,Chapter 1: A Road Map to Effective Communication
TRUE/FALSE
1. The fundamental purpose of a compensation system is to help create a willingness among qualified
persons to join the organization and to perform the tasks needed by the organization.
ANS: T PTS: 1 REF: 6 OBJ: 1
2. An effective compensation system is important to most organizations because it can mean the
difference between company success and failure.
ANS: T PTS: 1 REF: 6 OBJ: 2
3. The main similarity between extrinsic rewards and intrinsic rewards is that they both flow from job
content.
ANS: F PTS: 1 REF: 7 OBJ: 3
4. A reward strategy is the plan for the mix of rewards to be provided to organization members along
with the means through which they will be provided.
ANS: T PTS: 1 REF: 7 OBJ: 5
5. A compensation system must be viewed in the context of the total reward system because it is the total
pattern of financial and non-financial rewards that motivate employee behaviour.
ANS: T PTS: 1 REF: 8 OBJ: 7
6. The main difference between a reward system and a compensation system is that a reward system
rewards only good performance while a compensation system provides pay to all employees.
ANS: F PTS: 1 REF: 8 OBJ: 4
7. The two key aspects of a compensation strategy are the amount of direct pay (cash) compensation to
be paid and the amount of indirect compensation (non-cash services and benefits) to be provided.
ANS: F PTS: 1 REF: 8 OBJ: 6
8. Three of the key criteria for evaluating a compensation system are whether it promotes achievement of
organizational goals, whether it is seen as equitable, and whether it has lower salary costs than
competitors.
ANS: F PTS: 1 REF: 10 OBJ: 8
9. There is no single best compensation system that applies to all firms.
ANS: T PTS: 1 REF: 11 OBJ: 8
10. According to the “Road Map to Effective Compensation,” the first step is formulating your reward and
compensation strategy.
, ANS: F PTS: 1 REF: 11 OBJ: 9
MULTIPLE CHOICE
1. Which of the following statements is false?
a. Canadian firms spend 20 to 40% of their operating budgets on compensation.
b. Some compensation systems serve to promote unproductive behaviour.
c. Reward systems need to be continually evaluated.
d. Some firms spend too little on their compensation systems.
ANS: A PTS: 1 REF: 5 OBJ: 1
BLM: Understand
2. Which of the following statements most accurately describes extrinsic rewards?
a. They focus on factors inherent in the work itself - the job content.
b. They satisfy higher-order human needs.
c. They include monetary and nonmonetary rewards and come from the job context.
d. They involve skill variety, task identify, task significance, autonomy, and feedback.
ANS: C PTS: 1 REF: 6 OBJ: 3
BLM: Remember
3. Which of the following best explains extrinsic rewards?
a. They provide everything employees value.
b. They focus on quality of life at work.
c. They are derived from factors in the job context.
d. They provide development and career opportunities.
ANS: C PTS: 1 REF: 6 OBJ: 3
BLM: Remember
4. Which statement best describes the difference between the terms “rewards” and “incentives”?
a. Rewards are given to satisfy basic human needs while incentives are used to satisfy
higher-order human needs.
b. Rewards serve to recognize valued behaviour while incentives are intended to produce
valued behaviour.
c. Rewards are job context related while incentives are job content related.
d. Rewards are used to influence future performance and incentives are given to recognize
past work behaviour.
ANS: B PTS: 1 REF: 7 OBJ: 1
BLM: Understand
5. As a small business owner committed to the total rewards approach to compensation what do you need
to establish before you start to develop your compensation system?
a. a reward system
b. an incentive program
c. a compensation strategy
d. a reward strategy
ANS: D PTS: 1 REF: 7 STA: 7
BLM: Apply
6. Which of the following items is not considered part of a compensation system?
a. base pay
, b. company parking pass
c. union dues
d. work/life programs
ANS: C PTS: 1 REF: 7 OBJ: 4
BLM: Understand
7. Which statement best describes the term “reward strategy”?
a. The means through which performance bonuses are paid.
b. The mix of rewards provided to organization members.
c. The means for recognizing outstanding achievement.
d. Identifies the key contextual variables for an organization.
ANS: B PTS: 1 REF: 7 OBJ: 5
BLM: Remember
8. As an employer you want to implement a total rewards approach to compensation. Which of the
following practices would not support this concept?
a. Offering recognition programs.
b. Providing flexible work arrangements.
c. Providing challenging and interesting jobs with the opportunity for advancement.
d. Paying fixed salaries to minimize costs.
ANS: D PTS: 1 REF: 7 OBJ: 5
BLM: Apply
9. Which of the following best explains intrinsic rewards?
a. Intrinsic rewards focus on increasing an employee’s financial position.
b. Intrinsic rewards are provided by job content.
c. Intrinsic rewards provide security and employee services.
d. Intrinsic rewards relate to bonuses based on performance.
ANS: B PTS: 1 REF: 7 OBJ: 3
BLM: Understand
10. The compensation system typically refers to which aspect of the reward system?
a. The mix of intrinsic and extrinsic rewards
b. The economic or monetary part
c. The entire spectrum of rewards
d. Incentives
ANS: B PTS: 1 REF: 7 OBJ: 4
BLM: Remember
11. You have offered to your sales associate an all expenses paid trip for two to Australia if she doubles
her annual sales volume from last year. What concept are you applying?
a. Intrinsic rewards
b. Extrinsic rewards
c. Incentives
d. Job enrichment
ANS: C PTS: 1 REF: 7 OBJ: 1
BLM: Apply
12. Which of the following would be an example of an intrinsic reward?
a. Interesting and meaningful work
TRUE/FALSE
1. The fundamental purpose of a compensation system is to help create a willingness among qualified
persons to join the organization and to perform the tasks needed by the organization.
ANS: T PTS: 1 REF: 6 OBJ: 1
2. An effective compensation system is important to most organizations because it can mean the
difference between company success and failure.
ANS: T PTS: 1 REF: 6 OBJ: 2
3. The main similarity between extrinsic rewards and intrinsic rewards is that they both flow from job
content.
ANS: F PTS: 1 REF: 7 OBJ: 3
4. A reward strategy is the plan for the mix of rewards to be provided to organization members along
with the means through which they will be provided.
ANS: T PTS: 1 REF: 7 OBJ: 5
5. A compensation system must be viewed in the context of the total reward system because it is the total
pattern of financial and non-financial rewards that motivate employee behaviour.
ANS: T PTS: 1 REF: 8 OBJ: 7
6. The main difference between a reward system and a compensation system is that a reward system
rewards only good performance while a compensation system provides pay to all employees.
ANS: F PTS: 1 REF: 8 OBJ: 4
7. The two key aspects of a compensation strategy are the amount of direct pay (cash) compensation to
be paid and the amount of indirect compensation (non-cash services and benefits) to be provided.
ANS: F PTS: 1 REF: 8 OBJ: 6
8. Three of the key criteria for evaluating a compensation system are whether it promotes achievement of
organizational goals, whether it is seen as equitable, and whether it has lower salary costs than
competitors.
ANS: F PTS: 1 REF: 10 OBJ: 8
9. There is no single best compensation system that applies to all firms.
ANS: T PTS: 1 REF: 11 OBJ: 8
10. According to the “Road Map to Effective Compensation,” the first step is formulating your reward and
compensation strategy.
, ANS: F PTS: 1 REF: 11 OBJ: 9
MULTIPLE CHOICE
1. Which of the following statements is false?
a. Canadian firms spend 20 to 40% of their operating budgets on compensation.
b. Some compensation systems serve to promote unproductive behaviour.
c. Reward systems need to be continually evaluated.
d. Some firms spend too little on their compensation systems.
ANS: A PTS: 1 REF: 5 OBJ: 1
BLM: Understand
2. Which of the following statements most accurately describes extrinsic rewards?
a. They focus on factors inherent in the work itself - the job content.
b. They satisfy higher-order human needs.
c. They include monetary and nonmonetary rewards and come from the job context.
d. They involve skill variety, task identify, task significance, autonomy, and feedback.
ANS: C PTS: 1 REF: 6 OBJ: 3
BLM: Remember
3. Which of the following best explains extrinsic rewards?
a. They provide everything employees value.
b. They focus on quality of life at work.
c. They are derived from factors in the job context.
d. They provide development and career opportunities.
ANS: C PTS: 1 REF: 6 OBJ: 3
BLM: Remember
4. Which statement best describes the difference between the terms “rewards” and “incentives”?
a. Rewards are given to satisfy basic human needs while incentives are used to satisfy
higher-order human needs.
b. Rewards serve to recognize valued behaviour while incentives are intended to produce
valued behaviour.
c. Rewards are job context related while incentives are job content related.
d. Rewards are used to influence future performance and incentives are given to recognize
past work behaviour.
ANS: B PTS: 1 REF: 7 OBJ: 1
BLM: Understand
5. As a small business owner committed to the total rewards approach to compensation what do you need
to establish before you start to develop your compensation system?
a. a reward system
b. an incentive program
c. a compensation strategy
d. a reward strategy
ANS: D PTS: 1 REF: 7 STA: 7
BLM: Apply
6. Which of the following items is not considered part of a compensation system?
a. base pay
, b. company parking pass
c. union dues
d. work/life programs
ANS: C PTS: 1 REF: 7 OBJ: 4
BLM: Understand
7. Which statement best describes the term “reward strategy”?
a. The means through which performance bonuses are paid.
b. The mix of rewards provided to organization members.
c. The means for recognizing outstanding achievement.
d. Identifies the key contextual variables for an organization.
ANS: B PTS: 1 REF: 7 OBJ: 5
BLM: Remember
8. As an employer you want to implement a total rewards approach to compensation. Which of the
following practices would not support this concept?
a. Offering recognition programs.
b. Providing flexible work arrangements.
c. Providing challenging and interesting jobs with the opportunity for advancement.
d. Paying fixed salaries to minimize costs.
ANS: D PTS: 1 REF: 7 OBJ: 5
BLM: Apply
9. Which of the following best explains intrinsic rewards?
a. Intrinsic rewards focus on increasing an employee’s financial position.
b. Intrinsic rewards are provided by job content.
c. Intrinsic rewards provide security and employee services.
d. Intrinsic rewards relate to bonuses based on performance.
ANS: B PTS: 1 REF: 7 OBJ: 3
BLM: Understand
10. The compensation system typically refers to which aspect of the reward system?
a. The mix of intrinsic and extrinsic rewards
b. The economic or monetary part
c. The entire spectrum of rewards
d. Incentives
ANS: B PTS: 1 REF: 7 OBJ: 4
BLM: Remember
11. You have offered to your sales associate an all expenses paid trip for two to Australia if she doubles
her annual sales volume from last year. What concept are you applying?
a. Intrinsic rewards
b. Extrinsic rewards
c. Incentives
d. Job enrichment
ANS: C PTS: 1 REF: 7 OBJ: 1
BLM: Apply
12. Which of the following would be an example of an intrinsic reward?
a. Interesting and meaningful work
