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84 Cards in this Set

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"Everyone wears several hats" and "succeed by working together" are examples of which of the following?
Internal alignment

"Putting some skin in the game" refers to:


below market base pay with stock ownership

A compensation system that pays employees such that "some skin is in the game" means that

a portion of employee pay is at risk.
______________ changed its compensation strategy as the company grew and matured?
Microsoft
At the corporate level, a strategic compensation perspective addresses the question:
What business should we be in?
What level of strategy is the question "how do we gain competitive advantage"?
Business unit
The social, competitive and regulatory environment factors are most important for which type of strategy?
Strategic compensation
Which of the following relationships within a pay system is accurate?
Compensation objectives shape pay policies.
A focus on competitor's costs is most closely associated with a _____ strategy.
cost-cutter
A compensation system using market-based pay is most likely to be part of a _____ strategy.
innovator
Flexible-generic job descriptions would most likely be used with a _____ strategy.
innovator
_______ is to increasing variable pay as innovator is to market based pay.
Cost-cutter
A compensation system focusing on system control and work specifications is most closely associated with _____ strategy.
cost-cutter
All of the following except __________ are compensation systems associated with an innovator strategy.
customer satisfaction incentives
In the formula predicting performance, the component most closely related to compensation is ___________.
M
Whole Foods' policy of holding executive salaries to no more than 14 times average pay of full-time employees is an example of which strategic pay decision?
Internal alignment
Decisions regarding what forms compensation should be are part of ____.
external competitiveness
A book listing the previous year's pay of all employees is part of Whole Foods "No-secrets" philosophy. This is an example of which strategic compensation choice?
Management
Whole Foods' decision to seek and engage employees who are going to help the company make money is an example of which strategic pay decisions?
Objectives
The second step of developing a total compensation strategy is to:
map a total compensation strategy.

Examination of employee and union needs and the social and political context is a part of which step in formulating a total compensation strategy.


assess total compensation implications
"Choosing techniques to fit strategy" is a part of which step in developing a total compensation system?
Implement strategy
Which of the following is the correct order of the steps in formulating a total compensation strategy?
Assess total compensation strategy, map a total compensation strategy, implement strategy, reassess
"To maintain good citizenship as a company" and "To make a fair profit on current operations" are examples of ____.
values
Among unconventional benefits, U. S. workers in the Hudson's survey rated _____ as their most preferred.
a more flexible work schedule
According to the Hudson survey, __________ is the single thing that would make them happier.
more money
Which of the following statements regarding allowing employees choice in their pay mix is not true?
It provides an employer a clear competitive advantage
Union preferences is a major factor in _____ of a total compensation strategy.
assessing implications
In mapping a total compensation strategy, the question of how is compensation in the overall HR strategy is part of ____.
objectives
The issue of how much and what forms of pay are our competitors using is part of which objective of total compensation strategy?
External competitiveness
_____________ is the measure of how important compensation is in the overall HR strategy.
Prominence
The role non-HR managers play in making pay decisions is called ____.
ownership
Issues of transparency, technology, and choice are examples of choices related to the _____ strategy choice of total compensation.
management
Career growth, hierarchy and flexible design are examples of choices related to the _____ strategy choice of total compensation.
internal alignment
A strategy map contains strategies about all but which of the following?
HR alignment
Which of the following is not a test of whether a pay strategy is a source of competitive advantage?
Cost effectiveness
Which of the following is not one of the tests to determine if a pay strategy is a source of competitive advantage?
External competitiveness of the pay system
Which of the following tests of competitive advantage is the easiest test to pass?
Alignment
The alignment test
helps ensure passing the differentiation test.
Trying to measure an ROI for any compensation strategy implies that
people are "human capital," similar to other factors of production.
_____ is a "best practice".
Both smaller and larger internal pay differences
Which of the following statements is not true?
Focusing on employee contributions vs other objectives is a best practice
Research investigating high-performance workplaces found that performance-based pay _____ when combined with other high performance practices.
improves attitudes and behaviors
When organization performance declines,
performance-based pay plans do not pay off.
Research shows that ____________ can effectively shift an organization in a downward performance spiral to an upward one.
there are no compensation practices that
Most organizations rely upon the market to determine how to pay their employees since compensation strategy is uncertain and complex.
False
When Microsoft replaced stock options with stock awards, they were asking employees to put more "skin in the game".
False
Labor market-based compensation practices in countries such as China, Germany and France, are likely to be less effective than in countries such as the U.S., Korea or Singapore because there is less movement from company to company
True
Strategy refers to the fundamental direction that an organization chooses.
True
An organization's strategy is defined by the tradeoffs in choices of what to do and what not to do.
True
IBM was discussed as an example of an organization that changed it pay system and strategy to meet a different business strategy.
True
In the proper sequence of strategic decisions, HR strategies are made before business unit strategies.
False
Customer-focused pay strategies are very likely to use market-based pay.
False
Compensation systems focusing on competitor labor costs typically follow a cost-cutter strategy.
True
Although three separate compensation strategies may be identified, many companies use a combination of all three.
True
Most firms do not have generic strategies but use a blend of cost and innovation.
True
Internal alignment refers to how differently levels of skills and work are paid across different organizations.
False
How an organization positions its total compensation against competitors is part of external competitiveness strategic choices.
True
One of Whole Foods' employee contributions strategic compensation choices is to seek and engage employees who are going to help the company make money.
False
All organizations that pay their employees have a compensation strategy even though it may not be stated or written.
True
What business should a company be in and how does the company win are questions that are a part of mapping a total compensation strategy.
False
Compensation strategy should reflect the organization's values.
True
A major challenge in the design of future pay systems is how to better satisfy individual needs and preferences.
True
The major challenge in the design of future pay systems is reducing the pay gap between top executives and low-level employees.
False
Unlimited compensation choices by employees would meet with disapproval from the U.S. Internal Revenue Service.
True
Offering employees choice in their compensation mix provides firms a distinct competitive advantage.
False
Since unions represent such a small fraction of the labor force, their influence on pay decisions is relatively minor.
False
Pay systems should fit well with other HR systems.
True
In a high-performance system, pay strategy plays a lead, as opposed to support role.
False
Work/life balance issues are part of competitiveness decisions in the pay model.
True
A compensation strategy map shows which strategy is best for an organization.
False
External competitiveness is one test of competitive advantage.
False
Benchmarking and copying best practices does not lead to competitive advantage.
True
Research on the effects of pay level showed that pay level affects financial performance while how employees are paid has no effect.
False
When an organization uses pay for performance and performance is improving, this is a virtuous circle.
True
What is strategy? How is it defined?
Strategy refers to the fundamental directions that an organization chooses. An organization defines its strategy through the tradeoffs it makes in choosing what to do and what not to do.
Define defenders and prospectors as referred to by Miles and Snow.
According to Miles and Snow, defenders are those firms that operate in stable markets and compete on cost, and prospectors are firms that are more focused on innovation and new markets.
What are the different levels of strategy and the strategic choices in each level?
There are three levels of strategy, (i) the corporate level, (ii) the business unit level, and (iii) the functional level. At the corporate level, the fundamental strategic choice is: "What business should we be in?" At the business unit level, the choice shifts to: "How do we gain and sustain competitive advantage in this business?" At the function level the strategic choice is: "How should total compensation help this business gain and sustain competitive advantage?"
Compensation systems can be tailored to general business strategies. List and explain these strategies.

Compensation systems can be tailored to three general business strategies:


i. The innovator stresses new products and short response time to market trends. A supporting compensation approach places less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations.


ii. The cost cutter's efficiency-focused strategy stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed.


iii. The customer-focused business strategy stresses delighting customers and bases employee pay on how well they do this.
What are the different steps in formulating a total compensation strategy? List them in their order of occurrence.

There are four steps in formulating a total compensation strategy. They are:


i. Assess Total Compensation Implications


ii. Map a Total Compensation Strategy


iii. Implement Strategyiv. Reassess
List the different factors in mapping a total compensation strategy.
Factors in mapping a total compensation strategy include objective, alignment, competitiveness, contributions and, management.
What is the first step in assessing total compensation implications?
The first step in assessing total compensation implications includes an understanding of the specific industry in which the organization operates and how the organization plans to compete in that industry. This corresponds with the strategic choices in the corporate and the business unit levels: What business should we be in, and how do we win in that business?
What are the aspects of the alignment of pay strategies?

Alignment of the pay strategy includes three aspects:


i. align with the business strategy,


ii. align externally with the economic and sociopolitical conditions, and


iii. align internally within the overall HR system.
Write short notes on Virtuous and Vicious Circles.
Virtuous Circle - Thinking of pay as part of a circle suggests that performance-based pay works best when there is success to share. An organization whose profits or market share is increasing is able to pay larger bonuses and stock awards which fairly improve employee attitudes and work behaviors, which in turn improves their performance. The circle gains upward momentum. Employees receive returns that compensate for the risks they take. And they behave like owners, since they are sharing in the organization's success.Vicious Circle - Circles can also gain momentum going downward to become a vicious circle. When organization performance declines, performance-based pay plans do not pay off; there are no bonuses, and the value of stock declines—with potentially negative effects on organization performance. Declining organization performance increases the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs. Unless the increased risks are offset by larger returns, the risk-return imbalance will reinforce declining employee attitudes and speed the downward spiral.