1. In designing incentive pay plans, organizations should consider all but one of the following. Name the exception.
Whether the pay encourages the kinds of behavior that are most needed and valued by the organization.
Whether the key account customers are using the same or similar pay plans.
Whether employees believe they have the ability and resources to meet the performance standards.
Whether employees value the rewards and think the pay plan is fair.
2. In order to control compensation costs, administrators of merit pay programs must closely monitor the compa-ratio and what other factor?
The number of pay grades in the pay structure
The distribution of annual performance ratings
The number of new hires
The company's stock price
3. What is backdating?
Reaping windfall in the stock market by selling stock based on company's nonpublic information.
Falsifying numbers in the company's annual report to hide losses and inflate the stock prices.
Changing the price in the original option agreement so that the option holder can buy stock at a bargain price.
Buying the company's stock just before the date of key product launch.
4. In 2003, 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 2005, the employee will most likely:
exercise the option, receiving a gain of $5.
hold on to the option, hoping the stock price will increase in the future.
exercise the option, receiving a gain of $40.
try changing the price in the original option agreement to improve the stock's performance.
5. Stock options have their greatest motivational potential during periods of:
high unemployment.
downturns in the economy.
high economic and company growth.
low inflation.
6. Gainsharing is most likely to succeed when organizations provide the right conditions. Which one of the following is NOT one of these conditions?
High levels of cooperation and interaction
Strong commitment to continuous improvement
Information sharing on productivity and costs
Strong commitment to at-will employment
7. When is the standard hour plan likely to succeed?
Paying most or all of a salesperson's compensation in the form of commissions.
Employees have to keep labor costs to a minimum and produce as much as possible with that amount of labor.
Employees want the extra money more than they want to work at a pace that feels comfortable.
The pay increase is linked to ratings on performance appraisals.
8. Communicating with employees regarding pay-related decisions can:
encourage the employees to make decisions that are in their interest at the expense of the organization's interests.
increase the complexity of creating and administering incentive pay plans.
encourage competition at the expense of cooperation to achieve organizational goals.
demonstrate to employees that the pay plan is fair and influence their behavior as desired.
9. What should employees do to earn bonus under the Scanlon plan?
Keep labor costs to a minimum and produce as much as possible with that amount of labor.
Create goodwill with customers and close as many sales as possible.
Increase the number of pieces produced beyond the expected standard output.
Improve performance year after year and re-earn the bonus during each performance period.