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Test Bank for Strategic Compensation: A Human Resource Management Approach, 10th Edition

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    1 Strategic Compensation: A Human Resource Management Approach, 10e (Martocchio) Chapter 1 Strategic Compensation: A Component of Human Resource Systems 1) ________ refers to the design and implementation of compensation systems to reinforce the objective s of both HR strategies and competitive business strategies. A) Extrinsic compensation B) Strategic compensation C) Strategic analysis D) Intrinsic compensation Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic compensation. 2) Protection programs are what type of compensation benefits? A) external B) non - monetary rewards C) internal D) monetary Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic co mpensation. 3) Which of the following is an example of a core compensation? A) medical insurance B) vacations C) day care assistance D) monetary compensation Answer: D Difficulty: Easy Skill: Concept AACSB: Reflective Thinking LO: 1.1: Define strateg ic compensation.

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    2 4) Since the economic recession (2007 - 2009) ended, fewer companies have offered pay increases, and those that do are offering lower amounts. Approximately, how much have pay increases been? A) less than 2 percent B) 2 percent up to 2.9 p ercent C) 3 percent up to 3.8 percent D) 4 percent or more Answer: C Difficulty: Challenging Skill: Concept AACSB: Reflective Thinking LO: 1.1: Define strategic compensation. 5) This concept describes a company's success when the company acquires or develops capabilities that facilitate outperforming the competition. A) differentiation B) capital C) compensation practices D) competitive advantage Answer: D Difficulty: Easy Skill: Concept AACSB: Reflective Thinking LO: 1.1: Define strategic compen sation. 6) Which of the following refers to the planned use of company resources - financial capital, equipment capital, and human capital - to promote and sustain competitive advantage? A) strategic analysis B) comparative analysis C) 360 degree analysis D) competitive business strategy Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic compensation. 7) ________ compensation refers to the mental state of employees as a result of their performance on the j ob. Answer: Intrinsic Difficulty: Moderate Skill: Concept AACSB: Reflective Thinking LO: 1.1: Define strategic compensation.

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    3 8) Compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs. Together, both intrinsic and extrinsic compensation describe a company's total compensation system. Briefly describe both types of rewards and indicate the professionals who are responsible for managing them. Answer: Intrinsic compensation reflects employees' psyc hological mind - sets that result from performing their jobs. Extrinsic compensation includes both monetary and nonmonetary rewards. Organizational development professionals promote intrinsic compensation through effective job design. Compensation profession als are responsible for extrinsic compensation. Extrinsic compensation includes both monetary and nonmonetary rewards. Compensation professionals establish monetary compensation programs to reward employees according to their job performance levels or for learning job - related knowledge or skills. Nonmonetary rewards include protection programs (e.g., medical insurance), paid time off (e.g., vacations), and services (e.g., day care assistance). Most compensation professionals refer to nonmonetary rewards as employee benefits. Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.1: Define strategic compensation. 9) Which of following enables companies to generate income, higher company stock prices, economic value, strong positive brand id entity, and reputation? A) capital B) assets C) competency D) human capital Answer: A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.2: Summarize the role of compensation as a strategic business partner. 10) As a strategic busin ess partner, HR and compensation professionals today need to think most like whom? A) vice president of human resources B) chief financial officer (CFO) C) chief executive officer (CEO) D) comptroller Answer: C Difficulty: Moderate Skill: Concept AACSB : Application of Knowledge LO: 1.2: Summarize the role of compensation as a strategic business partner.

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    4 11) In GE's human resource leadership program (HRLP), successful participants will achieve which of the following? A) gain an understanding of the d epth of specialization for each (HR) function B) gain an understanding of HR competencies, global leadership skills, and business acumen C) gain an understanding of the depth of specialization for each HR function D) gain an understanding of HR from a gene ralist's perspective Answer: B Difficulty: Easy Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.2: Summarize the role of compensation as a strategic business partner. 12) Cash and equipment such as a mass spectrometer in a resea rch lab are examples of which of the following? A) nonliquid assets B) organizational structure C) capital D) liquid assets Answer: C Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.2: Summarize the role of c ompensation as a strategic business partner. 13) ________ and ________ programs are key to giving employees the necessary knowledge and skills to use new workplace technology effectively. Answer: Pay - for - knowledge; skill - based pay Difficulty: Moderate S kill: Concept AACSB: Analytical Thinking LO: 1.2: Summarize the role of compensation as a strategic business partner. 14) Discerning threats and opportunities is the main focus of which activity? A) human resource planning B) environmental scanning C) job evaluation D) job analysis Answer: B Difficulty: Moderate Skill: Concept AACSB: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

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    5 15) This term suggests that a loss is likely for the firm, and that the individual will b e left with little control. A) reverse opportunity B) negative equity C) threat D) foreclosure Answer: C Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions. 16) Which of the following competit ive strategies does Apple Computer use? A) lowest - cost strategy B) differentiation strategy C) total quality management strategy D) human capital strategy Answer: B Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO : 1.3: Explain strategic compensation decisions. 17) IKEA, a furniture manufacturer, sources its products to countries where labor is cheaper and provides a low level of service. Which of the following competitive strategies does IKEA use? A) differentia tion strategy B) high quality strategy C) brand notoriety D) lowest - cost strategy Answer: D Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.3: Explain strategic compensation decisions. 18) A company using th is competitive strategy seeks to offer a product or service that is completely unique from other competitors in their market segment. A) differentiation strategy B) defender strategy C) prospector strategy D) lowest - cost strategy Answer: A Difficulty: E asy Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions.

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    6 19) Which of these actions would HR encourage in attempting to create a lowest - cost competitive strategy? A) an employee's long - term focus B) unpredictabl e employee behavior C) cost minimization D) high concern for the quality of output Answer: C Difficulty: Challenging Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions. 20) Saudi Arabia, which is one of the to p oil producing countries in the world, continues to pump crude oil even as demand for oil decreases. This activity is considered to be a(n) ________ to other oil producing countries such as the United States. Answer: threat Difficulty: Challenging Skill : Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions. 21) Strategic management involves distinguishing between ________ and ________ in attempting to achieve company goals, thus making strategic management an imprecise process. Answer: threats, opportunities Difficulty: Challenging Skill: Concept AACSB: Analytical Thinking LO: 1.3: Explain strategic compensation decisions. 22) Apple Computer's use of a differentiation strategy promotes both ________ and ________. Answer: market demand, loyalty Difficulty: Challenging Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.3: Explain strategic compensation decisions.

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    7 23) What are the three questions that compensation professionals should answer to help determine whether they are making a strategic contribution to the company? Answer: • Does compensation strategy fit well with the objectives of competitive business and HR strategies? • Does the choice and design of compensation practices fit we ll to support compensation strategy? • Does the implementation of compensation practices effectively direct employee behavior to enhance job performance that supports the choice of compensation practices? Difficulty: Challenging Skill: Concept AACSB: An alytical Thinking LO: 1.3: Explain strategic compensation decisions. 24) This law made it illegal to pay women less for performing equal work as men. A) Equal Pay Act of 1963 B) Civil Rights Act of 1964 C) Davis - Bacon Act of 1931 D) Fair Labor Standard s Act of 1938 Answer: A Difficulty: Moderate Skill: Concept AACSB: Reflective Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems. 25) Cost - of - living adjustments (COLAs) are typically b ased on which index? A) Producer Price Index B) Consumer Price Index C) Employment Cost Index D) Employee Benefit Index Answer: B Difficulty: Moderate Skill: Concept AACSB: Reflective Thinking LO: 1.4: Identify and discuss the building blocks and str uctural elements of strategic compensation systems.

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    8 26) What type of pay system rewards employees for partially or completely attaining a predetermined work objective? A) seniority pay B) merit pay C) incentive pay D) skill - based pay Answer: C Difficul ty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems. 27) Jason works at a call center for an insurance company, and he has been answering ca lls regarding auto insurance. Recently, he started to attend a training program about home insurance. Upon successful completion of this training program, Jason will be able to handle home insurance questions and queries as well. If this insurance company has a compensation policy that rewards Jason's completion of this training, then what type of pay system does it employ? A) incentive pay B) merit pay C) seniority pay D) pay - for - knowledge Answer: D Difficulty: Moderate Skill: Application of Knowledge A ACSB: Application of Knowledge LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems. 28) Sandra's position changed from supervisor at the planning department to supervisor at the new projects depart ment. In terms of career development, which of the following describes Sandra's situation? A) maintaining focus with less responsibilities B) making a lateral move across the company's hierarchy C) moving upward through a company's hierarchy D) maintain ing the focus and assuming greater responsibilities Answer: B Difficulty: Moderate Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation syst ems.

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    9 29) What do compensation managers use to recognize differences in the relative worth of jobs and to establish pay differentials based upon management priorities? A) job evaluation B) internal consistency C) job analysis D) strategic analysis Answer : A Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems. 30) These compensation systems go a long way in attracting and retaining t he most qualified employees and are based upon market and compensation surveys. A) internally consistent compensation systems B) market - competitive pay systems C) job evaluation compensation systems D) externally consistent compensation systems Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems. 31) Which of the following represents the pay rate differences for jobs and em ployee contributions of unequal worth to a company? A) merit pay B) incentive pay C) retention pay D) pay structures Answer: D Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and struct ural elements of strategic compensation systems.

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    10 32) What are the three goals of compensation professionals? Answer: Compensation professionals promote effective compensation systems by meeting three important goals: internal consistency, market competi tiveness, and recognition of individual contributions. Internally consistent compensation systems clearly define the relative value of each job among all jobs within a company. This ordered set of jobs represents the job structure or hierarchy. Companies rely on a simple, yet fundamental, principle for building internally consistent compensation systems: Employees in jobs that require greater qualifications, more responsibilities, and more complex job duties should be paid more than employees whose jobs re quire lesser qualifications, fewer responsibilities, and less - complex job duties. Internally consistent job structures formally recognize differences in job characteristics, which therefore enable compensation managers to set pay accordingly. Market - compe titive pay systems play a significant role in attracting and retaining the most qualified employees. Compensation professionals build market - competitive compensation systems based on the results of market surveys and compensation surveys. Recognizing Indi vidual Contributions are captured in pay structures, which represent pay rate differences for jobs of unequal worth and the framework for recognizing differences in employee contributions. No two employees possess identical credentials or perform the same job equally well. Companies recognize these differences by paying individuals according to their credentials, knowledge, or job performance. When completed, pay structures should define the boundaries for recognizing employee contributions. Well - designed s tructures should promote the retention of valued employees. Difficulty: Challenging Skill: Concept AACSB: Analytical Thinking LO: 1.4: Identify and discuss the building blocks and structural elements of strategic compensation systems. 33) This agreeme nt describes the terms of employment that are set between management and union bargaining representatives. A) employee relationship agreement B) collective bargaining agreement C) joint employment agreement D) workplace requisite agreement Answer: B Diff iculty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations.

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    11 34) Which type of professional is involved in the compensation functions such as building job structures, market competiti ve pay systems, and merit pay structures? A) compensation generalist B) HR specialist C) compensation specialist D) HR generalist Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation functi on in organizations. 35) Oftentimes, companies use this method to trim their payroll responsibilities by encouraging higher - paid workers with more seniority to voluntarily leave the company earlier than previously planned. A) resignation plans B) severanc e plans C) early retirement programs D) employee expenditure plans Answer: C Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations. 36) The demand for human resource pro fessionals is ________. Answer: increasing Difficulty: Challenging Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe the fit of the compensation function in organizations. 37) Companies that implement ________ and ________ plans generally i ncrease the amount of classroom and on - the - job training as these types of plans make training necessary rather than optional. Answer: pay - for - knowledge; person - focused Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.5: Describe th e fit of the compensation function in organizations.

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    12 38) Employment ________ occurs when an employee's agreement to perform work is ended, whether it is voluntarily or involuntarily. Answer: termination Difficulty: Easy Skill: Concept AACSB: Reflecti ve Thinking LO: 1.5: Describe the fit of the compensation function in organizations. 39) Due to the recent economic downturn, XYZ Co. decided to shut down one of its appliance manufacturing plants in the United States, and therefore around 300 workers we re laid off. XYZ Co. has chosen to award laid - off workers 6 months of ________ pay. Answer: severance Difficulty: Challenging Skill: Application of Knowledge AACSB: Application of Knowledge LO: 1.5: Describe the fit of the compensation function in or ganizations. 40) This group is directly involved in producing goods and delivering services for a company. A) staff employees B) line employees C) managers D) executives Answer: B Difficulty: Moderate Skill: Concept AACSB: Analytical Thinking LO: 1.6 : Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform. 41) The success of HR departments depends on how well they serve the interests of which of the following stakeholder groups ? A) employees, line managers, executives, unions, and the U.S. government B) unions and the U.S. government C) executives and shareholders D) employees and line managers Answer: A Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.6: Id entify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

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    13 42) Which of the following group is a stakeholder within a company? A) Equal Employment Opportunity Commission B) Department o f Labor C) prospective employees D) line managers Answer: D Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals pe rform. 43) Which stakeholder group turns to compensation professionals for advice about appropriate pay rates for jobs? Answer: Line managers Difficulty: Easy Skill: Concept AACSB: Analytical Thinking LO: 1.6: Identify the stakeholders of the compens ation function and summarize their stakes in the work compensation professionals perform. 44) What is a constituency? How does it affect the HR department? Answer: The HR department does not exist in isolation. Rather, it must respond to a variety of par ties, each with its own interests. In fact, the success of an HR department may depend on how well it serves various constituencies. Constituencies can include employees, line managers, executives, unions, the U.S. government, and customers. Each of these groups expects certain actions by the HR department, rates these actions according to its own standards, and tries to set up goals or present constraints within their realm of understanding. As a result, the HR department plays the role of a juggler, tryin g to meet often - competing goals presented by multiple constituencies. Difficulty: Challenging Skill: Concept AACSB: Analytical Thinking LO: 1.6: Identify the stakeholders of the compensation function and summarize their stakes in the work compensation professionals perform.

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    14 45) Which of the following is the use of oral, written, and non - verbal skills for multiple purposes? A) ethics B) data literacy C) information technology D) communication Answer: D Difficulty: Easy Skill: Concept AACSB: Reflec tive Thinking LO: 1.7: Explore essential skills for developing your career in compensation or any other career path. 46) Which of the following is used to define and solve problems and to make decisions or form judgments related to a situation or set of circumstances? A) collaboration B) critical thinking C) information technology D) communication Answer: B Difficulty: Easy Skill: Concept AACSB: Reflective Thinking LO: 1.7: Explore essential skills for developing your career in compensation or any o ther career path. 47) When individuals work together on a task, constructing meaning and knowledge as a group through dialogue and negotiation is known as A) collaboration. B) data literacy. C) social responsibility. D) critical thinking. Answer: A Diff iculty: Easy Skill: Concept AACSB: Reflective Thinking LO: 1.7: Explore essential skills for developing your career in compensation or any other career path.

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    15 48) ________ is/are guiding principles that influence the way individuals and organizations behave within the society that they operate A) Business ethics B) Data literacy C) Information technology D) Communication Answer: A Difficulty: Easy Skill: Concept AACSB: Reflective Thinking LO: 1.7: Explore essential skills for developing your care er in compensation or any other career path. 49) ________ is/are the ability to access, assess, interpret, manipulate, summarize, and communicate data. A) Business ethics B) Data literacy C) Information technology D) Communication Answer: B Difficulty: Easy Skill: Concept AACSB: Reflective Thinking LO: 1.7: Explore e s sential skills for developing your career in compensation or any other career path.

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