Variable pay: improving performance with
variable pay Questions and Answers
What is a multiyear performance plan? Correct Ans-A plan in which cash payouts are earned
and paid over a period of years, with a portion of the payout earned in each year
What is a performance unit plan? Correct Ans-A plan in which a fixed number of units are
granted with a stated value per unit. Based on the attainment of stated, goals and objectives at the
end of the performance.
What is a stock appreciation rights plan? Correct Ans-A plan in which the company grants an
employee the right to receive a monetary amount, equal to the future appreciation of its stock
What is a stock grant? Correct Ans-Providing stock to the employees without any cost
What is a stock option plan? Correct Ans-plan that gives employees the right to purchase a
fixed number of shares of company stock at a specified price for a limited period of time
What is cycling? Correct Ans-The variation of performance, above and below the baseline.
Cycling can result in plan payouts, despite note, cumulative improvement over the course of the
plan period.
Aka how often you payout
,What is direction? Correct Ans-What the organization is attempting to accomplish, and is
reinforced by the variable pay program
- business objectives
- culture
What is dual perspective evaluation? Correct Ans-Evaluating from two viewpoints
Employers perspective, and employees perspective
What is individually measured culture type? Correct Ans-Orange culture that place is low
value on its people, but affords them the opportunity to affect organizational performance with
an individually measured focus may use individual incentives.
What is performance shares? Correct Ans-Planned that award shares or stock contingent upon
achievement of certain predetermined, external or internal performance goals
What is power? Correct Ans-How well the plans design reinforces its direction
- awareness
- value
- performance sensitivity
- participation
, What is restricted stock? Correct Ans-Stock grants that are contingent upon remaining with
the organization for a stated period of time
What is the advisory group alternative Correct Ans-A hybrid approach, both internal and
external design team.
Advisory team is not involved with detailed design steps but review the plan at key junctures and
discussed recommendations, creates excitement, and provides feedback.
What is the bonus plans objective Correct Ans-Motivate employee to complete a specific task
What is the book value plan? Correct Ans-A plan that bases awards on the increase in the
book value of the organization over the performance period. Book value is defined as total assets
minus total liabilities.
What is the goal of variable pay? Correct Ans-The ultimate goal of variable pay is to improve
organizational performance.
What is the integrative/team focused culture type? Correct Ans-Org, places high value on
people, with employees having the ability to affect org performance. However, the strong culture
could inhibit a variable pay plan that places significant rewards on individual performance.
What is the role of the design team Correct Ans-Plan design
Approval- obtain at management approval
Evaluation- how the plan will be evaluated
variable pay Questions and Answers
What is a multiyear performance plan? Correct Ans-A plan in which cash payouts are earned
and paid over a period of years, with a portion of the payout earned in each year
What is a performance unit plan? Correct Ans-A plan in which a fixed number of units are
granted with a stated value per unit. Based on the attainment of stated, goals and objectives at the
end of the performance.
What is a stock appreciation rights plan? Correct Ans-A plan in which the company grants an
employee the right to receive a monetary amount, equal to the future appreciation of its stock
What is a stock grant? Correct Ans-Providing stock to the employees without any cost
What is a stock option plan? Correct Ans-plan that gives employees the right to purchase a
fixed number of shares of company stock at a specified price for a limited period of time
What is cycling? Correct Ans-The variation of performance, above and below the baseline.
Cycling can result in plan payouts, despite note, cumulative improvement over the course of the
plan period.
Aka how often you payout
,What is direction? Correct Ans-What the organization is attempting to accomplish, and is
reinforced by the variable pay program
- business objectives
- culture
What is dual perspective evaluation? Correct Ans-Evaluating from two viewpoints
Employers perspective, and employees perspective
What is individually measured culture type? Correct Ans-Orange culture that place is low
value on its people, but affords them the opportunity to affect organizational performance with
an individually measured focus may use individual incentives.
What is performance shares? Correct Ans-Planned that award shares or stock contingent upon
achievement of certain predetermined, external or internal performance goals
What is power? Correct Ans-How well the plans design reinforces its direction
- awareness
- value
- performance sensitivity
- participation
, What is restricted stock? Correct Ans-Stock grants that are contingent upon remaining with
the organization for a stated period of time
What is the advisory group alternative Correct Ans-A hybrid approach, both internal and
external design team.
Advisory team is not involved with detailed design steps but review the plan at key junctures and
discussed recommendations, creates excitement, and provides feedback.
What is the bonus plans objective Correct Ans-Motivate employee to complete a specific task
What is the book value plan? Correct Ans-A plan that bases awards on the increase in the
book value of the organization over the performance period. Book value is defined as total assets
minus total liabilities.
What is the goal of variable pay? Correct Ans-The ultimate goal of variable pay is to improve
organizational performance.
What is the integrative/team focused culture type? Correct Ans-Org, places high value on
people, with employees having the ability to affect org performance. However, the strong culture
could inhibit a variable pay plan that places significant rewards on individual performance.
What is the role of the design team Correct Ans-Plan design
Approval- obtain at management approval
Evaluation- how the plan will be evaluated
