Reward Systems in Organizations
Exam Answer Key
Course Introduction
This course explores the design, implementation, and evaluation of reward systems within organizational settings. Students will analyze the strategic role of compensation, benefits, recognition, and incentive programs in attracting, motivating, and retaining talent. Emphasis is placed on aligning reward systems with organizational goals, legal considerations, and equity issues, as well as understanding the behavioral and economic theories underpinning different approaches. Through case studies and practical applications, learners will develop the skills needed to design effective and equitable reward systems that drive performance and support organizational success.
Recommended Textbook
Strategic Compensation A Human Resource Management Approach 7th Edition by
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Joseph J. Martocchio
Chapter 1: Strategic Compensation: A Component of Human Resource Systems
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Sample Questions
Q1) This term suggests that a loss is likely for the firm,and that the individual will be left with little control.
A) reverse opportunity
B) negative equity
C) threat
D) foreclosure
Answer: C
Q2) Employment ________ occurs when an employee's agreement to perform work is ended,be it voluntarily or involuntarily.
Answer: termination
Q3) Companies that are implementing ________ plans generally increase the amount of classroom and on-the-job training,as these types of plans make training necessary rather than optional.
Answer: pay-for-knowledge
Q4) Due to recent economic downturn,XYZ Co.decided to shut down one of its appliance manufacturing plants in the United States and therefore around 300 workers need to be laid off.XYZ Co.will award these laid off workers with 6 months of ________ pay.
Answer: severence
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Chapter 2: Contextual Influences on Compensation Practice
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Sample Questions
Q1) This type of bargaining occurs when unions shift from bargaining for large pay increases to simply bargaining for greater job security.
A) guarded
B) concessionary
C) heightened
D) compensationary
Answer: B
Q2) Congress creates and passes laws within the ________ branch of the American government.
Answer: legislative
Q3) Which branch of the federal government is responsible for interpreting laws?
A) Service branch
B) Legislative branch
C) Executive branch
D) Judicial branch
Answer: D
Q4) The ________ of 1963 makes it illegal to pay one sex more than the other for equal work performed.
Answer: Equal Pay Act
Page 4
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Chapter 3: Traditional Bases for Pay: Seniority and Merit
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Q1) With the ________ comparative appraisal technique,supervisors compare each employee to every other employee,selecting the best performer in each dyadic instance.
Answer: paired comparison
Q2) There are 15 animal keepers working for the XYZ Company.Their supervisor is required to rate the performance of these workers based on the following criteria: 30% of the animal keepers will be rated as below-average,40% of the animal keepers will be rated as average,and 30% of the animal keepers will be rated as above average.What type of performance appraisal is used?
A) paired comparison
B) forced distribution
C) critical incident technique
D) behavioral observation scale
Answer: B
Q3) Job analysis is vital to companies that wish to establish ________ comparison systems.
Answer: internally consistent
Q4) ________ systems evaluate a given employee's performance against the performance of other employees.
Answer: Comparison
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Chapter 4: Incentive Pay
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Sample Questions
Q1) What is the main objective of Scanlon plans?
A) to standardize the workforce
B) to encourage unionization
C) to increase workforce competitiveness
D) to increase employee involvement
Q2) On which teams is membership relatively permanent,with the members working full-time on the team?
A) work (process)
B) project
C) parallel
D) innovative
Q3) Stock ________ describe an employee's right to purchase company stock.
Q4) Which type of individual incentive plan requires the achievement of multiple,complex objectives without compromising the quality and quantity of output that is generated by employees?
A) piecework plans
B) referral plans
C) management incentive plans
D) behavior encouragement plans
Q5) The main disadvantage of group incentive compensation is employee ________.
Page 6
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Chapter 5: Person-Focused Pay
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Q1) ________ of skills is the level of expertise or specialization an employee brings to a job.
Q2) Which company discussed in the chapter tests its employees twice per year,and has abnormally high training costs in assessing the skill levels of its employees?
A) McDonald's
B) Wal-Mart
C) Tiffany's
D) Federal Express
Q3) Core ________ are often derived from the overall strategic statements of companies,and are very general knowledge and skills.
Q4) Pay-for-knowledge and skill-based pay are two types of person-focused pay programs that fall under this pay category.
A) competency-based
B) innovation-based
C) service based
D) stair-step
Q5) ________ skills refer to similar skills or knowledge.
Q6) ________ skills are those skills typically considered supervisory.
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Chapter 6: Building Internally Consistent Compensation Systems
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Sample Questions
Q1) A job analysis method is this if it yields the kind of information that it was designed to provide and accurately assesses each job's duties.
A) reliable
B) complete
C) valid
D) market-based
Q2) What type of organizations use classification plans most prevalently?
A) private sector organizations
B) non-profit organizations
C) multi-national organizations
D) public sector organizations
Q3) The federal GS classification system is divided into how many classifications?
A) 15
B) 10
C) 6
D) 21
Q4) ________ describe preferences for work environments and outcomes.
Q5) The ________ ranking method orders jobs by extremes,as committee members determine most and least valuable jobs until all jobs have been evaluated.
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Chapter 7: Building Market-Competitive Compensation Systems
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Q1) As of September 2010,U.S.companies spent approximately how much per employee for discretionary benefits?
A) $28,995
B) $19,000
C) $3,050
D) $1,200
Q2) ________ represents the amount of spread or dispersion in a set of data.
Q3) Compensation surveys are typically focused on which two factors?
A) competitors' promotion and advancement opportunities
B) internal promotion and advancement opportunities
C) competitors' wage and salary practices
D) internal wage and salary practices
Q4) The NCS provided incidence and extensive data on which two types of compensation benefits?
A) health insurance & retirement
B) retirement & stock options
C) health insurance & pay
D) pay & stock options
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Q5) The ________ is the most commonly used method for tracking cost changes throughout the United States.
Chapter 8: Building Pay Structures that Recognize
Individual Contributions
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Sample Questions
Q1) This type of sales incentive compensation plan offers the sales person a salary and further compensation if they meet a specific,exceptional sales goal.
A) salary-plus-bonus
B) salary-plus-commission
C) salary-plus-draw
D) salary-plus-graduated commission
Q2) Money that covers the basic living expenses of sales professionals is better known as a ________,
Q3) A ________ is the difference between the maximum and minimum pay rates of a given pay grade.
Q4) ________ is a form of compensation based upon a percentage of the selling price of a product or service.
Q5) ________ describe the allocation of monetary resources to fund pay structures.
Q6) Richard's job has a compa-ratio of 0.85.What does this ratio tell about Richard's pay rate?
A) Richard's pay is highly competitive with the market.
B) Richard's pay is not competitive with the market.
C) There is no way to judge the competitiveness of Richard's pay.
D) You need more information to be able to judge Richard's pay.
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Chapter 9: Discretionary Benefits
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Q1) Smoking cessation,stress reduction,and weight loss programs are examples of which type of employee benefit program?
A) employee assistance
B) employee welfare
C) wellness
D) employee education
Q2) ________ programs help bring employees to the workplace and back home again by using more energy-efficient forms of transportation.
Q3) Referrals to on-site child care or elder care centers and company-sponsored day care programs are examples of which type of service?
A) employee assistance programs
B) family assistance programs
C) day care
D) cessation programs
Q4) Which of the following is a characteristic of integrated paid time off policies?
A) Such policies distinguish among reasons for absence
B) Individuals have to justify reason for taking time off
C) Holiday, vacation, sick leave, and personal leave are combined
D) Can lead to increased unscheduled absences
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Chapter 10: Employer-Sponsored Retirement Plans and Health Insurance Programs
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Q1) A new employee comes into your office and asks you how many hours a year he has to work to qualify as a year towards his vesting requirements.What would you tell him?
A) 1,000
B) 1,400
C) 800
D) 1,200
Q2) Compare and contrast defined contribution plans with defined benefit plans.
Q3) A company uses graduated first-dollar-of-profits formula for their profit-sharing plans.They choose to share 4% of the first $10 million of after-tax profits and 7% of the after-tax profits in excess of that level.Last year if this company's after-tax profit were $15 million,how much of this profit would be distributed to the employees?
A) $1,200,000
B) $1,000,000
C) $750,000
D) $600,000
Q4) ________ accounts allow employees to pay for specified health care costs not covered by an employer's insurance plan.
Q5) ________ refers to an employee's nonforfeitable rights to pension benefits.
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Chapter 11: Legally Required Benefits
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Q1) Both employers and employees finance Medicare Part A benefits through payroll taxes of ________ percent on all earnings.
Q2) This Medicare Plan was established with the passage of the Balanced Budget Act of 1997 as an alternative to the original program (parts A &B).
A) Medicare Select
B) Medicare Prescription Drug Program
C) Medicare Advantage
D) Medigap
Q3) ________ specify insurance rates based on classifications of businesses.
Q4) To receive OASDI disability benefits,Sung Lee's disability would have to be expected to last at least how long?
A) 6 months
B) 12 months
C) 3 months
D) 18 months
Q5) ________ Act contains provisions to make health care more affordable and will slowly eliminate the "donut hole" coverage gap.
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Page 13
Chapter 12: Compensating Executives
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Q1) What was the median annual earnings for all U.S.civilian workers in 2009?
A) $33,190
B) $41,778
C) $46,120
D) $51,980
Q2) Which of the following are the two main components of current core compensation?
A) base pay & bonuses
B) base pay & legally-required benefits
C) bonuses & legally-required benefits
D) base pay & discretionary benefits
Q3) Who are the key players in setting executive compensation? Detail their different roles.How does SEC affect their roles?
Q4) The SEC's Summary Compensation Table contains data covering how many years?
A) 3
B) 5
C) 7
D) 10
Q5) Shareholders' interests are represented by a ________ who weigh the pros and cons of top executives' decisions.
Page 14
Q6) Company stock shares are the main form of executives' ________ compensation.
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Chapter 13: Compensating the Flexible Work Force:
Contingent Employees and Flexible Work Schedules
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Q1) What type of test is used to determine if an independent contractor is financially dependent?
A) right to control test
B) safe harbor test
C) economic reality test
D) financial dependence test
Q2) What are the strategic issues involved with contingent and flexible workers for a company pursuing a lowest cost strategy?
Q3) This type of telecommuting involves executives who travel extensively and maintain control over projects through the use of telephones,faxes,and e-mail.
A) neighborhood work center
B) satellite work center
C) nomadic executive office
D) electronic remote work center
Q4) Explain leased employee arrangements.Discuss employee benefits for leased workers.
Q5) Discuss flexible work schedules from the perspective of both unions and employees.
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Chapter 14: Compensation Expatriates
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Q1) ________ benefits allow for expatriates to take paid time off back in the United States.
Q2) When is a goods and services allowance given?
A) to any person willing to work outside of the U.S.
B) when there is a high level of stagflation
C) when the cost of living is lower in the foreign work location than in the U.S.
D) when the cost of living is higher in the foreign work location than in the U.S.
Q3) Juanita was told that on her first overseas assignment she would be getting a foreign service premium.That probably means she will be there at least how long?
A) 12 months
B) 6 months
C) 3 months
D) 24 months
Q4) ________ is the transition process of working in a domestic assignment in a worker's home country after having worked on an international assignment abroad.
Q5) ________ premiums reward employees for moving from one assignment to another.
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Page 16
Chapter 15: Pay and Benefits Outside the United States
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Q1) Indian per capita expenditure on health care in 2006 was what amount at the international dollar rate?
A) $109
B) $284
C) $563
D) $1,384
Q2) In ________,time away from work for pregnant women under the terms of the Maternity Leave Law still counts towards entitlement to vacation time.
Q3) Nora has been working at a manufacturing plant in Mexico for the last 18 months.Which of the following is NOT true regarding her paid time off benefits?
A) She is entitled to paid time off during public holidays.
B) She is entitled to 6 weeks of maternity leave with full pay.
C) She is entitled to 6 vacation days.
D) If she works during a public holiday, she is entitled to double pay.
Q4) At least how many days of maternity leave are women entitled to in China?
A) 60
B) 90
C) 100
D) 120
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Chapter 16: Challenges Facing Compensation
Professionals
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Q1) The gap between productivity and real hourly compensation is the highest between the periods of
A) 1947-1973
B) 1979-1990
C) 1990-2000
D) 2000-2009
Q2) Which of the following is NOT true about the changes brought by PPACA?
A) The new legislation will require most employers to provide health care insurance to employees.
B) The lifetime benefits cap will be eliminated.
C) Waiting periods before employees may receive health care coverage will be limited with a maximum of 70 days.
D) The fines will be higher for employers that offer unaffordable health insurance.
Q3) ________ is the face value of a dollar.
Q4) ________ is a situation in which a worker possesses more qualifications,skill,and education than is required by his/her existing job.
Q5) Briefly discuss the uncertainties brought by health care reform and changing workforce demographics.
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