Q&A Hero

Q: What is true about disability insurance? A) It benefits the disabled employee only for the first year of disability. B) Payments under short-term plans are less than that of long-term plans. C) It pays about 50 to 70 percent of the employee's salary in case of disability. D) Most employers offer long-term disability plans. E) It offers coverage when the employee's dependent is disabled.

Q: What is true of short-term disability insurance? A) It pays the full amount of a disabled employee's salary for a minimum period of one year. B) It pays double the full salary of a disabled employee for a period of two months. C) Only employees who have been with an organization for less than two years are eligible for short-term disability insurance. D) It pays a portion of a disabled employee's salary as benefits for up to six months. E) It is only provided to those individuals who work part time.

Q: Connor, the manager of a shipping company, introduces a set of communications, activities, and facilities designed to change health-related behaviors in ways that reduce health risks and subsequent medical costs. The program aims at specific health risks, such as high blood pressure, high cholesterol levels, smoking, and obesity. Based on these offerings, Connor has introduced a(n) A) employee wellness program. B) health maintenance organization plan. C) preferred provider program. D) managed care program. E) consumer-driven health program.

Q: Jesse has a health care plan that provides him with coverage that allows him to be involved in making decisions to help lower costs. This plan typically includes insurance with a high deductible, a medical savings account, and ongoing health education. Which type of health care plan is Jesse using? A) managed care B) health maintenance organization C) preferred provider organization D) flexible health plan E) consumer-driven health plan

Q: Frankie is deciding between two jobs that provide equal pay. He compares the health care benefits provided by both jobs to help him make a decision. One job offers a flexible spending account, while the other job offers him managed care. Which statement will help Frankie make a decision? A) With managed care, the insurer makes all decisions about health care so Frankie has no control. B) Money in flexible spending accounts is not taxed, so employees get more take-home pay. C) The money in the flexible spending accounts must meet IRS requirements. D) At the end of each year, money remaining in a flexible spending account reverts to the employer. E) Contributions to a flexible spending account may not exceed $5,000 per year.

Q: Riley works at Kupton Co., which provides her with a health care plan that contracts with health care professionals to provide services at a reduced fee. Which type of health care plan is Kupton Co. providing to its employees? A) flexible spending account B) preferred provider organization C) health maintenance organization D) consumer-driven health plan E) managed care plan

Q: Meghan, who recently moved to a new city, evaluates several insurance options from her new employer. Owing to her recent medical issues, she wants to choose her health care providers, even if seeing them costs more than seeing the providers in a specific insurance network. Which health care plan is Meghan most likely to find suitable for her needs? A) a managed care plan B) a health maintenance organization C) a preferred provider organization D) an employee wellness program E) a flexible spending account

Q: Courtney's employer provides her with an insurance plan that requires her to obtain approval before being admitted to the hospital for surgical procedures. Which variation of health coverage does this illustrate? A) managed care B) health maintenance organization C) employee wellness D) flexible spending account E) consumer-driven health plan

Q: Jerry loses his job during a layoff at his company. He's worried about not having access to his health insurance benefits anymore. However, his company is required to offer him the same health insurance coverage for up to 36 months following the layoff. Which federal law applies in this scenario? A) Social Security Act B) Employee Retirement Income Security Act C) Family and Medical Leave Act D) Consolidated Omnibus Budget Reconciliation Act E) Affordable Care Act

Q: Rose, a new employee, learns her company provides a group insurance plan that she can enroll in. Her friend, Gary, suggests that Rose would save money if she chooses to purchase an individual insurance plan over the company's group insurance plan. Which statement weakens Gary's argument? A) Individual plans are typically offered only to senior executives. B) Rates for group insurance are typically lower than those of individual policies. C) Rose will not be eligible for other benefits if she does not enroll in a group insurance plan. D) Employees get more for their money when they receive insurance as a group benefit. E) Rose will get more take-home pay if she opts for a group insurance plan.

Q: Tiffany, the engineering manager at Cardinal Tech, takes an eight-week unpaid leave to go on a tour to promote a book she wrote. She does so in accordance with Cardinal Tech's policy for leaves without pay. In what sense could this unpaid leave be an employee benefit for Tiffany? A) Her leave is based on length of service, so it accumulates over time. B) Her time off is an example of personal days. C) The Family and Medical Leave Act requires the employer to grant unpaid time off. D) She uses her paid time off for the leave. E) She retains her seniority and benefits during the leave.

Q: Phono Inc. has a benefits package that includes paid vacations and sick leave. The human resource manager proposes shifting this time into a bank of paid time off. What would be an advantage of this change? A) Vacation and sick leave do not make economic sense. B) Most companies offer this arrangement. C) The company won't have to set a schedule for holidays. D) The company won't have to pay for the time the employees take off. E) Employees have more flexibility and privacy for their personal matters.

Q: In the U.S., the amount of sick leave given to employees is often based on A) length of service. B) position within the company. C) age. D) educational background. E) prior job experience.

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

Q: What is a balanced scorecard? Explain its purpose.

Q: What are the implications of designing pay for organizational performance?

Q: What are group bonuses and team awards?

Q: Define incentive pay and explain how it can motivate employees.

Q: Explain how employee stock ownership plans (ESOPs) differ from stock options.

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

Q: What are the different types of pay for rewarding individual performance?

Q: What are the advantages and disadvantages of a merit pay system?

Q: What are the different types of piecework rates? Explain each of them.

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 percent of its assets in the company's own stock.

Q: Kokan Inc., a marketing company, includes stock options and stock purchase plans in executive pay. Executives at the company will want to do what is best for Kokan because that will cause the value of the stock to grow. What is being exemplified in this scenario? A) Scanlon plan B) balanced scorecard C) long-term incentives D) merit plan E) short-term incentives

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: Global Development Corp. pays its executives short-term incentives for meeting financial targets. What 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

Q: Executive pay at Ashcroft 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. What 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

Q: 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 supervisors.

Q: The human resource, accounting, and legal departments of Glorious Software, a company with locations in seven states plus Europe, are working together on developing a profit-sharing plan. Which option for communicating with employees about the plan 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.

Q: Beyond Space Aeronautics is developing a profit-sharing plan. Ben, the human resource manager, assumes the employees are excited to participate in this start-up company's success. However, a supervisor tells Ben about anxiety surrounding a rumor that employees will lose money if the company has a bad year. How should Ben 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

Q: Kotochi 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 condition 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.

Q: If employee participation in making pay-related decisions is encouraged in an organization, then A) administering the plans becomes 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: Joe, a supervisor, believes that employees should participate in pay-related decisions. He says that it will most likely help in the success of incentive plans, and the plans are more likely to influence employee behavior as desired. Which statement 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: 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 plan 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: What 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.

Q: 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.

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) 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

Q: InfoTech Inc., a sales and marketing company, wants to combine the advantages of different incentive-pay plans and help employees understand the organization's goals. Which plan 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

Q: What is the 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 statement 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: What 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.

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

Q: Franklin Appliances 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. What is Franklin Appliances using 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: In 2018, 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 2020, 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: Alyssa, the financial officer at Doone & Smithfield, 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 statement 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.

Q: Which statement 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: 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.

Q: 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.

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 offering an equivalent sum.

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: Leonard, 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, Leonard 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: Chris, 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 statement strengthens Chris' argument? A) In a profit-sharing plan, employees are the owners of the organization. B) Profit sharing helps employees to cooperate and 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: Which incentive plan 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

Q: 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

Q: What 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

Q: ________ 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

Q: In which condition is it 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

Q: What 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.

Q: 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.

Q: 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.

Q: The Henry-Bell 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 percent. 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.

Q: What should employees typically do to earn bonuses under the Scanlon plan? A) They should produce products at a rate 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 standards 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.

Q: 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.

Q: 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.

Q: The CEO of Workforce asked the human resource manager, May, to propose an approach to incentive pay. May 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

Q: What common condition is necessary for gainsharing to be successful 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

Q: For five years, Mainstream 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 statement 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.

Q: West End 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.

Q: Paul, the HR manager at Carletta & Co., is trying to implement an effective group incentive plan that measures increases in productivity and effectiveness and distributes a portion of its earnings to all employees. In this case, Paul should apply the incentive scheme of A) piecework rate. B) gainsharing. C) sales commission. D) merit pay. E) ESOPs.

Q: ________ 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

Q: 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

Q: QVT 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 percent of the improvement is the company's share. The other 40 percent is distributed among the employees in the company. What is being exemplified in this scenario? A) profit rate B) gainsharing C) commission sharing D) merit gain E) group bonus

Q: Which incentive plans are specifically designed to promote group performance? A) performance bonuses B) gainsharing C) standard hour plans D) merit pay E) commissions

Q: What 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.