Midterm Exam

Question 1

What are 3 Goals of the reward compensation system?

Answer 1

• Help Achieve Strategies and Objectives
• Help attract, retain and motivate Employees
• Influences a standard of living (EE perceives that accepting the job w/ ER will help them satisfy their own needs)

Question 2

What are 4 Contextual variables?

Answer 2

• Organization’s Environment
• Business Strategy
• Technology
• Size
• Workforce

Question 3

What are 3 Managerial Strategies - Define 1.

Answer 3

Classical - Believes that EEs are lazy and dislike their work
Human Relations - same as classical but they differ in that they believe people can be MOTIVATED by appealing to their SOCIAL NEEDS
High Involvement - Believes that if jobs are structured correctly, people can actually enjoy and by motivated intrinsically by their work

Question 4

What are the 5 determinants of the most appropriate managerial strategy?

Answer 4

• Organization’s Environment
• Business Strategy
• Technology
• Size
• Workforce

Question 5

What are 3 employee behaviours?

Answer 5

MEMBERSHIP behaviour (deciding to join and stay, loyalty)
TASK behaviour (doing the specific tasks assigned)
ORGANIZATIONAL CITIZENSHIP behaviour (not assigned, voluntarily undertake special behaviours beneficial to the organization that go beyond simple membership)

Question 6

What are 3 employee attitudes?

Answer 6

1. JOB SATISFACTION
2. WORK MOTIVATION
3. ORGANIZATIONAL IDENTIFICATION

Question 7

What are 4 causes of Reward Dissatisfaction?

Answer 7

1. Violation of Psychological Contract
2. Perceived Inequity
3. Relative Depravation
4. Lack of Organizational Justice

Question 8

Difference between CLASSICAL and HUMAN RELATIONS Managerial Strategies

Answer 8

Though both believe that EEs are lazy and need close monitoring to perform tasks, Human Relations Managerial Style mgmt believes that EEs can be motivated by appealing to SOCIAL NEEDs - as such, jobs are arranged to allow social interactions among EEs.

Question 9

What are 3 methods of determining base pay?

Answer 9

1. Market Pricing (determining avg. pay for other ERs offering same job)
2. Job Evaluation (ranking according to value)
3. Pay-for-Knowledge (based on the PERSON, not the job or market - total value of their skills and competencies)

Question 10

What are 3 choices of performance pay?

Answer 10

Rewarding for INDIVIDUAL, GROUP or ORGANIZATIONAL Performance

Question 11

What are 4 main kinds of constraints on compensation strategy?

Answer 11

1. Legislation
2. Labour Market (supply / demand of occupational groups)
3. Product / Service Market
4. Financial

Question 12

Difference between MERIT RAISE and MERIT BONUS

Answer 12

Though both would be awarded as part INDIVIDUAL PERFORMANCE PAY, a merit RAISE is a PERMANENT salary increase that is added to your base pay whereas a merit BONUS is a ONE-TIME pay out that is not added to your base pay.

Question 13

What are 3 basic Criteria of EVALUATING compensation strategy?

Answer 13

1. Affordability
2. Legality
3. Employee Attraction

Question 14

Difference between GAIN sharing and GOAL sharing

Answer 14

Both based on group performance and focused on productivity and cost savings
Gain - the focus is voluntary, own initiative - no target give - doesn’t cost anything to the organization
Goal - here, you are GIVEN A TARGET

Question 15

Difference between MERIT RAISE and MERIT BONUS

Answer 15

Though both would be awarded as part INDIVIDUAL PERFORMANCE PAY, a merit RAISE is a PERMANENT salary increase whereas a merit BONUS is a ONE-TIME pay out (i.e. NOT added to the BASE PAY)**

Merit Raise - Small (2-3%) increase at the end of the year - a salary increase based on performance - added to base salary

Merit Bonus - Based on performance but a one time lump sum amount (base pay remains the same)

Question 16

Difference between WAGE and SALARY

Answer 16

Wage is an hourly measure of compensation whereas Salary is a yearly measure of compensation.

Question 17

what are three components of compensation mix

Answer 17

Base Pay
Performance Pay
Indirect Pay (Benefits)

Question 18

5 main steps in formulating a compensation strategy

Answer 18

Define Required Behaviour 
Define Role of Compensation
Determine Compensation Mix 
Determine Compensation Level
Evaluate Proposed Strategy

Question 19

Difference Between Reward and Incentive

Answer 19

Reward recognize valued behaviour while incentives intended to produce valued behaviour

Question 20

Difference Between Extrinsic Rewards and Intrinsic Rewards

Answer 20

Extrinsic Rewards satisfy basic needs for survival and security, as well also social needs and needs for recognition (include non-monetary and monetary rewards) and /are based on the job context while Intrinsic rewards satisfy higher order human needs for self-esteem, achievement, growth and development are based on job content

Question 21

Difference Between Base Pay and Performance Pay

Answer 21

Base Pay is foundation component for most employees and is usually based on some unit of time worked

Performance Pay relates monetary rewards to some measure of individual, group or organizational performance

Question 22

Difference Between Competency Based Pay and Skill Based Pay

Answer 22

Compentency Based pay focuses on CHARACTERSTICS rather than performance of individual employees (usually applied to MANAGERIAL or PROFESSIONAL employees)

Skills based pay focuses on SKILLS and CAPABILITIES of individual employees rather than the specific tasks they are carrying out. (usually applied to OPERATIONAL level employees)

Question 23

Difference Between Lagging and Leading Pay Policy

Answer 23

Lagging the Market is compensation level based on paying below the average in a given labour market (usually when supply outweighs demand)

Leading the Market is compensation level based on paying above the average in a given labour market (usually when demand outweighs supply)