Performance Management & Pay Flashcards
7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Performance Management & Pay flashcards as text
A company uses a 'forced distribution' performance rating system. What is the primary criticism of this approach?
Answer: It may force low ratings on solid performers in high-performing teams
Forced distribution requires a fixed percentage of employees in each rating category, which can unfairly penalize good performers when the entire team performs well.
Which pay-for-performance plan distributes a share of company profits to employees based on a predetermined formula?
Answer: Profit sharing
Profit sharing distributes a portion of company profits to employees according to a set formula, typically tied to overall organizational financial results.
An employee receives a lump-sum merit payment instead of a base salary increase. What is the primary organizational benefit?
Answer: It avoids the compounding effect on base pay costs
Lump-sum merit payments do not become part of base salary, preventing the compounding cost effect that occurs when base pay increases are built into future salary calculations.
What is 'pay at risk' in the context of variable compensation?
Answer: A portion of total compensation contingent on achieving performance targets
Pay at risk refers to a portion of an employee's total compensation that is not guaranteed and depends on achieving defined individual, team, or organizational performance goals.
A compensation manager wants to align individual performance metrics with overall business strategy. Which approach best achieves this?
Answer: Cascading organizational goals down to individual performance objectives
Cascading goals translates high-level organizational strategy into specific individual performance objectives, ensuring that individual effort directly supports business outcomes.
In a balanced scorecard performance system, compensation metrics are typically linked to which perspectives?
Answer: Financial, customer, internal process, and learning/growth
The balanced scorecard links performance and compensation to four perspectives: financial, customer, internal business processes, and learning and growth.
What is the 'compa-ratio' and how does it relate to pay-for-performance decisions?
Answer: An employee's actual salary divided by the midpoint of their pay range
The compa-ratio is calculated by dividing an employee's salary by the range midpoint, and it is commonly used to guide merit increase amounts—lower compa-ratios typically receive larger increases.