Choose the option below that reflects the correct missing words in the above paragraph: 1 a = vicious b = increases c = positive d = decreases e = larger f = weaken 2 a = vicious b = declines c = negative d = increases e = larger f = reinforce 3 a = virtuous b = declines c = positive d = decreases e = smaller f = weaken 4 a = virtuous b = increases c = negative d = increases Pay for performance
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9 MNH306K/201 e = smaller f = reinforce The correct alternative is 2. See chapter 2, “Virtuous and vicious circles” in the prescribed book. Think of pay as part of a circle. A circle can gain downward momentum to become a vicious circle. As shown in exhibit 2.9 (b), when organisation performance declines, performance-based plans do not pay off, there are no bonuses, and the value of the stock declines – with potentially negative effects on organisation performance. Declining organisation performance increases the risks facing employees – risks of still smaller bonuses, demotions, wage cuts and even layoffs. Unless the increased risks are offset by larger returns, the risk-return imbalance will reinforce declining employee attitudes and speed the downward spiral. Options 1, 3 and 4 are therefore incorrect. 17 Employees judge the equity (fairness) of their pay by making multiple comparisons. Employees are therefore comparing: (a) jobs different from theirs (b) jobs similar to theirs (c) their jobs with others at the same employer (d) their jobs with similar jobs at different employers (e) their job’s pay against internal pay levels (f) their job’s pay against external pay levels The correct alternative is: 1 a, b, and c 2 b, c, and f 3 d, e, and f 4 b, and f Alternative 2 is correct. See chapter 3, “Guidance from the evidence: equity theory” in the prescribed book. Employees judge the fairness of their organisation’s internal pay structure by making multiple comparisons: •comparing their job with jobs similar to their own (internal alignment); •comparing their job with others at the same place of employment (internal alignment); and •comparing the pay for their job with external pay levels (external competitiveness) Options 1, 3 and 4 are therefore incorrect. 18 The pay structure can also be influenced by how it is linked with other HR systems in the organisation. The importance of a fit between pay and other HR systems is illustrated in “high performance” systems, and generally include three features: (a) high/skill knowledge requirements (b) low/skill knowledge requirements (c) autocratic work design where employees cannot make any decisions (d) work designed so that employee teams enjoy discretion in making decisions and continue to learn (e) pay systems based on performance (f) pay systems based on individual performance The correct alternative is: 1 a, b, and c 2 b, c, and d 3 d, e, and f 4 a, d, and e