Q&A Hero

Q: An employee stock ownership plan is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.

Q: In larger organizations that have stock ownership plans, the employees may not see a strong link between their actions and the company's stock price.

Q: Under profit sharing, payments are a percentage of the organization's profits and become part of the employees' base salary.

Q: The costs associated with profit sharing increase substantially when the organization experiences financial difficulties.

Q: Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk.

Q: Under the team awards type of group incentive, cost savings is excluded as a performance measure.

Q: Group bonuses typically reward the performance of all employees in an organization.

Q: The Scanlon plan of gainsharing gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.

Q: Retention bonuses are one-time incentives paid to top managers, engineers, top-performing salespeople, and information technology specialists in exchange for remaining with the company.

Q: As in the case of merit pay, performance bonuses for rewarding individual performance are rolled into an employee's base pay.

Q: From employers' perspective, an advantage of merit pay is that it is cheap.

Q: Merit pay is a system of linking pay increases to ratings on performance appraisals.

Q: A merit pay incentive system is used to attract employees who are more team-oriented.

Q: Under incentive pay, piecework rates are most suited for routine, standardized jobs with output that is easy to measure.

Q: Incentive pay is specifically designed to energize, direct, or control employees' behavior and is influential because the amount paid is linked to certain predefined behaviors or outcomes.

Q: How does allowing employees to participate in pay-related decisions affect the incentive process?

Q: What is balanced scorecard? What is its purpose? What are the advantages of using a balanced scorecard?

Q: Explain how employee stock ownership plans differ from stock options?

Q: What are group bonuses and team awards? What are their advantages and disadvantages?

Q: Elaborate on how gainsharing can be successful as a form of group incentive.

Q: How does linking executive pay to stock performance lead to unethical behavior? A. Executives can use the advantage of knowing the company's inside information to buy or sell stock and create huge personal gains. B. Executives can roll in the stock price into their base pay to avoid paying a huge tax. C. Executives will lower the stock prices in order to enjoy bonuses. D. Executives can use the employee stock ownership plan to buy their company if it is experiencing financial problems. E. The executives can obtain as many shares as they need at a price that is much lower than the market rate.

Q: The _____ has required companies to more clearly report executive compensation levels and the company's performance relative to that of competitors. A. National Credit Union Administration B. Financial Industry Regulatory Authority C. Commodity Futures Trading Commission D. Securities and Exchange Commission E. Omnibus Budget Reconciliation Act

Q: How does the balanced scorecard help organizations deal with unethical behaviors of executives? A. It allows companies to deduct executive pay that exceeds $1 million. B. It ensures that by rewarding the achievement of a variety of goals, temptation on the executive's part to gain bonuses by manipulating data are reduced. C. It encourages executives to hold on to their stock options when the company is undergoing financial problems. D. It forces executives to focus on the company's long-term success because ESOP funds are guaranteed by the Pension Benefit Guarantee Corporation. E. It mandates that an ESOP invest at least 51% of its assets in the company's own stock.

Q: Which of the following is a long-term incentive? A. Sales commission B. Group bonus C. Merit pay D. Stock option E. Piece rate

Q: Kolese Inc., a manufacturing company, includes stock options and stock purchase plans. Executives at the company will want to do what is best for Kolese because that will cause the value of the stock to grow. Which of the following is being exemplified in this scenario? A. Scanlon plan B. Balanced scorecard C. Long-term incentive D. Merit plan E. Short-term incentive

Q: Which of the following is a short-term incentive? A. Return on investment B. Straight salary C. Stock options D. Stock purchase plans E. Company shares

Q: Ashance Inc., a manufacturing company, includes bonuses based on the year's profits or other measures related to the organization's goals as an incentive method. Sometimes, to gain tax advantages, the actual payment of the bonus is deferred. Which of the following is being exemplified in this scenario? A. Long-term incentive B. Balanced scorecard C. Piecework plan D. Employee stock incentive plan E. Short-term incentive

Q: Harry, the HR manager at Kopi Co., has been asked to reward good performance. However, the budget allocated for rewards is limited. He therefore decides to offer raises to a few employees and spot bonuses to the remaining employees. Which of the following would further strengthen his decision? A. The performance appraisals of each employee were performed by two supervisors to avoid bias. B. The performance measures used to evaluate employees had been communicated to the employees before the start of the review period. C. The spot bonuses have been increased by ten percent from the previous financial year. D. The organization had decided to reward teams that worked on new types of projects. E. The organization believes that merit pay is for exceptional and not regular work.

Q: Employees should participate in pay-related decisions. This will most likely help in the success of incentive plans, and the plans are more likely to influence employee behavior as desired. Which of the following statements weakens this argument? A. Employees will make decisions that are in their best interests at the expense of the organization's interests. B. It is difficult to monitor an employee's work output when decisions are made by the employee. C. When employees become more involved in pay decisions, they neglect the work assigned to them. D. Employees should be a part of the human resource department to be involved in pay-related decisions. E. It will have a negative impact on the top-level management of the company.

Q: Keytechi and Sons, a marketing company, has implemented a few incentive plans to motivate its employees. The organization encourages employees to learn new skills and cooperate with others. Which of the following will contribute to employees' feeling that the organization's incentive pay plans are fair? A. Employees must be able to understand the requirements of the incentive pay plan. B. Equal incentives should be offered to all the employees of the organization. C. Employees must be the key decision makers when creating incentive pay plans. D. The company should not inform the employees about incentive plan changes. E. Employees should make decisions that are only in favor of their interests.

Q: If employee participation in making pay-related decisions is encouraged in an organization, then: A. administering the plans become simple. B. the organization's interests can be best protected. C. the cost borne by the organization decreases. D. monitoring performance becomes difficult. E. the incentive plan has more chances of being successful.

Q: Employee participation in pay-related decisions can be part of a general move toward: A. employee empowerment. B. centralized decision making. C. self ownership. D. high power distance. E. federalism.

Q: An organization wants to provide its employees information about what its goals are and what it expects employees to accomplish. It is planning to implement an incentive plan that helps employees understand the organization's goals. Which of the following should be used by this organization? A. A retention bonus B. A piecework rate system C. A merit pay system D. The Scanlon plan E. A balanced scorecard

Q: Which of the following statements is true about a balanced scorecard? A. It encourages employees to compete at the expense of cooperating to achieve organizational goals. B. It allows employees to buy their company when it is experiencing financial problems. C. It combines the advantages of different incentive pay plans and helps employees understand the organization's goals. D. It increases cooperation but does little to motivate day-to-day effort or to attract and retain top individual performers. E. It is the only measure used by top management to measure the performance of HR professionals and managers.

Q: Kelltech Inc. is a sales and marketing company based in Baltimore. It wants to combine the advantages of different incentive-pay plans and help employees understand the organization's goals. Which of the following will help the company accomplish this goal? A. A Scanlon plan B. A balanced scorecard C. A dashboard D. An employee stock ownership plan E. A differential piece rate system

Q: Which of the following is an advantage of using balanced scorecard? A. It eliminates the need to communicate the details of the plan to the employees. B. It eliminates managerial effort when providing incentives to employees. C. It increases the pay for all employees in the organization regardless of their performances. D. It reduces employee stress because it does not focus on financial targets. E. It helps employees understand the organization's goals.

Q: Which of the following best describes a balanced scorecard? A. A combination of performance measures directed toward the company's long and short-term goals and used as the basis for awarding incentive pay B. A performance review process where the organization collects feedback from customers, managers, and subordinates, assigns ratings, and lists them on the company's performance card C. An arrangement in which the organization distributes shares of stock to all its employees by placing the stock into a trust D. An incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary E. It is a system designed to measure the performance of HR personnel based on the quality of recruitment

Q: Which of the following is a method where a combination of performance measures directed toward the company's long- and short-term goals are used as the basis for awarding incentive pay? A. Merit pay B. Profit sharing C. Gainsharing D. Balanced scorecard E. Scanlon plan

Q: A major problem with ESOPs is that: A. they carry a significant risk for employees. B. employees are not allowed to participate in votes by shareholders. C. the stocks within the trust are too widely diversified to earn high returns. D. any earnings from the trust holdings are taxed at an extremely high rate. E. they result in reduced profitability for the employees.

Q: Employee stock ownership plans (ESOPs) are attractive to employers. Along with tax and financing advantages, ESOPs give employers a way to build pride in and commitment to the organization. Which of the following statements weakens this argument? A. Employees are not allowed to participate in general body meetings as shareholders. B. The stocks within the trust are too widely diversified to earn high returns. C. The stock earnings are taxed at high rates. D. Employees are forced to return the stock profits to the organization. E. Risks involved will directly affect employees' retirement income.

Q: By law, what is the minimum percentage of assets that an ESOP must invest in its company's stock? A. 10 B. 26 C. 51 D. 60 E. 76

Q: Which of the following is a reason for ESOPs' popularity? A. ESOPs provide tax advantages to employers. B. ESOPs provide very high risk-free retirement income. C. Employees can use ESOPs to buy their company during financial crises. D. ESOPs must invest at least 51 percent of its assets in the company's own stocks. E. The employees are provided with many more stocks than they actually own.

Q: What is the difference between stock options and an employee stock ownership plan (ESOP)? A. Stock options carry significant risk whereas ESOPs are risk-free. B. Stock options are usually granted to company executives whereas ESOPs are provided to all employees. C. In stock options, stocks are placed into a trust whereas ESOPs give employees the right to buy a certain number of shares of stock. D. Under stock options, employees can sell their stocks whereas ESOPs do not allow employees to sell their stocks. E. Earnings from stock options are exempt from income taxes whereas earnings from ESOPs are taxable.

Q: In the context of stock ownership, what is meant by backdating a stock option? A. Reaping windfall in the stock market by selling stock based on company's nonpublic information B. Falsifying numbers in the company's annual report to hide losses and inflate the stock prices C. Buying company's stock just before the date of key product launch D. Changing the price in the original option agreement so that the option holder can buy stock at a bargain price E. Re-evaluating a company's stocks to adjust it to a previous date so that the shareholders and employees minimize the losses

Q: Electrix Inc. is an electrical appliances manufacturing company. It distributes shares of stock to its employees by placing the stock in a trust managed on the employees' behalf. Which of the following has been implemented by Electrix in this scenario? A. Scanlon plan B. Balanced scorecard C. Piecework stock plan D. Employee stock ownership plan E. Differential piece stock plan

Q: Which of the following is an arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust? A. Stock options B. Employee stock ownership plan C. Scanlon plan D. Collective stock options E. Profit sharing plan

Q: Alan, a manager at Conephase, decides to sell his shares at the current market value. He had purchased the stock at $20 per share a few years ago. However, the current market rate per share is $15. In this case, Alan should: A. avoid selling the stock and wait for the market value to be higher than $20. B. ask a lower-level employee to purchase the stocks at his price. C. apply the Scanlon plan. D. negotiate with stock market authorities to increase the market value. E. sell his shares at the current rate or wait for the rate decrease.

Q: In 2014, a company employee received an option to purchase the company's stock at $45 per share. If the stock is trading at $40 a share in 2016, the employee will most likely: A. exercise the option, receiving a gain of $5. B. exercise the option, receiving a gain of $40. C. not bother to exercise the options. D. buy the stock at $45 per share. E. sell the shares to a third party slightly above the market price.

Q: Maria, an employee of a finance company, believes that purchasing the company's stock will always be profitable regardless of the stock's market value. She feels that stock options are long-term incentive plans that make employees part owners of the organization. Which of the following statements contradicts Maria's belief? A. Stock options are not profitable to employees. B. A large percentage of top and middle managers avoid stock options. C. A company does not allow its employees to purchase its own stock. D. Offering stock options discourages employees from thinking like owners. E. Stock prices in the market may fall below their purchased value.

Q: Which of the following statements is true of using stock options as incentive pay? A. The use of stock options ensures that managers add value in terms of efficiency and customer satisfaction. B. Stock options require an option holder to purchase the organization's stocks at its present market rate. C. Stock options are rewarding for employees who exercise their option when the company's stock value has risen. D. Low-level employees with stock options are more likely to think like owners than executives who have stock options. E. A company's performance in the stock market tends to be significantly better if its low-level employees are provided stock options.

Q: In the context of stock options, _____ is called exercising the option. A. purchasing stock B. selling stock C. retaining stock D. distributing stock E. liquidating stock

Q: The link between employees' performance and pay is harder to establish in: A. piece rate plans. B. merit pay plans. C. standard hour plans. D. stock ownership plans. E. Scanlon plans.

Q: What is the drawback of stock ownership as a form of incentive pay? A. Financial benefits mostly come when the employee leaves the organization. B. Employees have the right to participate in votes by shareholders, hence reducing the negotiating power of the employer. C. It causes the employers to lose control over their employees. D. The employees will not benefit even if the organization is performing well. E. Stock options do not provide any ownership to employees, instead it offers an equivalent sum.

Q: Sheldon, the manager of a manufacturing firm, wants the organization to perform better. He expects his employees to think more like owners, taking a broad view of what they need to do in order to make the organization more effective. In this case, Sheldon should: A. pay his employees per piece that is manufactured. B. create a balanced scorecard. C. reorganize the departments in the organization. D. implement a profit-sharing incentive plan. E. hire new employees and pay them above the market rate.

Q: Identify the disadvantage of using profit sharing plans. A. They cannot be used to improve the organization's performance as a whole. B. The employees may develop a narrow view of their roles in the organization. C. They cost more when the organization experiences financial difficulties. D. Sharing profit with the employees ultimately reduces the organization's profitability. E. Profit sharing is not directly linked to individual behavior.

Q: Mike, the CEO of an automobile company, believes that profit sharing has increased the productivity of his organization. He feels that an incentive plan motivates employees to be more productive. Which of the following statements strengthens Mike's argument? A. In a profit-sharing plan, employees are the owners of the organization. B. Profit sharing helps employees to cooperate and to focus on organizational interests. C. Profit sharing makes employees workaholics. D. In profit sharing, employees contribute their base salary for the development of the organization. E. Profit sharing benefits employees even if the organization makes less profit or no profit.

Q: Executive pay has drawn public scrutiny in recent years. Which of the following statements best explains the reason? A. Top executives' pay is much higher than average workers' pay. B. Most of the top executives' pay is in the form of a salary. C. Top executives come under the category of exempt employees. D. Top executives are paid in the form of commissions. E. Executives are denied short-term or long-term incentives with their pay.

Q: The _____ requires employers to make jobs available to their workers when they return after fulfilling military duties for up to five years. A. USERRA B. FLSA C. EEOA D. NLRB E. FMLA

Q: Compa-ratio: A. is defined as the ratio of average pay to the midpoint of the pay range. B. is defined as the ratio of the average pay for the grade divided by the minimum pay for the grade. C. can range from 0 to 100 percent. D. uses data from market-pay surveys. E. measures the degree to which new skills learnt are consistent with the increases in pay.

Q: Which of the following statements is true about skill-based pay? A. Skill-based pay provides a way to ensure that employees can use their new skills. B. Gathering market data about skill-based pay is easy. C. Skill-based pay ensures that the employer pays the employee for learning skills that benefit the employer. D. Skill-based pay does not necessarily provide an alternative to the bureaucracy and paperwork of traditional pay structures. E. Skill-based pay does not require records related to skills, training, and knowledge acquired.

Q: Which of the following is a disadvantage of skill-based pay systems? A. It makes organizations inflexible. B. It reduces employee empowerment. C. It does not guarantee that employees can use their new skills. D. It reduces opportunities for promoting employees. E. It does not contribute to job enrichment.

Q: Which of the following is a disadvantage of broad bands? A. They reduce managers' flexibility in making assignments. B. They always result in pay decreases. C. They increase the number of levels in the organization's job structure. D. They reduce the opportunities for promoting employees. E. They discourage employees from gaining valuable experience through lateral career moves.

Q: Which of the following is the result of combining more assignments into a single layer, thus giving managers more flexibility in making assignments and awarding pay increases? A. Outsourcing B. Broad bands C. Rightsizing D. Benchmarks E. Downsizing

Q: Which of the following is a characteristic of delayering? A. It increases an organizations' flexibility. B. It increases the opportunities for promoting employees. C. It sets pay according to the employees' level of knowledge. D. It encourages a climate of learning. E. It decreases the flexibility of managers in making assignments.

Q: Which of the following is a disadvantage of a pay structure that rewards employees for winning promotions? A. It does not focus on setting pay for groups of jobs. B. It does not make adjustments to a pay rate to reflect differences in labor markets. C. It discourages employees from gaining valuable experience through lateral career moves. D. It rewards employees for acquiring skills but does not provide a way to ensure that employees can use their new skills. E. It places the employer at an economic disadvantage relative to other employers that pay the market rate, by raising the pay for some jobs.

Q: Instruck Inc. is a real estate firm based in Colorado. The company ensures that employees' pay is dependent on what they are capable of doing. The company also supports efforts to empower its employees by encouraging them to be independent and making decisions in various areas. This, in turn, ensures job enrichment. Based on this information, identify the pay structure being exemplified in this scenario. A. Straight piecework plan B. Skill-based pay systems C. Merit pay system D. Differential piece rates E. Standard hour plan

Q: Joy Limon, a manufacturing company, has a job structure that focuses on higher pay for higher status. When the company's CEO decides that the company will need a new set of knowledge, skills, and abilities, he realizes that the existing pay structure may be rewarding the wrong behaviors. In this case, which of the following alternatives to job-based pay structures may help the organization to respond to this problem? A. Straight piecework plan B. Skill-based pay system C. Delayering D. Quality-based pay system E. Benchmarking

Q: Which of the following statements is true about job-based pay structures? A. A pay structure that rewards employees for winning promotions will encourage them to gain valuable experience through lateral career moves. B. Their focus on higher pay for higher status can work in favor of efforts for empowerment. C. They typically reward desired behaviors, particularly in a rapidly changing environment. D. Organizations may avoid change because it requires repeating the time-consuming process of creating job descriptions and related paperwork. E. They always encourage flexibility, innovation, quality, and customer service.

Q: Both Thomas and his cousin, Alex, work for two different branches of the same organization. Both have the same level of experience in management. However, Thomas earns more than Alex. Under the laws governing Fair Labor Standards Act (FLSA), which of the following will justify the organization's decision to pay Thomas more than Alex? A. Thomas lives in a location where living expenses are higher. B. Alex is younger than Thomas. C. Thomas is a U.S. citizen. D. Alex is physically disabled. E. Alex is a substance abuser.

Q: Which of the following is an adjustment to a pay rate to reflect differences in working conditions or labor markets? A. Bonus B. Pay differential C. Green-circle rate D. Rank-and-file adjustment E. Red-circle rate

Q: Assuming an organization wants to motivate employees through promotions, and assuming enough opportunities for promotions are available, the organization would want to: A. increase the overlap from one level to the next. B. reduce its compa-ratio to less than 1. C. implement a broad-band pay structure. D. limit the overlap from one pay range to the next. E. use a fixed interval promotion policy.

Q: Overlapping _____ give the organization more flexibility in transferring employees among jobs, because transfers need not always involve a change in pay. A. pay rates B. pay ranges C. pay policies D. pay differentials E. pay ranks

Q: Which of the following statements is true about pay ranges? A. Pay ranges are most common for blue-collar jobs and those covered by union contracts. B. Pay ranges are widest for employees who are at lower levels in terms of their job evaluation points. C. Pay ranges generally are designed so that they do not overlap. D. The market rate or the pay policy line generally serves as the midpoint of a range for the job. E. The less overlap, the more flexibility in transferring employees among jobs.

Q: Low job involvement and low organizational commitment are: A. essentially the same thing. B. examples of psychological withdrawal. C. examples of physical withdrawal that are related to job dissatisfaction. D. examples of behavior change. E. examples of physiological withdrawal.

Q: Akira is very dissatisfied with her job situation, but she does not perceive any other employment opportunities, so she stays and spends most of the workday dreaming about nonwork matters. Which of the following is being experiencing by Akira? A. Physical withdrawal B. Psychological job withdrawal C. Role overload D. Benchmarking E. Whistle-blowing

Q: In terms of job dissatisfaction, an employee who calls in sick or arrives to work late is engaging in: A. behavior change. B. benchmarking. C. physical job withdrawal. D. whistle-blowing. E. emotional withdrawal.

Q: When employees cannot work with management to make changes, they may engage in _____, taking their charges to the media in the hope that if the public learns about the situation, the organization will be forced to change. A. scapegoating B. progressive discipline C. benchmarking D. media manipulation E. whistle-blowing

Q: The amount of income linked to each job is called the: A. pay rank. B. pay status. C. pay differential. D. incentive pay. E. pay level.

Q: Christina, an employee at Value Depot, regularly is late for work and takes excessive sick days. In this scenario, which of the following types of job withdrawal is being experienced by Christina? A. Behavior change B. Physical job withdrawal C. High job involvement D. Emotional withdrawal E. Psychological job withdrawal

Q: Carol is a single mother who works full-time and attends to the needs of her two young children. Carol has opted to work from home for a short period after one of her children suffered a fractured arm while playing soccer. Even though she works from home she often feels a lot of pressure in balancing her work and looking after her children. Which of the following is being experienced by Carol? A. Role ambiguity B. Role carve-out C. Role conflict D. Role overload E. Role underload