MGT Chapter 16

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One way to improve productivity is to encourage employee involvement in improving work processes.

True

Controlling is one of the four management functions.

True

Productivity equals inputs divided by outputs.

False. Productivity is defined by the formula of outputs divided by inputs for a specified period of time.

If a manager increases the efficiency of labor but makes no improvements to the efficiency of capital, an increase in productivity will result.

True

Lumber mills that sell sawdust and wood chips are increasing their efficiency of labor and
thereby improving productivity.

False. You can increase the efficiency of materials inputs by expanding their uses, as when lumber mills discovered they could sell not only boards but also sawdust and wood chips for use in gardens.

Raising productivity contributes to an increasing gross domestic product in the United States.

True

The 1960s were characterized by very low productivity in the United States.

False. The 1960s were characterized by very low productivity in the United States.

Most economists agree that recent productivity growth is the result of an improved work ethic, primarily due to more Millennials in the workforce.

False. Most economists seem to think the recent productivity growth is the result of organizations’ huge investment in information technology like computers, the Internet, other telecommunications advances, and computer-guided production line improvements.

Control is making something happen the way it was planned to happen.

True

The purpose of controlling is to make sure that performance meets objectives.

True

Controlling is arranging tasks, people, and other resources to accomplish the work.

False. Organizing is arranging tasks, people, and other resources to accomplish the work.

Controlling is the only management function that affects productivity.

False. All four management functions affect one another and in turn affect an organization’s productivity (see Figure 16.2).

Control systems can help managers anticipate, monitor, and react to environmental changes.

True

Japanese-produced cars that were perceived as better built than American ones resulted from the Japanese use of controls.

True

A markdown on certain grocery-store items may result in a rush of customer demand for those products, which is an example of the control systems benefit of detecting threats.

False. A markdown on certain grocery store items that results in a rush of customer demand for those products is an example of the use of control systems to detect opportunities, such as reducing prices for similar items.

One reason why control is needed is to centralize decision making.

False. Controls allow top management to decentralize decision making at lower levels within the organization and to encourage employees to work together in teams.

The control process begins with measuring performance.

False. The four control process steps are (1) establish standards; (2) measure performance; (3) compare performance to standards; and (4) take corrective action, if necessary (see Figure 16.4).

A control standard is the average performance level for a given workplace activity.

False. A control standard, or performance standard or simply standard, is the desired performance level for a given goal.

Standards are best measured when they can be made quantifiable.

True

Performance measures can be obtained through personal observation.

True

A maximum 2% deviation from the standard is the acceptable level prescribed for control systems.

False. The acceptable deviation depends on the range of variation built into the standards when they were set.

Management by exception is a control principle that states that managers should be informed of a situation only if data show a significant deviation from standards.

True

When performance exceeds the standards set in the control systems, managers should take no action.

FALSE. When performance meets or exceeds the standards set, managers should give rewards, ranging from giving a verbal "Job well done" to more substantial payoffs such as raises, bonuses, and promotions to reinforce good behavior.

The three levels of control are strategic, tactical, and operational.

True

25. Strategic control is monitoring performance to ensure that day-to-day goals are being met and taking corrective action when needed.

False. Strategic control is monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed.

Tactical control is monitoring performance to ensure that divisional or departmental plans are being implemented and taking corrective action as needed.

True

Middle-level managers are responsible for operational control.

False. Operational control is done mainly by first-level managers, those with titles such as department head," "team leader," or "supervisor."

Drug tests at hiring are an example of the human resources area of organizational control.

True

Bureaucratic control is characterized by the use of rules, regulations, and formal authority to guide performance.

True

Decentralized control is most appropriate for an organization in which the tasks are explicit and certain.

False. Bureaucratic control works well in organizations in which the tasks are explicit and certain. While rigid, it can be an effective means of ensuring that performance standards are being met.

Except for in rare instances, employees at McLaren Professional Painting take responsibility for
their own work and how it is done, rather than being governed by a rigid set of rules. McLaren is using bureaucratic control.

False. Decentralized control is an approach to organizational control that is characterized by informal and organic structural arrangements, the opposite of bureaucratic control. This form of control aims to get increased employee commitment, using the corporate culture, group norms, and workers taking responsibility for their performance.

The balanced scorecard, also known as the triple bottom line, gives top managers a fast but comprehensive view of the organization via three indicators.

False. The balanced scorecard gives top managers a fast but comprehensive view of the organization via four indicators: (1) customer satisfaction, (2) internal processes, (3) innovation and improvement activities, and (4) financial measures.

Social responsibility and ethics make up one of the four indicators used in the balanced scorecard.

True

Social responsibility and ethics make up one of the four indicators used in the balanced scorecard.

True

A strategy map is a visual representation of the four perspectives of the balanced scorecard that enables managers to communicate their goals.

True

Strategy maps show the cause-and-effect links between environmental factors and preferred strategy.

False. As Kaplan and Norton state, "Strategy maps show the cause-and-effect links by which specific improvements create desired outcomes," such as objectives for revenue growth, targeted customer markets, the role of excellence and innovation in products, and so on.

Measurement-managed companies are those in which senior management agrees on measureable criteria to determine strategic success.

True

One of the reasons that measurement-managed firms succeed is that their organizational cultures tend to minimize risk taking.

False. Managers in measurement-managed companies more frequently reported strong teamwork and cooperation among the management team and more willingness to take risks.

Informal feedback systems interfere with effective measurement.

True

A formal financial projection is known as a budget.

True

The most popular form of budgeting is known as zero-based budgeting.

False. Managers can take essentially two budget-planning approaches. One of them, zero-based budgeting (ZBB), which forces each department to start from zero in projecting funding needs, is no longer favored. Incremental budgeting is mainly used now.

Incremental budgeting requires setting up many budgets based on short periods, which together make up the full resource requirement.

False. Incremental budgeting allocates increased or decreased funds to a department by using the last budget period as a reference point; only incremental changes in the budget request are reviewed.

One difficulty with incremental budgets is that they tend to lock departments into stable spending arrangements.

True

An expense budget anticipates investment in major assets such as land, buildings, and major equipment.

False. A capital expenditures budget anticipates investments in major assets such as land, buildings, and major equipment.

A fixed budget does not allow for adjustment over time except when there are pertinent changes in the environment.

False. A fixed budget allocates resources on the basis of a single estimate of costs. That is, there is only one set of expenses; the budget does not allow for adjustment over time. A variable budget allows the allocation of resources to vary in proportion with various levels of activity. That is, the budget can be adjusted over time to accommodate pertinent changes in the environment.

A variable budget allows the allocation of resources to vary in proportion with various levels of activity.

True

A balance sheet summarizes an organization’s overall financial worth at a specific point in time.

True

A cash flow statement summarizes an organization’s financial results over a specified period of time.

False. The income statement summarizes an organization’s financial results, its revenues and expenses, over a specified period of time, such as a quarter or a year.

The practice of evaluating financial ratios to determine an organization’s financial health is called viability analysis.

Managers often use ratio analysis, the practice of evaluating financial ratios, to determine an organization’s financial health.

The task of external auditors is to verify that the organization, in preparing its financial statements, followed generally accepted accounting principles.

True

An internal audit is a verification of an organization’s financial accounts and statements by the organization’s own professional staff.

True

A principle of Deming management is that quality should be aimed at the needs of the worker.

False. One of Deming’s principles is that quality should be aimed at the needs of the consumer. "The consumer is the most important part of the production line," Deming wrote. Thus, the efforts of individual workers in providing the product or service should be directed toward meeting the needs and expectations of the ultimate user.

In Deming’s PDCA cycle, "A" stands for "act," which means to implement the change or make a small scale test.

False. The PDCA cycle is a plan-do-check-act cycle using observed data for continuous improvement of operations (see Figure 16.7). "Do" means to implement the change or make a small-scale test.

The two core principles of TQM are people orientation and improvement orientation.

True

TQM assumes that, if given empowerment, employees will focus on strategic goal setting.

False. The people orientation of TQM has several assumptions, one of which is that people will focus on quality if given empowerment. The reasoning here is that the people actually involved with the product or service are in the best position to detect opportunities for quality improvements.

TQM assumes that it’s better to make small improvement all the time.

True

TQM assumes that it’s better to make small improvement all the time.

False. The RATER scale enables customers to rate the quality of a service along the five dimensions of reliability, assurance, tangibles, empathy, and responsiveness (abbreviated RATER), each on a scale from 1 (for very poor) to 10 (for very good).

On her first visit to a new doctor’s office, Melanie noted the fine furniture in the lobby and the crisp white coats that each of the staff wore. She was judging the tangibles dimension of the RATER scale.

True

Twice daily, factory workers at Teller Copperworks select random samples from the production runs and test them for quality, rejecting runs if too many samples fall outside a standard range of acceptability. These workers are engaged in benchmarking.

False. Benchmarking is a process by which a company compares its performance with the best practices of high-performing organizations. The question is describing statistical process control.

Reduced cycle time means a reduction in steps in a work process.

True

Gulf Satellite has restructured its procedures for service calls, reducing the number of steps involved so that employees can finish each call faster. Gulf has engaged in reduced cycle time.

True

Though ISO 9000 can help a company improve its processes, unfortunately this quality designation is only accepted currently by the United States.

False. The ISO 9000 designation is now recognized by more than 100 countries around the world, and a quarter of the corporations around the globe insist that suppliers have ISO 9000 certification.

According to Six Sigma, 99% perfect is the threshold for accepting defects in manufacturing and service-related products.

False. Six Sigma means being 99.9997% perfect. By contrast, Three Sigma or Four Sigma means settling for 99% perfect, which is the equivalent of no electricity for 7 hours each month, two short or long landings per day at each major airport, or 5,000 incorrect surgical operations per week.

Lean Six Sigma focuses on problem solving and performance improvement.

True

Managers should develop control standards when they are developing strategic plans.

True

Control systems should leave no room for individual judgment.

False. Control systems must leave room for individual judgment, so that they can be modified when necessary to meet new requirements. In other words, control systems should be flexible.

Employees frustrated by too much control in the workplace may turn to sabotage of the control process.

True

Control systems are significantly improved by focusing them on reporting.

False. A specific kind of misdirection of control effort is management emphasis on getting reports done, to the exclusion of other performance activity. Reports are not the be-all and end-all. Undue emphasis on reports can lead to too much focus on quantification of results and even to falsification of data.

Reema was recently promoted to facilities director at Harvest Processing. Which of the

following should she do immediately as she tries to improve productivity?

A. Use the established technology with which her employees are most familiar.

B. Rotate all personnel so that each has an opportunity to try something new.

C. Hire new employees such that they are similar to those already on the team.

D. Immediately cut costs.

E. Establish a system of measurement.

E.

72. Which of the following is a challenge a manager will deal with in the 21st century?

A. Sustainability

B. Employee revolts

C. Economic stagnation

D. Leadership vacuums

E. Religious issues

A.

73. Which of the following is a primary function of management?

A. Communicating

B. Organizing

C. Cooperating

D. Globalizing

E. Influencing

B

Productivity equals

A. labor, capital, energy, and materials, divided by goods and services produced.

B. goods and services and energy and materials, divided by labor and capital produced.

C. labor, energy, and capital, divided by goods, services, and materials.

D. goods and services produced, divided by labor, capital, energy, and materials.

E. energy and materials, divided by labor and capital.

D.

Managers can increase overall productivity by

A. decreasing efficiency of capital.

B. increasing energy.

C. increasing the efficiency of materials.

D. decreasing the efficiency of labor.

E. decreasing outputs.

C.

Which of the following has been a primary source of productivity gains in the years 1995 to

2001?

A. Reduced standards of living.

B. Recessionary spending.

C. Reemphasis on ethical business behaviors.

D. Enterprise resource planning software systems.

E. Reduced costs of raw materials through globalization.

D.

Which of the following has been a primary source of productivity gains in the years 1995 to
2001?

A. Reduced standards of living.

B. Recessionary spending.

C. Reemphasis on ethical business behaviors.

D. Enterprise resource planning software systems.

E. Reduced costs of raw materials through globalization.

A.

______ is defined as monitoring performance, comparing it with goals, and taking corrective

action as needed.

A. Measuring

B. Controlling

C. Organizing

D. Leading

E. Planning

B.

Corrine, a customer service manager, tracks monthly complaints and has been trying over the

past six months to reduce them to fewer than 0.2% with additional training for her staff. She is engaged in

A. controlling.

B. organizing.

C. measuring.

D. leading.

E. planning.

A.

Which of the following is not one of the reasons that control is needed in an organization?

A. To adapt to change and uncertainty.

B. To eliminate the need for teamwork.

C. To detect opportunities.

D. To deal with complexity.

E. To decentralize decision making.

B.

Carlyon Land Development has effective control processes, allowing its managers to discover

______ in bookkeeping right away, before a would-be embezzler could seriously affect its

business.

A. team problems

B. a potential merger

C. competence

D. a tax break

E. irregularities

E.

Which of the following is a step in the control process?

A. Complete a job redesign.

B. Evaluate opportunities.

C. Establish standards.

D. Implement TQM.

E. Compare work units to one another.

C.

Standards are best measured when they are

A. broad.

B. efficient.

C. narrow.

D. quantifiable.

E. ethical.

D.

Which of the following standards is the most difficult to measure directly?

A. An increase in insurance policies sales month to month.

B. Stable material costs.

C. More effective teamwork.

D. 0.5% of products rejected for poor quality.

E. Reduced energy costs compared to the same month last year.

C.

The amount of acceptable deviation from a standard, determined when the standard was

established, is called the

A. span of exception.

B. range of variation.

C. breadth control.

D. benchmark.

E. zero-based control.

B.

Which of the following may be done as corrective action in the control process?

A. Evaluate performance.

B. Revise standards.

C. Compare performance to standards.

D. Align processes with goals.

E. Establish standards.

B.

Jimmy’s supervisor noticed that he was struggling with the computerized setup for production runs at his new job. The supervisor sat next to him while he tried it again and gave suggestions for improvement. The supervisor is doing which step of the control process?

A. Compare performance to standards.

B. Establish standards.

C. Take corrective action.

D. Measure performance.

E. Control productivity.

C.

At UPS, delivery ______ vary according to whether a route is urban, suburban, or rural in

nature.

A. RATER scales

B. ratio analyses

C. standards

D. PDCA cycles

E. strategy maps

C.

Tactical control is performed mainly by

A. middle managers.

B. top managers.

C. the CEO.

D. first-level managers.

E. team leaders.

A.

90. Monitoring performance to ensure that day-to-day goals are being implemented and taking

corrective action as needed is known as ______ control.

A. strategic

B. functional

C. tactical

D. operational

E. managerial

D.

Typically, operational control is accomplished through reports issued

A. daily.

B. weekly.

C. monthly.

D. quarterly or less frequently.

E. randomly.

A.

A sales forecast is an example of an organizational control from the _____ area.

A. physical

B. informational

C. human resources

D. financial

E. capital

B.

Tara was required to take a word processing test as part of her application for an executive

assistant position. This control is part of the ______ area.

A. human resources

B. physical

C. financial

D. informational

E. structural

A.

Which of the following is an example of an informational resource control?

A. A personality test

B. A delivery-tracking system

C. A debt-repayment schedule

D. A leadership survey

E. A competition analysis

E.

95. Which of the following is the best example of bureaucratic control?

A. Southwest Airlines

B. U.S. Army

C. General Electric

D. Levi Strauss

E. Ritz Carlton

B.

Eileen manages employees at Maui Tours and Lodging. She has noticed that one of her employees submits via the computer system the same suggestions for continuous improvement multiple times, knowing that performance is evaluated on the number of
suggestions only. This problem is typical of ______ control.

A. clan

B. market

C. decentralized

D. bureaucratic

E. functional

D.

______ control is an approach to organizational control that is characterized by informal and

organic structural arrangements.

A. Decentralized

B. Functional

C. Relational

D. Bureaucratic

E. Market

A.

Which of the following areas of control for organizations exerts informal control?

A. Structural

B. Human resources

C. Informational

D. Cultural

E. Competitive

D.

Some managers use _____, which provides four indicators with which organizations can set

goals and measure performance.

A. the balanced scorecard

B. a strategic map

C. measurement management

D. a strategic scorecard

E. evidence-based management

A.

Which of the following is a perspective of the balanced scorecard?

A. Internal weaknesses

B. Innovation and learning

C. External processes

D. Stakeholder satisfaction

E. Collaboration and teamwork

B.

Examining how the organization looks to shareholders is part of which of the balanced

scorecard perspectives?

A. External perspective

B. Customer perspective

C. Financial perspective

D. Internal business perspective

E. Innovation and learning perspective

C.

Which balanced scorecard perspectives helps top management’s judgment to be better linked

to measures of employee actions at lower levels?

A. Operational perspective

B. Financial perspective

C. Customer perspective

D. Internal business perspective

E. Innovation and learning perspective

D.

103. According to Kaplan and Norton, "_______ show the cause-and-effect links by which specific

improvements create desired outcomes."

A. Positioning maps

B. Strategy maps

C. Multidimensional maps

D. Customer maps

E. Graphical interface maps

B.

Which of the following is a mechanism that contributes to a measurement-managed company’s success?

A. Using mostly "soft" objectives that are not quantifiable.

B. Measuring activities of all types.

C. Developing the measurement systems without interference from employees.

D. Trusting in informal feedback systems.

E. Developing alignment between individual, unit, and strategic performance.

E.

Which of the following is a frequent barrier to effective measurement?

A. Communication is bureaucratic.

B. Top executives create the organization’s strategy.

C. The organizational culture overemphasizes teamwork.

D. Employees resist new measurement systems.

E. The organizational culture allows too much risk taking.

D.

A budget that allocates increased or decreased funds to a department by using the last budget

period as a reference point is called a(n)

A. standardized budget.

B. incremental budget.

C. zero-based budget.

D. fixed budget.

E. tactical budget.

B.

One characteristic of incremental budgeting is that it

A. allows comparison using various units, like labor hours and dollars.

B. is flexible towards changing environmental demands.

C. locks managers into stable spending arrangements.

D. allows easy comparison of different departments doing different activities.

E. requires more time from managers than zero-based budgeting.

C.

A(n) ______ budget projects what an organization will create in goods and services, what financial resources are needed, and what income is expected.

A. expense

B. revenue

C. cash

D. operating

E. cash flow

D.

A budget that allocates resources on the basis of a single estimate of costs is called a(n)

______ budget.

A. unitary

B. zero-based

C. cash

D. fixed

E. incremental

D.

The type of budget that can be adjusted over time for changing environmental conditions is known as a(n) ______ budget.

A. variable

B. incremental

C. zero-based

D. operating

E. cash

A.

At Camden Windows and Doors, orders have significantly exceeded projections, and Nischal, the operations director, has decided to hire for a third shift in the plant. Nischal is clearly operating with the use of a(n) ______ budget.

A. zero-based

B. incremental

C. variable

D. fixed

E. cash

C.

Current assets, fixed assets, and liabilities are all part of an organization’s

A. capital expenditures budget.

B. balance sheet.

C. income statement.

D. expense budget.

E. cash flow statement.

b.

Profits or losses incurred by an organization are represented in its

A. income statement.

B. expense budget.

C. ratio analysis.

D. capital expenditures budget.

E. balance sheet.

A.

______ ratios can help an organization to detect if it has obsolete or excessive inventory on hand.

A. Return

B. Liquidity

C. Debt management

D. Asset management

E. Activity

D.

ROI is a(n)

A. liquidity ratio.

B. return ratio.

C. cash ratio.

D. asset management ratio.

E. debt management ratio.

B.

Which of the following is not characteristic of an external audit?

A. Primarily used when management suspects embezzlement.

B. Performed by CPAs.

C. Performed by an independent organization.

D. Verifies that generally accepted accounting principles have been followed.

E. Verifies the accuracy and fairness of financial statements.

A.

Which of the following is not a principle of Deming management?

A. Quality should be aimed at the needs of the consumer.

B. Companies should aim at improving the system.

C. Improved quality leads to increased market share.

D. Quality can be improved on the basis of hard data.

E. Companies should determine which workers are to blame for problems.

E.

Which of the following is part of Deming’s PDCA cycle?

A. Process

B. Direct

C. Apply

D. Check

E. Decide

D.

TQM is defined as a comprehensive approach dedicated to continuous

A. measurement of quantifiable goals and quick corrections.

B. quality improvement, training, and customer satisfaction.

C. product innovation and organizational learning, over fast cycles.

D. customer input into management strategy and decision making.

E. focus on components of service success: tangibles, questions, and margins.

B.

TQM has two core principles:

A. Employee commitment and customer satisfaction.

B. Financial health and financial stability.

C. People orientation and improvement orientation.

D. Management and leadership.

E. Radical innovation and continuous improvement.

C.

A team that meets to solve a onetime problem is called a

A. continuous improvement team.

B. work group.

C. self-managed team.

D. special-purpose team.

E. department.

D.

Thurmond Paper Mills convened a team to help the organization determine a course of action in the wake of a forest fire that temporarily closed access to its mountain satellite office. This is an example of a

A. cross-functional team.

B. special-purpose team.

C. JIT team.

D. self-managed team.

E. continuous improvement team.

B.

The process of instituting ongoing small, incremental improvements in all parts of an

organization is called

A. MBO.

B. reengineering.

C. radical innovation.

D. MBWA.

E. continuous improvement.

A.

Employees’ knowledge, courtesy, and ability to convey trust and confidence make up which dimension of the RATER scale?

A. Reliability

B. Assurance

C. Tangibles

D. Empathy

E. Responsiveness

B.

Installing quality-control procedures that can be audited by independent quality-control experts is fundamental to

A. ISO 14000.

B. restructuring.

C. reduced cycle time.

D. ISO 9000.

E. statistical process control.

D.

At New Haven Medical Devices, Nico pulls six samples an hour from an assembly line toexamine them for quality defects. If he finds any, he makes adjustments to various pieces of equipment in his area. Nico’s job involves

A. statistical process control.

B. benchmarking.

C. reduced cycle time.

D. feedforward control.

E. strategic control.

A.

Which of the following is not a common characteristic of successful control systems?

A. Results oriented

B. Realistic

C. Encouragement of self-control

D. Flexible

E. Emphasis on accountability

E.

Which kind of organization is most likely to try to exert too much control?

A. Clan

B. Market

C. Bureaucratic

D. Decentralized

E. Matrix

C.

Before the fall term began, professors at Ridgeview College were required to fill out many forms, ranging from performance objectives to lists of summer contacts with prospective students. Many professors complained that they would rather spend the time getting ready for
their courses. This is an example of which barrier to successful control?

A. Overemphasis on one instead of multiple approaches.

B. Overemphasis on paperwork.

C. Overemphasis on means instead of ends.

D. Too much control.

E. Too much flexibility.

B .

At Claremont Profession Fencing, employees were asked how the quality of its customer service could best be measured, and management then implemented a survey system based on the feedback. Claremont has overcome which of the following barriers to success of control
systems?

A. Overemphasis on one instead of multiple approaches.

B. Overemphasis on paperwork.

C. Overemphasis on means instead of ends.

D. Too much control.

E. Too little employee participation.

E.

Recruiters for Littleton University were under extreme pressure to meet their objective of a 10% increase in the size of the freshman class. As a result, they admitted many students who were not qualified and who failed to perform in classes. This is an example of which problem
associated with control systems?

A. Overemphasis on one instead of multiple approaches.

B. Overemphasis on paperwork.

C. Overemphasis on means instead of ends.

D. Too much control.

E. Too little participation.

C.

Harbor Casino and Resort requires its casino dealers to have licenses, observes them using closed-circuit TV, and requires detailed reports at the end of each shift. This organization has overcome the control system barrier of

A. overemphasis on one instead of multiple approaches.

B. overemphasis on paperwork.

C. overemphasis on means instead of ends.

D. too much control.

E. too little participation.

A.

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