Unit 8 Performance, Compensation and Benefit Management (End-of-unit assessment)
1. Which of the following is NOT the purpose of performance management? a) To increase the productivity of the company.
b) To enhance the corporate governance.
c) To motivate the employees.
d) To review the management system of the company. Solution
a) Incorrect. Performance management will have effect on the productivity of the company.
b) Correct. Performance management does not enhance the corporate governance of the company directly as the governance will focus on the transparency of the management instead of the productivity.
c) Incorrect. Performance management will have effect on the motivation of the employees of the company.
d) Incorrect. Performance management process involves reviewing the management system of the company.
2. Do you agree that a performance related pay (PRP) system must be better than a fixed and across-the-board pay system?
a) Yes b) No
c) It depends on the way that the performance related pay is carried out.
d) It depends on the resources that the company is having. Solution
a) Incorrect. Performance related pay is theoretically sound but it must be carried out very carefully. Otherwise the backfire could overwhelm the system. The case of Lai Chi Yau and Co is a good example in point. In that case, the staff with higher increment may not necessarily be happier as they may be subject to prejudice of other staff. The staff with less increment naturally will become hostile. Therefore, if the PRP system is not well-thought-out or not supported by the management, an across- the-board pay system may be better.
b) Incorrect. See the explanation in a.
c) Correct. See the explanation in a especially the fact that the success of PRP system depends on the way that the system is carried out.
d) Incorrect. This has nothing to do with the resources of the company.
3. The statement “Performance appraisal refers to an exercise which is filling out an appraisal form and the form is used to adjust the salary or wages of a staff member.” is not true because
a) the performance appraisal may not link up with the salary adjustment. b) the performance appraisal may not need filling out a form.
c) the performance appraisal may be used to adjust the salary of a group of workers.
d) the performance appraisal is not simply an exercise of filling out an appraisal form. It refers to a process whereby the performance of the staff is evaluated.
Solution
a) Wrong answer as the performance appraisal should link up with the reward management or else it is meaningless.
b) Wrong answer as filling out a form or not is not the focus of the performance appraisal.
c) Wrong answer as adjusting an individual or a group is not the focus of the performance appraisal.
d) Correct answer. It is probably the best answer in the sense that the appraisal is a process, rather than an one-off exercise, that an individual or a group’s performance is evaluated and actions be taken as a result thereof.
4. Which of the following is a possible problem with a performance appraisal system? a) It is not supported by the management.
b) There is problem in the implementation of the system
c) The system is designed to eliminate those employees who are undesirables. d) The system is too expensive.
Solution
a) Wrong answer. To be successful, a performance appraisal system must get the blessing from the top. However, it is difficult to imagine that the system can be implemented without the approval of the management.
b) Correct answer. The system needs meticulous planning and implementation. If it is unsuccessful, the most likely problem is in the process.
c) Wrong answer. It is not designed to eliminate the undesirables.
d) Wrong answer. The performance appraisal system does not need much resource in the sense that the benefit will definitely outweigh the cost.
5. If the performance management system is carried out correctly, which of the following area could change the result of Peter’s resignation in the Accounting Supervisor’s case? a) The importance attached to the system.
b) The planning stage of the process.
c) The implementation stage of the process. d) The assessment stage of the process. Solution
a) Wrong answer. Peter rebutted that nobody told him what to do and there is no performance standard set at all, it is not the problem of the importance of the system.
b) Correct answer. As Peter rebutted that nobody told him what to do and there is no performance standard set at all. Therefore, it is likely that the planning stage of the performance management process is at fault. Job duty, responsibility and standard should be clearly defined and presented to the responsible employee in the planning stage of the process.
c) Wrong answer. Job duty, responsibilities and standard should be clearly defined and presented to the responsible employee at an earlier stage of the process.
d) Wrong answer. Job duty, responsibilities and standard should be clearly defined and presented to the responsible employee at an earlier stage of the process.
6. In a nutshell, why the performance management must tie up with the pay system? a) It is a management design.
b) It is a theory that had been honored for years.
c) It is a sensible arrangement as it provides a cause-and-effect scenario.
d) It is a fundamental text-book case. Solution
a) Wrong answer. This answer does not explain why the performance management must tie up with the pay system.
b) Wrong answer. This answer does not explain why the performance management must tie up with the pay system.
c) Correct answer. The arrangement makes sense for the basic question: why bother to work better? If the reward system does not tie up with the performance management system, people will tend to take it lightly because they will think it is only an academic exercise.
d) Wrong answer. This answer does not explain why the performance management must tie up with the pay system.
7. Which of the following is wrong in setting performance objectives?
a) The objectives should be distinguishable.
b) The objectives should be measurable. c) The objectives should be attainable. d) The objectives should be reasonable. Solution
a) Correct answer. The objectives should be SMART: Specific, Measurable, Attainable, Reasonable, Timely
b) Wrong answer. The objectives should be SMART: Specific, Measurable, Attainable, Reasonable, Timely
c) Wrong answer. The objectives should be SMART: Specific, Measurable, Attainable, Reasonable, Timely
d) Wrong answer. The objectives should be SMART: Specific, Measurable, Attainable, Reasonable, Timely
8. Which of the following is a correct statement?
a) Employees always prefer direct compensation as it confers maximum flexibility. b) Employees always prefer direct compensation as it confers maximum freedom.
c) Employees prefer a combination of direct and indirect compensation as it can have maximum flexibility and tax-efficient.
d) Employees do not have any preference. Solution
a) Wrong answer. Although direct compensation confers maximum flexibility and freedom, the employees may not necessarily prefer direct compensation, for instance, direct compensation is usually not tax effective.
b) Wrong answer. Although direct compensation confers maximum flexibility and freedom, the employees may not necessarily prefer direct compensation, for instance, direct compensation is usually not tax effective.
c) Correct answer. Unless the employee is earning a salary which is only enough to satisfy a minimum quality of life, an employee usually prefer to have a combination that confers with maximum tax efficiency, freedom and flexibility.
d) Wrong answer. See the above explanation and it is wrong to suggest people do not have any preference as to the desire of maximum satisfaction, freedom or command over the uses of the earning.
9. Which of the following is correct?
a) The wider the pay range, the more motivational effect.
b) The wider the pay range, the more flexibility the company may have. c) The narrower the pay range, the less motivational effect.
d) The narrower the pay range, emphasis is more on the promotion.
Solution
a) Wrong answer. The pay range has nothing to do with the motivation though indirectly it will tie up with the performance.
b) Wrong answer. The pay range should not be used as a flexibility measure for the company to maneuver.
c) Wrong answer. The pay range has nothing to do with the motivation though indirectly it will tie up with the performance.
d) Correct answer. A narrow range will have emphasis more on the promotion because, in order to reflect a better performance, the narrow pay range cannot fulfill the function. A promotion of shifting to another pay range will do.
10. The most critical step in establishing a pay scale is the alignment with the market rate. However, this is not easy. Why?
a) The market rate fluctuates.
b) The market rate is difficult to find as it is confidential in most companies. c) There is no absolute identical job in different companies to compare.
d) All of the answers
Solution
a) Wrong answer. It is one of the difficulties to compile the alignment, there are some others.
b) Wrong answer. It is one of the difficulties to compile the alignment, there are some others.
c) Wrong answer. It is one of the difficulties to compile the alignment, there are some others.
d) Correct answer. If the alignment is at fault, any pay scale will doom to fail however, it is difficult to have the perfect data of the market to compile the alignment. The reasons are reflected in answers a, b, and c.
