Compensation Management
Final Exam Questions
Course Introduction
Compensation Management is a comprehensive course that explores the principles, policies, and practices involved in designing and administering employee compensation systems. Students will examine key components such as job evaluation, salary surveys, incentive plans, benefits, and legal considerations affecting compensation. The course integrates theoretical frameworks with real-world applications, emphasizing the strategic role of compensation in attracting, motivating, and retaining talent within an organization. Through case studies and practical exercises, learners will develop the skills necessary to design equitable and competitive compensation structures aligned with organizational goals and market trends.
Recommended Textbook
Strategic Compensation in 4th Canada Edition by Richard Long
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13 Chapters
585 Verified Questions
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Page 2
Chapter 1: A Road Map to Effective Communication
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Sample Questions
Q1) What is the first step to effective compensation according to the "Road Map to Effective Compensation"?
A) Develop new job descriptions.
B) Understand your organization and your employees.
C) Determine your compensation values.
D) Cost out the plan.
Answer: B
Q2) Which of the following best explains intrinsic rewards?
A) Intrinsic rewards focus on increasing an employee's financial position.
B) Intrinsic rewards are provided by job content.
C) Intrinsic rewards provide security and employee services.
D) Intrinsic rewards relate to bonuses based on performance.
Answer: B
Q3) As a job analyst you are responsible for which of the following functional areas?
A) Designing and implementing compensation policies
B) Formulating compensation strategy
C) Evaluating market data
D) Developing job descriptions and conducting job evaluations
Answer: D
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Page 3
Chapter 2: A Strategic Framework for Compensation
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Sample Questions
Q1) The link between contextual and structural variables is the managerial strategy.
A)True
B)False
Answer: True
Q2) Which of the following conditions has not made it increasingly difficult for Canadian firms to make the classical managerial strategy work for them?
A) Educational levels have increased.
B) Globalization has allowed work to be outsourced to a variety of developing countries.
C) Economic security and social security have improved.
D) Social values have become more democratic and egalitarian.
Answer: B
Q3) The key feature of an organizational system is that it transforms input resources into outputs that are valued by a body or group.
A)True
B)False
Answer: True
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Chapter 3: A Behavioural Framework for Compensation
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Sample Questions
Q1) If employees feel that they are valued and respected members of their organization,they are much more likely to engage in which type of behaviour?
A) Citizenship
B) Task
C) Membership
D) All desired types
Answer: A
Q2) Which of the following attitudes refers to the strength of an employee's desire to perform his or her job duties well?
A) job satisfaction
B) work motivation
C) organizational identification
D) organizational commitment
Answer: B
Q3) Task behaviour can be generated through organizational identification.
A)True
B)False
Answer: True
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Chapter 4: Components of Compensation Strategy
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Sample Questions
Q1) As an employer you believe it is always a good idea to pay people for their contributions to organizational results.Which of the following pay plans should you consider implementing?
A) Indirect pay
B) Base pay
C) Pay for knowledge
D) Performance pay
Q2) An advantage of base pay is that it demonstrates commitment to employees by the employer.
A)True
B)False
Q3) Briefly explain the three methods for establishing base pay.
Q4) According to the text,what are the key conditions for using output-related pay?
Q5) Which of the following refers to job evaluation?
A) Determining how well a job is performed.
B) Surveying the market.
C) Ranking all jobs according to their value to the firm.
D) Establishing the skill level of each employee.
Q6) Briefly discuss the advantages and disadvantages of using indirect pay.
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Q7) Identify and briefly describe the issues in developing a skill-based pay system.
Chapter 5: Performance Pay Choices
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Sample Questions
Q1) Discuss the nature of suggestion systems and some of the problems you need to be aware of.
Q2) Which of the following statements refers to a targeted incentive?
A) A payment to work teams if they achieve a certain goal
B) Aimed at a specific individual
C) Intended to reduce compensation costs
D) Focused on a specific behaviour
Q3) From an employee's perspective,why are merit bonuses seen as less valuable than merit raises?
A) Employees have little confidence in the results of performance appraisal.
B) Bonuses can cause poor relations with supervisors and coworkers.
C) Bonuses are given in lump sum payments and apply only for one year.
D) Bonuses are not suited for work that depends on collaboration and cooperation.
Q4) The three main types of employee stock plans are: stock bonus plans,stock purchase plans and stock option plans.
A)True
B)False
Q5) Identify and briefly explain the nature of individual performance pay plans.
Q6) Explain the difference between goal sharing and gain sharing plans.
Page 7
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Chapter 6: Formulating the Reward and Compensation Strategy
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Sample Questions
Q1) Briefly summarize the legislative framework that compensation must comply with.
Q2) Which of the following is not one of the main groups for whom the compensation system often differs from the organization's compensation norm?
A) Contingent workers
B) Expatriate and foreign employees
C) Executives
D) Production employees
Q3) The nature of the compensation mix affects the amount that an organization can afford to pay.
A)True
B)False
Q4) Which of the following factors does not justify the differences of pay among employees with similar job duties?
A) Seniority
B) Performance
C) Experience
D) Age
Q5) Briefly discuss the four key understandings necessary for successful formulation of compensation strategy.
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Chapter 7: Evaluating Jobs: the Job Evaluation Process
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Sample Questions
Q1) Which of the following statements is an example of job specifications?
A) arranges meetings and schedules out of town travel
B) possession of a valid driver's licence.
C) answers telephones and personal inquiries
D) reports to the head of the department
Q2) Pay differences are not considered pay inequities if they are due to "permissible differences." Which of the following is not a permissible difference?
A) Differences due to formal seniority system
B) Differences due to a temporary training/development assignment
C) Differences due to merit compensation plan
D) Differences due to special arrangements between an employee and the employer
Q3) A job description is determined from a careful process of job evaluation.
A)True
B)False
Q4) The "job to job" method for pay equity job comparison applies only to public sector,not private sector,organizations in Ontario.
A)True
B)False
Q5) What should a job description contain if it is to be useful for job evaluation?
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Chapter 8: Evaluating Jobs: the Point Method of Job Evaluation
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Sample Questions
Q1) In some cases,where to establish pay grade boundaries is an arbitrary decision. A)True
B)False
Q2) The midpoint of split pay range serves as a control point to prevent pay increases unless they are based on performance.
A)True
B)False
Q3) Your firm allows employees to reach the midpoint of their pay range using annual seniority increases. Pay increases beyond the midpoint are based on performance. What type of range movement system is your employer using?
A) just noticeable difference
B) split pay range
C) fixed steps
D) supervisory increments
Q4) In establishing criteria for movement within a pay range,the three most commonly used are experience,performance,and market rates.
A)True
B)False
Q5) What are the key considerations in establishing pay grades and pay ranges?
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Chapter 9: Evaluating the Market
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Q1) Which of the following conditions best explains why professional athletes command the kinds of fees they do for endorsing various products and services?
A) wage compression
B) labour scarcity
C) compensating differentials
D) union wage premiums
Q2) Which of the he following is not a possible limitation of compensation surveys?
A) Free labour market data is not readily available.
B) Cannot surmise anything about compensation strategies practised by other firms.
C) May misrepresent actual pay trends.
D) Markets may not value jobs fairly.
Q3) Two of the least important aspects of pay data are the actual distribution of employees within their pay ranges and the amounts actually paid to employees.
A)True
B)False
Q4) Discuss some of the advantages and disadvantages of in-house surveys.
Q5) Briefly discuss some of the limitations of compensation surveys.
Q6) Briefly describe the process for analyzing and interpreting survey data.
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Chapter 10: Evaluating Individuals
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Q1) Define and describe the key elements of performance management.
Q2) One advantage of tying pay to appraisals is that this increases the likelihood that appraisals will be taken seriously by all parties involved.
A)True
B)False
Q3) Which source uses many different rating groups to evaluate the employee's performance?
A) professional raters
B) tiered supervisors
C) 360-degree feedback
D) field review
Q4) Which of the following appraisal methods provides specific descriptors for each point on a rating scale?
A) behavioural observation scales
B) management by objectives
C) behaviourally anchored rating scales
D) forced distribution
Q5) Identify the key characteristics and advantages of 360-degree feedback appraisal system.
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Chapter 11: Designing Performance Pay Plans
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Q1) A rolling baseline goes up each year there is a productivity gain,and last year's productivity becomes the new baseline.
A)True
B)False
Q2) Which of the following is not an example of a nonmonetary award?
A) a day off for perfect attendance
B) a pat on the back for a job well done
C) a company picnic
D) an all expenses-paid-holiday
Q3) What is the most common basis for allocating the profit-sharing bonus across employees in Canadian firms?
A) seniority
B) individual performance
C) salary level
D) salary level or individual performance
Q4) Gain-sharing is not a viable plan to use if no valid historical benchmark can be set.
A)True
B)False
Q5) Briefly describe the Scanlon Plan.
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Chapter 12: Designing Indirect Pay Plans
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Q1) In developing a benefits system,the first issue is determining the structure of each benefit.
A)True
B)False
Q2) Which of the following is not a possible reason for implementing flexible benefit plans?
A) cutting benefit costs
B) more diverse work force
C) union demands
D) shift employee perspective away from an entitlement approach
Q3) Describe how a health care spending account works.
Q4) Which is not one of the considerations in deciding whether to include a particular benefit in indirect pay?
A) whether it contributes to the objectives of indirect pay
B) whether or not there is a union
C) whether it is valued by employees
D) whether it adds much net value to the compensation package
Q5) Identify and briefly explain the most common and important employee services.
Q6) Identify and briefly explain the types of pension plans discussed in the text.
Q7) Describe the main issues in designing the benefits system.
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Chapter 13: Activating and Maintaining an Effective Compensation System
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Q1) The final step in implementing a new compensation system is communicating the system.
A)True
B)False
Q2) Identify the four key aspects that need to be considered in planning the infrastructure for compensation administration.
Q3) Which of the following is not an appropriate use for computers?
A) computing market lines and pay policies
B) determining the relative value of jobs
C) labour market data analysis
D) online surveys of employee attitudes
Q4) As a result of focusing your recruitment efforts on attracting recent university graduates your workforce has become younger. What impact does this change have on your compensation system?
A) greater focus on pension plans and retirement income
B) offer more cash and family benefits
C) adopt job evaluation system
D) adopt new managerial strategy
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Q5) Identify and describe the steps necessary for implementing a compensation system.