Chapter 9 Strategic Control and Corporate Governance Multiple Choice 2

37) Zappos and Amazon focus on customer service. What purpose does this serve in terms of attaining behavioral control? A) It uses culture to sustain their primary source of competitive advantage. B) It uses rewards and incentives to sustain corporate culture. C) It demonstrates to employees the importance of articulating explicit goals and objectives. D) It gives management more control over employees. Answer: A Explanation: Culture wears many different hats, each woven from the fabric of those values that sustain the primary source of competitive advantage for the organization. Zappos and Amazon focus on customer service to create a strong corporate culture. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 38) Ritz-Carlton hotels employees meet each day for 15 minutes to share stories about how they went the extra yard to meet customer needs. What is the intended outcome of these activities? A) Stories help build a customer-centric culture. B) Storytime gives employees an opportunity to vent their frustrations. C) Storytime demonstrates to employees the importance of articulating explicit goals and objectives. D) Storytime gives management more control over employees. Answer: A Explanation: Stories can also help build a customer-centric culture. Inside the firm, the stories that employees share with each other become imprinted on the organizational mind. Thus, as employees share their positive stories of experiences with customers, they not only provide encouragement for other employees to better meet the needs of customers but also reinforce the storytelling employee desire to work hard to serve customers. For example, at Ritz-Carlton hotels, employees meet each day for 15 minutes to share stories about how they went the extra yard to meet customers' needs. These stories can even be more significant for new employees, helping them learn about the values of the firm. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 17 39) Which of the following is not one of the characteristics of reward and incentive systems? A) They represent a poor means of influencing the culture of an organization. B) They focus efforts on high priority tasks. C) They motivate high levels of individual and collective task performance. D) They represent an effective control mechanism. Answer: A Explanation: Reward and incentive systems represent a powerful means of influencing the culture of an organization, focusing efforts on high priority tasks, and motivating individual and collective task performance. Just as culture deals with influencing beliefs, behaviors, and attitudes of people within an organization, the reward system is an effective motivator and control mechanism by specifying who gets rewarded and why. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 40) Individual rationality ________ organizational rationality. A) is a good indicator of B) will ensure C) is often the opposite of D) does not always guarantee Answer: D Explanation: Generally speaking, people in organizations act rationally, each motivated by their personal best interest. However, the collective sum of individual behaviors of the employees of the organization does not always result in what is best for the organization; individual rationality is no guarantee of organizational rationality. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 18 41) When subcultures emerge that have shared values opposite from the dominant culture of an organization A) organizational cohesiveness increases. B) information is shared rather than hoarded. C) individuals begin working at cross purposes. D) individuals gain insights into overarching goals and objectives. Answer: C Explanation: Subcultures within organizations may reflect differences among functional areas, products, services, and divisions. To the extent that reward systems reinforce such behavioral norms, attitudes, and belief systems, cohesiveness is reduced; important information is hoarded rather than shared, individuals begin working at cross-purposes, and they lose sight of overall goals. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 42) Which of the following is not a characteristic of effective reward and incentive systems? A) Performance measures are clear and highly visible. B) The structure is fixed to assure employees of consistency. C) The compensation system is perceived as fair and equitable. D) Objectives are well understood, and broadly accepted. Answer: B Explanation: Effective reward and incentive systems share a number of common characteristics. Among these are: objectives are clear, well understood, and broadly accepted; performance measures are clear and highly visible; the compensation system is perceived as fair and equitable; and the structure is flexible. It can adapt to changing circumstances. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 19 43) Chesapeake Energy set a goal to improve workplace safety. To reinforce this, one year it gave out over 8 million USD in safety bonuses to over 6000 employees for following safe work practices. This served to create A) happy employees because they got more free time. B) an effective reward and incentive program because it reinforced commitment to goals. C) a new mission statement for the company. D) an effective incentive program because employees worked harder. Answer: B Explanation: To be effective, incentive and reward systems need to reinforce basic core values, enhance cohesion and commitment to goals and objectives, and meet with the organization's overall mission and purpose. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 44) Lack of a clear understanding of organizational goals and objectives is a probable cause of A) productive behavior. B) counterproductive motivation. C) counterproductive behavior. D) motivated self-interest. Answer: D Explanation: Counterproductive behavior can arise because of motivated self-interest, lack of a clear understanding of goals and objectives, or outright malfeasance. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 20 45) Effective boundaries and constraints A) tend to inhibit efficiency and effectiveness. B) distract employees who are trying to focus on organizational priorities. C) minimize improper and unethical conduct. D) tend to limit organizational growth. Answer: C Explanation: Boundaries and constraints can serve many useful purposes for organizations, including focusing individual efforts on strategic priorities, providing short-term objectives and action plans to channel efforts, improving efficiency and effectiveness, and minimizing improper and unethical conduct. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 46) Effective short-term objectives should be ________ and ________. A) specific; measurable B) achievable; not challenging C) motivating; not limiting D) time defined; not limiting Answer: A Explanation: To be effective, short-term objectives must have several attributes. They should be specific and measurable, include a specific time horizon for their attainment, and be achievable yet challenging enough to motivate managers who must strive to accomplish them. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 21 47) Which of the following statements about action plans is true? A) Action plans should permit a degree of autonomy to managers and not be constrained by budgets. B) Action plans must be specific so that managers have a clear understanding of the resource requirements necessary to implement the plan. C) Action plans should not be constrained by a time frame in order to allow for modification. D) Action plans should hold employees accountable for the implementation. Answer: B Explanation: Unless action plans are specific, there may be little assurance that managers have thought through all of the resource requirements for implementing their strategies. In addition, unless plans are specific, managers may not understand what needs to be implemented or have a clear time frame for completion. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 48) Rules and regulations are examples of ________ and ________. A) controls; behaviors B) controls; norms C) boundaries; behaviors D) boundaries; constraints Answer: D Explanation: Boundaries and constraints are rules that specify behaviors that are acceptable and unacceptable. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 22 49) The best way to minimize improper and unethical conduct is to ________ and ________. A) set boundaries; constraints B) establish standards; guidelines C) develop policies; regulations D) design sanctions; guidelines Answer: A Explanation: In an ideal world, a strong culture and effective rewards should be sufficient to ensure that all individuals and subunits work toward the common goals and objectives of the whole organization. However, this is not usually the case. Counterproductive behavior can arise because of motivated self-interest, lack of a clear understanding of goals and objectives, or outright malfeasance. Boundaries and constraints can serve many useful purposes for organizations, including: focusing individual efforts on strategic priorities; providing short-term objectives and action plans to channel efforts; improving efficiency and effectiveness; minimizing improper and unethical conduct. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Apply AACSB: Analytical Thinking Accessibility: Keyboard Navigation 50) Which of the following approaches to behavioral strategic control would be the least appropriate for an organization in which there is a great need for innovation and a high degree of autonomy? A) culture B) rewards C) rules D) incentives Answer: C Explanation: Rules are most appropriate when associated with standardized output, tasks are generally repetitive and routine, and there is little need for innovation or creative activity. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 23 51) Most successful organizations minimize the need for explicit rules, regulations, and other boundaries by A) posting written statements of the organizational goals and objectives. B) discouraging the formation of subcultures that isolate work groups. C) designing effective reward systems. D) encouraging employees to see themselves as free agents. Answer: C Explanation: In most environments, organizations should strive to provide a system of rewards and incentives, coupled with a culture strong enough that boundaries become internalized. This reduces the need for external controls such as rules and regulations. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Understand AACSB: Analytical Thinking Accessibility: Keyboard Navigation 52) Rule-based controls are least appropriate in organizations with which one of the following characteristics? A) Environments are stable and predictable. B) Employees are highly skilled and independent. C) There is consistency in product and service. D) The risk of malfeasance is extremely high. Answer: B Explanation: Rule based controls are most appropriate in organizations with the following characteristics: environments are stable and predictable, employees are largely unskilled and interchangeable, consistency in product and service is critical, and the risk of malfeasance is extremely high. Difficulty: 2 Medium Topic: Organizational Structure and Controls Learning Objective: 09-04 The benefits of having the proper balance among the three levers of behavioral control: culture, rewards and incentives, and boundaries. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 24