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Compensation and Benefits > Topic 2 - Strategic Total Rewards > Flashcards

Topic 2 - Strategic Total Rewards Flashcards

1
Q

What is a Total Rewards Strategy?

A

It is the combination of pay forms, plans, policies, and practices that enable long-term organizational performance.

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2
Q

What are the two main components of Total Rewards Strategy?

A

Content Strategies (what rewards are offered) and Process Strategies (how rewards are designed and implemented).

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3
Q

What does a Total Rewards Content Strategy specify?

A

The type, level, and combination of rewards offered to employees.

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4
Q

What are the three types of rewards covered in the Reward Forms Strategy?

A

Salary (cash), Benefits (e.g., retirement contributions), and Intangibles (e.g., safe working conditions).

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5
Q

What is the difference between Reward Absolute Level and Relative Level?

A

Absolute Level: A fixed reward amount (e.g., $50,000/year).

Relative Level: Rewards compared to the market (Leading, Matching, or Lagging).

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6
Q

What is a Hybrid Approach in Reward Levels

A

A strategy where an organization leads, matches, or lags the market in different reward categories (e.g., leading in benefits, lagging in hourly wages).

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7
Q

What are the key principles of a Reward Design Strategy?

A

Transparency, reliance on objective data, and broad input from employees at all levels.

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8
Q

Why is a Communication Strategy important in Total Rewards?

A

It ensures employees understand rewards, and it provides feedback to improve the reward system before employee dissatisfaction arises.

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9
Q

What is a Role and Control Strategy?

A

It defines who is responsible for designing, implementing, and managing the reward system (Centralized vs. Decentralized).

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10
Q

What are the three primary challenges of a Global Rewards Strategy?

A

Centralization, Reward Equivalence, and National Culture.

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11
Q

What is the difference between Centralized and Decentralized Global Rewards Strategies?

A

Centralized: Uniform policies across locations.

Decentralized: Policies tailored to specific countries or locations.

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12
Q

What factors must organizations consider for Reward Equivalence in global strategies?

A

Tax laws, cost of living, exchange rates, and perceived equity between expatriates and host country employees.

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13
Q

How does National Culture impact reward systems?

A

Individualistic cultures may value personal recognition, while collectivistic cultures may prefer group-based rewards.

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14
Q

What is the purpose of the Reward Level Strategy?

A

To define the amount of each reward offered, either absolutely or relative to the market.

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15
Q

What does the phrase “it’s not what you pay, it’s how you pay it” relate to?

A

The Total Rewards Process Strategy, focusing on how rewards are designed and implemented.

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16
Q

Why is employee feedback critical in a Communication Strategy?

A

It helps identify issues with the reward system before they lead to employee turnover.

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17
Q

What is the goal of Total Rewards Process Strategies?

A

To influence employee behavior and reactions by focusing on how rewards are designed and implemented.

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18
Q

What is the role of Broad Input in designing a rewards system?

A

It involves employees from all levels to ensure fairness and transparency.

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19
Q

True or False: Total Rewards Strategies are identical across all organizations.

A

False. They vary in content and process depending on the organization.

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20
Q

True or False: Reward Form Strategies are limited to salaries and legal benefits only.

A

False. They include salaries, benefits, and intangibles such as safe working conditions.

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21
Q

True or False: Leading the market means offering rewards below the industry average.

A

False. Leading the market means offering rewards above the industry average.

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22
Q

True or False: A Hybrid Approach allows an organization to lead, lag, or match the market depending on the reward type.

A

True. Hybrid strategies customize rewards to fit business needs.

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23
Q

True or False: The Reward Design Strategy should rely on subjective data and limited employee input.

A

False. It should rely on objective data, transparency, and broad input.

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24
Q

True or False: A strong Communication Strategy ensures employees’ reality aligns with the organization’s intended message about rewards.

A

True. Communication shapes employees’ perceptions of the reward system.

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25
Q

True or False: Decentralized Role and Control Strategies allow supervisors to have full discretion over rewards without guidelines.

A

False. Even decentralized strategies typically include some structure and limits.

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26
Q

True or False: In a Global Rewards Strategy, Reward Equivalence focuses solely on monetary compensation.

A

False. It also considers equity, tax laws, and perceived value of rewards.

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27
Q

True or False: National Culture has no significant impact on the effectiveness of a rewards system

A

False. Cultural differences influence what employees find rewarding.

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28
Q

True or False: Communication in Total Rewards Strategies should flow both to employees and back to the organization.

A

True. Feedback from employees helps improve the reward system.

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29
Q

An organization’s total rewards strategy is composed of:
A. Pay forms
B. Plans
C. Policies
D. All of the above

A

D. All of the above

Total Rewards Strategy is the combination of pay forms, plans, policies, and practices that enable long-term organizational performance.

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30
Q

What is the total rewards content strategy?

A. Market-driven levels of rewards offered
B. A negotiation between management and the employee for total rewards offered
C. Type, Level, and Combination of rewards offered
D. Experienced-based rewards offered

A

C. Type, Level, and Combination of rewards offered

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31
Q

Reward form combination strategy refers to:

A. Rewards (cash, benefits, etc.) and how they relate to each other
B. Rewards (cash, benefits, etc.) and how they differ from each other
C. Rewards (cash, benefits, etc.) and how they compete with departments within the organization
D. Rewards (cash, benefits, etc.) and how they compete in the market

A

A. Rewards (cash, benefits, etc.) and how they relate to each other

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32
Q

Absolute level refers to:

A. Competitive salary
B. Experience salary
C. Base salary
D. Fair salary

A

C. Base salary

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33
Q

What is a communication strategy?

A. The plan for sharing coworkers’ salary data
B. The plan for communicating with employees about competitive salaries
C. The plan for sharing the compensation strategy with employees and receiving their ongoing feedback
D. The plan for communicating with other HR professionals to understand market data

A

C. The plan for sharing the compensation strategy with employees and receiving their ongoing feedback

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34
Q

Total Rewards Strategy

A

The combination of pay forms, plans, policies, and practices that enable long-term organizational performance

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35
Q

Total Rewards Content Strategy

A

Specifies the type, level, and combination of rewards offered to employees

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36
Q

Reward Form Combinations Strategy

A

The reward forms offered (e.g., cash, benefits, etc.) and the way in which they relate to each other.

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37
Q

Reward Level Strategy

A

‘How much is being offered?’ Answering this question is the goal of the Reward Level Strategy. In formulating Reward Level Strategy, organizations must define what Level of each reward will be offered.

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38
Q

Level

A

Organizations must define what level of each reward will be offered. The level of reward offered can be understood in two ways. First, the Absolute Level of a reward can be defined. Paying an employee $50,000 salary per year, for example, is a defining absolute level. Alternatively, organizations can define their strategy relative to the market.

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39
Q

Absolute Level

A

The reward can be defined. Paying an employee $50,000 salary per year, for example, is a defining absolute level.

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40
Q

Relative Level

A

States the rewards strategy as greater than, equal to, or less than some labor market reference point

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41
Q

Leading the market

A

A Rewards Strategy in which the firm is trying to provide more of a given reward than its competitors for those employees.

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42
Q

Lagging the market

A

When an organization provides a lesser amount of the reward than its competitors.

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43
Q

Matching the market

A

A Rewards Strategy of providing an amount of the reward equal to the market average.

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44
Q

Hybrid Approach

A

Leading the market on certain forms of rewards while matching or lagging the market on other forms.

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45
Q

Total Rewards Process Strategies

A

The decisions, policies, and practices that define how Total Rewards are designed and implemented.

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46
Q

Design Strategy

A

The process used to design the rewards system.

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47
Q

Transparency

A

Clear information on the who, what, when, and why of the reward system is available to all.

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48
Q

Data

A

Facts and statistics collected for reasoning or calculation.

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49
Q

Broad Input

A

Help, advice and thoughts from employees of all levels of the organization.

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50
Q

Communication Strategy

A

A plan for creating, sharing, and receiving information relating to its Total Rewards Systems.

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51
Q

Role and Control Strategy

A

The policies and practices that allocate design, implementation, and discretionary control of the rewards system.

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52
Q

Centralized approach

A

The Human Resources department makes all decisions relating to pay strategy, as well as specific reward decisions.

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53
Q

Decentralized approach

A

Decisions can be made by the employee’s immediate supervisor or manager.

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54
Q

Domestic Rewards Strategy

A

Organizations that operate in a single country can define a single Domestic Rewards Strategy.

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55
Q

Global Rewards Strategy

A

The collection of decisions, guidelines, and policies that define how the total rewards will account for country differences.

56
Q

Centralized Global Rewards Strategy

A

Organizations attempt to have a single set of policies that are determined by the organization and utilized at all locations.

57
Q

Decentralized Global Rewards Strategy

A

Rewards policies are established and monitored at the country level with each location having discretion to adapt to their unique situations and contexts.

58
Q

Reward Equivalence

A

Organizations also face the important decision Reward Equivalence about across global locations. Due to differences in tax laws, costs of living, exchange rates, and differential perceived costs and rewards of the overseas assignments, organizations have to consider how to motivate the employees to take the expatriate assignment while simultaneously maintaining a sense of equity for those host country employees with which the expatriate works. Anchoring the definition of equivalence to the employees home country, the host country, or some global metric are common approaches.

59
Q

National Culture

A

Finally, differences in National Culture should be considered when rewards systems are designed because employees from diverse cultures may have very different definitions of what is rewarding.

60
Q

What is the goal of Human Resource Management (HRM)?

A

HRM manages the interface between the organization and its employees to enable long-term organizational performance.

61
Q

Name three HR functions aside from Total Rewards.

A

Workforce planning, recruiting, and training (others include selection, performance management, career management, HR information systems, etc.).

62
Q

How do HRM practices impact Critical Success Factors (CSFs)?

A

HRM practices influence individual and collective employee behaviors that drive the business success tied to CSFs.

63
Q

Provide an example of how employee behavior might align with a business strategy.

A

In an upscale restaurant, employees learning customers’ names, using specific phrases, and speaking in a certain tone can enhance customer perception of exclusivity.

64
Q

What is Strategic Human Resource Management?

A

It ensures that HR practices align with the business strategy and critical success factors to drive organizational success.

65
Q

True or False: Total Rewards practices are the only HR function that impacts employees.

A

False. Other HR functions, such as training, recruiting, and performance management, also impact employees.

66
Q

Why is alignment between HR practices and business strategy important?

A

Alignment ensures HR systems support the behaviors necessary to achieve critical success factors and long-term business success.

67
Q

Human Resource Management

A

The policies, practices, and systems that manage the interface between the organization and its employees in order to enable long-term organizational performance

68
Q

Human resource strategy is:

A. The policies, practices, and systems that manage the interface between the organization and its employees in order to enable long-term organizational performance
B. A strategy in which management aligns the people to the business in order to enable long-term organizational performance
C. The alignment between management and employees to develop goals focused on business results
D. A strategy in which employees are given duties to perform to achieve long-term business results

A

A. The policies, practices, and systems that manage the interface between the organization and its employees in order to enable long-term organizational performance

69
Q

Which of the following is not a function of Human Resources?

A. Performance Management
B. Risk Management
C. Recruiting
D. Human Resource Information System

A

B. Risk Management

Other HR functions include workforce planning, recruiting, selection, training, rewards, performance management, and career management as well as the human resource information systems and strategic functions that integrate across those areas.

70
Q

Strategic Human Resource Management ensures that HR practices are aligned with the ____________ _____________ in general and critical success factors in particular.

A. Employee Preferences
B. Market Trends
C. Management Goals
D. Business Strategy

A

D. Business Strategy

71
Q

If customer perception is part of the business strategy, which of the following is not aligned with the strategy?

A. Knowing a customer by name
B. Making the customer feel welcome
C. Using a friendly tone of voice
D. Not making a good impression on the customer

A

D. Not making a good impression on the customer

72
Q

Total rewards plays a ______________ role in the business strategy.

A. Not very important
B. Not important
C. Important
D. Vital

A

D. Vital

73
Q

What is Business Strategy?

A

It is the collection of decisions, approaches, and activities that allow an organization to compete and win.

74
Q

Why is it important to understand your organization’s Business Strategy when making Strategic Reward decisions?

A

Because Total Rewards systems need to align with the specific ways the business competes in its industry.

75
Q

What are the three main Generic Competitive Strategies?

A

Cost Leadership, Differentiation, and Niche Focused.

76
Q

What is the primary focus of a Cost Leadership strategy?

A

Lowering cost structures to offer lower prices while still making a profit.

77
Q

Give an example of a business that follows a Cost Leadership strategy.

A

A fast-food chain.

78
Q

What is the goal of a Differentiation strategy?

A

To offer innovative, high-quality products or services that set the business apart from competitors.

79
Q

Provide an example of a Differentiation strategy in the restaurant industry.

A

An upscale restaurant offering high-quality food, elegant decor, and exceptional service.

80
Q

Why can businesses using a Differentiation strategy afford to pay employees more?

A

Because the additional costs of differentiation are passed on to customers through higher prices.

81
Q

What is a Niche-Focused strategy?

A

Competing in a small, segmented market without the competitive pressures of broader markets.

82
Q

What is a limitation of a Niche-Focused strategy?

A

Once the niche is outgrown, the organization must compete in more competitive markets to continue growing.

83
Q

What is a Hybrid strategy?

A

A mix of Cost Leadership, Differentiation, and Niche Focused approaches tailored to specific business needs.

84
Q

Can a business use elements of both Cost Leadership and Differentiation?

A

Yes, this is an example of a Hybrid strategy.

85
Q

What is a SWOT Analysis?

A

A process to systematically review an organization’s Strengths, Weaknesses, Opportunities, and Threats.

86
Q

What are the two internal components of a SWOT Analysis?

A

Strengths and Weaknesses.

87
Q

What are the two external components of a SWOT Analysis?

A

Opportunities and Threats.

88
Q

What type of questions help identify an organization’s Strengths?

A

Questions like: What can we do better than competitors? Why do customers choose us?

89
Q

Why is it important to identify organizational Weaknesses?

A

To address areas where the organization is underperforming or losing customers.

90
Q

Give an example of a Weakness for a fast-food restaurant.

A

Inability to retain employees or shift managers.

91
Q

How can Opportunities benefit an organization?

A

They can lead to growth, increased market share, or improved performance if approached successfully.

92
Q

What are Critical Success Factors (CSFs)?

A

The capabilities, activities, customer perceptions, and market positions that allow an organization to outcompete its rivals.

93
Q

How do CSFs influence business decisions?

A

They guide decisions, including HR practices and reward strategies, to align with business success.

94
Q

Why is the SWOT analysis crucial for the strategic management process?

A

It helps organizations understand their strengths, weaknesses, and external factors to define their strategies.

95
Q

strengths

A

The firm’s core competencies, abilities and capacities that provide an advantage when meeting the needs of target customers. (i.e., production costs, marketing skills, brand image, technology, design and financial resources).

96
Q

weaknesses

A

Limitations a firm faces when seeking to deliver value to customers.

97
Q

What type of questions help identify an organization’s Weaknesses?

A

What can we not do? Why have we lost customers? What have we failed at recently?

98
Q

A business strategy is:

A. The collection of decisions, approaches, and activities that allow an organization to compete and win
B. A plan that an organization uses to prepare for the upcoming fiscal year
C. A strategy that a business uses to gain market share among its competitors
D. A collection of decisions on how to ensure financial stability

A

A. The collection of decisions, approaches, and activities that allow an organization to compete and win

99
Q

A cost leadership strategy is:

A. Having a lower-cost product or service at the lowest priority throughout its processes
B. Having a higher-cost product or service at the highest priority throughout its processes
C. Having a higher-cost product or service at the lowest priority throughout its processes
D. Having a lower-cost product or service at the highest priority throughout its processes

A

D. Having a lower-cost product or service at the highest priority throughout its processes

100
Q

A differentiation strategy is:

A. Placing a high priority on providing innovative, exceptional, and high-quality products and/or services to customers
B. Creating an atmosphere of making an absolute differentiation of products between competitors
C. A price strategy focusing on the net income
D. A strategy used by statisticians developing ways for a company to create more market value

A

A. Placing a high priority on providing innovative, exceptional, and high-quality products and/or services to customers

101
Q

A niche-focused strategy is:

A. When an organization chooses a small market, but has many competitors
B. When an organization chooses a small and segmented market and competes only in that small arena
C. When an organization chooses to compete in a medium sized market with few competitors
D. When an organization chooses a large, varied market and competes among many competitors

A

B. When an organization chooses a small and segmented market and competes only in that small arena

102
Q

A hybrid strategy is:

A. A combination of any of the differentiation, niche, or cost-leadership strategies
B. Nonexistent
C. A strategy where segmented markets compete against larger markets
D. A strategy in which an organization will implement a competitor’s strategy

A

A. A combination of any of the differentiation, niche, or cost-leadership strategies

103
Q

What is the primary way to evaluate the effectiveness of a Total Rewards System?

A

By considering its outcomes, such as whether it augments performance, attracts and retains employees, satisfies employee needs, and operates efficiently.

104
Q

Name one question to evaluate if a Rewards System is effective.

A

Is your Rewards System augmenting or inhibiting employee, team, and organizational performance?

105
Q

What does Business Strategy Support in a Total Rewards System evaluate?

A

The extent to which the rewards system aligns with and supports the organization’s business strategy and critical success factors.

106
Q

What is a recommended approach to evaluate Business Strategy Support for a Rewards System?

A

Use a two-column approach: one column for business strategy and critical success factors, and the other for rewards elements that support them.

107
Q

What does Rewards Strategy Coherence refer to?

A

The extent to which the parts of the rewards strategy (e.g., forms, levels, communication) fit together logically and clearly.

108
Q

Why is coherence in a Total Rewards System important?

A

It enables issues to be easily explained and helps connect the strategy to specific reward decisions.

109
Q

What does Organizational Culture Fit evaluate in a Rewards Strategy?

A

The extent to which the rewards strategy aligns with the organization’s norms, values, and ingrained practices.

110
Q

What risk exists if a Rewards Strategy deviates significantly from an organization’s culture?

A

It may be rejected or subverted in practice by employees.

111
Q

When might a Rewards Strategy intentionally diverge from organizational norms?

A

When the rewards system is used as a tool to create change in the organization’s culture.

112
Q

Why is broad involvement critical in developing a Rewards Strategy?

A

To ensure that organizational cultural elements are considered and to increase compatibility with existing norms and values.

113
Q

The effectiveness of your compensation plan can be addressed by which of the following questions:

A. Is your rewards system augmenting or inhibiting employee, team, and organizational performance?
B. Does it help your organization attract and retain its best employees or cause them to seek better opportunities elsewhere?
C. Is your system seen as fair and does it satisfy employees’ needs?
D. Does your rewards system accomplish its objectives in an efficient, cost-conscious way?
E. All of the above

A

E. All of the above

114
Q

Rewards Strategy Coherence refers to:

A. An irrelevant topic and should be dismissed
B. The ability for all members of an organization to completely understand the goals of the rewards strategy
C. The extent to which the parts of the strategy fit together in a logical and clear way
D. The basic idea of the rewards strategy, which is to place the company in an attractive view to potential employers and competitors

A

C. The extent to which the parts of the strategy fit together in a logical and clear way

115
Q

Organizational Cultural Fit is:

A. The ability to keep employees happy with pay when an organizational change occurs
B. The extent to which the rewards strategy fits make senior management happy
C. The extent to which the rewards strategy aligns with and supports the ingrained practices, norms, and values of the organization
D. The fit to make the human resources and finance departments agree upon the strategy for the organization

A

C. The extent to which the rewards strategy aligns with and supports the ingrained practices, norms, and values of the organization

116
Q

The more a rewards system deviates from ‘the way we do things around here,’ the more likely it is to be:

A. Ignored
B. Accepted
C. Rejected
D. Changed

A

C. Rejected

The more a rewards system deviates from ‘the way we do things around here,’ the more likely it is to be rejected or even subverted in practice.

117
Q

True or False. When total rewards is used to change a culture, past norms should still be considered.

A

True

118
Q

Cost leadership focuses more on:

A. Price
B. Strategy
C. Leadership
D. Cost

A

A. Price

Price is at the essence of the cost leadership strategy.

119
Q

Which of the following industries best demonstrates the cost leadership strategy?

Technology
Fine dining
Fast food
Manufacturing

A

Fast food

While a fast-food restaurant can still make a profit selling a meal for two to five dollars, the fine dining establishment has to sell its meals at fifty dollars per plate to be profitable. Fast food, therefore, takes a cost leadership strategy.

120
Q

Within the cost leadership strategy, a business will have a ____________ cost structure.

Frugal
Expensive
Lower
Higher

A

Lower

Businesses using a cost leadership strategy must design their systems to have a lower cost structure than their competitors so that they can charge their customers lower prices but still make a profit.

121
Q

Within the cost leadership strategy, the customers will be charged ________________.

More
Less
Nothing
All of the above

A

Less

122
Q

Ture or False. Total Rewards are one of those decisions that businesses make that influences their cost structure and their ability to provide those low costs to customers.

A

True

123
Q

In the differentiation strategy, the costs of the organization will be passed on to the:

Organization
Government
Customer
Employees

A

Customer

Differentiation requires a company to spend whatever funds are necessary to differentiate themselves from their competition, and those additional costs must then be passed on to the customer in the form of higher prices.

124
Q

Generally, an organization that follows the differentiation strategy will be able to pay their employees:

A higher overall total compensation package
Higher benefits
Less
More

A

More

The differentiating organization can afford to pay its employees more than the cost-focused organization because it is charging more for its services.

125
Q

In a niche-focused strategy, an organization will have to compete with the following strategies:

Cost leadership
Differentiation strategy
Hybrid
None of the above

A

None of the above

In a niche-focused strategy, an organization chooses a small and segmented market and competes only in that small arena.

126
Q

Rewards strategies that work in the ______ term, while the firm is niche focused, may be forced to change in the _______ term.

Short, long
Long, short
Short, short
Long, long

A

Short, long

Rewards strategies that work in the short term while the firm is niche-focused may need to change in the long term.

127
Q

True or False. A company cannot have a hybrid strategy.

A

False

A hybrid strategy involves employing a combination of cost-leadership, differentiation, and niche-focused business strategies.

128
Q

SWOT stands for:

Strengths, Weaknesses, Opportunities, Transfer
Strengths, Weaknesses, Opportunities, Threats
Supply, Weakness, Opportunities, Transfer
Supply, Weakness, Opportunities, Threats

A

Strengths, Weaknesses, Opportunities, Threats

129
Q

Understanding weaknesses can help ask the question:

What can we not do?
What societal flaws can hurt our organization?
Where can we improve?
What can we do that our competitors can’t?

A

What can we not do?

The weaknesses discussion can be facilitated by addressing such questions as: what can we not do? Why have we lost customers? What have we failed at recently?

130
Q

Understanding opportunities can help ask the question:
What can we do that our competitors can’t?
What societal flaws can hurt the organization?
Where can we improve?
What can our competitors do that we can’t?

A

Where can we improve?

131
Q

Understanding threats can help ask the question:
What can we do that our competitors can’t?
What societal flaws can hurt the organization?
What can we not do?
Where can we improve?

A

What societal flaws can hurt the organization?

132
Q

The primary outcome of SWOT analysis is to list out:

Critical Summation Factors
Critical Series Factors
Critical Success Factors
Critical Sample Factors

A

Critical Success Factors
The primary outcomes of the SWOT analysis and other strategic discussions should be a thorough understanding of the organization’s Critical Success Factors (CSF).

133
Q

True or False. CSFs take into account both internal strengths of the organization and the external values of customers and markets.

A

True

These factors arise out of the strategic analysis and take into account both the internal strengths of the organization and the external values of the customers and markets.

134
Q

Human Resource Strategy is to ______ business strategy and CSFs.

Separate
Align
Analyze
Investigate

A

Align

Strategic Human Resource Management ensures that HR practices are aligned with the business strategy in general and critical success factors in particular.

135
Q

Reward forms include:

Salary
Retirement
Intangibles
All of the above

A

All of the above

Total Rewards Content Strategy defines what Forms of Rewards (e.g., salary), Benefits (e.g., retirement contributions), and Intangibles (e.g., safe working conditions) will be provided.

136
Q

The relative level involves which of the following:

Leading the market
Lagging the market
Matching the market
Any of the above

A

Any of the above

The Relative Level states the rewards strategy as greater than, equal to, or less than some labor market reference point.

Compensation and Benefits (6 decks)

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