# Compensation issues

1. The Employee Benefit Research Institute (www.ebri.org) has conducted a "Retirement Survey" for several years. Visit EBRI's website and find the 2010 Retirement Confidence Survey. Scan the "Findings" and take a look at the "Fact Sheets" and comment on how HR might help solve the problem of inadequate employee participation in company supported retirement plans (e.g., 401K-like programs). Also, make observations on why most companies are shifting from defined benefit to contributory plans and any other aspects of retirement planning from the HR perspective.

2. One of basic premises of economics is that people respond to incentives. Give examples of individual incentives used by an organization in which you were either employed or know about. Describe why those plans were successful or unsuccessful. How could you have structured the unsuccessful ones to work better?

3. The attached series of articles from SHRM regarding pension funding issues helps us understand why employers are shifting away from defined benefit plans to contribution plans (e.g., 401K). To pay a $30,000 per year pension takes about $500,000 in the bank. If you are General Motors with thousands of pensioners, you have to tie up a lot of cash to cover the pension obligations. That much cash is a tempting source for urgently needed funds, and leads to borrowing and those sincere promises to pay it back. Do you have any observations?

4. SHRM reports, "In what could prove to be a bellwether for corporate compensation generally, financial organizations have changed their pay mix, moving away from short-term incentives in favor of increased salary, deferred compensation and modified incentive program design. According to a global survey by HR consultancy Mercer, key changes in the sector's short-term incentive (STI) programs include more focus on balanced, risk-adjusted performance measurement and deferral of bonus payouts over several years." The full SHRM article is attached and the Mercer Survey summary is http://www.mercer.com/press-releases/1368340. Do you have any observations regarding SHRM's claim that the Mercer survey represents a "bellwether for corporate compensation"?

5. It seems that competition has tended to drive up the "worth" of a good CEO to unsustainable levels. Basic economics says that someone should be paid what they are worth. Read the attached WSJ article about how one company tried to pull back. Did Sharper Image make some good decisions? Has their profitability shown results?

about 500 words total

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HUMAN RESOURCE

1. The Employee Benefit Research Institute (www.ebri.org) has conducted a "Retirement Survey" for several years. Visit EBRI's website and find the 2010 Retirement Confidence Survey. Scan the "Findings" and take a look at the "Fact Sheets" and comment on how HR might help solve the problem of inadequate employee participation in company supported retirement plans (e.g., 401K-like programs). Also, make observations on why most companies are shifting from defined benefit to contributory plans and any other aspects of retirement planning from the HR perspective.

There are several ways in which HR might help the problem of inadequate employee participation in company supported retirement plans. First, HR must communicate the main effects of the Patient Protection and Affordable Care Act of 2010. Second, HR must increase employee involvement in company supported retirement plans. The 2010 Retirement Confidence Survey shows that those plans that are developed by the employees themselves are rated highly by the employees. Third, the HR must show employees their legal rights and the fact that employees can avail themselves of the health benefits. In other words the HR must create confidence that they will actually get health benefits. Fourth, HR should commence auto-enrollment helping those that stand the risk of running short of money in retirement. Fifth, the HR should explain why Health Savings Accounts cannot cover all retiree medical costs. Sixth, in case of defined plans similar to 410 (k) retirement plan, the effect on the employees income adequacy is positive but the employees continue to have doubts about the efficacy and adequacy of such plans.

Most companies are shifting from defined benefit to contributory plans so that companies are able to reduce their share of contribution. However, there are other reasons also. When employees join in contributory plans and other plans where employees actively participate, their satisfaction and confidence is higher than receiving a defined benefit. The survey shows that own health plans are rated highly. Further, if the employees select the contributory plans and elect to contribute a certain portion of the salary, these employees have lesser doubts about health benefits.

2. One of basic premises of economics is that people respond to incentives. Give examples of individual incentives used by an organization in which you were either employed or know about. Describe why those plans were successful or unsuccessful. How could you have structured the unsuccessful ones to work better?

The basic premise in the factory where I worked was that any salesperson that exceeded his target was paid an incentive at the rate of 2% of the value of sales above her target. This plan was ...

#### Solution Summary

This solution gives you a detailed discussion on Compensation issues

9 Introductory Statistic Problems

I need help with these nine stat. questions.

They come in two labs. Lab 6 and 7 and you need to use the data in the excel.

I need to use the top half of the lab to answer the questions for the bottom half of the lab.

Thank You

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The goal of this lab is to learn about hypothesis testing (This lab is out of 13 points).

Use V3, the salaries of your 40 hitters, as the variable x you're interested in learning about on this lab.

MAKE SURE TO HAND IN THE ANSWER SHEET ONLY WHEN YOU HAND IN LAB 6!

(2 points) 1. Use Excel to compute the mean and standard deviation of your data. If you don't remember how to do this, refer back to the instructions on page 2 of Lab 2.

Also, sort your data and write down the 16th value (call that L) and the 25th value (call that H). You will use your values for the sample mean, the sample standard deviation, L and H in the rest of this problem. Assume that the sample standard deviation is the true standard deviation.

(1 points) 2. What is the standard deviation of the mean? Remember that your sample size is 40.

(4 points) 3. You will now test the hypothesis that the true mean is equal to L (the number you wrote

down in Question 1) against the alternative that the true mean is less than L.

i) Write down the null and alternative hypotheses.

ii) Is this a one-tailed test or a two-tailed test?

iii) What is the critical value for this test if ? Please make sure to state your

answer as a critical value for salary. Your answer should not be a z-

value.

iv) Do we accept or reject the null hypothesis that the true mean is equal to L at the

5% significance level?

(4 points) 4. Now you will test the hypothesis that the true mean is equal to H (the number you wrote

down in Question 1) against the alternative that the true mean is not equal to H.

i) Write down the null and alternative hypotheses.

ii) Is this a one-tailed test or a two-tailed test?

iii) What are the critical values for this test if ? Please make sure to state

your answer as a critical value for salary. Your answer should not be

a z-value.

iv) Do we accept or reject the null hypothesis that the true mean is equal to H at the

10% significance level?

(2 points) 5. If you accepted the null hypothesis in problem 4, what is the smallest significance level

at which you would be able to reject the null hypothesis? If you rejected the null

hypothesis in problem 4, what is the biggest significance level for which you could

accept the null hypothesis?

Answer sheet

You should hand in only the answer sheets (in your folder with the previous labs, of course) when you hand in Lab 6. Make sure to include all your work on these problems.

1.

Sample mean = = ______________

Standard deviation = = _____________

L = _________________

H = __________________

2.

Answer: ______________

3.

i) Null hypothesis H0: ___________________________

Alternative hypothesis H1: _________________________

ii) Circle one: One-tailed test Two-tailed test

iii)

Answer: Critical value = _____________________

iv) Circle one: Accept H0 Reject H0

4.

i) Null hypothesis H0: ___________________________

Alternative hypothesis H1: _________________________

ii) Circle one: One-tailed test Two-tailed test

iii)

Answer: Lower critical value = _______________; Higher critical value = ________________

iv) Circle one: Accept H0 Reject H0

5.

Answer: _____________________

--------------------------------------------------------------

The goal of this lab is to learn about chi-squared testing (This lab is out of 12 points).

For this lab you will use chi-square testing to see if there is a significant relationship between slugging percentage (your V2) and salary (your V3) for your 40 players.

MAKE SURE TO HAND IN THE ANSWER SHEET ONLY WHEN YOU HAND IN LAB 7!

(2 points) 1. Use Excel to find the mean of your players' slugging percentages and the mean of your players' salaries. Classify each of your 40 observations as falling into one of the following four categories.

1. Value of slugging percentage is less than or equal to the mean and value of salary is less than or equal to the mean.

(slugging percentage low, salary low)

2. Value of slugging percentage is less than or equal to the mean, but value of salary is greater than the mean.

(slugging percentage low, salary high)

3. Value of slugging percentage is greater than the mean, but value of salary is less than or equal to the mean.

(slugging percentage high, salary low)

4. Value of slugging percentage is greater than the mean and value of salary is greater than the mean.

(slugging percentage high, salary high)

Enter into the table the frequencies of each of these categories in your data. The four

numbers that you enter in the table should add up to 40.

On the next page, there is an example of how you need to classify your observations for

this problem.

(2 points) 2. If slugging percentage and salary are independent, then we would expect that salary is equally likely to be high, regardless of whether slugging percentage is high or low. Given the sums of the two rows and two columns that you found in problem 1, what would you expect the table to look like if slugging percentage and salary are independent? Round your answers to the nearest tenth.

(Hint: If slugging percentage and salary are independent, then the probability of salary being low (or high) does not depend on whether slugging percentage is low or high. So the fraction of the observations in column 1 that are in row 1 should be the same as the fraction of observations in column 2 that are in row 1.)

(6 points) 3. Using the tables from problems 1. and 2., test at the 5% significance level the hypothesis that slugging percentage and salary are independent. Your null hypothesis is that they are independent and the alternative hypothesis is that they are dependent.

i) The test statistic follows a chi-square distribution with how many

degrees of freedom?

ii) What is the value of the test statistic?

iii) What is the critical value for this test?

iv) Do you reject the hypothesis that slugging percentage and salary are independent at the 5% significance level?

(2 points) 4. In two sentences, describe at least two things you've learned by analyzing

your data this semester.

Example for problem 1:

Suppose that my mean slugging percentage was 0.425 and my mean salary was $1,500,000. Then suppose the table below describes slugging percentage and salary for three players:

Cirillo, Jeff IF 0.293 6975000

Davis, Ben C 0.4 1400000

Estrada, Johnny C 0.45 312500

Each of these players goes into the following categories.

Slugging percentage

low Slugging percentage

high Total

Salary low Ben Davis Johnny Estrada

Salary high Jeff Cirillo

Total

For example, Jeff Cirillo goes into the lower-left box because his slugging percentage (0.293) is below the mean and his salary ($6,975,000) is above the mean.

You need to classify each of your forty players by comparing their slugging percentages and salaries to the means for each variable. Be careful to make sure to you use your mean for slugging percentage and your mean for salary, and not the numbers used in this example.

Answer sheet

You should hand in only this sheet (in your folder with the previous labs, of course) when you hand in Lab 7. You should include all your work on these problems.

1.

Slugging percentage

low Slugging percentage

high Total

Salary low

Salary high

Total

2. Start by writing the column and row totals from the table above in the below table. Then fill in the four cells that have "Answer:" written in them.

Slugging percentage

low Slugging percentage

high Total

Salary low Answer: Answer:

Salary high Answer: Answer:

Total

3.

i) Degrees of freedom = ________

ii)

Test statistic = _____________

iii)

Critical value = _____________________

iv) Circle one: Accept H0 Reject H0

4.

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