Exam 2 Flashcards
Motivation is the product of expectancy, instrumentality, and Valence
Expectancy theory
Belief that effort will lead to performance
Expectancy
Belief that performance will yield outcomes
Instrumentality
Outcome available are valued
Valence
A ___ system links increases in base pay to how highly employees are rated on a performance evaluation
Merit pay
Employees receive an end of the year bonus that does not build into base pay
Merit bonus
Linked to some objective, pre established level of performance
Individual incentive plans
Plans based on some measure of group performance
Group incentive plans
Focus on organizational profitability as the standard for incentive
Profit sharing plans
Focus on performance beyond the one-year timeline
Long term incentive plans
Process of systematically determining the relative worth of jobs to create a job structure for the organization
Job evaluation
Prototypical jobs used as a reference point for making pay comparisons inside or outside of the organization
Benchmark (key) jobs
Typically chosen as the primary method of job evaluation
Market pricing
__% of organizations use market pricing as their primary approach to job evaluation
75%
Most common traditional job evaluation methods
Ranking, Classification, Point (factor)
Orders the job descriptions from highest to lowest based on a global definition of relative value to the organizations success
Ranking
Advantages for Ranking (Job evaluation)
Simple, fast, inexpensive
Series of classes covers the range of jobs
Classification
Hierarchy of work
Structure
Two key types of work
Transactional
Tacit
Routine work
Transactional work
Complex work
Tacit work
Link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to work
Skill-based structures
Pays employees for the job to which they are assigned, regardless of the skills they possess
Job-based plan
Pay is based on the knowledge of the individual doing the job rather than on job content or output (specialist)
Depth
Employees in a multi-skill system earn pay increases by acquiring new knowledge (generalist)
Breadth
Refers to the pay relationships among organizations - organizations pay relative to its competitors
External competitiveness
Refers to the average of the array of rates paid by an employer
Pay level
Is the various types of payments, or pay forms, that make up the total compensation
Pay mix
Pay level and pay mix focus on two objectives ___
Control costs and increase revenues
Attract and retain employees
Pay individuals for their skills, regardless of whether the work they are doing requires all or just a few of those particular skills
Skill-based Structures
Early conceptions of competencies focused on five areas
Skills, Knowledge, self-concepts, traits, motives
Often used when considering work requiring more tacit knowledge (e.g., managerial and professional work)
Competency-based pay structure
schemes for classifying competencies
Personal characteristics, visionary, organization specific
The demand side focuses on the actions of ___________– how many they are hiring and what they are willing to pay
Employers
The supply side looks at ______ – their qualifications and what pay they are willing to accept
Employees
suggests that high wages may increase efficiency and actually lower labor costs
Efficiency wage theory
tries to ensure that an organization’s wage costs are approximately equal to those of product competitors
Pay with competition policy
maximizes the ability to attract and retain quality employees and minimizes employee dissatisfaction with pay
Lead pay level policy
A policy of paying below-market rates may hinder a firm’s ability to attract potential employees
•If coupled with the promise of higher future returns, it may increase commitment, teamwork, and productivity
Lag pay level policy
•Benefits:
•Widely accepted and relatively easy to manage
•Downsides:
•Requires accurate performance ratings, adequate allotment of money, and differentiation across performance levels to be truly effective
•Can become costly as it increases fixed compensation costs
Merit pay
•Benefits:
•Because employees must earn this increase every year, it is viewed as less of an entitlement than merit pay
•Helps employers by reducing fixed salary costs
•Downsides:
•Employees may come to expect them
•Base pay wages may not stay competitive if they go unadjusted
Merit bonus
•Benefits:
•Easy to justify and track
•Downsides:
•They don’t work for every job due to difficulties in identifying objective individual measures of performance
Individual incentive plan
•Benefits:
•Fosters teamwork and cooperation
•Effective in stimulating ideas/problem solving
•Downsides:
•Not always easy to identify the impact of a team
•Can be difficult to implement
•Higher risk of “social loafers”
Group incentive plans
Benefits:
•Focus is on the measure that matters most to the most people – a predetermined index of profitability
•Downsides:
•Most employees do not feel their jobs have a direct impact on profits
Profit sharing plan
• Benefits:
•More likely to motivate longer-term value creation
•Have some tax and “defense” advantages for organizations (e.g., defense against hostile takeovers)
•Downsides:
•Stock price risk for employees
•There is little evidence that stock ownership by employees leads to better firm performance
Long term incentive plan
Which of the following is a job evaluation method that can group a wide range of work together in one system but may leave too much room for manipulation?
Classification
Competencies are derived from the ________ beliefs about the organization and its strategic intent.
Executive leaderships
A ________ approach controls costs by paying only as much as the work performed is worth, regardless of any greater skills the employee may possess.
Job based
Which of the following is the reason why skill-based pay plans have maximum flexibility?
They pay employees for the highest level of skill they have achieved regardless of the work they perform.
Which of the following is NOT a disadvantage of the ranking method of evaluation?
Determining classes and writing class descriptions can be a challenge
Criteria for ranking may not be well defined
May become problematic as the number of jobs goes up
Raters must have knowledge about the jobs they are rating
Determining classes and writing class descriptions can be a challenge
Who among the following is most likely to be working for a company that uses a competency-based pay plan?
Carlos, who focuses on obtaining certifications in her field to get a pay increase
Julia, who focuses on getting promoted to get a pay increase
Faiza, a manager who focuses on choosing the employees best suited for job roles
Juan, a manager who focuses on controlling costs through budgets and work assignments
Carlos, who focuses on obtaining certifications in her field to get a pay increase
What percent of organizations tend to use the more traditional “in-house” methods of job evaluation?
25%
Which of the following is a characteristic of benchmark jobs?
They employ a reasonable proportion of the workforce.
Employees tend to like _____ because they can see the link between the work that they do and the amount they are compensated.
Skill based pay plans
Which of the following highlights the correct ordering of the job evaluation procedure
job analysis -> job description -> job evaluation -> structure
Which of the following is an example of the demand side of labor?
The pay level offered by an employer.
If the supply of employees is higher than the demand for employees in a particular job, organizations will be less likely to utilize a lag pay-level policy.
False
An employer offering higher base pay with low bonuses is a likely signal that the organization is seeking risk-taking employees
False
The supply of labor will impact the effectiveness of a lag pay-level policy.
True
Marie hired on with a tech company offering the usual benefits but paying below-market rates. She took the job because the company was promising generous stock options and hefty yearly bonuses if goals are met. Plus, they are paying her to relocate to Hawaii! Marie’s new employer is using a _____.
Lag pay level policy
Which of the following statements is true of pay level?
Pay level is directly proportional to labor costs
The degree of competition that an organization faces for its products/services is a key organization factor that will dictate pay decisions.
False
Which of the following is an assumption held by the labor supply model about the behavior of potential employees?
Job seekers do not face barriers to mobility.
The number of job seekers is low.
Job seekers are unaware of job openings.
Job seekers often lie on their resumes.
Job seekers do not face barriers to mobility.
Theories of labor markets usually begin with four basic assumptions. Which of the following options is not one of those four assumptions?
Pay rates reflect the total costs of base pay.
People are interchangeable.
Employers face competitive markets.
Employers always seek to maximize profits.
Pay rates reflect the total costs of base pay.
Which of the following is linked to high pay levels?
Reduced vacant rates
The behavior model (of potential employees) assumes:
•Many people are seeking jobs
•They possess accurate information about all job openings
•And no barriers to mobility exist
