EXAM ANSWER GUIDE
I write exams that use a wider range of the 0-100 scale than is used in most classes. I scale each question so that a 20/25 represents an A- and a 16/25 represents a B-. Answers that get 22 are A answers; those that go above and beyond the call of duty get the full 25. This results in extra points which can be used to offset problems elsewhere. With this scale it is pretty hard to get above a 90 and scores tend to be more dispersed, so the cutlines between A and B are usually around 80 and the B/C slice usually is around 65.
Lincoln competes mainly on price and quality. (5 points)
The following HR policies support this strategy: piecework, bonus, guaranteed employment, the trust management has built up over the years, the promote-from-within policy (internal labor market) and the absence of a union. (14 points: 3 each for the first four, 1 each for the last two)
These policies reduce costs by generating extra effort (2 points), attracting employees who are willing to work hard (1 point), and by reducing turnover (1 point).
They are a source of competitive advantage because they result in lower prices and, most importantly, they are hard for other firms in this market to copy.
a) There are two main problems at the time the case was written: (1) turning down business because of inadequate staffing (caused by guaranteed employment policy) and (2) problems created by the promote-from-within policy. Answers that discussed both got 13 points; answers that discussed one got 8 points; answers that said nothing about neither but said otherwise sensible things got 5 points.
b) This was worth 12 points and everyone who took a good shot at it got at least six. The problems LE faces are that globalization, which is making it harder to maintain communications, and the IPO, which is putting pressure to give shareholders a bigger slice of the pie. One alternative is to do nothing; to support that, you could argue that HR systems are hard to change and very fragile. Another choice is to bump up base pay to offset the smaller bonus; this could keep employees whole (and this is what they have actually done). Yet another viable option is to hire temps and contract workers, although this may not be viewed as a positive sign by LE employees. Grading: -6 for answers that either did not specify a course of action or did not use the facts in the case; -4 for answers which have problems being consistent with LE's overall HR strategy; -2 for answers that needed a bit more explanation.
This question was based upon the Zenger theory presented in the text, ch. 10. There are three key arguments: (1) it is very important to identify the top 10 from the next 10 and the bottom 10 from the next-to-bottom 10 (7 points); (2) it is much less important to identify who is in the 40-49 slice and who is in the 50-59 slice -- the differences in performance between these groups is much smaller (3 points); and (3) the costs of making these distinctions are much smaller at the 10/90 deciles than the 40/50/60 deciles (3 points).
Objectives well served: feedback, paper trail, some promotion/layoff/pay decisions (5 points for all 3, 4 points for 2, 3 points for 1)
Objectives not well served: promotion/layoff/pay decisions for middle 80 percent (2 points)
Saying sensible things about +/- of this system without addressing some key points above was worth an extra 5 points.
a) There were three key reasons firms are shifting to bonuses: (1) NPV comparisons of raises and bonuses; (2) bonuses are more salient -- they link to individual and firm performance is much clearer; and (3) bonuses are more flexible -- they can be cut next year, whereas salaries generally cannot be cut.
b) I accepted any of the following for full credit: employee value to employer permanently increases (skills, responsibility); market rates rise and have to be matched; retain key employees; reward for making long-term commitments.
Grading scale: there were 3 key points in (a) and 1 key point in (b). To get 25, you needed to mention 4 key points; 22, 3 key points; 18, 2 key points; and 13, one key point.
This and question 2 were my "step-outside-the-box" questions. There were four key issues to worry about (that I based grades on):
To make a decision I was looking for some framework; it could be cost/benefit, five factors, internal consistency, whatever. This was the fifth key point I was looking for.
Grading scale: 5 key points, 25; 4 key points, 23; 3 key points, 20 (some reward for taking on the hardest question); 2 key points, 17; 1 key point, 13.
Grade distribution and cuts:
|A||83 and up||6|
|A-||80 to 82||5|
|B+||77 to 79||5|
|B||68 to 76||9|
|B-||64 to 67||4|