Question 1

Internal process metrics are most useful in which of the following situations?

AAssessing how well the business is running

BDetermining employee satisfaction levels

CMeasuring the financial success of the business

DEvaluating customer perceptions of products or services

Answer : A

Question 2

What best describes the primary purpose of budgeting?

ALimiting spending to a fixed percentage of organizational revenue

BMaking choices about spending based on expectations of performance

CIncreasing profitability of the business annually to maximize shareholder/owner value

DComplying with local legislation and maintaining accurate records to prepare financial reports and tax documents

Answer : B

Question 3

The Delta Company has experienced increased turnover in the past two years. Data from exit interviews indicate that most of those leaving did so for better opportunities and higher compensation. If Delta pays at the highest percentile of the market for their peer group, what data analysis should they do?

AAdditional quantitative analysis to determine whether pay rates are truly competitive or existing data are unreliable

BQualitative data collection to talk to key stakeholders and employees and determine whether the exit interviews accurately reflect their concerns

CQualitative data collection in the form of an employee survey with questions about employee satisfaction with pay levels

DNo additional data analysis is needed. Delta should increase pay rates based on the existing data to decrease turnover.

Answer : B

Question 4

Your company has had a strong fiscal year with a 15% increase in net income over the prior fiscal year. Share prices are at an all time high. Working with Finance, you have arrived at a 2.5% merit increase budget for the next fiscal year, a smaller increase than the last fiscal year. Finance has indicated that some large capital expenditures will be needed next year, so the company needs to conserve resources. Additionally, Legal is in final negotiations on a lawsuit that may be very costly to the company. Word of the smaller increases has line management concerned that they will lose their best performers. Given all of these factors, what is your best course of action?

AImplement the merit increase budget as is because the anticipated financial obligations have made it necessary

BMeet with Finance and make a case for a larger merit increase budget because the loss of key talent will cost more over the long term than the savings from the smaller merit increases

CGather the perspectives of all stakeholders, analyze their individual concerns and meet to determine whether a compromise solution is possible

DRecommend a reduction in force to eliminate poor performers, which will increase the merit budget by reducing headcount

Answer : C

Question 5

Which of the following best describes the most likely perspectives of different groups in the organization that compensation professionals must be aware of?

AInvestors and Finance want to see money spent wisely. Legal must ensure compliance, and HR and operating departments want to see their needs taken into account to attract, retain and motivate a high quality workforce.

BOperating departments and HR understand the company must live within its means and Finance cannot allocate funds to a budget if it is likely that profitability will be adversely affected.

CInvestors want to maximize gains and want to see compensation tightly controlled and Legal needs to ensure that compensation plans do not attract undue scrutiny.

DOperating departments view compensation as it applies to them, HR must balance available resources to attract, retain and motivate employees and Finance knows the value of a motivated workforce and will provide the budget necessary to achieve it.