Compensation Chapter 2

Question 1

The fundamental business directions that an organization has made in order to achieve its strategic objectives

Answer 1

Strategy

Question 2

True or False
The greater the alignment or fit between organizational strategy and the compensation system, the less effective the organization.

Answer 2

False

Question 3

True or False
Pay systems should align with the organization’s business strategy.

Answer 3

True

Question 4

3 Tests of Competitive Advantage

Answer 4

1. Is it aligned?
2. Does it differentiate?
3. Does it add value?

Question 5

A business practice or process that results in better performance than one’s competitor

Answer 5

Competitive advantage

Question 6

Focuses on efficiency and stresses doing more
with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed

Answer 6

Cost Cutter

Question 7

Stresses delighting customers and bases employee pay on how well they achieve this goal

Answer 7

Customer-focused based strategy

Question 8

Focuses on how an organization can recognize and reward employees for their work in helping the organization achieve its objectives

Answer 8

Employee Contributions

Question 9

TRUE or FALSE
Pay systems should align with the organization’s overall HR strategy and systems which include hiring, training and development

Answer 9

True

Question 10

TRUE or FALSE
Compensation is key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy.

Answer 10

True

Question 11

Steps in Formulating a Total Compensation Strategy

Answer 11

1. Assess Total Compensation Implications
2. Map a Total Compensation Strategy
3. Implement Strategy
4. Reassess the Fit

Question 12

Suggests that a company is more likely to achieve a competitive advantage if pay practices are aligned with business and overall HR strategies. Reflects the company’s strategies and values.

Answer 12

Best Fit

Question 13

Suggests that there exists a set of best-pay practices, which can be applied universally across all situations, results in better performance with almost any business strategy.

Answer 13

Best Practices

Question 14

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Business strategy and competitive dynamics

Answer 14

Step 1 - Assess Total Compensation Implications

Question 15

Step 1, 2, 3, 4 in the Total Compensation Strategy:

HR strategy

Answer 15

Step 1 - Assess Total Compensation Implications

Question 16

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Culture/values – pay system mirror image and reputation

Answer 16

Step 1 - Assess Total Compensation Implications

Question 17

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Social and political context

Answer 17

Step 1 - Assess Total Compensation Implications

Question 18

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Employee preferences

Answer 18

Step 1 - Assess Total Compensation Implications

Question 19

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Union Preferences

Answer 19

Step 1 - Assess Total Compensation Implications

Question 20

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Map a total compensation strategy using the five elements of the pay model.

Answer 20

Step 2 - Map a Total Compensation Strategy

Question 21

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Decisions in the pay model work in concert and the totality of decisions form the compensation strategy.

Answer 21

Step 2 - Map a Total Compensation Strategy

Question 22

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Involves implementing the strategy through the design and execution of the compensation system.

Answer 22

Step 3 - Implement

Question 23

Step 1, 2, 3, 4 in the Total Compensation Strategy:

Recognizes that the strategy must change to fit changing conditions, and involves periodic reassessment. Periodic reassessment is needed to continuously learn, adapt, and improve.

Answer 23

Step 4 - Reassess

Question 24

True or False

The steps to develop a total compensation strategy are: assess total compensation implications, map out a total compensation strategy, implement the strategy and reassess and realign the strategy to ensure achievement of the objectives.

Answer 24

True

Question 25

True or False

The “best fit” perspective on compensation suggests that compensation be aligned with the specific business strategy.

Answer 25

True

Question 26

True or False

The “best practices” perspective suggests there is one set of best pay practices that can be universally applied across situations and strategies.

Answer 26

True