Compensation 10th Edition Milkovich Test Bank

Compensation 10th Edition Milkovich
Test Bank
Visit to download the full and correct content document:
https://testbankdeal.com/download/compensation-10th-edition-milkovich-test-bank/
Chapter 09 Pay-for-Performance: The Evidence
Student: ___________________________________________________________________________
1. A key factor in increasing trust in top management is _____.
A. an acceptable appraisal system

B. high base pay
C. stock options
D. a well-designed piece rate system
2. The primary guiding force that determines needed employee behaviors is _____.
A. corporate goals
B. organization strategy
C. strategic business unit goals
D. department/team goals
3. The motivation triangle includes _____.
A. selection
B. organization design
C. culture
D. organization development
4. The ability triangle includes _____.
A. selection
B. performance management
C. compensation
5. A business has a centralized structure and a compensation system that rewards sales volume.
However, sales volumes are low compared to competitors who respond more quickly to changes
in consumer demand. Which of the following is the most likely source of the low sales
performance?
A. A poorly designed compensation program

B. An ineffective recruitment and selection program
C. An inappropriate organization design
D. A poorly designed performance management program
6. Compensation should reinforce all but which of the following behaviors?
A. Attracting and hiring good employees

B. Keeping turnover to nearly zero
C. Encourage skill development
D. Motivate high job performance
7. When employee performance is easily measured and the organization's performance is fairly
stable over time, the most effective type of compensation is to offer _____.
A. large base and low-incentive pay

B. variety of rewards and base pay
C. a variety of rewards with significant incentive pay
D. monetary rewards with large incentives
8. When an organization's performance has regular and large swings and individual performance is
unclear and hard to measure, the most effective compensation mix is to offer _____.
A. base pay with low incentives and a variety of rewards

B. monetary rewards with large incentives
C. large base and low-incentive pay
D. a wide range of rewards and significant incentives
9. Which of the following best supports a culture of flexibility and innovation?
A. A flexible benefits package

B. A strong commitment to job security
C. High base wage
D. Stock options
10. _____ involves identifying what is important to a person and offering it to them in exchange for
some desired behavior.
A. Conditioning
B. Goal setting
C. Empathy
D. Motivation
11. The key ingredient in _____ is careful cost analysis to make sure the dollar cost of the package
an employee selects meets employer budgetary limits.
A. gain-sharing plans
B. individual incentive plans
C. success-sharing plans
D. cafeteria-style compensation
12. When developing a flexible compensation system, which theory or theories would be most
useful?
A. Expectancy theory
B. Equity theory and agency theory
C. Maslow's theory and Herzberg's theory
D. Goal setting
13. In _____ theory, incentive pay is motivating if it helps an employee gain a sense of achievement,
recognition or approval.
A. Herzberg's two-factor
B. equity
C. Maslow's
D. Reinforcement
14. Which theories would support a higher minimum wage?
A. Reinforcement and agency

B. Goal setting and equity
C. Maslow and Herzberg's two-factor
D. Expectancy and agency
15. _____ theory contends that success-sharing plans will be motivating but at-risk plans will be de-
motivating.
A. Equity
B. Expectancy and agency
C. Herzberg's two-factor
D. Agency
16. Which of the following theories is least relevant to merit pay?
A. Herzberg's theory
B. Expectancy theory
C. Equity theory
D. Reinforcement theory
17. According to expectancy theory, effort level depends on which of these factors?
(1) expectancy
(2) valence
(3) instrumentality
(4) reward
(5) goals
A. 1, 2, 3
B. 2, 3, 4
C. 1, 4, 5
D. 2, 5, 4
18. _____ is the belief that when a specified level of job performance is attained, the employee will
receive a specified reward.
A. Valence
B. Expectancy
C. Instrumentality
D. Utility
19. For which motivation theory is it important for organizations to pay attention to the training and
development needs of their employees?
A. Equity
B. Expectancy
C. Goal setting
D. Reinforcement
20. Line of sight is an important pay implication for which theory or theories?
A. Agency
B. Equity
C. Agency and reinforcement
D. Expectancy and goal setting
21. _____ theory argues that performance-based pay is best for complex jobs where monitoring
employee performance is difficult.
A. Reinforcement
B. Goal setting
C. Agency
D. Expectancy
22. As per the _____ theory, relative pay is important as employees evaluate their pay-effort balance
in comparison to other employees.
A. equity
B. expectancy
C. agency
D. reinforcement
23. Theories dealing with exchange include _____.
A. Maslow and Herzberg

B. equity and agency
C. expectancy and reinforcement
D. goal setting and equity
24. _____ theory contends that we choose to do those things that we believe are most likely to lead
to desired rewards.
A. Expectancy
B. Reinforcement
C. Agency
D. Equity
25. Which among the following components of a reward system is a dimension of empowerment?
A. Work importance
B. Control
C. Feedback
D. Advancement
26. A(n) ____ requires annually "re-earning" the added pay.
A. success sharing plan

B. lump-sum bonus
C. profit-sharing plan
D. individual incentive plan
27. _____ is an individual level form of performance pay.
A. Risk sharing
B. Gain sharing
C. Lump-sum bonus
D. Success sharing
28. Compared to other incentive plans, line of sight is lowest in _____.
A. profit sharing
B. gain sharing
C. risk sharing
D. success sharing
29. Which of the following is not true?
A. More companies are using pay based upon individual, group and organization performance.
B. Workers with high security needs may accept lower pay for pay security.
C. Workers may need higher pay to stay and perform in an at-risk pay company.
D. Companies are moving back to entitlement-oriented pay to reduce turnover.
30. A person with low self-esteem is likely to seek _____.
A. an organizations with pay plans based upon individual not group performance
B. an organizations with a significant amount of pay based upon performance
C. a small organization with large benefits
D. a large, decentralized organization with little performance-based pay
31. Turnover tends to be highest among _____.
A. poor performers
B. good performers
C. single women with children
D. ethnic minorities
32. When moving from an individual to a group incentive plan, you would expect _____.
A. high turnover among high performers

B. an increase in instrumentality
C. an increase in the output of high performers
D. an increase in perceived equity
33. Growing evidence suggests that the major effect of skill-based pay is _____.
A. high productivity
B. reduced labor costs
C. high quality products
D. low training costs
34. Available evidence indicates managers believe the most important factor for pay increases is
_____.
A. effort
B. nature of the job
C. seniority
D. performance
35. Company X pays for performance. Allan, an employee of the company, is not in favor of this
reward system and, therefore, leaves Company X in search of another company with different
rules for getting rewards. This is an example of the:
A. design effect.
B. compensation effect.
C. sorting effect.
D. incentive effect.
36. The most obvious sorting factor is _____.
A. seniority
B. ability
C. experience
D. educational qualification
37. There is evidence that every 10 percent increase in the bonus paid to employees yields a _____
percent increase in ROA to the firm.
A. 1
B. 1.5
C. 5
D. 15
38. The key to designing a pay-for-performance system rests on standards. Specifically, managers
need to be concerned about the:
A. objectives, structure, eligibility, and funding.

B. strategy, measures, structure, and equity.
C. structure, efficiency, equity, and funding.
D. objectives, measures, eligibility, and funding.
39. Research suggests that for employees to notice and work hard to perform behaviors desired by
the organization, incentives need to be _____ percent.
A. 5-8
B. 8-10
C. 15-20
D. 25-30
40. The amount of fairness given to employees refers to _____.
A. total justice
B. quantitative justice
C. procedural justice
D. distributive justice
41. In the formula (behavior = f (M, A, E)), M standards monetary incentives.
True False
42. The point of the behavior = f (M, A, E) model is that, though very important, compensation alone
cannot change employee behavior.
True False
43. When pay raises are based on events over which employees lack significant control, they are
likely to regard the system as unfair.
True False
44. Incentive pay systems are an effective way to motivate workers to perform a variety of tasks in
changing situations.
True False
45. Cafeteria-style compensation is based on the idea that the organization knows what package of
rewards would best suit individual employees' needs.
True False
46. Maslow's theory suggests that performance-based pay can be de-motivating.
True False
47. Line of sight means that employees believe they can influence performance targets.
True False
48. An important implication of reinforcement theory is that when employees receive pay is
important.
True False
49. Goal setting theory argues that employees' performance in maximized when performance targets
are stated as "do your very best".
True False
50. Agency theory argues that employees prefer risky pay since rewards can be greater than a
salary.
True False
51. According to agency theory, because employees prefer a salary, they demand higher total pay if
performance-based pay is used.
True False
52. Identifying desired behaviors is the emphasis of agency theory.
True False
53. In today's organizations, socialization, the culture and training rather than compensation
packages are typically used to direct employees to desired behaviors.
True False
54. Work load and work variety are both components of a total reward system.
True False
55. Additional authority, control and autonomy are always positively motivating job factors for
workers.
True False
56. Security in terms of compensation refers to the predictability of one's paycheck from one time to
another.
True False
57. Many employees are not satisfied with compensation at risk plans because they do not
understand the process used to determine their pay.
True False
58. Lump-sum bonuses have less risk for workers than merit pay.
True False
59. Line of sight is highest in individual incentive plans.
True False
60. Gain sharing poses greater risk to individual employees than profit sharing.
True False
61. Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years when
the organization meets performance objectives.
True False
62. Both pay level and pay system characteristics affect applicants decisions to accept a job.
True False
63. An individual incentive pay system is associated with high turnover of high performers.
True False
64. Evidence suggests that skill-based pay may not increase productivity.
True False
65. Generally, team-based incentives are more attractive than individual incentives.
True False
66. Blue-collar workers feel pay increases should be based upon performance.
True False
67. Incentive effect means pay can motivate people to perform better.
True False
68. A problem with incentive pay plans is workers focus exclusively on behaviors that are rewarded.
True False
69. Eligibility refers to who in the organization may participate in an incentive pay program.
True False
70. Managers have more control over distributive justice than procedural justice.
True False
71. What are the behaviors that compensation ought to enforce?

72. What predictions can be made about performance-based pay based on Maslow's theory?
73. Briefly explain the concept of cafeteria-style or flexible compensation.
74. Explain the expectancy theory of motivation.
75. What are the implications for performance-based pay based on the theory of reinforcement?
76. What is a cost-of-living-increase?
77. Compare risk sharing and success-sharing plans.
78. Explain how personality characteristics can influence an employee's preference for rewards.
79. What are stay bonuses?

80. What are the four standards managers need to focus on when designing a pay-for-performance
system?
Chapter 09 Pay-for-Performance: The Evidence Key
1. A key factor in increasing trust in top management is _____.

(p. 284)
A. an acceptable appraisal system

B. high base pay
C. stock options
D. a well-designed piece rate system
Difficulty: Easy
Milkovich - Chapter 09 #1
2. The primary guiding force that determines needed employee behaviors is _____.
(p. 285)
A. corporate goals
B. organization strategy
C. strategic business unit goals
D. department/team goals
Difficulty: Medium
3. The motivation triangle includes _____.

(p. 286)
A. selection
B. organization design
C. culture
Difficulty: Medium
4. The ability triangle includes _____.

(p. 286)
A. selection
B. performance management
C. compensation
Difficulty: Medium
5. A business has a centralized structure and a compensation system that rewards sales volume.
(p. 287) However, sales volumes are low compared to competitors who respond more quickly to
changes in consumer demand. Which of the following is the most likely source of the low sales
performance?
A. A poorly designed compensation program

B. An ineffective recruitment and selection program
C. An inappropriate organization design
D. A poorly designed performance management program
Difficulty: Difficult
6. Compensation should reinforce all but which of the following behaviors?

(p. 287)
A. Attracting and hiring good employees

B. Keeping turnover to nearly zero
C. Encourage skill development
D. Motivate high job performance
Difficulty: Medium
7. When employee performance is easily measured and the organization's performance is fairly
(p. 288) stable over time, the most effective type of compensation is to offer _____.
A. large base and low-incentive pay

B. variety of rewards and base pay
C. a variety of rewards with significant incentive pay
D. monetary rewards with large incentives
8. When an organization's performance has regular and large swings and individual performance
(p. 288) is unclear and hard to measure, the most effective compensation mix is to offer _____.
A. base pay with low incentives and a variety of rewards

B. monetary rewards with large incentives
C. large base and low-incentive pay
D. a wide range of rewards and significant incentives
9. Which of the following best supports a culture of flexibility and innovation?
(p. 289)
A. A flexible benefits package

B. A strong commitment to job security
C. High base wage
D. Stock options
Difficulty: Medium
10. _____ involves identifying what is important to a person and offering it to them in exchange for
(p. 290) some desired behavior.
A. Conditioning
B. Goal setting
C. Empathy
D. Motivation
Difficulty: Medium
11. The key ingredient in _____ is careful cost analysis to make sure the dollar cost of the
(p. 290) package an employee selects meets employer budgetary limits.
A. gain-sharing plans
B. individual incentive plans
C. success-sharing plans
D. cafeteria-style compensation
Difficulty: Medium
12. When developing a flexible compensation system, which theory or theories would be most
(p. 290) useful?
A. Expectancy theory
B. Equity theory and agency theory
C. Maslow's theory and Herzberg's theory
D. Goal setting
Difficulty: Medium
13. In _____ theory, incentive pay is motivating if it helps an employee gain a sense of
(p. 291) achievement, recognition or approval.
A. Herzberg's two-factor
B. equity
C. Maslow's
D. Reinforcement
Difficulty: Medium
14. Which theories would support a higher minimum wage?

(p. 291)
A. Reinforcement and agency

B. Goal setting and equity
C. Maslow and Herzberg's two-factor
D. Expectancy and agency
15. _____ theory contends that success-sharing plans will be motivating but at-risk plans will be
(p. 291) de-motivating.
A. Equity
B. Expectancy and agency
C. Herzberg's two-factor
D. Agency
16. Which of the following theories is least relevant to merit pay?

(p. 291-
293)
A. Herzberg's theory
B. Expectancy theory
C. Equity theory
D. Reinforcement theory
17. According to expectancy theory, effort level depends on which of these factors?
(p. 292) (1) expectancy
(2) valence
(3) instrumentality
(4) reward
(5) goals
A. 1, 2, 3
B. 2, 3, 4
C. 1, 4, 5
D. 2, 5, 4
Difficulty: Medium
18. _____ is the belief that when a specified level of job performance is attained, the employee will
(p. 292) receive a specified reward.
A. Valence
B. Expectancy
C. Instrumentality
D. Utility
Difficulty: Medium
19. For which motivation theory is it important for organizations to pay attention to the training and
(p. 292) development needs of their employees?
A. Equity
B. Expectancy
C. Goal setting
D. Reinforcement
Difficulty: Medium
20. Line of sight is an important pay implication for which theory or theories?
(p. 292-
293)
A. Agency
B. Equity
C. Agency and reinforcement
D. Expectancy and goal setting
21. _____ theory argues that performance-based pay is best for complex jobs where monitoring
(p. 293) employee performance is difficult.
A. Reinforcement
B. Goal setting
C. Agency
D. Expectancy
Difficulty: Medium
22. As per the _____ theory, relative pay is important as employees evaluate their pay-effort
(p. 293) balance in comparison to other employees.
A. equity
B. expectancy
C. agency
D. reinforcement
Difficulty: Easy
23. Theories dealing with exchange include _____.

(p. 294)
A. Maslow and Herzberg

B. equity and agency
C. expectancy and reinforcement
D. goal setting and equity
Difficulty: Medium
24. _____ theory contends that we choose to do those things that we believe are most likely to
(p. 294) lead to desired rewards.
A. Expectancy
B. Reinforcement
C. Agency
D. Equity
Difficulty: Medium
25. Which among the following components of a reward system is a dimension of empowerment?
(p. 296)
A. Work importance
B. Control
C. Feedback
D. Advancement
Difficulty: Easy
26. A(n) ____ requires annually "re-earning" the added pay.

(p. 297)
A. success sharing plan

B. lump-sum bonus
C. profit-sharing plan
D. individual incentive plan
Difficulty: Easy
27. _____ is an individual level form of performance pay.

(p. 297-
298)
A. Risk sharing
B. Gain sharing
C. Lump-sum bonus
D. Success sharing
Difficulty: Easy
28. Compared to other incentive plans, line of sight is lowest in _____.

(p. 297-
298)
A. profit sharing
B. gain sharing
C. risk sharing
D. success sharing
Difficulty: Medium
29. Which of the following is not true?
(p. 298)
A. More companies are using pay based upon individual, group and organization
performance.
B. Workers with high security needs may accept lower pay for pay security.
C. Workers may need higher pay to stay and perform in an at-risk pay company.
D. Companies are moving back to entitlement-oriented pay to reduce turnover.
Difficulty: Medium
30. A person with low self-esteem is likely to seek _____.

(p. 299)
A. an organizations with pay plans based upon individual not group performance
B. an organizations with a significant amount of pay based upon performance
C. a small organization with large benefits
D. a large, decentralized organization with little performance-based pay
Difficulty: Medium
31. Turnover tends to be highest among _____.

(p. 300)
A. poor performers
B. good performers
C. single women with children
D. ethnic minorities
Difficulty: Medium
32. When moving from an individual to a group incentive plan, you would expect _____.
(p. 300)
A. high turnover among high performers

B. an increase in instrumentality
C. an increase in the output of high performers
D. an increase in perceived equity
33. Growing evidence suggests that the major effect of skill-based pay is _____.
(p. 301)
A. high productivity
B. reduced labor costs
C. high quality products
D. low training costs
Difficulty: Medium
34. Available evidence indicates managers believe the most important factor for pay increases is
(p. 302- _____.
303)
A. effort
B. nature of the job
C. seniority
D. performance
Difficulty: Easy
35. Company X pays for performance. Allan, an employee of the company, is not in favor of this
(p. 303) reward system and, therefore, leaves Company X in search of another company with different
rules for getting rewards. This is an example of the:
A. design effect.
B. compensation effect.
C. sorting effect.
D. incentive effect.
Difficulty: Easy
36. The most obvious sorting factor is _____.

(p. 303)
A. seniority
B. ability
C. experience
D. educational qualification
Difficulty: Easy
37. There is evidence that every 10 percent increase in the bonus paid to employees yields a
(p. 304) _____ percent increase in ROA to the firm.
A. 1
B. 1.5
C. 5
D. 15
Difficulty: Medium
38. The key to designing a pay-for-performance system rests on standards. Specifically, managers
(p. 306) need to be concerned about the:
A. objectives, structure, eligibility, and funding.

B. strategy, measures, structure, and equity.
C. structure, efficiency, equity, and funding.
D. objectives, measures, eligibility, and funding.
Difficulty: Medium
39. Research suggests that for employees to notice and work hard to perform behaviors desired
(p. 306) by the organization, incentives need to be _____ percent.
A. 5-8
B. 8-10
C. 15-20
D. 25-30
Difficulty: Medium
40. The amount of fairness given to employees refers to _____.

(p. 307)
A. total justice
B. quantitative justice
C. procedural justice
D. distributive justice
Difficulty: Easy
41. In the formula (behavior = f (M, A, E)), M standards monetary incentives.

(p. 286)
FALSE
Difficulty: Easy
42. The point of the behavior = f (M, A, E) model is that, though very important, compensation
(p. 287) alone cannot change employee behavior.
TRUE
Difficulty: Easy
43. When pay raises are based on events over which employees lack significant control, they are
(p. 289) likely to regard the system as unfair.
TRUE
Difficulty: Easy
44. Incentive pay systems are an effective way to motivate workers to perform a variety of tasks in
(p. 289) changing situations.
FALSE
Difficulty: Medium
45. Cafeteria-style compensation is based on the idea that the organization knows what package
(p. 290) of rewards would best suit individual employees' needs.
FALSE
Difficulty: Easy
46. Maslow's theory suggests that performance-based pay can be de-motivating.

(p. 291)
TRUE
Difficulty: Easy
47. Line of sight means that employees believe they can influence performance targets.
(p. 292)
TRUE
Difficulty: Easy
48. An important implication of reinforcement theory is that when employees receive pay is
(p. 293) important.
TRUE
Difficulty: Medium
49. Goal setting theory argues that employees' performance in maximized when performance
(p. 293) targets are stated as "do your very best".
FALSE
Difficulty: Easy
50. Agency theory argues that employees prefer risky pay since rewards can be greater than a
(p. 293) salary.
FALSE
Difficulty: Medium
51. According to agency theory, because employees prefer a salary, they demand higher total pay
(p. 293) if performance-based pay is used.
TRUE
Difficulty: Medium
52. Identifying desired behaviors is the emphasis of agency theory.

(p. 294)
FALSE
Difficulty: Medium
53. In today's organizations, socialization, the culture and training rather than compensation
(p. 294- packages are typically used to direct employees to desired behaviors.
295)
FALSE
Difficulty: Easy
54. Work load and work variety are both components of a total reward system.
(p. 295)
TRUE
Difficulty: Easy
55. Additional authority, control and autonomy are always positively motivating job factors for
(p. 296) workers.
FALSE
Difficulty: Medium
56. Security in terms of compensation refers to the predictability of one's paycheck from one time
(p. 296) to another.
TRUE
Difficulty: Easy
57. Many employees are not satisfied with compensation at risk plans because they do not
(p. 296) understand the process used to determine their pay.
TRUE
Difficulty: Easy
58. Lump-sum bonuses have less risk for workers than merit pay.
(p. 297)
FALSE
Difficulty: Medium
59. Line of sight is highest in individual incentive plans.

(p. 297)
TRUE
Difficulty: Medium
60. Gain sharing poses greater risk to individual employees than profit sharing.
(p. 298)
FALSE
Difficulty: Medium
61. Risk-sharing plans include a provision for cuts in base pay that are only recaptured in years
(p. 298) when the organization meets performance objectives.
TRUE
Difficulty: Medium
62. Both pay level and pay system characteristics affect applicants decisions to accept a job.
(p. 299)
TRUE
Difficulty: Easy
63. An individual incentive pay system is associated with high turnover of high performers.
(p. 300)
FALSE
Difficulty: Medium
64. Evidence suggests that skill-based pay may not increase productivity.
(p. 301)
TRUE
Difficulty: Medium
65. Generally, team-based incentives are more attractive than individual incentives.
(p. 302)
FALSE
Difficulty: Medium
66. Blue-collar workers feel pay increases should be based upon performance.
(p. 303)
FALSE
Difficulty: Easy
67. Incentive effect means pay can motivate people to perform better.
(p. 303)
TRUE
Difficulty: Easy
68. A problem with incentive pay plans is workers focus exclusively on behaviors that are
(p. 304) rewarded.
TRUE
Difficulty: Easy
69. Eligibility refers to who in the organization may participate in an incentive pay program.
(p. 306)
TRUE
Difficulty: Easy
70. Managers have more control over distributive justice than procedural justice.
(p. 307)
FALSE
Difficulty: Medium
71. What are the behaviors that compensation ought to enforce?
(p. 287)
First, compensation should be sufficiently attractive to make recruiting and hiring good
potential employees possible (attraction). Second, compensation should be used to ensure
that the good employees stay with the company (retention). It should also concentrate on
further building employee knowledge and skills (develop skills). Compensation should
motivate employees to perform well on their jobs—to take their knowledge and abilities and
apply them in ways that contribute to organizational performance.
Difficulty: Medium
72. What predictions can be made about performance-based pay based on Maslow's theory?
(p. 291)
Based on Maslow's need hierarchy the following predictions can be made about performance-
based pay:
1. Base pay must be set high enough to provide individuals with the economic means to meet
their basic living needs.
2. An at-risk program will not be motivating since it restricts employees' ability to meet lower
order needs.
3. Success-sharing plans may be motivating to the extent they help employees pursue higher-
order needs.
Performance-based pay may be de-motivating if it impinges upon employees' capacity to meet
daily living needs. Incentive pay is motivating to the extent it is attached to achievement,
recognition, or approval.
Difficulty: Medium
73. Briefly explain the concept of cafeteria-style or flexible compensation.

(p. 291,
295)
Cafeteria-style or flexible compensation is based on the idea that only the individual employee
knows what package of rewards would best suit personal needs. Employees choose their own
"blend" of rewards which may be both more satisfying and less expensive. As such,
employees who hate risk could opt for more base pay and less incentive pay. Tradeoffs
between pay and benefits could also be selected. Cafeteria-style compensation is based on
the notion of different rewards having different dollar costs associated with them. The key
ingredient is careful cost analysis to make sure the dollar cost of the package an employee
selects meets employer budgetary limits.
Difficulty: Medium
74. Explain the expectancy theory of motivation.
(p. 292)
According to the expectancy theory, motivation is the product of three perceptions:

Expectancy is employees' assessment of their ability to perform required job tasks.
Instrumentality is employees' beliefs that requisite job performance will be rewarded by the
organization.
Valence is the value employees attach to the organization rewards offered for satisfactory job
performance.
Difficulty: Easy
75. What are the implications for performance-based pay based on the theory of reinforcement?
(p. 293)
The implication for performance-based pay based on the theory of reinforcement is that the
timing of payouts is very important. As per this theory, rewards must follow directly after
behaviors to be reinforcing and behaviors that are not rewarded will be discontinued. As such,
withholding payouts can be a way to discourage unwanted behaviors.
Difficulty: Easy
76. What is a cost-of-living-increase?

(p. 297)
Cost-of-living-increase is a wage increase granted to all employees, regardless of

performance. The magnitude of increase is based on changes in the cost of living (e.g., as
measured by CPI). This wage component poses some risk to the employee since the increase
is at the discretion of the employer, but the risk is also lower as it is not tied to performance
differences.
Difficulty: Easy
77. Compare risk sharing and success-sharing plans.
(p. 297-
298)
A success-sharing plan is a generic category of pay add-on (variable pay) which is tied to
some measure of group performance, not individual performance. It is not a part of an
employee's base pay. In these plans, employees share in any success—performance above
standard—but are not penalized for performance below standard.
A risk sharing plan is also a generic category of pay add-on (variable pay). It differs from
success sharing in that an employee not only shares in successes but is also penalized during
poor performance years. Penalty is in form of lower total compensation in poor corporate
performance years. Rewards, though, are typically higher than that for success-sharing
programs in high performance years. These plans pose greater risk than success-sharing
plans.
Difficulty: Medium
78. Explain how personality characteristics can influence an employee's preference for rewards.
(p. 299)
Recent research suggests job candidates look for organizations with reward systems
that fit their personalities. For example, people who are more materialistic are likely to be
relatively more concerned about the level of pay. Also, individuals with low self-esteem are
likely to prefer large, decentralized organizations which offer little pay for performance. Risk
takers are likely to want more pay based on performance while risk-averse individuals would
prefer less performance-based pay. Individualists want pay plans based on individual
performance, not group performance. Evidence suggests talented employees are attracted to
companies that have strong links between pay and performance.
Difficulty: Medium
79. What are stay bonuses?

(p. 301)
Stay bonuses are generally lump-sum or installment bonuses designed specifically to retain
key employees during and after a Chapter 11 restructuring. These bonuses can be as large as
50 to 75 percent of salary for CEOs, dropping down to 25 percent for middle-level managers
and below.
Difficulty: Medium
80. What are the four standards managers need to focus on when designing a pay-for-
(p. 306) performance system?
When designing a pay-for-performance system, managers need to be concerned about:

1. Objectives
2. Measures
3. Eligibility
4. Funding
Difficulty: Easy
Chapter 09 Pay-for-Performance: The Evidence Summary
Category # of Questions
Difficulty: Difficult 8
Difficulty: Easy 29
Difficulty: Medium 43
Milkovich - Chapter 09 80

Compensation 10th Edition Milkovich Test Bank

Uploaded by

Copyright:

Available Formats

Compensation 10th Edition Milkovich Test Bank

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Compensation 10th Edition Milkovich Test Bank

Uploaded by

Copyright:

Available Formats

Compensation 10th Edition Milkovich

1. A key factor in increasing trust in top management is _____.

A. an acceptable appraisal system

3. The motivation triangle includes _____.

4. The ability triangle includes _____.

A. A poorly designed compensation program

6. Compensation should reinforce all but which of the following behaviors?

A. Attracting and hiring good employees

A. large base and low-incentive pay

A. base pay with low incentives and a variety of rewards

9. Which of the following best supports a culture of flexibility and innovation?

A. A flexible benefits package

14. Which theories would support a higher minimum wage?

A. Reinforcement and agency

16. Which of the following theories is least relevant to merit pay?

23. Theories dealing with exchange include _____.

A. Maslow and Herzberg

26. A(n) ____ requires annually "re-earning" the added pay.

A. success sharing plan

27. _____ is an individual level form of performance pay.

28. Compared to other incentive plans, line of sight is lowest in _____.

29. Which of the following is not true?

30. A person with low self-esteem is likely to seek _____.

A. high turnover among high performers

A. objectives, structure, eligibility, and funding.

40. The amount of fairness given to employees refers to _____.

41. In the formula (behavior = f (M, A, E)), M standards monetary incentives.

46. Maslow's theory suggests that performance-based pay can be de-motivating.

59. Line of sight is highest in individual incentive plans.

71. What are the behaviors that compensation ought to enforce?

73. Briefly explain the concept of cafeteria-style or flexible compensation.

74. Explain the expectancy theory of motivation.

77. Compare risk sharing and success-sharing plans.

79. What are stay bonuses?

1. A key factor in increasing trust in top management is _____.

A. an acceptable appraisal system

3. The motivation triangle includes _____.

4. The ability triangle includes _____.

A. A poorly designed compensation program

6. Compensation should reinforce all but which of the following behaviors?

A. Attracting and hiring good employees

A. large base and low-incentive pay

A. base pay with low incentives and a variety of rewards

A. A flexible benefits package

14. Which theories would support a higher minimum wage?

A. Reinforcement and agency

16. Which of the following theories is least relevant to merit pay?

23. Theories dealing with exchange include _____.

A. Maslow and Herzberg

26. A(n) ____ requires annually "re-earning" the added pay.

A. success sharing plan

27. _____ is an individual level form of performance pay.

28. Compared to other incentive plans, line of sight is lowest in _____.

30. A person with low self-esteem is likely to seek _____.

31. Turnover tends to be highest among _____.

A. high turnover among high performers

36. The most obvious sorting factor is _____.

A. objectives, structure, eligibility, and funding.

40. The amount of fairness given to employees refers to _____.

41. In the formula (behavior = f (M, A, E)), M standards monetary incentives.