BUSMHR 3200 Exam 2: Compensation
Questions With Complete Solutions
Compensation The rewards, usually monetary in nature (either short- and/or long-term)
that reinforce behavior, organizational membership, performance and retention
Compensation to Earlier Class Topics -Directly relates to an orgs ability to attract, select,
hire the best possibly employee/org members
-Strongly related to individual motivation, satisfaction, engagement and retention
-Can cause internal conflicts (team effectiveness) when equity is not perceived to be present
-Needs to be aligned with the goals and strategy of the org
*Different elements of compensation plan (merit vs. bonus)
*Focus for compensation (individual vs. group vs. organizational level)
-Can present difficulties in global org management
(In the U.S., compensation is intensely personal and related to self-worth)
Merit Pay -Link performance-appraisal ratings to annual pay increases
-A merit increase grid combines an employee's performance rating with the employee's position
in a pay range (often called a "comp-ratio" to determine the size and frequency of his or her pay
increase)
, BUSMHR 3200 Exam 2: Compensation
Questions With Complete Solutions
-A merit increase grid can also help bring about perceived pay equity
-Some orgs provide guidelines regarding the percentage of employees who should fall into each
performance category (forced distribution)
-Criticisms of merit pay include emphasis on individual performance vs. team work,
measurement problems, and (from deming) that individuals don't have much impact on their own
performance
(merit-based pay is an effective means of reinforcing performance)
Incentive/Variable Compensation -Incentive pay (aka "variable comp" aka "bonuses") are
variable in nature
-Can be supplemental income (e.g. commissions in addition to base pay) or sole source of
income (e.g. some realtor commissions)
-Typically are linked to some perviously-set performance targets, accountabilities, etc (think
carefully about these when setting them)
-More objective when objective performance metric (e.g. sales $) exist, but can be used for
qualitative situations (e.g. accountabilities)
-Typically are focused on both individual and org performance but can be set up to reward team-
level performance as well.
Questions With Complete Solutions
Compensation The rewards, usually monetary in nature (either short- and/or long-term)
that reinforce behavior, organizational membership, performance and retention
Compensation to Earlier Class Topics -Directly relates to an orgs ability to attract, select,
hire the best possibly employee/org members
-Strongly related to individual motivation, satisfaction, engagement and retention
-Can cause internal conflicts (team effectiveness) when equity is not perceived to be present
-Needs to be aligned with the goals and strategy of the org
*Different elements of compensation plan (merit vs. bonus)
*Focus for compensation (individual vs. group vs. organizational level)
-Can present difficulties in global org management
(In the U.S., compensation is intensely personal and related to self-worth)
Merit Pay -Link performance-appraisal ratings to annual pay increases
-A merit increase grid combines an employee's performance rating with the employee's position
in a pay range (often called a "comp-ratio" to determine the size and frequency of his or her pay
increase)
, BUSMHR 3200 Exam 2: Compensation
Questions With Complete Solutions
-A merit increase grid can also help bring about perceived pay equity
-Some orgs provide guidelines regarding the percentage of employees who should fall into each
performance category (forced distribution)
-Criticisms of merit pay include emphasis on individual performance vs. team work,
measurement problems, and (from deming) that individuals don't have much impact on their own
performance
(merit-based pay is an effective means of reinforcing performance)
Incentive/Variable Compensation -Incentive pay (aka "variable comp" aka "bonuses") are
variable in nature
-Can be supplemental income (e.g. commissions in addition to base pay) or sole source of
income (e.g. some realtor commissions)
-Typically are linked to some perviously-set performance targets, accountabilities, etc (think
carefully about these when setting them)
-More objective when objective performance metric (e.g. sales $) exist, but can be used for
qualitative situations (e.g. accountabilities)
-Typically are focused on both individual and org performance but can be set up to reward team-
level performance as well.
