MGT Chap 13

26.
A pay structure specifically designed to energize, direct, or control employees’ behavior is known as

A. monthly salary.

B. wage.

C. incentive pay.

D. annual salary.

E. fixed pay.

c

27.
Vactin Motors, an automobile company, ties individual performance, profits, and other measures of employees’ success to a particular form of pay. This form of pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. Which of the following is exemplified in this scenario?

A. minimum wage

B. overtime pay

C. incentive pay

D. piecework rates

E. salary

c

28.
A feature of an effective incentive pay plan is that it should

A. have performance measures based on employees’ requirements.

B. not be provided as a direct percentage of employees’ performance.

C. encourage group performance and sideline individual achievements.

D. be the same for all employees in the organization.

E. have performance measures linked to the organization’s goals.

e

29.
For incentive pay to motivate employees to contribute to the organization’s success, the pay plans must be well designed. Which of the following statements describes a characteristic of a well-designed plan?

A. Performance measures are to be linked to the individual’s goals.

B. Employees are given unattainable performance standards.

C. Employees value the rewards or incentives that are being offered.

D. Employees are given limited resources to meet their goals.

E. The pay plan takes into account that employees will accept all goals irrespective of their rewards.

c

30.
Which of the following is a disadvantage of using incentive plans?

A. The goals of an incentive plan may interfere with other management goals.

B. The goals of incentive plans can seldom be linked to particular outcomes or behaviors.

C. Incentive plans cannot be used to promote group and organizational performance.

D. Incentive plans cause dissatisfaction among the non-performing employees in the organization.

E. Incentive plans are not very effective for jobs other than sales and service.

a

31.
In the process of designing incentives, managers should make sure that

A. all the employees are paid the same amount.

B. even the lowest performing employees are rewarded.

C. employees focus only on completing the task quickly.

D. employees believe that the pay plan is fair.

E. they hire employees who consider earning money as the sole reason to perform well.

d

32.
The many kinds of incentive pay fall into three broad categories: _____.

A. incentives linked to individual, group, or organizational performance

B. incentives linked to output, productivity, or quality of a product

C. pay linked to goals, focus, or achievements of an organization

D. pay related to base salary, bonus, and travel allowance

E. incentives obtained in the form of company shares, gift coupons, and trial products

a

33.
Which of the following types of incentive plans are used to reward individual performance?

A. gainsharing

B. merit pay

C. Scanlon plan

D. profit sharing

E. stock ownership

b

34.
Jules & Co., a smartphone manufacturing company, provides wages to its employees based on the number of smartphones the workers assemble. The more the employees assemble, the more they earn. This type of plan is called a

A. piecework rate plan.

B. merit pay plan.

C. Scanlon plan.

D. profit-sharing plan.

E. rapid hour plan.

a

35.
As an incentive to work efficiently, some organizations pay production workers _____, a wage based on the amount they produce.
A.

merit pay

B.

a sales commission

C.

standard hour pay

D.

a piecework rate

E.

a special bonus

d

36.
Wayan Inc., a health insurance company, pays clerks an incentive based on the average amount of work completed per hour. Wayan pays $10 for processing 20 invoices per hour. An employee who processes 30 invoices would earn $15 per hour. Hence, Wayan pays the same rate per invoice no matter how many invoices an employee processes per hour. Which type of incentive pay does this scenario illustrate?
A.

straight piecework plan

B.

falling differential

C.

rising differential

D.

standard hour plan

E.

straight commission plan

a

37.
An employee at CellWorks who produces 10 components in an hour earns $9 ($.90 × 10) per hour, while another employee who produces 15 components earns $13.50 ($.90 × 15). This is an example of a
A.

commission plan.

B.

differential piece rate plan.

C.

direct commission plan.

D.

profit-sharing plan.

E.

straight piecework plan.

e

38.
_____ refers to incentive pay in which the wage paid is higher when a greater amount is produced.
A.

Profit sharing

B.

Differential piece rate

C.

Gainsharing

D.

Scanlon pay

E.

Merit pay

b

39.
The differential piece rate system refers to
A.

an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees.

B.

a system that gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.

C.

an incentive pay in which the piece rate is higher when a greater amount is produced.

D.

a system of linking pay increases to ratings on performance appraisals.

E.

an incentive pay plan where employees are paid different wages based on the skills they possess.

c

40.
Token Inc. is an envelope manufacturer based in Dallas. The employees of the organization receive pay based on the amount of work produced. If the output of an employee is more than the average production volume, then the organization pays more for the work performed. In this case, which of the following incentives is offered by Token Inc.?
A.

differential piecework rate

B.

minimum wage

C.

merit pay

D.

retention bonus

E.

group bonus

a

41.
Which of the following statements is true about a piecework rate plan?
A.

It can be used for all types of jobs and in all types of industries.

B.

It is best suited for complex jobs and tasks.

C.

It can be used to encourage teamwork and collaboration.

D.

It has a direct link between the work done by the employee and the amount earned.

E.

It encourages the employee’s peers to perform and reduces conflicts.

d

42.
Piecework rate plans are most suited for _____.
A.

innovative tasks

B.

non-standard jobs

C.

managerial jobs

D.

jobs with difficult-to-measure output

E.

routine jobs

e

43.
A piecework rate plan is best suited for
A.

HR professionals.

B.

executives.

C.

production workers.

D.

managers.

E.

knowledge workers.

c

44.
Jeff owns and manages a small electronics repair store. He determines the time required by his employees to complete each task assigned by him. When employees complete the repairs in less time, they receive an amount of pay equal to that time determined by him. In this scenario, Jeff is using a
A.

standard hour plan.

B.

differential piecework plan.

C.

merit pay plan.

D.

straight piecework plan.

E.

Scanlon plan.

a

45.
Jupiter Systems, an information technology company, determines that most problems handled by employees at its help desk can be resolved within 20 minutes. The company sets 20 minutes as the standard time for resolving a customer problem. If an employee solves a customer’s problem in less than 20 minutes, the employee still earns 20 minutes’ worth of wages. Which of the following payment methods does this scenario illustrate?
A.

piecework plan

B.

differential plan

C.

standard hour plan

D.

merit pay

E.

performance bonus

c

46.
Which of the following statements is true about standard hour plans?
A.

They encourage employees to focus exclusively on customer service.

B.

They succeed only for employees who are not motivated by money.

C.

They encourage employees to focus mainly on quality.

D.

In terms of their pros and cons, they are very different from piecework plans.

E.

They encourage employees to work as fast as they can.

e

47.
Which of the following is a drawback of a standard hour plan?
A.

It does not focus on quality or customer service.

B.

It escalates costs for an employer in the long term.

C.

It is applicable only in team-based work environments.

D.

It helps employees work at a comfortable pace.

E.

It does not pay workers extra for work done in less than the standard time.

a

48.
A standard hour incentive plan is likely to be successful if
A.

most or all of a salesperson’s compensation is in the form of commissions.

B.

employers keep labor costs to a minimum.

C.

the pay increase is linked to ratings on performance appraisals.

D.

employees want the extra money more than they want to work at a pace that feels comfortable.

E.

the organization values employee satisfaction, product quality, and customer service more than profits.

d

49.
An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as _____.
A.

commissions

B.

the Scanlon plan

C.

merit pay

D.

gainsharing

E.

profit sharing

c

50.
The primary function of a merit increase grid is to
A.

make pay increases consistent.

B.

further increase the pay of those whose pay is relatively higher for their job.

C.

increase the employees’ compa-ratios.

D.

stabilize economic conditions.

E.

increase incentives on a year-by-year basis.

a

51.
Julianna, the HR manager at Hudson Corp., wants to ensure that incentive pay rewards the individuals who contribute the most to the organization and whose contributions have grown since their pay rates were originally set. She determines that she can best accomplish these goals by paying an incentive amount based on individuals’ performance ratings and compa-ratios. In this scenario, Julianna would be applying the system of
A.

merit pay.

B.

piecework pay.

C.

standard hour pay.

D.

commissions.

E.

attendance bonus.

a

52.
Merit pay system decisions are based on two factors: an individual’s performance rating and their
A.

compa-ratio.

B.

seniority.

C.

pay grade.

D.

educational qualifications.

E.

experience.

a

53.
To make merit increases consistent, administrators of merit pay programs must closely monitor the compa-ratio and the
A.

number of grades in the pay structure.

B.

individual’s performance ratings.

C.

number of new hires in the company.

D.

company’s stock price in the current financial year.

E.

average pay of the area where the organization is based.

b

54.
In a company’s merit pay program, an individual’s compa-ratio represents
A.

the individual’s pay relative to the individual’s performance rating.

B.

the individual’s pay relative to company’s average pay for that position.

C.

the individual’s worth versus that of others in the organization.

D.

the ratio of the individual’s pay to benefits.

E.

the average worth of the skills possessed by the individual.

b

55.
A _____ gives the biggest pay increases to the best performers and to those whose pay is relatively low for their job.
A.

piecework pay system

B.

merit pay system

C.

standard hour plan

D.

differential plan

E.

skill-based plan

b

56.
Songreen Inc., a firm that manufactures ready-to-eat soups, offers incentives based on an employee’s performance rating and the employee’s compa-ratio. Which of the following payment plans is exemplified in this scenario?
A.

piecework plan

B.

merit pay

C.

standard hour plan

D.

differential plan

E.

skill-based plan

b

57.
Which of the following is an advantage of the merit pay incentive system?
A.

It makes the reward more valuable by relating it to economic conditions.

B.

It promotes group performance instead of promoting individual behavior.

C.

It provides merit increases to employees solely on the basis of performance.

D.

It is the most economical incentive system for the employers.

E.

It provides a direct link between the work done by the employee and the amount earned.

a

58.
_____ provides a method for rewarding performance in all of the dimensions measured in the organization’s performance management system.
A.

Differential piece rate

B.

Standard hour plan

C.

Merit pay

D.

Piece rate

E.

Commission

c

59.
Which of the following is a disadvantage of a merit pay system?
A.

It does not relate the rewards to economic conditions.

B.

It cannot be used effectively with performance appraisals.

C.

Comparative pay is not considered in its evaluation.

D.

It does not provide rewards for performance in all the dimensions measured in the organization’s performance management system.

E.

It can quickly become expensive for the company.

e

60.
Which of the following statements is true of a performance bonus?
A.

It is designed to reward group performance.

B.

It should be re-earned by employees during each performance period.

C.

It is rolled into base pay and provided yearly or monthly.

D.

It lacks flexibility and hence it is less popular.

E.

It is exclusively linked to subjective ratings, rather than objective performance measures.

b

61.
Retention bonuses refer to
A.

the special reward programs used to satisfy the lower and middle-level managers.

B.

the bonuses provided to union members to withhold a strike.

C.

the bonuses provided to employees who take long leaves without pay.

D.

annual incentives paid to daily wage workers to remain in the organization.

E.

one-time incentives paid in exchange for remaining with the company.

e

62.
When Greater Aircraft acquired Middling Aircraft, the executives of the two companies identified key employees they needed for the combined companies’ success. One of them was Michael, the vice president of engineering. The executives offered Michael a one-time bonus of $25,000 if he stayed with Greater Middling for 12 months following the acquisition. In this scenario, Michael’s the $25,000 represents _____.
A.

a commission

B.

a retention bonus

C.

stock options

D.

merit pay

E.

a differential piece rate

b

63.
When an employee’s pay is calculated as a percentage of sales, it is referred to as
A.

commissions.

B.

gainsharing.

C.

a merit plan.

D.

a variable wage plan.

E.

profit sharing.

a

64.
Straight commission plans are plans which
A.

provide a straight salary to employees.

B.

are useful when the organization wants salespeople to concentrate on listening to customers.

C.

help to attract risk-averse employees.

D.

are common among insurance and real estate agents.

E.

are uncommon among car salespeople.

d

65.
Which of the following is most likely a consequence of paying most or all of a salesperson’s compensation in the form of commissions?
A.

It encourages the salesperson to focus on closing the sale.

B.

It frees the salesperson to focus on developing customer goodwill.

C.

It encourages teamwork over individual performance.

D.

It makes the employee appreciate the reward as the reward relates to economic conditions.

E.

It will quickly become expensive for the employer.

a

66.
Which of the following incentive plans are specifically designed to promote group performance?
A.

performance bonuses

B.

gainsharing

C.

standard hour plans

D.

merit pay

E.

commissions

b

67.
QVO Financial, an auditing firm, distributes a portion of the profits resulting from improvements in productivity and efficiency among its employees. If the company enjoys an improvement of $45,000, 60% of the improvement is the company’s share. The other 40% is distributed among the employees in the company. Which of the following is being exemplified in this scenario?
A.

profit rate

B.

gainsharing

C.

commission sharing

D.

merit gain

E.

group bonus

b

68.
Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program.
A.

gainsharing

B.

standard hour

C.

bonus

D.

commission

E.

piece rate pay

a

69.
_____ is a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.
A.

Profit rate

B.

Gainsharing

C.

Commission sharing

D.

Merit rate

E.

Group bonus

b

70.
Which of the following incentive programs measures improvements in productivity and effectiveness and distributes a portion of the earnings to all employees?
A.

merit pay

B.

team award

C.

commission

D.

standard hour plans

E.

gainsharing

e

71.
Brendan, the HR manager at Baretta & Co., is trying to implement an effective group incentive plan which measures increases in productivity and effectiveness and distributes a portion of its earnings to all employees. In this case, Brendan should apply the incentive scheme of _____.
A.

piecework rate

B.

gainsharing

C.

sales commission

D.

merit pay

E.

ESOPs

b

72.
East Bay Hospital was concerned about rising costs for patients who have surgery for joint replacement. It tried rewarding staff in any quarter they met targets for lower use of supplies, but costs continued to rise. An investigation showed that one source of costs was the readmission of patients who experienced infections after surgery. The human resource department proposed setting up a gainsharing program with an effectiveness measure related to reducing infections. Which statement about gainsharing best supports this recommendation?
A.

With gainsharing, employees are freed to collaborate on how to improve performance.

B.

Gainsharing creates a competitive environment, so employees will try to outdo one another.

C.

Gainsharing is appropriate because the jobs in this case are simple, and so are the performance standards.

D.

Gainsharing will narrow employees’ focus to the key aspects of their individual jobs and rewards.

E.

The success of gainsharing requires management acceptance of employee input.

a

73.
For five years, Speed-All Production Systems offered $500 bonuses to individuals who identified ways to reduce costs by at least $1,000 per year. In the first year of that incentive program, 23 employees earned the bonus, but last year, only 7 submitted ideas, and only two of the ideas would actually save more than a few dollars. The company’s HR director suggests that the company is likely to see more improvement if it replaces individual incentives with a gainsharing plan. Which of the following statements best supports this argument?
A.

Gainsharing succeeds regardless of whether employees understand how performance is measured.

B.

Gainsharing is likely to succeed under almost any organizational conditions.

C.

Gainsharing broadens employees’ horizons beyond the range of activities they can influence.

D.

Gainsharing measures oversimplify the complex responsibilities of production work.

E.

Gainsharing expands employees’ thinking beyond their individual interests.

e

74.
Which of the following is a common condition for gainsharing to be a success in an organization?
A.

employees who value working in groups

B.

employers who do not set short-term goals for employees

C.

work environment with minimum management commitment

D.

employees who prefer minimum interaction and cooperation

E.

low levels of cooperation and interaction

a

75.
The CEO of Logiworks asked the human resource manager, April, to propose an approach to incentive pay. April proposes that the company create a gainsharing plan. What action(s) by the company will best increase the likelihood that gainsharing will succeed?
A.

hiring employees who prefer to work alone and equipping them with cost data

B.

sharing data about costs and setting up time for employees to interact

C.

indicating that failure to achieve goals will lead to job cuts

D.

using incentive pay as a substitute for goal setting and performance standards

E.

promoting continuous improvement and limiting time spent on personal interactions

b

76.
Developed in the 1930s, the Scanlon plan is a variation of a(n)
A.

profit-sharing plan.

B.

gainsharing plan.

C.

merit pay plan.

D.

individual bonus.

E.

commission plan.

b

77.
A multinational organization uses a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard. This incentive plan is referred to as
A.

a group bonus.

B.

merit pay.

C.

the Scanlon plan.

D.

a piecework rate.

E.

a team award.

c

78.
What should employees typically do to earn bonuses under the Scanlon plan?
A.

They should produce products at a rate that is much higher than the standard production time.

B.

They should create goodwill with customers and close as many sales as possible.

C.

They should follow a defined set of quality standard to produce the desired outcome.

D.

They should keep labor costs to a minimum and produce as much as possible with that amount of labor.

E.

They should improve their performance year after year so that they re-earn the bonus during each performance period.

d

79.
The Rudd-Mitchell organization uses the Scanlon plan to provide incentives to its employees. The workers produce electrical components worth $5 million. The target ratio set by the organization is 30%. The employees will be given a bonus if the actual labor costs are less than
A.

$0.5 million.

B.

$1 million.

C.

$1.5 million.

D.

$2 million.

E.

$2.5 million.

c

80.
What is the difference between bonuses and team awards?
A.

Bonuses are for bigger work groups, whereas team awards are for small teams.

B.

Unlike bonuses, team awards encourage cooperation.

C.

Bonuses are usually given to employees who meet deadlines, whereas team awards are given only when the team as a whole meets the targets.

D.

Unlike team awards, bonuses encourage competition among individuals.

E.

Bonuses reward attainment of a specific goal, whereas team awards reward performance measured more broadly.

e

81.
Team awards differ from group bonuses in that they
A.

are typically plant-wide group incentive programs.

B.

make payments in company stock rather than in cash.

C.

are more likely to use a broad range of performance measures.

D.

encourage competition among individual employees to achieve higher bonuses.

E.

give more importance to organizational performance than small groups’ performances.

c

82.
Which of the following is a disadvantage of using group bonuses?
A.

Physical outputs are not rewarded.

B.

It reduces the level of cooperation between the members of the group.

C.

The performance measures used are narrow.

D.

It could result in competition among groups.

E.

It cannot be used to promote specific goals.

d

83.
In which of the following conditions is an advantage when group incentives encourage competition between groups of employees?
A.

when concern for costs obscures customer service

B.

when groups try to outdo one another in satisfying customers

C.

when competition replaces cooperation to meet company goals

D.

when competition for sales obscures the importance of ethical behavior

E.

when performance goals consider only one objective, such as sales growth

b

84.
_____ is a type of incentive pay in which payments are a percentage of an organization’s profits and do not become part of its employees’ base salary.
A.

Merit pay

B.

Gainsharing

C.

Group bonus

D.

Profit sharing

E.

Commission

d

85.
Which of the following is an organization-level incentive plan that is intended to motivate employees to align their activities with the organization’s goals?
A.

profit sharing

B.

gainsharing

C.

merit pay

D.

group bonus

E.

Scanlon plan

a

86.
Which of the following best describes profit sharing?
A.

a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard

B.

incentive pay in which payments are a percentage of the organization’s profits and do not become part of the employees’ base salary

C.

a group incentive program that measures improvements in productivity and effectiveness and distributes a portion of profit to employees

D.

a combination of performance measures directed toward the company’s profit and used as the basis for awarding incentive pay

E.

an incentive plan where a percentage of the previous year’s profits is provided to the employees as a part of their salary

b

87.
Which of the following incentive plans would enable its employees to think like owners, taking a broad view of what they need to do in order to make the organization more effective?
A.

merit pay

B.

gainsharing

C.

the Scanlon plan

D.

performance bonuses

E.

profit sharing

e

88.
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.

b

89.
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.

d

90.
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.

e

91.
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 offering an equivalent sum.

a

92.
The link between employees’ performance and pay is hardest to establish in
A.

piece rate plans.

B.

merit pay plans.

C.

standard hour plans.

D.

stock ownership plans.

E.

Scanlon plans.

d

93.
If a company distributes stock to employees by granting stock options, employees exercise the option when they
A.

purchase the stock.

B.

sell the stock.

C.

retain the stock.

D.

distribute the stock.

E.

liquidate the stock.

a

94.
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.

c

95.
Maria, the financial officer at Boone & Borowitz, encourages the human resource manager to consider using stock options as incentive pay for all employees. The human resource manager cautions that employees could become upset if the options don’t turn out to be as valuable as cash. Which of the following statements supports this concern?
A.

Stock options are not profitable to employees.

B.

Option owners must exercise the options, no matter what the market price.

C.

Employees may not purchase their employer’s stock.

D.

Offering stock options discourages employees from thinking like owners.

E.

Stock prices in the market may fall below the exercise price of the options.

e

96.
In 2017, 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 2019, 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.

c

97.
_____ occurs when a date or price in a stock option agreement is changed so that the option holder can buy shares at a bargain price.
A.

"Backdating"

B.

"Option revising"

C.

"Retro-vising"

D.

"Adjusting"

E.

"Rechecking"

a

98.
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 a company’s stock just before the date of key product launch

D.

changing the date or price in an option agreement so that the option holder can buy stock at a bargain price

E.

hiding losses and inflating the recorded value of revenues to boost the price of the company’s stock

d

99.
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

b

100.
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

d

101.
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

c

102.
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.

b

103.
Which of the following is a reason for the popularity of employee stock ownership plans (ESOPs)?
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 their assets in the company’s own stocks.

E.

The employees are provided with many more shares of stock than they actually own.

a

104.
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.

e

105.
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.

a

106.
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

d

107.
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.

the Scanlon plan

B.

a balanced scorecard

C.

a dashboard

D.

an employee stock ownership plan

E.

a differential piece rate system

b

108.
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.

a type of incentive pay in which payments are a percentage of the organization’s profits and do not become part of the employees’ base salary

E.

a system designed to measure the performance of HR personnel based on the quality of recruitment

a

109.
Organizations customize their balanced scorecards according to their
A.

earnings.

B.

profits, benefits, and incentives.

C.

markets, products, and objectives.

D.

objectives as set by the organization’s CEO and board of directors.

E.

research on what drives employee motivation.

c

110.
Which of the following is an advantage of using balanced scorecard?
A.

It eliminates the need to communicate the details of an incentive 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.

e

111.
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.

c

112.
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

e

113.
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.

a

114.
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.

a

115.
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.

e

116.
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 and something to pursue?
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.

a

117.
Deep Space Aeronautics is developing a profit-sharing plan. Randy, the human resource manager, assumes the employees are excited to participate in this start-up company’s success. However, a supervisor tells Randy about anxiety surrounding a rumor that employees will lose money if the company has a bad year. How should Randy address this problem with employee morale?
A.

by recalling that employees are also motivated by factors other than pay

B.

by removing non-management employees from the team designing the incentive plan

C.

by conducting meetings to teach about profit sharing and how employees will benefit

D.

by reminding employees that rumors are against company policy

E.

by shutting down the company’s intranet to prevent further spreading of rumors

c

118.
The human resource, accounting, and legal departments of GloryB Software, a company with locations in seven states plus Australia, are working together on developing a profit-sharing plan. Of the following options for communicating with employees about the plan, which would be the most practical and effective?
A.

Call a meeting of all the employees to discuss the plan face-to-face.

B.

Set up a balanced scorecard to measure opinions about the plan.

C.

Ask employees not to engage in rumors.

D.

Post descriptions and videos on the company’s intranet.

E.

Hold off on any communications until all employees can be brought together.

d

119.
Most pay-related communications come through
A.

the company newsletter.

B.

one designated company speaker.

C.

rumors between employees from various departments.

D.

an employee’s annual review.

E.

individual discussions between employees and their supervisor.

e

120.
Executive pay at Ashance Inc., a manufacturing company, includes bonuses based on the year’s profits or other measures related to the organization’s goals. Sometimes, to gain tax advantages, the bonus is made part of executives’ retirement plans. Which of the following is being exemplified in this scenario?
A.

long-term incentives

B.

balanced scorecards

C.

piecework plans

D.

employee stock ownership plans

E.

short-term incentives

e

121.
Global Solutions Corp. pays its executives short-term incentives for meeting financial targets. Which of the following could be included in this incentive pay?
A.

bonus for meeting the return on investment goal for last year

B.

bonus for meeting a target for greater customer satisfaction

C.

stock options

D.

stock purchase plans

E.

merit pay

a

122.
Which of the following is a long-term incentive?
A.

sales commission

B.

group bonus

C.

merit pay

D.

stock option

E.

piece rate

d

123.
Kolese Inc., a manufacturing company, includes stock options and stock purchase plans in executive pay. 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

c

124.
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.

b

125.
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

d

126.
How does linking executive pay to stock performance make unethical behavior tempting?
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.

a