee

plan

27. An automotive shop wants to reward employees for demonstrating creative customer service that leads to repeat

business. A particular employee received a 10 percent bonus for suggesting that the company contact customers 24 hours

after repairs to ensure customers are satisfied. What type of incentive would be the most appropriate in this scenario?

a. merit-raise plans

b. goal-sharing plans

c. gain-sharing plans

d. special-purpose

plans

28. What is a key advantage of piece rate pay systems?

a. They reduce the need for external control of employees through supervision.

b. They create team work.

c. They link pay to group effort.

d. They encourage “rate busters.”

29. Which characteristic of profit-sharing plans may be viewed as negative from the perspective of an employer?

a. They align employee and employer interests.

b. They eliminate the “free rider” principle by holding everyone accountable.

c. They are more complex than gain-sharing plans.

d. They require the sharing of potentially confidential information with

employees.

30. What is a key difference between gain-sharing and organizational performance pay plans?

a. Unlike organizational level plans, gain sharing can be applied to not-for-profit and government

organizations.

b. Gain sharing results in more pay for employees.

c. Unions support organizational level pay plans but not gain sharing.

d. There are more free riders in gain-sharing plans.31. Which plans are set up so that a payout is contingent on the achievement of three- to five-year performance goals?

a. pension plans

b. long-term incentives

c. deferred profit-sharing

plans

d. goal-sharing plans

32. According to the textbook, what is the main drawback associated with attendance plans?

a. There are costs associated with administering the program.

b. Both intended and unintended behaviours are not easy to observe.

c. It is difficult to deal with the so-called “legitimate” absences.

d. They do not deal with the underlying cause of the issue.

33. Martin, the HR Manager, bought 1000 shares in his company at a price that was a little less than market prices. What

type of stock plan is this?

a. stock option

b. stock bonus

c. share

purchase

d. market share

34. In what way are piece rates and commissions similar to each other?

a. Employees don’t have to worry about working themselves out of a job.

b. They reduce the need for external control of employees through supervision.

c. Both types are commonly used in conjunction with base pay.

d. Both are popular systems widely used in the service sector.

35. Which type of selling requires the most initiative on the part of the sales representative?

a. maintenance

b. conversion

c. leverage

d. new market

36. Which of the following is normally seen as an advantage associated with long-term incentives plans?

a. They may encourage a better understanding of the business.

b. They tie rewards to the company’s ability to pay.

c. They usually dilute shareholder equity for existing

shareholders.

d. Goals are easy to determine, particularly in dynamic industries.

37. Which of the following is a group level organizational pay performance system?

a. gain sharing

b. piece rates

c. merit raises

d. commission

s38. What is the most common form of performance pay used by medium to large Canadian firms?

a. merit raises

b. profit sharing

c. merit bonuses

d. commissions

39. Your employer is considering tying the bonus pool to the firm’s profitability and then allocating this amount to

employees based on individual merit. With reference to expectancy theory, which component of the merit system will be

weakened and thus make it less motivational for you as an employee?

a. valence

b. expectancy

c. instrumentality

d. effort

40. Your CEO is concerned that employees are not saving enough for their retirement. At the same, the CEO wants to

have some of the company’s profits shared with all employees. To address these issues, your CEO asks you, a human

resource compensation specialist, to recommend the most appropriate profit-sharing plan to address this retirement issue.

Which profit-sharing plan would you recommend?

a. deferred

b. combination

c. current distribution

d. cash plan

41. Discuss the nature of suggestion systems and some of the problems you need to be aware of.

42. Identify and briefly define each of the three types of employee stock plans.

43. There are three types of profit-sharing plans discussed in the textbook. Identify and briefly explain each of them.

44. Identify and briefly explain the nature of individual performance pay plans.

45. Explain the difference between goal-sharing and gain-sharing plans.

46. What is the rationale that makes employee stock plans such a “natural fit” with organizations using a high-

involvement management strategy?Answer Key

1. False

2. True

3. True

4. True

5. False

6. True

7. True

8. False

9. True

10. True

11. b

12. a

13. b

14. b

15. d

16. b

17. a

18. a

19. d

20. a

21. d

22. c

23. b

24. a

25. b

26. c

27. d28. a

29. d

30. a

31. b

32. d

33. c

34. b

35. d

36. a

37. a

38. a

39. c

40. a

41. Suggestion systems are intended to promote and reward innovative thinking by employees. Employees are encouraged

to submit suggestions that may improve organizational effectiveness in exchange for cash bonuses. The components of

such a system are as follows: a system through which suggestions are channelled, a systematic process for evaluating

them, and an incentive for submitting usable ideas. Problematic issues include the following: non-accepted ideas cause

resentment and a reluctance to contribute further suggestions; employees may feel that the amount of the award is not

equitable compared to the cost savings realized by the company; supervisors resent employees who make suggestions,

feeling this is a negative reflection of managers’ performance; co-workers resent suggestions that disrupt existing work

practices; and who receives credit for the idea if developed by several individuals.

42. An employee stock plan is any type of plan through which employees acquire shares in the firm that employs them.

An employee stock bonus plan is a plan through which employees receive shares in their employing firm at no cost to the

employee. An employee stock purchase plan is a plan through which employees may purchase shares in their employing

firm. An employee stock option plan provides options to employees to purchase company shares at some point in the

future at a fixed price.

43. Profit sharing may take one of the following three forms: the current distribution plan, the deferred profit-sharing plan,

and the combination plan. The current distribution plan is a profit-sharing plan that distributes the profit-sharing bonus to

employees at least annually in the form of cash or shares. The deferred profit-sharing plan is a plan in which bonuses are

allocated to employee accounts but not actually paid out until a later date, usually on termination or retirement. A

combination plan is a plan that combines the current distribution and deferred profit-sharing plans by paying some of the

profit-sharing bonus on a current (cash) basis and deferring the remainder.44. Individual performance pay plans—piece rates, sales commissions, merit pay, and special-purpose incentives—

generally focus on promoting task behaviour. Under piece rates, an employee receives a specified sum of money for each

unit of output produced or processed. They are commonly used in manufacturing and service sectors. Sales commissions

are used to compensate sales personnel in a variety of industries. Sales associates receive a certain percentage of their

gross sales. The commission rate often varies, depending on the products or services sold. Merit pay is used to recognize

and encourage continuing good performance, and unlike the other types of performance pay, is based on appraisals of

overall employee performance. Special-purpose incentive programs (sometimes referred to as “targeted incentive

programs”) are intended to promote and reward certain behaviours that are of special importance to an organization, or to

counteract behaviours that are causing problems. Such incentives are most appropriate in circumstances where intrinsic

motivation does not already exist, where both intended and unintended behaviours are easy to observe, and where no other

alternatives for inducing the desired behaviour are feasible.

45. The core of goal sharing is that work groups or teams receive a bonus when certain prespecified performance goals are

met, while under gain sharing, cost savings are quantified and then shared between the company and the group. Under

goal sharing, goals on one or more performance indicators are set for each group or team, goals are to be met within a

specified timeframe, and a bonus is paid to all team members if the goal is achieved. Under gain sharing, there are no set

goals other than to simply improve as much as possible relative to the historical baseline. Employee involvement is

considered to be a fundamental aspect of most gain-sharing plans. Goal-sharing plans can be much more arbitrary, with

management making most of the decisions.

46. The notion of unity and common purpose (goals) fits well with providing employees with a so-called stake in the

company via share ownership. This could be further expanded by including elements of power, transparency, and

accountability. In a sense, employees become owners with “skin in the game,” so to speak.