Q&A Hero

Q: What is a survey? What purpose does it serve in terms of compensation?

Q: Grades and ranges or bands recognizes both external and internal pressureson pay decisions.

Q: A pure market pricing strategy tends to ignore internal alignment.

Q: Market pricers match a small percentage of their jobs with market data.

Q: A job structure is anchored by the organization's external competitive position and reflected in its pay-policy line.

Q: Managers often regard external market data as more objective than internal job evaluation.

Q: Career moves between bands are more common than within bands.

Q: Use of broad bands has risks of bias and high labor costs.

Q: Flat rates, in which pay is the same regardless of performance or seniority, are often used in skill-based pay systems and in unionized employers.

Q: When flat pay rates are used, they are typically the midpoint of a corresponding survey job.

Q: A high degree of overlap between adjacent pay ranges means pay raises can be larger compared to low overlap.

Q: Smaller pay ranges may reduce the opportunities for promotion.

Q: Pay ranges for managerial jobs are larger than ranges for other jobs because these jobs have greater opportunity for both discretion and performance than lower level jobs.

Q: Pay ranges for top-level management positions are commonly larger than those other professional and midlevel managerial positions.

Q: Grades group job evaluation data on the horizontal axis.

Q: A pay range exists when at least two employees in the same job are paid different rates.

Q: Aging the market data to a point halfway through the plan year is called lead/lag.

Q: A market pay line is useful for setting pay for benchmark jobs that match competitors, but not for non-benchmark jobs.

Q: Regression smoothes large amounts of data while minimizing variations.

Q: Market lines may be constructed by either freehand drawing or linear regression.

Q: A common practice is to use the 10th and 90th percentiles from pay survey data to set minimums and maximums of pay grades.

Q: The measure of central tendency that minimizes distortion is the mode.

Q: The most common measure of variation in pay surveys is the standard deviation.

Q: Research shows that most managers analyze pay surveys in similarly by weighting pay of their major product and labor market competitor more than others.

Q: The process of multiplying survey data by a factor reflecting the difference between a survey and a company job is called survey leveling.

Q: Total cash includes base pay plus stock options and benefits.

Q: Setting your company's base pay to competitors' total compensation risks high fixed costs.

Q: Turnover and organizational revenues are examples of survey data collected to gather competitive intelligence.

Q: Pay surveys include information about both all forms of cash compensation and benefits.

Q: If the purpose of a survey is to price the entire structure, then benchmark jobs can be selected to include the entire job structure.

Q: Salary.com provides fewer different job descriptions for a similar job title such as programmer than the BLS survey.

Q: Salary data available to employees via the Internet are as reliable and accurate as other more traditional surveys.

Q: Identifying pay survey participants by company name is considered price fixing under the Sherman Act.

Q: It is easier for companies using a market pricing approach to price "fuzzy market" jobs than those using a benchmark job approach.

Q: It is easier for employers to determine the worth of jobs that fall into fuzzy markets than traditional relevant markets.

Q: A segmented labor supply requires multiple labor market comparisons.

Q: The relevant labor market for accounting, sales or clerical skills should be limited to each industry in which these types of work are found.

Q: When there is an unusual level of turnover in a job, an employer is likely to conduct a market survey.

Q: What explains the upward sloping supply under the human capital theory?

Q: What is the relevance of signaling in compensation systems?

Q: Does an above-market wage guarantee a better workforce?

Q: According to efficiency-wage theory, how does increased wages increase efficiency and lower labor costs?

Q: What is the principal argument of the compensating differentials theory?

Q: How do managers tackle the fact that neither marginal product nor marginal revenue is directly measurable?

Q: What is the significance of marginal revenue?

Q: What are the basic assumptions of labor market theories?

Q: What are the factors that affect decisions on pay level and mix?

Q: Explain external competitiveness.

Q: The text argues the east-risk approach may be to set both pay level and pay mix to match competition.

Q: Research shows that a lead pay strategy reduces turnover.

Q: A lead policy may force the employer to increase wages of current employees too, to avoid internal misalignment and murmuring.

Q: Combat pay premiums paid to military personnel offset some of the risk of being fired upon is an example of a lead pay-level policy.

Q: Technological advances and lower wage levels offshore are the deciding factors in companies' decisions to outsource jobs.

Q: The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors.

Q: Talented individuals have a higher marginal value in larger organizations.

Q: Wages in labor-intensive industries are generally lower than in technology intensive industries.

Q: Segmenting sources of labor is a means of reducing labor costs.

Q: Employers in highly competitive markets are less able to raise prices without loss of revenues.

Q: Employers tend to underestimate the importance of pay to employees and over estimate the role of relationships with the supervisor.

Q: The product market sets the floor on the minimum wage required to attract sufficient numbers of employees.

Q: Human capital theory assumes that people are paid at the value of their marginal product.

Q: The most influential theory explaining pay-level differences is marginal revenue productivity.

Q: It is likely that workers act in accordance with reservation wage theory with respect to both wages and benefits.

Q: A study of graduating students found students selected jobs based upon the match between their personalities and employers' pay policies.

Q: Job applicants who will not accept a job that pays below a certain level are acting according to signaling theory.

Q: Signaling theory applies to both the demand and supply side.

Q: An employer offering lower base pay with high bonuses is likely signaling they are seeking risk-taking employees.

Q: Signaling theory argues that higher wages leads to greater efficiency.

Q: According to efficiency-wage theory, paying higher wages than competitors lowers labor costs due to more efficient workers.

Q: Compensating differentials theory says that paying above market wages will lead to workers with higher ability.

Q: In practice, organizations use skills and competencies to assess value of labor instead of marginal revenue product.

Q: Marginal revenue is measurable and used by managers to determine both pay levels and how many employees to hire.

Q: Other things being constant, in a hiring scenario, the employer will continue to hire until the marginal revenue generated by the last hire is equal to the costs associated with employing that person.

Q: Marginal productivity theory argues that when factors of production are held constant, each additional worker is less productive than the last one hired.

Q: The first assumption of labor market theories is that employers always seek to maximize penetration.

Q: In a labor market, the market rate is where the lines for labor demand and labor supply cross.

Q: In a labor market, the demand side focuses on the actions of the employers.

Q: Graduating students usually find themselves in a quoted-labor market.

Q: An individual manager could be a factor affecting an employer's external competitiveness.

Q: Stores that label each item's price or ads that list a job opening's starting wage are examples of bourses.