Additional Case 11.2 Richland Manufacturing Uses an Individual-Based Pay-For-Performance Plan for Employees

question 43

Multiple Choice

Additional Case 11.2
Richland Manufacturing uses an individual-based pay-for-performance plan for employees.
Manager input in the form of performance evaluations primarily determines individual employee rewards. Performance appraisals at Richland are used for multiple purposes including compensation, training, and work planning. Since implementing the plan, many managers have noticed that employees tend to play it safe by setting modest rather than challenging goals for themselves. Employees have also been avoiding important tasks, such as satisfying the needs of customers and keeping work areas neat. In addition, most employees express disbelief that pay and performance are actually linked. As a result, Richland is considering making modifications to the system.
The HR Director wants a system that will reward all employees based on the entire company's performance because he wants to increase employee commitment. The VP of Operations wants to reward specific productivity and quality improvements with a simply structured system that considers labor costs as well as other production expenses. The VP of Operations also believes that labor and management should work together to allocate the rewards.
-Refer to Additional Case 11.2.Employees avoiding important tasks is most likely a problem associated with:

• A) lack of promotion opportunities for employees.
• B) employee motivation as explained by expectancy theory.
• C) the deterioration of quality that comes with individual-based plans.
• D) the single-mindedness and focus that comes with individual-based plans.

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Definitions:

Semiannual Payments

Payments made twice a year, often in the context of loan repayments or interest payments.

Compounded Semiannually

A method of calculating interest where the interest earned over half a year is added to the principal, and the new total becomes the basis for the next round of interest calculation.

Cost

The monetary value spent by a company to produce or acquire goods or services, including manufacturing and operating expenses.

Compounded Annually

The process of adding interest to the principal sum of a deposit or loan, with the interest that has been added also earning interest from that point on.