Compensation 10th Edition by George Milkovich Jerry Newman Barry Gerhart test bank

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Compensation 10th Edition by George Milkovich Jerry Newman Barry Gerhart test bank

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Multiple Choice Questions

1. Which of the following includes restrictions on executive pay that are designed to discourage executives from taking unnecessary and excessive risks?

A. Corporate Welfare Program

B. Employee Welfare Program

C. Troubled Asset Relief Program

D. Corporate Liability Relief Program

2. According to the text, if women had the same education, experience, and union coverage as men and also worked in the same industries and occupations, they would be expected to earn about _____ of what men earn.

A. 62%

B. 70%

C. 80%

D. 90%

3. Employers spend ____ cents for benefits in addition to each dollar of wages or salaries.

A. 44

B. 34

C. 24

D. 14

4. Hourly compensation costs for manufacturing workers are higher in _____ than the U.S.

A. Germany

B. Czech Republic

C. Spain

D. Singapore

5. One of the reasons 8 in 10 working families have no health insurance is because ______.

A. many large employers do not offer health insurance

B. health insurance is more costly at large employers

C. many small employers do not offer health insurance

D. most workers decline health insurance when offered by their employer

6. _____ would be most concerned about executive pay.

A. Managers

B. Employees

C. Society

D. Stockholders

7. _____ would be most concerned about compensation as a major expense.

A. Managers

B. Employees

C. Society

D. Stockholders

8. The primary reason compensation is important to managers is because:

A. employees regard it as a reward.

B. it influences employee behavior.

C. it is a larger cost than benefits.

D. stock holders dislike high compensation costs.

9. Say on pay is part of a law designed to protect the interests of ___________.

A. Employees

B. Managers

C. Society

D. Shareholders

10. Employees view compensation as all but which of the following?

A. A return

B. An entitlement

C. A reward

D. An investment

11. Costco has higher labor costs than Walmart and Sams Club. The result is Costco has better performance in all but which of the following?

A. turnover

B. profit

C. customer satisfaction

D. sales/square foot

12. The degree to which pay influences individual and aggregate motivation among the employees at any point in time is referred to as:

A. sorting effect.

B. incentive effect.

C. motivational effect.

D. directional effect.

13. In China, compensation, daiyu, has come to mean

A. entitlement and benefits.

B. cash compensation.

C. returns and entitlement.

D. cash compensation and relational returns.

14. In Japanese companies, the concept of teate is consistent with which of the following?

A. Sophisticated performance appraisal systems

B. A strong emphasis on performance pay

C. Family, housing and commuting allowances

D. Rapid promotions

15. Which of the following is an example of a relational return?

A. Short-term incentives

B. Recognition and status

C. Work-life balance

D. Income protection

16. Which of the following are given as increments to the base pay in recognition of past work behavior?

A. Base pay

B. Cost-of-living adjustments

C. Merit pay

D. Incentives

17. Which form of pay is likely to be least expensive for employers?

A. Incentive

B. Merit pay

C. Cost-of-living adjustments

D. Base pay

18. Recent surveys show the average merit raise for an outstanding performer is ______ and average performers receive and poor performers receive 0.4%.

A. 10.5, 7

B. 8.4, 5.2

C. 6.7, 4.2

D. 4.4, 2.8

19. Employees who want to be sure their good performance will be rewarded will prefer

A. merit pay.

B. team incentives.

C. individual incentives.

D. across-the-board pay increases

20. Variable pay may also be called

A. exempt.

B. non-exempt.

C. stock options.

D. incentives.

21. Which of the following is the largest component in an executive pay package?

A. Base pay

B. Stock options

C. Merit pay

D. Perks

22. Employers annual cost per employee to provide family health care coverage is approximately ______________.

A. $5000

B. $10000

C. $15000

D. $20000

23. A company that says its relatively low starting pay will be offset by larger future pay increases is using the concept of ____.

A. present-value

B. merit pay

C. incentives

D. deferred benefits

24. All of the following have direct financial costs for an employer except:

A. benefits

B. relational returns

C. work-life balance

D. income protection

25. Which of the following is not an objective in the pay model?

A. Fairness

B. Compliance

C. Efficiency

D. Productivity

26. Costs are to management as _____ is to alignment.

A. work analysis

B. communication

C. surveys

D. merit guideline

27. Market definitions are to competitiveness as performance based is to ____.

A. alignment

B. compliance

C. efficiency

D. contribution

28. Which of the following is not a policy in the pay model?

A. Fairness

B. Competitiveness

C. Contributions

D. Alignment

29. Which of the following is not an objective of the pay model?

A. Ethics

B. Competitiveness

C. Efficiency

D. Fairness

30. Cost is to change in the pay model as ______________ are to policy lines.

A. market definitions

B. surveys

C. descriptions

D. incentives

31. Seniority based, incentive and merit guidelines are components of the ____________ policy.

A. internal alignment

B. efficiency

C. competitiveness

D. management

32. _____ refers to comparisons among jobs or skills inside a single organization.

A. External competitiveness

B. Internal alignment

C. Pay structure

D. Equitable contributions

33. Which of the following policy choices has the greatest effect on employees decisions to stay with the organization and to seek additional training and responsibilities?

A. External competitiveness

B. Employee contributions

C. Internal alignment

D. Job evaluation

34. Managers seek internal alignment within their organization by:

A. matching competitors pay rates.

B. following FLSA guidelines.

C. using fair merit increases.

D. paying on the basis of similarities among jobs.

35. Compensation policy choices affecting pay level are most closely associated with ____.

A. internal alignment

B. external competitiveness

C. contributions

D. management

36. Sams Club matches the pay of other similar businesses, Whole Foods uses base pay and team incentives and Medtronic emphasizes work and life balance. These illustrate _____ pay policy choices.

A. cost control

B. internal alignment

C. contributions

D. external competitiveness

37. Choices among pay for performance, flat rate pay and profit sharing are examples of _____ policy decisions.

A. internal alignment

B. efficiency

C. employee contributions

D. management

38. According to the text, which of the following decisions should be made jointly?

A. Internal alignment and Management.

B. External competitiveness and Employee contribution

C. Employee contribution and Internal alignment

D. Management and External competitiveness

39. Page: 22Which of the following policy decisions directly affects employees attitudes and work behaviors?

A. Employee contributions

B. Internal alignment

C. External competitiveness

D. Management

40. Which of the following decisions answers the So What question?

A. Internal alignment

B. Employee contributions

C. External competitiveness

D. Management

41. If an organization allows workers to get rewards such as stock options due to illegal and unethical means, this reflects a failure of which policy choice?

A. Internal alignment

B. Efficiency

C. Employee contributions

D. Management

42. You are an HR manager and your boss has told you to find the best way to raise job performance. After some research you find that _____ produce(s) the largest and most reliable performance increases.

A. high base pay

B. great benefits that attract and retain workers

C. a combination of goal setting and job enrichment

D. monetary incentives

43. Which of the following is not a guideline for determining if research has value?

A. Is the research useful

B. Can alternative explanations be ruled out

C. Was the research conducted by Ph D researchers

D. Is correlation separated from causation

44. A measure of how changes in one variable are related to changes in another variable is:

A. standard deviation

B. analysis of variance

C. correlation coefficient

D. regression analysis

45. The best way to establish _____ is to account for competing explanations, either statistically or through control groups.

A. causation

B. profitability

C. correlation coefficient

D. internal alignment

True / False Questions

46. Companies that pay high wages compared to their industry competitors, such as Nucor Steel and General Motors did for many years, are likely to go bankrupt.

True False

47. A financial expert concluded that misaligned incentive programs were a major cause of the recent crisis in the US financial system.

True False

48. The U.S. has the highest hourly compensation costs for manufacturing workers of any industrialized nation.

True False

49. When unemployment increases, the proportion of the population covered by health insurance decreases.

True False

50. Since the U.S. has the highest hourly compensation costs for manufacturing workers of any industrialized nation, executives could minimize total labor costs by producing in low cost countries such as China and Mexico.

True False

51. Compensation is important to managers success because it is a major cost and it influences employee behavior.

True False

52. The degree to which pay influences individual and aggregate motivation among employees is called the sorting effect.

True False

53. The degree to which pay influences individual and aggregate motivation among employees is called the sorting effect.

True False

54. Total compensation includes relational returns, cash compensation and benefits.

True False

55. In jobs paid a base wage, the wage is the same for everyone with the same job title.

True False

56. Challenging work and employment security are examples of total compensation.

True False

57. Employees classified as non-exempt under FLSA are paid a salary, not wages.

True False

58. Commissions are an example of incentives.

True False

59. If you often had to work 50 or more hours per week at an assembly job, you would probably prefer to that your job is classified as exempt under the FLSA.

True False

60. Most U. S. firms use merit pay increases.

True False

61. Base wage reflects both the value of the work and individual employee skills and experience.

True False

62. A bonus promised by your boss if costs are below your budget is a merit increase.

True False

63. In practice, there is no real difference between merit pay increases and cost-of-living adjustments.

True False

64. Pension and health benefits are a very large component of total compensation for many large companies such as American Airlines and GM.

True False

65. A major challenge facing most employers is the rising cost of health care benefits.

True False

66. The most important of the pay model policies for assuring fairness is contributions.

True False

67. The objective of compliance suggests the way a pay decision is made may be as important to employees as the results of that decision.

True False

68. Compensation professionals conduct is guided by the American Compensation Associations Code of Ethics.

True False

69. If an objective is to increase customer satisfaction, then incentive programs and merit pay might be used to pay for performance.

True False

70. Objectives guide the design of pay systems and provide standards for evaluating their effectiveness.

True False

71. The objective of procedural fairness suggests the way a pay decision is made may be as important to employees as the results of that decision.

True False

72. Internal alignment refers to comparisons among jobs or skill levels inside a single organization.

True False

73. Contributions refers to employees perceptions of the fairness of pay differences among different jobs within their organization.

True False

74. External competitiveness decisions focus on both pay levels.

True False

75. Management of the pay system focuses on cost control and employee perceptions of fairness since they are most important to management.

True False

76. The policy choice of management means ensuring that the right people get the right pay for achieving the right objectives in the right way.

True False

77. Since HR research contains information useful to managers, most managers read research in HR, management and compensation journals.

True False

78. Management and HR research has conclusively shown that goal setting and job enrichment produce the largest and most reliable increases in job performance.

True False

79. Monetary incentives produce the biggest increases in job performance.

True False

80. An important criteria for determining the value of research is whether the research is useful.

True False

81. An important criteria for determining the value of research is/are there alternative An 80. An important criteria for determining the value of research is/are there alternative explanations for the research findings?

True False

82. A study found that there is only a very small amount of change in CEO pay is related to changes in company performance.

True False

83. A study of IBM showed that their long-standing policy of no layoffs was the major cause of their strong profits.

True False

84. Causality is one of the most difficult questions to answer and continues to be an important and sometimes perplexing problem for researchers.

True False

85. The R2 is different form correlation in that it tells us what percentage of the variation is accounted for by the variables we are using to predict or explain.

True False

Short Answer Questions

86. Compensations differ with perspective. What are the different perspectives of compensation described in the text?

87. Describe stockholders perspective on compensation.

88. What are the different ways in which employees see compensation?

89. What are the different ways in which pay can influence employee motivation and behavior?

90. Describe the various returns received from work.

91. Write short notes on the different types of cash compensations discussed in the text.

92. Write short notes on the different types of benefits discussed in the text.

93. List the basic elements of the pay model.

94. Explain the compensation objectives of the pay model. The basic objectives include efficiency, fairness, ethics, and compliance with laws and regulations.

95. List and define the different policy decisions of the pay model.


Chapter 01 The Pay Model AnswerKey

Multiple Choice Questions

1.
(p. 5) Which of the following includes restrictions on executive pay that are designed to discourage executives from taking unnecessary and excessive risks?

A. Corporate Welfare Program

B. Employee Welfare Program

C. Troubled Asset Relief Program

D. Corporate Liability Relief Program

Difficulty: Medium

2.
(p. 5) According to the text, if women had the same education, experience, and union coverage as men and also worked in the same industries and occupations, they would be expected to earn about _____ of what men earn.

A. 62%

B. 70%

C. 80%

D. 90%

Difficulty: Easy

3.
(p. 5) Employers spend ____ cents for benefits in addition to each dollar of wages or salaries.

A. 44

B. 34

C. 24

D. 14

Difficulty: Hard

4.
(p. 6) Hourly compensation costs for manufacturing workers are higher in _____ than the U.S.

A. Germany

B. Czech Republic

C. Spain

D. Singapore

Difficulty: Medium

5.
(p. 6) One of the reasons 8 in 10 working families have no health insurance is because ______.

A. many large employers do not offer health insurance

B. health insurance is more costly at large employers

C. many small employers do not offer health insurance

D. most workers decline health insurance when offered by their employer

Difficulty: Medium

6.
(p. 7) _____ would be most concerned about executive pay.

A. Managers

B. Employees

C. Society

D. Stockholders

Difficulty: Easy

7.
(p. 7) _____ would be most concerned about compensation as a major expense.

A. Managers

B. Employees

C. Society

D. Stockholders

Difficulty: Easy

8.
(p. 9) The primary reason compensation is important to managers is because:

A. employees regard it as a reward.

B. it influences employee behavior.

C. it is a larger cost than benefits.

D. stock holders dislike high compensation costs.

Difficulty: Medium

9.
(p. 9) Say on pay is part of a law designed to protect the interests of ___________.

A. Employees

B. Managers

C. Society

D. Shareholders

Difficulty: Hard

10.
(p. 11) Employees view compensation as all but which of the following?

A. A return

B. An entitlement

C. A reward

D. An investment

Difficulty: Medium

11.
(p. 10-11) Costco has higher labor costs than Walmart and Sams Club. The result is Costco has better performance in all but which of the following?

A. turnover

B. profit

C. customer satisfaction

D. sales/square foot

Difficulty: Medium

12.
(p. 11) The degree to which pay influences individual and aggregate motivation among the employees at any point in time is referred to as:

A. sorting effect.

B. incentive effect.

C. motivational effect.

D. directional effect.

Difficulty: Easy

13.
(p. 12) In China, compensation, daiyu, has come to mean

A. entitlement and benefits.

B. cash compensation.

C. returns and entitlement.

D. cash compensation and relational returns.

Difficulty: Medium

14.
(p. 12) In Japanese companies, the concept of teate is consistent with which of the following?

A. Sophisticated performance appraisal systems

B. A strong emphasis on performance pay

C. Family, housing and commuting allowances

D. Rapid promotions

Difficulty: Medium

15.
(p. 13) Which of the following is an example of a relational return?

A. Short-term incentives

B. Recognition and status

C. Work-life balance

D. Income protection

Difficulty: Medium

16.
(p. 14) Which of the following are given as increments to the base pay in recognition of past work behavior?

A. Base pay

B. Cost-of-living adjustments

C. Merit pay

D. Incentives

Difficulty: Medium

17.
(p. 15) Which form of pay is likely to be least expensive for employers?

A. Incentive

B. Merit pay

C. Cost-of-living adjustments

D. Base pay

Difficulty: Medium

18.
(p. 15) Recent surveys show the average merit raise for an outstanding performer is ______ and average performers receive and poor performers receive 0.4%.

A. 10.5, 7

B. 8.4, 5.2

C. 6.7, 4.2

D. 4.4, 2.8

Difficulty: Hard

19.
(p. 15) Employees who want to be sure their good performance will be rewarded will prefer

A. merit pay.

B. team incentives.

C. individual incentives.

D. across-the-board pay increases

Difficulty: Hard

20.
(p. 15) Variable pay may also be called

A. exempt.

B. non-exempt.

C. stock options.

D. incentives.

Difficulty: Medium

21.
(p. 15) Which of the following is the largest component in an executive pay package?

A. Base pay

B. Stock options

C. Merit pay

D. Perks

Difficulty: Medium

22.
(p. 16) Employers annual cost per employee to provide family health care coverage is approximately ______________.

A. $5000

B. $10000

C. $15000

D. $20000

Difficulty: Hard

23.
(p. 17) A company that says its relatively low starting pay will be offset by larger future pay increases is using the concept of ____.

A. present-value

B. merit pay

C. incentives

D. deferred benefits

Difficulty: Hard

24.
(p. 17) All of the following have direct financial costs for an employer except:

A. benefits

B. relational returns

C. work-life balance

D. income protection

Difficulty: Hard

25.
(p. 18) Which of the following is not an objective in the pay model?

A. Fairness

B. Compliance

C. Efficiency

D. Productivity

Difficulty: Easy

26.
(p. 18) Costs are to management as _____ is to alignment.

A. work analysis

B. communication

C. surveys

D. merit guideline

Difficulty: Hard

27.
(p. 18) Market definitions are to competitiveness as performance based is to ____.

A. alignment

B. compliance

C. efficiency

D. contribution

Difficulty: Hard

28.
(p. 18) Which of the following is not a policy in the pay model?

A. Fairness

B. Competitiveness

C. Contributions

D. Alignment

Difficulty: Medium

29.
(p. 18) Which of the following is not an objective of the pay model?

A. Ethics

B. Competitiveness

C. Efficiency

D. Fairness

Difficulty: Medium

30.
(p. 18) Cost is to change in the pay model as ______________ are to policy lines.

A. market definitions

B. surveys

C. descriptions

D. incentives

Difficulty: Hard

31.
(p. 18) Seniority based, incentive and merit guidelines are components of the ____________ policy.

A. internal alignment

B. efficiency

C. competitiveness

D. management

Difficulty: Easy

32.
(p. 21) _____ refers to comparisons among jobs or skills inside a single organization.

A. External competitiveness

B. Internal alignment

C. Pay structure

D. Equitable contributions

Difficulty: Easy

33.
(p. 22) Which of the following policy choices has the greatest effect on employees decisions to stay with the organization and to seek additional training and responsibilities?

A. External competitiveness

B. Employee contributions

C. Internal alignment

D. Job evaluation

Difficulty: Medium

34.
(p. 22) Managers seek internal alignment within their organization by:

A. matching competitors pay rates.

B. following FLSA guidelines.

C. using fair merit increases.

D. paying on the basis of similarities among jobs.

Difficulty: Medium

35.
(p. 25) Compensation policy choices affecting pay level are most closely associated with ____.

A. internal alignment

B. external competitiveness

C. contributions

D. management

Difficulty: Easy

36.
(p. 22) Sams Club matches the pay of other similar businesses, Whole Foods uses base pay and team incentives and Medtronic emphasizes work and life balance. These illustrate _____ pay policy choices.

A. cost control

B. internal alignment

C. contributions

D. external competitiveness

Difficulty: Medium

37.
(p. 22) Choices among pay for performance, flat rate pay and profit sharing are examples of _____ policy decisions.

A. internal alignment

B. efficiency

C. employee contributions

D. management

Difficulty: Medium

38.
(p. 23) According to the text, which of the following decisions should be made jointly?

A. Internal alignment and Management.

B. External competitiveness and Employee contribution

C. Employee contribution and Internal alignment

D. Management and External competitiveness

Difficulty: Easy

39.
(p. 22) Page: 22Which of the following policy decisions directly affects employees attitudes and work behaviors?

A. Employee contributions

B. Internal alignment

C. External competitiveness

D. Management

Difficulty: Easy

40.
(p. 23) Which of the following decisions answers the So What question?

A. Internal alignment

B. Employee contributions

C. External competitiveness

D. Management

Difficulty: Medium

41.
(p. 23) If an organization allows workers to get rewards such as stock options due to illegal and unethical means, this reflects a failure of which policy choice?

A. Internal alignment

B. Efficiency

C. Employee contributions

D. Management

Difficulty: Hard

42.
(p. 25) You are an HR manager and your boss has told you to find the best way to raise job performance. After some research you find that _____ produce(s) the largest and most reliable performance increases.

A. high base pay

B. great benefits that attract and retain workers

C. a combination of goal setting and job enrichment

D. monetary incentives

Difficulty: Medium

43.
(p. 25-27) Which of the following is not a guideline for determining if research has value?

A. Is the research useful

B. Can alternative explanations be ruled out

C. Was the research conducted by Ph D researchers

D. Is correlation separated from causation

Difficulty: Medium

44.
(p. 26) A measure of how changes in one variable are related to changes in another variable is:

A. standard deviation

B. analysis of variance

C. correlation coefficient

D. regression analysis

Difficulty: Hard

45.
(p. 27) The best way to establish _____ is to account for competing explanations, either statistically or through control groups.

A. causation

B. profitability

C. correlation coefficient

D. internal alignment

Difficulty: Hard

True / False Questions

46.
(p. 4) Companies that pay high wages compared to their industry competitors, such as Nucor Steel and General Motors did for many years, are likely to go bankrupt.

FALSE

Difficulty: Medium

47.
(p. 5) A financial expert concluded that misaligned incentive programs were a major cause of the recent crisis in the US financial system.

TRUE

Difficulty: Easy

48.
(p. 6) The U.S. has the highest hourly compensation costs for manufacturing workers of any industrialized nation.

FALSE

Difficulty: Easy

49.
(p. 6) When unemployment increases, the proportion of the population covered by health insurance decreases.

TRUE

Difficulty: Medium

50.
(p. 6) Since the U.S. has the highest hourly compensation costs for manufacturing workers of any industrialized nation, executives could minimize total labor costs by producing in low cost countries such as China and Mexico.

FALSE

Difficulty: Hard

51.
(p. 9) Compensation is important to managers success because it is a major cost and it influences employee behavior.

TRUE

Difficulty: Easy

52.
(p. 10-11) The degree to which pay influences individual and aggregate motivation among employees is called the sorting effect.

FALSE

Difficulty: Medium

53.
(p. 10-11) The degree to which pay influences individual and aggregate motivation among employees is called the sorting effect.

FALSE

Difficulty: Medium

54.
(p. 13) Total compensation includes relational returns, cash compensation and benefits.

FALSE

Difficulty: Medium

55.
(p. 14) In jobs paid a base wage, the wage is the same for everyone with the same job title.

FALSE

Difficulty: Hard

56.
(p. 13) Challenging work and employment security are examples of total compensation.

FALSE

Difficulty: Medium

57.
(p. 14) Employees classified as non-exempt under FLSA are paid a salary, not wages.

FALSE

Difficulty: Easy

58.
(p. 15) Commissions are an example of incentives.

TRUE

Difficulty: Easy

59.
(p. 14) If you often had to work 50 or more hours per week at an assembly job, you would probably prefer to that your job is classified as exempt under the FLSA.

FALSE

Difficulty: Medium

60.
(p. 14) Most U. S. firms use merit pay increases.

TRUE

Difficulty: Easy

61.
(p. 11) Base wage reflects both the value of the work and individual employee skills and experience.

FALSE

Difficulty: Medium

62.
(p. 15) A bonus promised by your boss if costs are below your budget is a merit increase.

FALSE

Difficulty: Medium

63.
(p. 15) In practice, there is no real difference between merit pay increases and cost-of-living adjustments.

FALSE

Difficulty: Easy

64.
(p. 16) Pension and health benefits are a very large component of total compensation for many large companies such as American Airlines and GM.

TRUE

Difficulty: Easy

65.
(p. 16) A major challenge facing most employers is the rising cost of health care benefits.

TRUE

Difficulty: Easy

66.
(p. 19) The most important of the pay model policies for assuring fairness is contributions.

FALSE

Difficulty: Medium

67.
(p. 19) The objective of compliance suggests the way a pay decision is made may be as important to employees as the results of that decision.

FALSE

Difficulty: Easy

68.
(p. 20-21) Compensation professionals conduct is guided by the American Compensation Associations Code of Ethics.

FALSE

Difficulty: Medium

69.
(p. 21) If an objective is to increase customer satisfaction, then incentive programs and merit pay might be used to pay for performance.

TRUE

Difficulty: Easy

70.
(p. 21) Objectives guide the design of pay systems and provide standards for evaluating their effectiveness.

TRUE

Difficulty: Medium

71.
(p. 19) The objective of procedural fairness suggests the way a pay decision is made may be as important to employees as the results of that decision.

TRUE

Difficulty: Easy

72.
(p. 21) Internal alignment refers to comparisons among jobs or skill levels inside a single organization.

TRUE

Difficulty: Easy

73.
(p. 22) Contributions refers to employees perceptions of the fairness of pay differences among different jobs within their organization.

FALSE

Difficulty: Easy

74.
(p. 22) External competitiveness decisions focus on both pay levels.

TRUE

Difficulty: Easy

75.
(p. 23) Management of the pay system focuses on cost control and employee perceptions of fairness since they are most important to management.

FALSE

Difficulty: Medium

76.
(p. 23) The policy choice of management means ensuring that the right people get the right pay for achieving the right objectives in the right way.

TRUE

Difficulty: Easy

77.
(p. 25) Since HR research contains information useful to managers, most managers read research in HR, management and compensation journals.

FALSE

Difficulty: Medium

78.
(p. 25) Management and HR research has conclusively shown that goal setting and job enrichment produce the largest and most reliable increases in job performance.

FALSE

Difficulty: Medium

79.
(p. 25) Monetary incentives produce the biggest increases in job performance.

TRUE

Difficulty: Easy

80.
(p. 26) An important criteria for determining the value of research is whether the research is useful.

TRUE

Difficulty: Easy

81.
(p. 24) An important criteria for determining the value of research is/are there alternative An 80. An important criteria for determining the value of research is/are there alternative explanations for the research findings?

TRUE

Difficulty: Medium

82.
(p. 26) A study found that there is only a very small amount of change in CEO pay is related to changes in company performance.

TRUE

Difficulty: Hard

83.
(p. 26) A study of IBM showed that their long-standing policy of no layoffs was the major cause of their strong profits.

FALSE

Difficulty: Medium

84.
(p. 26) Causality is one of the most difficult questions to answer and continues to be an important and sometimes perplexing problem for researchers.

TRUE

Difficulty: Easy

85.
(p. 26) The R2 is different form correlation in that it tells us what percentage of the variation is accounted for by the variables we are using to predict or explain.

FALSE

Difficulty: Medium

Short Answer Questions

86.
(p. 4) Compensations differ with perspective. What are the different perspectives of compensation described in the text?

The text describes compensation from the perspective of a member of society, a stockholder, a manager, and an employee.

Difficulty: Easy

87.
(p. 6) Describe stockholders perspective on compensation.

Stockholders are interested in how employees are paid. Using stock to pay employees creates a sense of ownership which improves performance and increase stockholder wealth. However, granting employees too much ownership dilutes stockholder wealth.
Stockholders have a particular interest in executive pay. The interests of executives are aligned with those of shareholders who hope that company performance will be higher.

Difficulty: Medium

88.
(p. 8) What are the different ways in which employees see compensation?

Employees see compensation as a return in an exchange between their employer and themselves, as an entitlement for being an employee of the company, or as a reward for a job well done.

Difficulty: Easy

89.
(p. 9) What are the different ways in which pay can influence employee motivation and behavior?

Pay can influence employee motivation and behavior in two ways:

i. Pay can affect the motivational intensity, direction, and persistence of current employees. The degree to which pay influences individual and aggregate motivation among the employees at any point in time is referred to as incentive effect.
ii. Pay can also have an indirect, but important influence, via, a sorting effect. Different types of pay strategies cause different types of people to apply to and stay with an organization.

Difficulty: Medium

90.
(p. 10-11) Describe the various returns received from work.

Returns are categorized in two:

i. Relational returns are psychological and include learning opportunities, status, challenging work, and other psychological aspects.
ii. Total compensations are transactional and include

a. Pay received directly as cash through base pay, merit, incentives, cost-of-living adjustments etc.
b. Pay received indirectly as benefits through pensions, medical insurance, programs to help balance work and life demands, bright colored uniform etc.

Difficulty: Hard

91.
(p. 11-12) Write short notes on the different types of cash compensations discussed in the text.

i. Base pay is the cash compensation that an employer pays for the work performed. It tends to reflect the value of the work or skills and generally ignores differences attributable to individual employees.
ii. Merit increases are given as increments to the base pay in recognition of past work behavior. Some assessment of past performance is made, with or without a formal performance evaluation program, and the size of the increase is varied with performance.
iii. Cost-of-living adjustments give the same increases as merit, but to everyone, regardless of performance.
iv. Incentives tie pay increases directly to performance but differ from merit adjustments in two ways. Incentives can be tied to the performance of an individual employee, a team of employees, a total business unit, or some combination of individual, team, and unit. Incentives are one-time payments and do not permanently increase labor costs. When performance declines, incentive pay automatically declines, too. Consequently, incentives are frequently referred to as variable pay.
v. Long-term incentives are intended to focus employee efforts on multiyear results. Typically they are in the form of stock ownership or options to buy stock at specified, advantageous prices.

Difficulty: Medium

92.
(p. 13-14) Write short notes on the different types of benefits discussed in the text.

i. In the United States, employers must pay into a fund that provides income replacement for workers who become disabled or unemployed. Employers also make half the contributions to Social Security. (Employees pay the other half.) Different countries have different lists of mandatory benefits. Medical insurance, retirement programs, life insurance, and savings plans are common benefits.
ii. Programs that help employees better integrate their work/life balance include time away from work (vacations, jury duty), access to services to meet specific needs (drug counseling, financial planning, referrals for child and elder care), and flexible work arrangements (telecommuting, nontraditional schedules, nonpaid time off).
iii. Allowances often grow out of whatever is in short supply and differ from region to region.

Difficulty: Medium

93.
(p. 15) List the basic elements of the pay model.

The pay model contains three basic building blocks:

i. the compensation objective,
ii. the policies that form the foundation of the compensation system, and
iii. the techniques that make up the compensation system.

Difficulty: Easy

94.
(p. 15-17) Explain the compensation objectives of the pay model. The basic objectives include efficiency, fairness, ethics, and compliance with laws and regulations.

i. Efficiency can be stated more specifically: (1) improving performance, increasing quality, delighting customers and stockholders, and (2) controlling labor costs.
ii. The fairness objective calls for fair treatment for all employees by recognizing both employee contributions (e.g., higher pay for greater performance, experience, or training) and employee needs (e.g., a fair wage as well as fair procedures).
iii. Ethics means the organization cares about how its results are achieved. Because it is so important, it is inevitable that managing pay sometimes creates ethical dilemmas.
iv. Compliance as a pay objective means conforming to federal and state compensation laws and regulations. If laws change, pay systems may need to change, too, to ensure continued compliance. As companies go global, they must comply with the laws of all the countries in which they operate.

Difficulty: Medium

95.
(p. 19-20) List and define the different policy decisions of the pay model.
i. Internal alignment refers to comparisons among jobs or skill levels inside a single organization.
ii. External competitiveness refers to pay comparisons with competitors.
iii. Employee contribution emphasizes on the pay mix for different employees according to performance and/or seniority.
iv. Management means ensuring that the right people get the right pay for achieving the right objectives in the right way.

Difficulty: Medium

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