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Many managers are influenced by dangerous myths about pay that lead to

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Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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Many managers are influenced by dangerous myths about pay that lead to counterproductive decisions abouthow their companies compensate 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. This myth leads to the assumption that a company can simply lower its labor osts by cutting wages. But labor costs and labor rates are not in fact the same: one company could pay 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 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 company'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 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.

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 the "high" cost of German labor, citing as evidence the average amount paid to German workers. The myth is also perpetuated by the compensation-consulting industry, which has its own 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 continues 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 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 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 create new problems, the consultants will continue to have work solving the problems that result from their advice.
VRC000361-06
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


VRC000361-05
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


5. According to the passage, which of the following is true about changes to a company's compensation system?

A. They are often implemented in conjunction with a company's efforts to reconfigure its work processes.
B. They have been advocated by prominent business journals as the most direct way for a company to bring about changes in its labor costs.
C. They are more likely to result in an increase in labor costs than they are to bring about competitive advantages for the company.
D. They sometimes result in significant cost savings but are likely to create labor-relations problems for the company.
E. They may seem to managers to be relatively easy to implement compared with other kinds of changes managers might consider.

[Reveal] Spoiler:
E


6. The primary purpose of the passage is to

(A) describe a common practice used by managers to control labor costs
(B) examine the relation between labor costs and other costs incurred by businesses
(C) explain why labor rates are a more significant factor than labor costs for most businesses
(D) identify a common misperception held by managers and point out some of the reasons for its persistence
(E) distinguish between a factor that companies can easily control and another that is more difficult to change

[Reveal] Spoiler:
D

[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA
[Reveal] Spoiler: Question #3 OA
[Reveal] Spoiler: Question #4 OA

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Last edited by hazelnut on 11 Oct 2017, 01:56, edited 11 times in total.
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 11 Jul 2008, 00:27
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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: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 04 Jul 2014, 09:51
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 that lead to [#permalink]

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New post 06 Jul 2014, 04:53
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 that lead to [#permalink]

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New post 09 Jul 2014, 00:45
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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
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 07 Jan 2015, 06:23
PiyushK
Why can't we say that the journal has some sort of vested interest?
I am confused on this part
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 10 Jan 2015, 22:59
A, D, B, A

WaterFlowsUp: it is mentioned that

Quote:
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.


And... this can be linked back to the first sentence, where

Quote:
Many managers are influenced by
dangerous myths about pay....


Therefore, it is evident that managers possess myths about pay and this myth is supported by 'business journals'.
Thus, the answer should be D: identify one source of support for a view common among business managers.

Hope that helps~! ^^

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New post 13 Jun 2016, 12:53
7:48

4 right and 1 wrong. However, understood the question after reading it again.

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. Correct
B. It has highly influenced views that predominate in prominent business journals. BJs are not influenced by CFs
C. It tends to result in decreased labor rates but increased labor costs. It actually reduces labour rates but leads to other problems (not necessarily increased labour costs)
D. It leads to changes in companies’ compensation practices that are less visible than changes to work processes would be. compensation practices are actually more visible.
E. It might be different if the consulting firms were less narrowly specialized. No supporting evidence cited.
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 29 Jul 2016, 11:56
sayantanc2k mcelroytutoring

Can anyone help me with the tone of the passage here? Is it neutral or negative? I find it "neutral" as the author is concerned with highlighting a prevailing view among the business managers and citing reasons for its prevalence and widespread acceptance. On the other hand, I am a little confused with the usage of word "myth". It seems quite strong and looks like that the author is sad about the counterproductive decisions.

Please help me with the same.

Thanks a lot for your unconditional support till date :)

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New post 08 Sep 2016, 04:29
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Can anyone help me here with my question above^

souvik101990 carcass mikemcgarry MacFauz aditya8062 Nevernevergiveup


I would say that the tone is moderately negative. Indeed, the author considers a certain view as a myth and therefore tries to dismiss it by explaining the underlying reasons why this myth exists.

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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 17 Sep 2016, 19:54
Additional question :
The primary purpose of the passage is to
A. describe a common practice used by managers to control labor costs
B. examine the relation between labor costs and other costs incurred by businesses
C. explain why labor rates are a more significant factor than labor costs for most businesses
D. identify a common misperception held by managers and point out some of the reasons for
its persistence
E. distinguish between a factor that companies can easily control and another that is more
difficult to change

Answer : D
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 26 Nov 2016, 00:08
13 min overall

3 correct 2 wrong.

A
D
A(Wrong)
B(wrong)
E

1) In the last part of 1st para "Because labor rates are highly visible, managers can easily compare their company’s rates with those of competitors"

2) Process of elimination Option D is in line with that of managers thinking

3) In 1st para "But labor costs and labor rates are not in fact the same: one company could pay 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 processes, or other factors."
It shows that High labor rates might be the problem for all the companies. Might be for few but not all.

4) Question talks about "What author Suggests ABOUT the suggestions of consultancy
In last lines of the passage "Finally, to the extent that changes in compensation create new problems"
It will create new problems--Thus failing in bringing the intended change(Goal)

5) In last lines of the passage "so managers are more likely to find such advice from consultants palatable"
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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-The author describes a common myth held by business managers
-He then goes on to describe how that myth is concurred by business journals and hence is finding widespread acceptance

Took 9 mins in total, including 3 mins to read .

1. Because labor rates are highly visible, managers can easily compare their company’s rates with those of competitors
Answer A

2. "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"
Since the business journals support the common view held my managers, option (D) is the right answer choice.

3.
The author is trying to point out that labor rates and labor costs are not connected and that managers would not try to reduce labor rates to reduce costs. The author is stating that high labor costs could still bring about a reduction in a company’s overall costs.
Answer B

4. "Finally, to the extent that changes in compensation create new problems, the consultants will continue to have work solving the problems that result from their advice"

Since the changes in compensation create new problems, it is contrary to its intended effect and hence option (A) is the right answer

5.
"Furthermore, changes to the compensation system may appear to be simpler to implement than changes to other aspects of an organization, so managers are more likely to find such advice from consultants palatable"

Answer E
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New post 30 Apr 2017, 08:07
Many managers are influenced by dangerous myths about pay that lead to counterproductive decisions about how their companies compensate 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. 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 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 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 company'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 company's most malleable financial variable: cutting wages appears an easier way to control costs than such options as re-configuring work processes or altering product design.

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 the "high" cost of German labor, citing as evidence the average amount paid to German workers. The myth is also perpetuated by the compensation-consulting industry, which has its own 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 continues 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 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 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 create new problems, the consultants will continue to have work solving the problems that result from their advice.

I read only the bold part and skip the strike part but you can skim also.(A/q to your reading process)

P1 :- Talking about one myth i.e. labor rates are identical with labor costs. And then author perspective about this myth.
P2: - Who supported this myth.

1) The passage suggests that the “myth” mentioned in the highlighted text persists partly because

Background - It is mention in P1 - The confusion of costs with rates persists partly because labor rates are a convenient target for managers............

A. managers find it easier to compare their companies’ labor rates with those of competitors than to compare labor costs ---Correct , aligned with above mentioned background.
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 --- It is mentioned in P2

2) The author of the passage mentions business journals the highlighted text primarily in order to

Background - Business Journal mentioned in p2 , so need to reed that part.This is role base question so just apply concept of CR. It is mentioned to make reader know that who supports the myth.

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


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

Background : - Consulting Firm mentioned in p2 so need to read that part of p2. Author suggest three things about the advice of the CF.
Suggesting that a company's performance can be improved .................
Furthermore, changes to the compensation system .......................
Finally, to the extant that changes in compensation create new problems, the consultants will continue to have work solving the problems that result from their advice.


A. It often fails to bring about the intended changes in companies’ compensation systems. --- From third point we can infer this.
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. --- Author talk something about performance but not what this option is telling.
E. It might be different if the consulting firms were less narrowly specialized.


According to the passage, which of the following is true about changes to a company’s compensation system?

Background :- Answer for this question will be explicitly mentioned in the passage. "Changes to a company’s compensation system. --- mentioned in p2--"changes to the compensation system may appear to be simpler to implement than changes to other aspects of an organization"

A. They are often implemented in conjunction with a company’s efforts to reconfigure its work processes.
B. They have been advocated by prominent business journals as the most direct way for a company to bring about changes in its labor costs.
C. They are more likely to result in an increase in labor costs than they are to bring about competitive advantages for the company.
D. They sometimes result in significant cost savings but are likely to create labor-relations problems for the company.
E. They may seem to managers to be relatively easy to implement compared with other kinds of changes managers might consider.

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S

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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 24 Jul 2017, 05:34
GMATNinja, Could you help with question 3 (Inference)?

Quote:
But labor costs and labor rates are NOT in fact the same: one company could pay 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 processes, or other factors.


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.
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Re: Many managers are influenced by dangerous myths about pay that lead to [#permalink]

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New post 08 Aug 2017, 11:31
Adityagmatclub wrote:
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?



Please explain Question 4- A
I marked D
what is wrong with it?



Read the last few lines: Furthermore, changes to compensation system may appear to be simpler to implement...., The consultants will continue to have work solving problems that result from their advice.

Since the changes in compensation create new problems, intended changes have not been brought by the advice.

Also, if you take up POE
There is no comparison provided about the visibility of the changes.

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Re: Many managers are influenced by dangerous myths about pay that lead to   [#permalink] 08 Aug 2017, 11:31
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