Variable Pay Improving Performance With Variable Pay
(C12): Questions & Accurate Answers
*Elements of Compensation* Right Ans - *Fixed and Variable Pay*
Multi-year performance plan Right Ans - - A plan in which cash payouts are
earned and paid over a period of years, with a portion of the payout earned in
each year.
*Fixed Pay* Right Ans - a *non-discretionary compensation* that *does not
regularly vary according to performance* or results achieved.
Primary examples of Fixed Pay Right Ans - Base salary & base hourly rate
*Variable Pay* Right Ans - compensation that is *discretionary or
contingent on performance or results achieved*, and can be designed for any
individual or combination of individuals
Examples of Fixed Pay Rewards Right Ans - Market-based, Performance-
based, and Skill-based
Market-based Right Ans - Rewards individuals for their value relative to
the labor market
Performance-based Right Ans - A type of variable pay that serves as a pay
differentiator between those who achieve results and those who do not.
Rewards individuals for their sustained performance over time.
Skill-based Right Ans - Rewards individuals for their acquisition of new
skills and competencies
Characteristic of Variable Pay Right Ans - Flexible and adaptable
What is the goal of Variable Pay? Right Ans - improve organizational
performance.
Business strategy Right Ans - The broad framework of principles and
approaches that guide the day-to-day decisions affecting the business. It
,ensures that the business supports the organizations mission, goals, and
objectives.
*What are the three types of Business Strategies?* Right Ans - Operational
excellence, Product/service leadership, and Customer intimacy.
*Operational Excellence* Right Ans - *Price/cost-based strategy* that can
include a combination of price, quality, dependability and ease of purchase,
minimizing waste and rewarding efficiency.
*Product/Service Leadership* Right Ans - An *innovation-based strategy*
that focuses on innovation, product development, and market exploration.
The corporate culture encourages imagination and a mindset driven by the
perspective of creating the future. Usually found in companies *bringing the
best product to market and commercializing them faster than their
competitors.
*Customer Intimacy* Right Ans - *Solutions-based strategy* that focuses
on creating results for carefully selected customers by building bonds to
*meet or exceed customer needs in order to build loyalty.*
*What drives Business Strategy?* Right Ans - *Business Objectives*
*What business objectives are used to achieve Operational Excellence? *
Right Ans - Product quality, operational efficiency improvement, process
Improvement, and cost reduction.
*What business objectives are used to achieve Product/Service Leadership?*
Right Ans - Market share/market penetration, product development, and time
from innovation to market.
*What business objectives are used to achieve Customer Intimacy?* Right
Ans - Customer option of products, product quality, customer retention, and
customer satisfaction.
*Business Life Cycle Stages* Right Ans - Start-up, Growth, Maturity, and
Decline
, *Start-up* Right Ans - The organization is *new with little or no formal
policies or procedures.* The organization's focus is on *obtaining capital,
marketing products or services, initial sales growth and cash conservation.*
*Growth* Right Ans - The organization is highly *focused on growing sales,
increasing distribution capability and determining how to efficiently produce
products or services to meet growing demand.* It typically generates the need
to begin standardizing procedures through policy creation.
*Mature* Right Ans - Characterized by a *focus on maintaining/increasing
market share, improving productivity and otherwise reducing cost of sales.*
Improvements to products are more *evolutionary than revolutionary.* The
organization typically has higher levels of bureaucracy and greater amounts of
cash on hand than at other stages.
*Decline* Right Ans - The organization's *revenues are declining.* It must
*decide whether to reinvest in current products, create new products or
maximize profits* with current products as long as possible.
*Start-up Business Objectives* Right Ans - Obtaining capital
Cash conservation
Develop brand awareness
Develop marketing plan
*Growth Business Objectives* Right Ans - Production capability
Market share/market penetration
Sales volume/revenue growth
*Mature Business Objectives* Right Ans - Improve operational efficiency
Stock price appreciation
Maintain/increase market share
*Decline Business Objectives* Right Ans - Maximize profits
Extend product demand
New product development
*How do variable pay programs help achieve business objectives?* Right
Ans - *Focus, alignment, motivation, and reinforcement*
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