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Many managers are influenced by dangerous myths about pay

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Many managers are influenced by dangerous myths about pay [#permalink] New post 10 Jul 2008, 00:00
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Many managers are influenced by
dangerous myths about pay that lead
to counterproductive decisions about
Line how their companies compensate
(5) employees. One such myth is that
labor rates, the rate per hour paid to
workers, are identical with labor costs,
the money spent on labor in relation to
the productivity of the labor force.
(10) This myth leads to the assumption that
a company can simply lower its labor
costs by cutting wages. But labor
costs and labor rates are not in fact
the same: one company could pay
(15) its workers considerably more than
another and yet have lower labor
costs if that company’s productivity
were higher due to the talent of its
workforce, the efficiency of its work
(20) processes, or other factors. The
confusion of costs with rates persists
partly because labor rates are
a convenient target for managers who
want to make an impact on their com-
(25) pany’s budgets. Because labor rates
are highly visible, managers can easily
compare their company’s rates with
those of competitors. Furthermore,
labor rates often appear to be a
(30) company’s most malleable financial
variable: cutting wages appears an
easier way to control costs than such
options as reconfiguring work processes
or altering product design.
(35) The myth that labor rates and labor
costs are equivalent is supported by
business journalists, who frequently
confound the two. For example, prominent
business journals often remark on
(40) the “high” cost of German labor, citing
as evidence the average amount paid
to German workers. The myth is also
perpetuated by the compensationconsulting
industry, which has its own
(45) incentives to keep such myths alive.
First, although some of these consulting
firms have recently broadened
their practices beyond the area of
compensation, their mainstay con-
(50) tinues to be advising companies on
changing their compensation practices.
Suggesting that a company’s
performance can be improved in
some other way than by altering its
(55) pay system may be empirically correct
but contrary to the consultants’
interests. Furthermore, changes
to the compensation system may
appear to be simpler to implement
(60) than changes to other aspects of an
organization, so managers are more
likely to find such advice from consultants
palatable. Finally, to the
extant that changes in compensation
(65) create new problems, the consultants
will continue to have work solving the
problems that result from their advice.

Questions:


1. The passage suggests that the “myth” mentioned in line 5 persists partly because

A. managers find it easier to compare their companies’ labor rates with those of competitors than to compare labor costs
B. managers tend to assume that labor rates affect their companies’ budgets less than they actually do
C. managers tend to believe that labor rates can have an impact on the efficiency of their companies’ work processes
D. the average amount paid to workers differs significantly from one country to another
E. many companies fail to rely on compensation consultants when making decisions about labor rates
[Reveal] Spoiler:
A


2. The author of the passage mentions business journals (line 39) primarily in order to

A. demonstrate how a particular kind of evidence can be used to support two different conclusions
B. cast doubt on a particular view about the average amount paid to German workers
C. suggest that business journalists may have a vested interest in perpetuating a particular view
D. identify one source of support for a view common among business managers
E. indicate a way in which a particular myth could be dispelled
[Reveal] Spoiler:
D


3. It can be inferred from the passage that the author would be most likely to agree with which of the following statements about compensation?

A. A company’s labor costs are not affected by the efficiency of its work processes.
B. High labor rates are not necessarily inconsistent with the goals of companies that want to reduce costs
C. It is more difficult for managers to compare their companies’ labor rates with those of competitors than to compare labor costs.
D. A company whose labor rates are high is unlikely to have lower labor costs than other companies.
E. Managers often use information about competitors’ labor costs to calculate those companies’ labor rates.
[Reveal] Spoiler:
B


4. The author of the passage suggests which of the following about the advice that the consulting firms discussed in the passage customarily give to companies attempting to control costs?

A. It often fails to bring about the intended changes in companies’ compensation systems.
B. It has highly influenced views that predominate in prominent business journals.
C. It tends to result in decreased labor rates but increased labor costs.
D. It leads to changes in companies’ compensation practices that are less visible than changes to work processes would be.
E. It might be different if the consulting firms were less narrowly specialized.
[Reveal] Spoiler:
A


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Last edited by Narenn on 10 Mar 2014, 11:07, edited 1 time in total.
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Re: RC - Myth and Managers [#permalink] New post 10 Jul 2008, 02:08
1 -A
2 -D
3 -B
4 -A
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Re: RC - Myth and Managers [#permalink] New post 10 Jul 2008, 19:32
:o How you got the answers?!

I didn't get the approach. Can you help me out?
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Re: RC - Myth and Managers [#permalink] New post 10 Jul 2008, 23:27
Hi,
I mainly used process of elimination to solve these questions.
I am putting down my line of reasoning ...
Do tell me if it is correct. :P


1. The passage suggests that the “myth” mentioned in line 5 persists partly because
A. managers find it easier to compare their companies’ labor rates with those of competitors than to compare labor costs
B. managers tend to assume that labor rates affect their companies’ budgets less than they actually do
C. managers tend to believe that labor rates can have an impact on the efficiency of their companies’ work processes
D. the average amount paid to workers differs significantly from one country to another
E. many companies fail to rely on compensation consultants when making decisions about labor rates
The answer to this Q is clearly stated in the passage[line 21].

2. The author of the passage mentions business journals (line 39) primarily in order to

A. demonstrate how a particular kind of evidence can be used to support two different conclusions
B. cast doubt on a particular view about the average amount paid to German workers.
C. suggest that business journalists may have a vested interest in perpetuating a particular view
D. identify one source of support for a view common among business managers
E. indicate a way in which a particular myth could be dispelled

I used process of elimination to ans this Q.
Out of all the options option D seems to be most appropite cuz of the line
"so managers are more likely to find such advice from consultants palatable" [line 61].
This seems to be one of the reasons why business managers have started to beleive that its best to reduce labor rates.


3. It can be inferred from the passage that the author would be most likely to agree with which of the following statements about compensation?

A. A company’s labor costs are not affected by the efficiency of its work processes.
B. High labor rates are not necessarily inconsistent with the goals of companies that want to reduce costs
C. It is more difficult for managers to compare their companies’ labor rates with those of competitors than to compare labor costs.
D. A company whose labor rates are high is unlikely to have lower labor costs than other companies.
E. Managers often use information about competitors’ labor costs to calculate those companies’ labor rates.

used process of elimination once again.
A. A company's labor costs are infact affected by the efficiency of its work processes.
B. This options seems to be correct because of what is stated in lines 14-20. The labors may be getting paid better however they are doing a better jb and hence providing more revenue to the company.
C. infact its the opposite.
D. lines 14-20 negates this fact.
E. no such information is stated in the passage.


4. The author of the passage suggests which of the following about the advice that the consulting firms discussed in the passage customarily give to companies attempting to control costs?

A. It often fails to bring about the intended changes in companies’ compensation systems.
B. It has highly influenced views that predominate in prominent business journals.
C. It tends to result in decreased labor rates but increased labor costs.
D. It leads to changes in companies’ compensation practices that are less visible than changes to work processes would be.
E. It might be different if the consulting firms were less narrowly specialized.

I wasnt sure what should be the Ans to this Q. I just went ahead wit my gut feeling . :P

OA time :-D
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Re: RC - Myth and Managers [#permalink] New post 10 Jul 2008, 23:33
A
D ( not sure - could be C?)
A
D

This is the first readable passage (that is, it doesnt put you to sleep) I've come across in my GMAT journey:)
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Re: RC - Myth and Managers [#permalink] New post 12 Jul 2008, 00:34
MamtaKrishnia wrote:
1 -A
2 -D
3 -B
4 -A


Perfect. Those are OA.

You are correct. :) how much time you took for 3rd and fourth questions?
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Re: RC - Myth and Managers [#permalink] New post 12 Jul 2008, 01:19
Hi, do you have OE for #4. Also, what is the source of this passage?

Last edited by vksunder on 12 Jul 2008, 06:04, edited 3 times in total.
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Re: RC - Myth and Managers [#permalink] New post 12 Jul 2008, 04:51
priyankur_saha@ml.com wrote:
MamtaKrishnia wrote:
1 -A
2 -D
3 -B
4 -A


Perfect. Those are OA.

You are correct. :) how much time you took for 3rd and fourth questions?


:cool

Sorry, Don't rembr the amount of time i took for each Q. However for the entire passage i took some where between 10-15 mins.
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Re: Many managers are influenced by dangerous myths about pay [#permalink] New post 22 Jan 2013, 02:43
Can anyone explain the answer for #4... I went with C for this one...
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Re: Many managers are influenced by dangerous myths about pay [#permalink] New post 25 Jan 2013, 00:13
adbe.
it is easy to read the passage but it take me a long time to answer the questions.
how to reduce the time for answering questions.
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Re: Many managers are influenced by dangerous myths about pay [#permalink] New post 12 Mar 2014, 10:20
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Many managers are influenced by dangerous myths about pay [#permalink] New post 04 Jul 2014, 08:51
13min 3/4

I differ from OA of the last question.

Q.4 - OA - A
4. The author of the passage suggests which of the following about the advice that the consulting firms discussed in the passage customarily give to companies attempting to control costs?
A. It often fails to bring about the intended changes in companies’ compensation systems.

As per my understanding of the passage consulting firms are often successful in persuading managers to make changes in compensation system and
these changes lead to other types of problem. Therefore, consulting companies' intentions are meeting successfully to bring intended changes to create
more problems.

A is just telling opposite of what I inferred.
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Re: Many managers are influenced by dangerous myths about pay [#permalink] New post 05 Jul 2014, 00:24
very good qst 700+ I think
1 -A
2 -D
3 -B
4 -A
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Re: Many managers are influenced by dangerous myths about pay [#permalink] New post 06 Jul 2014, 03:53
4. The author of the passage suggests which of the following about the advice that the consulting firms discussed in the passage customarily give to companies attempting to control costs?

A. It often fails to bring about the intended changes in companies’ compensation systems.
B. It has highly influenced views that predominate in prominent business journals.
C. It tends to result in decreased labor rates but increased labor costs.
D. It leads to changes in companies’ compensation practices that are less visible than changes to work processes would be.
E. It might be different if the consulting firms were less narrowly specialized.


1 A 05:06
2 D 00:46
3 B 00:56
4 B 00:48
5 E 00:34 (numbering was different in the PDF from which I am studying)

Even I don't agree with the OA for above as (A).

CCI: Compensation consulting industry.

CCI recommended the change in compensation to the cos. and the cos. changed their compensation based on the advises.

However, CCI repeatedly gave advises to change compensation to maintain their future services.

So if I go by POE the closer answer should have been (B).
B. It has highly influenced views that predominate in prominent business journals.

CCI's views coincided with the views of "prominent business journals".

Plz advise!
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Re: Many managers are influenced by dangerous myths about pay [#permalink] New post 08 Jul 2014, 23:45
TGC wrote:
4. The author of the passage suggests which of the following about the advice that the consulting firms discussed in the passage customarily give to companies attempting to control costs?

A. It often fails to bring about the intended changes in companies’ compensation systems.
B. It has highly influenced views that predominate in prominent business journals.
C. It tends to result in decreased labor rates but increased labor costs.
D. It leads to changes in companies’ compensation practices that are less visible than changes to work processes would be.
E. It might be different if the consulting firms were less narrowly specialized.


1 A 05:06
2 D 00:46
3 B 00:56
4 B 00:48
5 E 00:34 (numbering was different in the PDF from which I am studying)

Even I don't agree with the OA for above as (A).

CCI: Compensation consulting industry.

CCI recommended the change in compensation to the cos. and the cos. changed their compensation based on the advises.

However, CCI repeatedly gave advises to change compensation to maintain their future services.

So if I go by POE the closer answer should have been (B).
B. It has highly influenced views that predominate in prominent business journals.

CCI's views coincided with the views of "prominent business journals".

Plz advise!


I was confused between A and B as well, but then i went through the latter part of the passage again and though was the whole point of CCI to relate with business mag? NO!
furthermore, the passage says
(line 46)
" some of these consulting
firms have recently broadened
their practices beyond the area of
compensation"

so we cannot say that CCI highly influenced views that predominate in prominent business journals.

just my 2 cents
:)
Re: Many managers are influenced by dangerous myths about pay   [#permalink] 08 Jul 2014, 23:45
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