Scenario 13.1 John Davis, a Human Resource Manager for a Medium-Size Chain

question 14

Multiple Choice

Scenario 13.1
John Davis, a human resource manager for a medium-size chain of hotels, is trying to motivate the company's employees with an updated compensation plan. There are two groups of operating employees. Line employees are responsible for dealing directly with customers, and their performance objectives are related to providing high-quality customer service. To do this, line personnel must undergo regular training to update their customer service skills. Operating managers are responsible for monitoring the activities of the line personnel and providing instructional/developmental support when needed. Currently, the line personnel are paid on an hourly basis, while the operating managers are paid salaries. If employees earn adequate performance appraisals, they can receive generous bonuses and pay raises. However, when performance evaluations are unacceptable, employees do not receive any rewards. John believes that his new plan to give employees shares of profit and stock on the basis of the results of performance evaluations will further motivate employees and managers.
-Refer to Scenario 13.1. John knows that the last time the compensation plan was updated, an incentive plan was proposed. However, the incentive pay for all of the chain's employees was much greater than anticipated and so the incentives were never paid. On the basis of ____ theory, when individuals did not receive the promised incentive pay, their motivation was reduced.

• A) agency
• B) expectancy
• C) equity
• D) performance
• E) outcome-based

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Definitions:

Purchasing Power

The quantity of goods or services that a person or entity can buy with a given amount of currency.

Income Effect

Income Effect describes how a change in an individual's income affects their purchasing behavior, impacting the quantity of goods and services they can afford.

Price Change

A variation in the cost of a good or service over time in a market.

Nominal Income

Income figures that have not been adjusted for inflation, representing the amount of money earned in current dollars.