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MBA - HRM Human Resource Management 2017 - Strategic Compensation, 9e (Martocchio) - Quiz 07

HRM Human Resource Management

HRM Human Resource Management

MBA - Human Resource Management 2017

Strategic Compensation, 9e (Martocchio)

Chapter 7   Building Market-Competitive Compensation Systems 

 

1) ________ is defined as an in-depth examination of the external and internal environmental factors that are likely to have the greatest impact on the future of the company.

  1. A) Market-competitive pay structure
  2. B) Regression analysis
  3. C) Competitive strategy
  4. D) Strategic analysis

Answer:  D

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

2) Compensation surveys are typically focused on which two factors?

  1. A) competitors' promotion and advancement opportunities
  2. B) internal promotion and advancement opportunities
  3. C) competitors' wage and salary practices
  4. D) internal wage and salary practices

Answer:  C

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

3) In which type of document do compensation professionals represent the selection and implementation of pay level and pay mix policies over a specified time period, usually one year?

  1. A) compensation plan
  2. B) job structure reports
  3. C) strategic compensation plan
  4. D) pay structure reports

Answer:  A

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

4) Which of the following entails an examination of a company's external market context and internal factors?

  1. A) compensation survey
  2. B) strategic analysis
  3. C) regression analysis
  4. D) compensation plan

Answer:  B

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

5) Compensation professionals integrate the internal job structure with the external market pay rates identified through compensation surveys, and this integration reveals which of the following?

  1. A) pay rates that reflect both the company's and the external market's valuations of jobs
  2. B) changes in wages and salaries over time
  3. C) changes in employee benefits over time
  4. D) changes in labor costs between geographic locations

Answer:  A

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

6) Which of the following surveys are tools used by employers to determine the pay levels needed to recruit highly qualified employees?

  1. A) strategic
  2. B) external market
  3. C) compensation
  4. D) internal market

Answer:  C

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

7) Identify and describe the four steps for establishing market competitive pay systems.

Answer:  Compensation professionals create market-competitive pay systems based on four activities:

 

  • Conducting strategic analyses
  • Assessing competitors' pay practices with compensation surveys
  • Integrating the internal job structure with external market pay rates
  • Determining compensation policies

 

 

First, a strategic analysis entails an examination of a company's external market context and internal factors. Examples of external market factors include industry profile, information about competitors, and long-term growth prospects. Internal factors encompass financial condition and functional capabilities (e.g., marketing and human resources).

 

Second, compensation surveys involve the collection and subsequent analysis of competitors' compensation data. Compensation surveys are important because they enable compensation professionals to obtain realistic views of competitors' pay practices. In the absence of compensation survey data, compensation professionals would have to use guesswork to try to build market-competitive compensation systems.

 

Third, compensation professionals integrate the internal job structure (Chapter 6) with the external market pay rates identified through compensation surveys. This integration results in pay rates that reflect both the company's and the external market's valuation of jobs. Most often, compensation professionals rely on regression analysis, a statistical method, to achieve this integration.

 

Finally, compensation professionals recommend pay policies that fit with their companies' standing and competitive strategies. Compensation professionals must strike a balance between managing costs and attracting and retaining the best-qualified employees. Top management ultimately makes compensation policy decisions after careful consideration of compensation professionals' interpretation of the data.

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.1: Explain the concept of market-competitive compensation systems and summarize the four activities compensation professionals engage in to create these systems.

 

 

8) Which process can companies use to make corrections for differences between their jobs and external benchmark jobs?

  1. A) job evaluation
  2. B) job leveling
  3. C) job analysis
  4. D) compensation surveys

Answer:  B

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

9) Which of the following are reference points against which jobs within the company are judged?

  1. A) benchmark jobs
  2. B) relevant labor markets
  3. C) internal labor markets
  4. D) human resource capabilities

Answer:  A

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

10) These are used as reference points for setting pay levels.

  1. A) mean pay
  2. B) median pay
  3. C) market-competitive pay
  4. D) benchmark jobs

Answer:  D

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

11) This causes compensation survey data to become obsolete fairly quickly.

  1. A) the lag time between data collection and data usage
  2. B) pay compression
  3. C) changes in the unemployment rate
  4. D) changes in the company's geographic location

Answer:  A

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

 

12) If the means salary for B42DA, Inc., is $30,000 and the median salary is $32,000, what would Yolanda's salary of $165,000 be considered?

  1. A) overlie
  2. B) outsider
  3. C) outlier
  4. D) over layer

Answer:  C

Difficulty:  Easy

Skill:  Application of Knowledge

AACSB:  Application of Knowledge

LO:  7.2: Discuss compensation survey practices.

13) In statistical analysis, which of the following is used to signify extreme observations?

  1. A) deviations
  2. B) extremities
  3. C) outliers
  4. D) variants

Answer:  C

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

14) Which of the following are the two types of central tendency measures that are pertinent to compensation?

  1. A) mode and arithmetic mean
  2. B) median and mode
  3. C) mode and quartile
  4. D) arithmetic mean and median

Answer:  D

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

15) Which of the following are the three measures of dispersion?

  1. A) percentile standard, deviation, arithmetic mean
  2. B) standard deviation, quartile, percentile
  3. C) quartile, arithmetic mean, standard deviation
  4. D) arithmetic mean, percentile, quartile

Answer:  B

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

 

16) Suppose that a compensation professional would like to calculate the median salary. He orders four salaries as follows: $20,000, $22,000, $24,000, $26,000. What is the median salary for this data set?

  1. A) $21,000
  2. B) $22,000
  3. C) $23,000
  4. D) $24,000

Answer:  C

Difficulty:  Moderate

Skill:  Application of Knowledge

AACSB:  Application of Knowledge

LO:  7.2: Discuss compensation survey practices.

17) This term refers to the distance of each salary figure from the mean.

  1. A) standard deviation
  2. B) quartile
  3. C) percentile
  4. D) deviated mean

Answer:  A

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

18) Jose Escobar conducts a survey of salaries at ERL Enterprises and finds that 50% of the workers fall below the market pay average of $32,000. In which quartile do the workers at ERL Enterprises fall?

  1. A) first
  2. B) second
  3. C) third
  4. D) fourth

Answer:  B

Difficulty:  Easy

Skill:  Application of Knowledge

AACSB:  Application of Knowledge

LO:  7.2: Discuss compensation survey practices.

 

19) What does Quartile 3 represent?

  1. A) figures that are above 25%
  2. B) figures that fall below 25%
  3. C) figures that are above 75%
  4. D) figures that fall below 75%

Answer:  D

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

20) What does it mean when the distribution of data is skewed to the right?

  1. A) a lower frequency of larger values and the median is greater than the mean
  2. B) a higher frequency of larger values and the median is greater than the mean
  3. C) a lower frequency of larger values and the mean is greater than the median
  4. D) a higher frequency of larger values and the mean is greater than the median

Answer:  C

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

21) How often is the Consumer Price Index calculated for the United States?

  1. A) daily
  2. B) weekly
  3. C) monthly
  4. D) twice a year

Answer:  C

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

22) The Consumer Price Index represents the average price changes for the price of goods and services in how many regions?

  1. A) 2
  2. B) 4
  3. C) 6
  4. D) 8

Answer:  B

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

23) ________ represent the fields of potentially qualified candidates for particular jobs.

Answer:  Relevant labor markets

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

 

24) ________ refers to a group of two or more jobs that are based on similar work characteristics, duties, and responsibilities.

Answer:  Occupational classification

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

25) HR professionals rely on ________ jobs as reference points for setting pay levels.

Answer:  benchmark

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

26) The ________ is the middle value in an ordered sequence of numerical data.

Answer:  median

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

27) ________ represents the amount of spread or dispersion in a set of data.

Answer:  Variation

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

28) ________ allow compensation professionals to describe the distribution of data based on four groupings.

Answer:  Quartiles

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

29) The ________ is the most commonly used method for tracking cost changes throughout the United States.

Answer:  Consumer Price Index (CPI)

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

30) Explain the three reasons why companies often choose not to develop their own compensation surveys.

Answer:  Managers must decide whether to develop their own survey instruments and administer them or rely on the results of surveys conducted by others. In theory, customized surveys are preferable because the survey taker can tailor the questions and select respondents to provide useful and informative data. Custom survey development should enable employers to monitor the quality of the survey methodologies.

 

In practice, companies choose not to develop and implement their own surveys for three reasons. First, most companies lack employees qualified to undertake this task. Developing and implementing valid surveys require specialized knowledge and expertise in sound questionnaire design, sampling methods, and statistical methods.

 

Second, rival companies are understandably reluctant to surrender information about their compensation packages to competitors because compensation systems are instrumental to competitive advantage if companies are willing to cooperate, the information may be incomplete or inaccurate. For example, rival companies may choose to report the salaries for their lowest-paid accountants instead of the typical salary levels. Such information may lead the surveying company to set accountants' salaries much lower than if they had accurate, complete information. Setting accountants' salaries too low may hinder recruitment efforts. Thus, custom development is potentially risky.

 

Third, custom survey development can be costly. Although cost figures are not readily available, it is reasonable to conclude that most companies use published survey data to minimize costs such as staff salaries and benefits, telephone and mail charges, and computers for data analyses.

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.2: Discuss compensation survey practices.

 

31) When using compensation survey data, statistical analyses are used to integrate this with the external market, in order to determine pay rates.

  1. A) internal pay scales
  2. B) nominal pay rates
  3. C) internal pay benchmarks
  4. D) internal job structures

Answer:  D

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

 

32) In the regression analysis formula, what does the X represent?

  1. A) predicted salary
  2. B) job evaluation points
  3. C) the slope
  4. D) the Y intercept

Answer:  B

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

 

33) The R2 statistic tells us how well the variation in the company's valuation of jobs based on job evaluation points explains the variation in market pay rates from the compensation survey. What does it mean when the R2 = 1?

  1. A) All of the variation in market pay can be explained by the company's job structure.
  2. B) None of the variation in market pay can be explained by the company's job structure.
  3. C) All of the variation in market pay can be explained by the company's external pay rates.
  4. D) All of the variation in market pay can be explained by the benchmark rates.

Answer:  A

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

 

34) Compensation professionals in the XYZ Company use regression analysis to determine the pay rates of its marketing professionals. There are 4 different marketing job titles in the XYZ Company. Compensation professionals use job evaluation points assigned to each marketing job title and a salary survey data. In other words, they regress job evaluation points on the salary data to indicate the amount of variation in market pay rates that can be explained by a company's job structure. Which of the following best describes this amount of variation when the R2 value turns out to be 0.85?

  1. A) All of the variation in market pay
  2. B) None of the variation in market pay
  3. C) A large amount of the variation in market pay
  4. D) A small amount of the variation in market pay

Answer:  C

Difficulty:  Difficult

Skill:  Application of Knowledge

AACSB:  Application of Knowledge

LO:  7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

 

 

35) ________ analyses enable compensation professionals to establish pay rates for a set of jobs that are consistent with typical pay rates for jobs in the external market.

Answer:  Regression

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.3: Describe how compensation professionals integrate internal job structures with external market pay rates.

36) The XYZ Company is a world leader in medical device manufacturing. Aiming to continue its market position in this industry, the XYZ Company pursues a differentiation strategy. As a result, this company compensates its employees higher than competitors in order to attract and retain the best employees. What kind of pay level policy does the XYZ Company follow?

  1. A) market match
  2. B) market lag
  3. C) market lead
  4. D) market pay line

Answer:  C

Difficulty:  Easy

Skill:  Application of Knowledge

AACSB:  Application of Knowledge

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

37) XYZ Inc. pursues a low-cost strategy in its industry and generally needs lower skilled employees. As a result, their management team decided to establish a compensation policy that pays less than the marketplace. In recent years, the company became susceptible to labor shortages and high turnover. Which kind of pay level policy does XYZ Inc. follow?

  1. A) market match
  2. B) market lag
  3. C) market lead
  4. D) market pay line

Answer:  B

Difficulty:  Easy

Skill:  Application of Knowledge

AACSB:  Application of Knowledge

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

 

38) Market match policies are generally set to which quartile in the salary survey?

  1. A) 1st
  2. B) 2nd
  3. C) 3rd
  4. D) 4th

Answer:  B

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

39) Market lag policies are generally set to which quartile in the salary survey?

  1. A) 1st
  2. B) 2nd
  3. C) 3rd
  4. D) 4th

Answer:  A

Difficulty:  Difficult

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

40) Companies pursuing a differentiation strategy are most likely to use which pay level policy?

  1. A) market lead
  2. B) market average
  3. C) market lag
  4. D) market match

Answer:  A

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

41) The market ________ policy distinguishes a company from competition by compensating employees less than most competitors.

Answer:  lag

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

 

42) The market ________ policy most closely follows the typical market pay rates because companies pay according to the market pay line.

Answer:  match

Difficulty:  Easy

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

43) What is an appropriate pay policy mix?

Answer:  For policy purposes, it makes sense to consider guidelines for jobs within a particular structure (for example, managerial, administrative, or sales) because of the common job content and worker requirements of jobs within a particular structure. For example, in a technology company, a greater portion of bonus compensation might be allocated to engineers than to administrative staff. Engineers possess crucial skills relating to the company's ability to find innovative applications of technology, and bonus incentives throughout the year may promote innovation initiatives. On the other hand, the administrative staff, though important to the company, may not play as important a role in determining the company's profitability or objectives. Therefore, less of their total compensation would likely be devoted to bonus funds. Also, some job structures, such as sales, employees may receive the majority of their compensation in the form of bonuses. In order to motivate a sales force to continually exceed quarterly targets, quarterly bonuses equal to or exceeding their annual base salaries might be used.

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

44) Elaborate on the link between a company's pay level policy and its strategic mandate.

Answer:  A company can choose from three pay level policies: 1) market lead, 2) market lag, or 3) market match. The market lead policy will compensate employees more highly than its competitors. Conversely, a market lag policy will compensate employees less than competitors do. The market match policy follows typical market rates.

 

Companies pursuing a differentiation strategy will opt for a market lead or market match policy. The market lead policy can be used to attract the very best employees to promote its competitive strategy. For less labor-intensive industries, a market match policy will suffice because funds can be used for capital needs. Companies pursuing a lowest cost strategy would more likely adopt a market lag policy. Companies can realize cost savings by paying less than the market pay line. However, these firms may have difficulty attracting and retaining highly qualified employees. Typically, companies will use more than one pay policy simultaneously.

Difficulty:  Moderate

Skill:  Concept

AACSB:  Analytical Thinking

LO:  7.4: Explain the basic concepts of compensation policies and strategic mandates: pay mix and pay level.

 

 

 

 

 

 

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Human Resource Management
Human Resource Management, 15th Edition, 2017, Gary Dessler,
Strategic Compensation: A Human Resource Management Approach, 9th Edition, 2017, Joseph J. Martocchio
Fundamentals of Human Resource Management, 4th Edition, 2016, Gary Dessler
Human Resource Management, 14th Edition, 2016, R. Wayne Dean Mondy, Retired, Joseph J. Martocchio
Mastering Project Human Resource Management: Effectively Organize and Communicate with All Project Stakeholders, 2015, Harjit Singh
Managing Human Resources, 8th Edition, 2016, Luis R. Gomez-Mejia, David B. Balkin, Robert L. Cardy

-----

PART 1: Setting the Stage for Strategic Compensation
1. Strategic Compensation: A Component of Human Resource Systems
2. Contextual Influences on Compensation Practice
PART 2: Bases for Pay
3. Seniority Pay and Merit Pay
4. Incentive Pay
5. Person-Focused Pay
PART 3: Designing Compensation Systems
6. Building Internally Consistent Compensation Systems
7. Market-Competitive Compensation Systems
8. Building Pay Structures that Recognize Employee Contributions
PART 4: Employee Benefits
9. Discretionary Benefits
10. Legally-Required Benefits
PART 5: Contemporary Strategic Compensation Challenges
11. Compensating Executives
12. Compensating the Flexible Workforce
PART 6: Compensation Around the World
13. Compensating Expatriates
14. Pay and Benefits outside the United States
Epilogue
15. Challenges Facing Compensation Professionals
------
Managing Human Resources Today
Managing Equal Opportunity and Diversity
Human Resource Strategy and Analysis
STAFFING: WORKFORCE PLANNING AND ENFORCEMENT
Job Analysis and Talent Management
Personnel Planning and Recruiting
Selecting Employees
TRAINING AND HUMAN RESOURCE DEVELOPMENT
Training and Developing Employees
Performance Management and Appraisal
Managing Careers
COMPENSATION AND TOTAL REWARDS
Developing Compensation Plans
Pay for Performance and Employee Benefits
EMPLOYEE AND LABOR RELATIONS
Maintaining Positive Employee Relations
Labor Relations and Collective Bargaining
Improving Occupational Safety, Health, and Risk Management
SPECIAL ISSUES IN HUMAN RESOURCE MANAGEMENT
Managing HR Globally
Managing Human Resources in Small and Entrepreneurial Firms
PHR and SPHR Knowledge Base
Comprehensive Cases
------
Human Resource Management: An Overview
Business Ethics and Corporate Social Responsibility
Equal Employment Opportunity, Affirmative Action, and Workforce Diversity
Staffing
Strategic Planning, Human Resource Planning, and Job Analysis
Recruitment
Selection
Performance Management and Training
Performance Management and Appraisal
Training and Development
Compensation
Direct Financial Compensation (Core Compensation)
Indirect Financial Compensation (Employee Benefits)
Labor Relations, Employee Relations, Safety, and Health
Labor Unions and Collective Bargaining
Internal Employee Relations
Employee Safety, Health, and Wellness
Operating in a Global Environment
Global Human Resource Management
------
Lectures, Test Bank, Case Study, Video Guides
Equal Opportunity,
Recruitment, Placement, Talent Management,
Job Analysis, Talent Management Process,
Personnel Planning, Recruiting,
Employee Testing, Selection,
Training, Development,
Developing Employees,
Performance Management, Appraisal,
Managing Careers, Retention,
Compensation,
Establishing Strategic Pay Plans,
Pay for Performance, Financial Incentives,
Benefits, Services,
Labor Relations,
Safety,
Health,
Human Resource Management Lectures

 

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Strategic Compensation: A Human Resource Management Approach, 9th Edition, 2017, Joseph J. Martocchio - LINK 

Fundamentals of Human Resource Management, 4th Edition, 2016, Gary Dessler - Link Free PPT Download

Managing Human Resources, 8th Edition, 2016, Luis R. Gomez-Mejia, David B. Balkin - Link Free PPT download

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Strategic Compensation: A Human Resource Management Approach, 9th Edition, 2017, Martocchio   - link free download

Human Resource Management, 15th Edition, 2017, Gary Dessler   - Link free Download

 

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