marketing

Chapter 11 - Organizational Control and Change

Chapter 11Organizational Control and Change

True / False Questions

1. The process by which managers monitor and regulate the organization in order to determine if the organization is operating efficiently and effectively is known as controlling. True False

2. Managers monitor and evaluate the organization's strategy to see if it is working using the controlling function. True False

3. Control is concerned with keeping employees motivated. True False

4. Control is simply just reacting to events after they have occurred. True False

5. Control helps managers build a competitive advantage. True False

6. Control helps managers respond more effectively to customers. True False

7. A control system must be rigid and consistent in order to be effective. True False

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8. At the input stage, managers use feedback control to anticipate problems before they arise so problems do not occur later during the conversion process. True False

9. The first step in the control process is to evaluate the results in terms of the performance standards. True False

10. In practice, managers can only measure the actual outputs that result from the behavior of their members. True False

11. When an organization and its members perform nonroutine activities, it is more challenging for managers to measure outputs or behavior. True False

12. Behaviors are usually easier to measure than outputs because they are intangible and subjective. True False

13. Establishing targets and designing measurement systems are much more difficult for managers because the high level of uncertainty in the organizational environment means managers rarely know what might happen in the future. True False

14. Top managers are most concerned with overall organizational performance and use various production measures to evaluate it. True False

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15. Profit ratios measure how well managers have protected organizational resources to be able to meet short-term obligations. True False

16. When you divide the organization's current assets by its current liabilities, the result is known as the times-covered ratio of the organization. True False

17. Operating margin is calculated by dividing a company's operating profit by sales revenues. True False

18. An organization is said to be highly leveraged if it uses more debt than equity to finance its ongoing operations. True False

19. Days sales outstanding is profit ratio that reveals how efficiently managers are collecting revenue from customers to pay expenses. True False

20. The "objectivity" of financial measures of performance is a main reason why managers use these ratios to measure the efficiency and effectiveness of their organizations. True False

21. Financial information by itself provides managers with all of the information that they need to measure the four building blocks of competitive advantage. True False

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22. To encourage a future-oriented approach, top managers must establish organizational goals. True False

23. If goals are set at an impossibly high level, managers might work only half-heartedly to achieve them because they are certain they will fail. True False

24. The least powerful form of behavior control is direct supervision of a subordinate by a manager. True False

25. When managers personally supervise subordinates, they lead by example and in this way can help subordinates develop and increase their own skill levels. True False

26. The more complex a job is, the more difficult it is for a manager to evaluate how well a subordinate is performing. True False

27. Management by objectives (MBO) is a formal system of evaluating subordinates on their ability to achieve specific organizational goals or performance standards and to meet operating budgets. True False

28. During the objective-setting process of the MBO, it is the sole responsibility of managers to establish the goals for the employees. True False

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29. Bureaucratic control is control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals. True False

30. Output control and behavior control are appropriate for many of the most important and significant organizational activities. True False

31. Clan control keeps organizational members goal-directed, while they are still open to new opportunities. True False

32. Organizational culture functions as a kind of control system. True False

33. Organizational dynamics is the movement of an organization away from its present state toward some preferred future state to increase its efficiency and effectiveness. True False

34. Evolutionary change involves a bold attempt to quickly find new ways to be effective. True False

35. Top-down change is typically more gradual or evolutionary than bottom-up change. True False

Multiple Choice Questions

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36. The process by which managers monitor and regulate the efficiency and effectiveness of the workers in an organization is called: A. PlanningB. OrganizingC. LeadingD. ControllingE. Coordinating

37. The formal monitoring, evaluation, and feedback systems that allow managers to determine if the organization's strategy and structure are working according to plans are known as: A. Organizational socializationB. Clan controlC. Control systemsD. Concurrent systemsE. Market control

38. Which type of control allows managers to anticipate problems before they arise? A. Feedforward controlB. Concurrent controlC. Feedback controlD. Bureaucratic controlE. Clan control

39. At the __________ stage of the process of transforming raw materials into finished goods, managers typically use __________ control procedures to anticipate problems before they occur. A. input; concurrentB. conversion; feedforwardC. output; concurrentD. input; feedforwardE. conversion; feedback

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40. RST Consulting diligently screens job applicants, often by viewing their résumés electronically and using several interviews to select the most highly skilled people. This is an example of: A. Concurrent controlB. Feedforward controlC. Feedback controlD. Bureaucratic controlE. Market control

41. Starling Manufacturing Inc. has carefully set up strict specifications for its raw materials and goes through a three-step approval process when selecting its suppliers to ensure its raw materials are the best possible quality. This is an example of: A. Concurrent controlB. Feedforward controlC. Feedback controlD. Bureaucratic controlE. Clan control

42. At the __________ stage of the process of transforming raw materials into finished goods, managers typically use __________ control procedures to obtain immediate feedback about how efficiently the raw materials are being transformed into finished goods. A. conversion; concurrentB. conversion; feedbackC. output; feedforwardD. input; concurrentE. output; concurrent

43. Which type of control do managers typically use at the conversion stage of transforming raw materials into finished goods? A. Feedforward controlB. Bureaucratic controlC. Concurrent controlD. Feedback controlE. Market control

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44. Which type of control is at the heart of total quality management programs? A. Feedforward controlB. Concurrent controlC. Feedback controlD. Bureaucratic controlE. Clan control

45. What type of control do managers typically use at the output stage of transforming raw materials into finished goods? A. Behavioral controlB. Concurrent controlC. Bureaucratic controlD. Feedforward controlE. Feedback control

46. At the __________ stage of transforming raw materials into finished goods, managers typically use __________ control methods to determine customers' reactions to the organization's goods and services. A. output; feedforwardB. input; feedbackC. conversion; feedforwardD. output; feedbackE. conversion; feedback

47. An organization monitors the number of customer returns for each product model to attempt to recognize when the organization is producing a large number of defective products. This is an example of: A. Feedforward controlB. Concurrent controlC. Clan controlD. Feedback controlE. Bureaucratic control

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48. Price Buster Retail has invested in a management information system (MIS) that measures increases or decreases in relative sales of different products alerts managers to changes in customer tastes. This is an example of: A. Feedforward controlB. Feedback controlC. MBO controlD. Bureaucratic controlE. Concurrent control

49. Which step of the control process deals with establishing the standards of performance? A. Step 1B. Step 2C. Step 3D. Step 4E. Step 5

50. The standard of performance that measures efficiency at the corporate level of the organization is: A. Cost of goods soldB. Operating profitC. Net salesD. Operating costsE. Net income after taxes

51. At what stage of the control process do managers evaluate actual outputs and behavior outputs? A. Step 1B. Step 2C. Step 3D. Step 4E. Step 5

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52. When an organization and its members perform ______ activities, it is ______ challenging for managers to measure outputs or behavior. A. nonroutine, moreB. nonroutine, lessC. routine, moreD. programmed, moreE. nonprogrammed, less

53. Trevor, the regional manager for Taylor Dairies, tracks the average sale of each dairy product sold in order to determine the quantity of each type of product to be carried on the fleet. This is an example of: A. Bureaucratic controlB. Feedforward controlC. Output controlD. Input controlE. Clan control

54. At Step 3 of the control process, managers: A. Measure actual performanceB. Compare actual performance to the standardsC. Establish the standards of performanceD. Initiate corrective actionE. Develop goals

55. The final step in the control process is to: A. Initiate corrective actionB. Measure actual performanceC. Establish the standards of performanceD. Compare actual performance to the standardsE. Provide feedback

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56. Top managers are most concerned with overall organizational performance and use various financial measures to evaluate it. The most common include all EXCEPT: A. Activity ratiosB. Leverage ratiosC. Profit ratiosD. Liquidity ratiosE. Cash flow ratios

57. Which of the following is the most commonly used financial performance measure when evaluating an organization's performance? A. Gross profit marginB. Debt-to-equity ratioC. Days sales outstanding ratioD. Inventory turnover ratioE. Return on investment

58. What is the result of dividing a company's operating profit (the amount it has left after all the costs of making the product and running the business have been deducted) by sales revenues? A. Gross profit marginB. Return on investmentC. Net profitD. Operating marginE. Operating costs

59. The direct and indirect costs associated with producing a specific product are subtracted from the net revenues received from the sale of this product. The resulting figure is called: A. Net incomeB. Operating profitC. Cash flowD. Gross profit marginE. The liquidity ratio

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60. Which type of financial ratios measures the ability of the organization to pay its short-term debts? A. Leverage ratiosB. Liquidity ratiosC. Activity ratiosD. Profit ratiosE. Inventory turnover ratios

61. Which type of financial ratio is computed by dividing the organization's current assets by its current liabilities? A. Inventory turnover ratioB. Days sales outstanding ratioC. Profit ratioD. Current ratioE. Debt-to-assets ratio

62. Which type of financial ratio indicates whether or not the organization is capable of paying off its short-term debts without having to sell any of its inventories? A. Quick ratioB. Current ratioC. Days sales outstanding ratioD. Inventory turnover ratioE. Profit ratio

63. The times-covered ratio, which measures the degree to which managers use debt or equity to finance ongoing operations, is a type of financial ratio known as: A. Current ratioB. Liquidity ratioC. Leverage ratioD. Activity ratioE. Profit ratio

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64. Which types of financial ratios measure how well the managers of the organization are creating value from the organization's assets? A. Leverage ratiosB. Liquidity ratiosC. Profit ratiosD. Current ratiosE. Activity ratios

65. Inventory turnover is a type of: A. Leverage ratiosB. Liquidity ratiosC. Profit ratiosD. Activity ratiosE. Quick ratios

66. What is the reason why so many managers use financial measures to assess the efficiency and effectiveness of their organizations? A. ObjectivityB. SubjectivityC. FeasibilityD. Ease of useE. Creativity

67. As the regional manager, Ted's performance is evaluated on the basis of the difference between the sales revenues generated by his region and the cost of making those goods and services. Ted is being evaluated using: A. A profit budget approachB. A revenue budget approachC. A cash flow budget approachD. A cost budget approachE. An expense budget approach

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68. As a regional manager, Dwight is given an operating budget of $1 million for the coming year and is evaluated on the basis of the amount of paper the region can sell based on that budget. Dwight's performance will be evaluated on: A. A revenue budget approachB. A cash flow budget approachC. An expense budget approachD. A profit budget approachE. A capital budget approach

69. A division manager is told to "maximize the sales of the division" and is then evaluated on the basis of the net sales generated by the division. This is an example of: A. A profit budget approachB. A revenue budget approachC. An expense budget approachD. A cash flow budget approachE. A capital budget approach

70. A division manager is evaluated based on his division's revenues less the budgeted cost of his division. This is an example of: A. A cash flow budget approachB. A capital budget approachC. A revenue budget approachD. An expense budget approachE. A profit budget approach

71. What is the most immediate and potent form of behavior control? A. SOPsB. An MBO systemC. RulesD. Direct supervisionE. Return on investment

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72. What allows managers at all levels to become personally involved with their subordinates and allows them to mentor subordinates and develop their management skills? A. Clan controlB. MBO systemsC. Market controlD. Output controlE. Direct supervision

73. All of the following are problems associated with direct supervision EXCEPT: A. ExpensiveB. Demotivation of subordinatesC. Not feasible for some jobsD. Employees may feel scrutinizedE. Personal involvement with subordinates

74. The use of direct supervision as a control mechanism: A. Is the least expensive form of controlB. Can demotivate subordinatesC. Is feasible for complex jobsD. Is preferred over output controlsE. Is preferred over behavior controls

75. A system for evaluating subordinates' behavior by their ability to achieve specific goals is called: A. An SOPB. Performance appraisalC. MBOD. TQME. Clan control

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76. MBO starts when top managers: A. Establish lines of communicationB. Develop behavior controlsC. Develop output controlsD. Establish organizational objectivesE. Establish individual performance objectives

77. In MBO: A. Subordinates set goals for themselvesB. Managers set goals for subordinatesC. Subordinates set goals for managersD. Managers and subordinates set goals togetherE. Managers and subordinates goals are unrelated

78. Control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals is known as: A. A bureaucratic control systemB. Management by objectiveC. Output controlD. Clan controlE. Market control

79. ___________ guide behavior and specify what an employee should do when they confront a problem that needs a solution. A. GoalsB. SOPsC. RulesD. Rules and SOPs, but not goalsE. Rules, SOPs, and goals

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80. The workers of an organization perform the same activities in the same way over and over again, based on rules that managers have developed. We say that the behavior of these workers has been: A. CompromisedB. StandardizedC. MaximizedD. MinimizedE. Simplified

81. Too much ______ can actually ______ the level of learning taking place in an organization and get the organization off track if managers and workers focus on the wrong issues. A. standardization; reduceB. standardization; increaseC. innovation; reduceD. innovation; increaseE. stability; increase

82. Bureaucratic control should be used when organizational activities are ________________; it is less useful when _________. A. routine; nonprogrammed decisions must be madeB. routine; programmed decisions must be madeC. nonroutine; programmed decisions must be madeD. nonstandardized; nonprogrammed decisions must be madeE. standardized; programmed decisions must be made

83. The set of values, norms, and expectations of behavior which control the ways in which workers interact with one another within the organization is known as: A. Bureaucratic cultureB. Organizational cultureC. An MBO cultureD. SOPsE. Rules

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84. The type of control that is imposed on workers within the organization by the shared values and standards of behavior for workers within that organization is known as: A. Bureaucratic controlB. Feedforward controlC. Clan controlD. Feedback controlE. Output control

85. Which type of control keeps organizational members goal-directed while open to new opportunities by taking advantage of the power of organizational culture? A. Bureaucratic controlB. Feedforward controlC. Market controlD. Clan controlE. Output control

86. Many researchers believe that the highest-performing organizations are those that are constantly: A. ChangingB. StandardizingC. StabilizingD. ControllingE. Minimizing

87. What theory states that a wide variety of forces arise from the way an organization operates that make organizations resistant to change? A. TQMB. Force-fieldC. BenchmarkingD. Evolutionary changeE. Revolutionary change

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88. When the forces are evenly balanced, the organization is in a state of ______ and does not change. A. equilibriumB. balanceC. stagnationD. inertiaE. stability

89. Which theory deals with understanding organizational change? A. Maslow's HierarchyB. Lewin's Force-Field TheoryC. Scientific ManagementD. TQME. MBO

90. What type of change is gradual, incremental, and narrowly focused? A. Force-fieldB. CultureC. StructuralD. RevolutionaryE. Evolutionary

91. What type of change is rapid, dramatic, and broadly focused? A. Force-fieldB. CultureC. StructuralD. RevolutionaryE. Evolutionary

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92. The first step managers must take to manage change effectively is: A. Evaluate the changeB. Decide on the change to makeC. Implement the changeD. Assess the need to changeE. Identify obstacles to change

93. A change that is gradual, in which managers at all levels work together to develop a detailed plan for change, is called a __________ change. A. top-downB. management-directedC. bottom-upD. revolutionaryE. restructuring

Essay Questions

94. Explain the relationship between organizational control and the four building blocks of competitive advantage.

95. Discuss the three characteristics of an effective control system in an organization. Illustrate each characteristic with a specific example from an organization of your choosing.

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96. Discuss the type of control used at each stage in process of transforming inputs into finished goods or services. Provide examples of each type of control.

97. Describe the four steps in the control process.

98. The top managers of an organization typically use a variety of financial indicators to assess the performance of their organization. Discuss the four major types of financial measures and give one specific example of how each would be computed.

99. Discuss three ways in which managers can attempt to control the behavior of subordinates.

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100. Discuss the steps involved in the management by objective process.

101. Discuss the problems associated with bureaucratic control.

102. What is "clan control"? How can a manager use clan control to influence employees' work behaviors?

103. Discuss the two opposing forces in the control process that influence how organizations change.

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104. Describe Lewin's Force-Field Theory.

105. Define evolutionary and revolutionary change. When is each appropriate?

106. Describe the steps in the organizational change process.

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Chapter 11 Organizational Control and Change Answer Key

True / False Questions

1. (p. 355) The process by which managers monitor and regulate the organization in order to determine if the organization is operating efficiently and effectively is known as controlling. TRUE

Controlling is the process by which managers monitor and regulate the organization in order to determine if the organization is operating efficiently and effectively.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

2. (p. 356) Managers monitor and evaluate the organization's strategy to see if it is working using the controlling function. TRUE

In controlling, managers monitor and evaluate whether the organization's strategy and structure are working as intended, how they could be improved, and how they might be changed if they are not working.


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3. (p. 356) Control is concerned with keeping employees motivated. TRUE

Control is concerned with keeping employees motivated, focused on the important problems confronting the organization, and working together to make the changes that will help an organization improve its performance over time.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

4. (p. 356) Control is simply just reacting to events after they have occurred. FALSE

Control is more than just reacting to events after they have occurred.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

5. (p. 356) Control helps managers build a competitive advantage. TRUE

To understand the importance of organizational control, consider how it helps managers obtain superior efficiency, quality, responsiveness to customers, and innovation-the four building blocks of competitive advantage.


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6. (p. 356) Control helps managers respond more effectively to customers. TRUE

To understand the importance of organizational control, consider how it helps managers obtain superior efficiency, quality, responsiveness to customers, and innovation-the four building blocks of competitive advantage.


7. (p. 357) A control system must be rigid and consistent in order to be effective. FALSE

An effective control system is flexible enough to allow managers to respond as necessary to unexpected events.


8. (p. 357) At the input stage, managers use feedback control to anticipate problems before they arise so problems do not occur later during the conversion process. FALSE

At the input stage, managers use feedforward control to anticipate problems before they arise so problems do not occur later during the conversion process.


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9. (p. 358) The first step in the control process is to evaluate the results in terms of the performance standards. FALSE

At step 1 in the control process managers decide on the standards of performance, goals, or targets that they will use in the future to evaluate performance.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-02 Describe the four steps in the control process and the way it operates over time.Topic: Control Process

10. (p. 359) In practice, managers can only measure the actual outputs that result from the behavior of their members. FALSE

In practice, managers can measure or evaluate two things: the actual outputs that result from the behavior of their members and the behaviors themselves.


11. (p. 359) When an organization and its members perform nonroutine activities, it is more challenging for managers to measure outputs or behavior. TRUE

When an organization and its members perform complex, nonroutine activities that are intrinsically hard to measure, it is more challenging for managers to measure outputs or behavior.


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12. (p. 360) Behaviors are usually easier to measure than outputs because they are intangible and subjective. FALSE

Outputs are usually easier to measure than behaviors because they are more tangible and objective.


13. (p. 361) Establishing targets and designing measurement systems are much more difficult for managers because the high level of uncertainty in the organizational environment means managers rarely know what might happen in the future. TRUE

Establishing targets and designing measurement systems are much more difficult for managers because the high level of uncertainty in the organizational environment means managers rarely know what might happen in the future.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-02 Describe the four steps in the control process and the way it operates over time.Topic: Control Process

14. (p. 361) Top managers are most concerned with overall organizational performance and use various production measures to evaluate it. FALSE

Top managers are most concerned with overall organizational performance and use various financial measures to evaluate it.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

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15. (p. 362) Profit ratios measure how well managers have protected organizational resources to be able to meet short-term obligations. FALSE

Liquidity ratios measure how well managers have protected organizational resources to be able to meet short-term obligations.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

16. (p. 362) When you divide the organization's current assets by its current liabilities, the result is known as the times-covered ratio of the organization. FALSE

The current ratio (current assets divided by current liabilities) tells managers whether they have the resources available to meet the claims of short-term creditors.


17. (p. 362) Operating margin is calculated by dividing a company's operating profit by sales revenues. TRUE

Operating margin is calculated by dividing a company's operating profit (the amount it has left after all the costs of making the product and running the business have been deducted) by sales revenues.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

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18. (p. 362) An organization is said to be highly leveraged if it uses more debt than equity to finance its ongoing operations. TRUE

An organization is highly leveraged if it uses more debt than equity.


19. (p. 363) Days sales outstanding is profit ratio that reveals how efficiently managers are collecting revenue from customers to pay expenses. FALSE

Days sales outstanding, an activity ratio, reveals how efficiently managers are collecting revenue from customers to pay expenses.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: HardLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

20. (p. 363) The "objectivity" of financial measures of performance is a main reason why managers use these ratios to measure the efficiency and effectiveness of their organizations. TRUE

The objectivity of financial measures of performance is the reason why so many managers use them to assess the efficiency and effectiveness of their organizations.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

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21. (p. 364) Financial information by itself provides managers with all of the information that they need to measure the four building blocks of competitive advantage. FALSE

Although financial information is an important output control, financial information by itself does not tell managers all they need to know about the four building blocks of competitive advantage.


22. (p. 364) To encourage a future-oriented approach, top managers must establish organizational goals. TRUE

To encourage a future-oriented approach, top managers must establish organizational goals.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

23. (p. 364) If goals are set at an impossibly high level, managers might work only half-heartedly to achieve them because they are certain they will fail. TRUE

If goals are set at an impossibly high level, managers might work only half-heartedly to achieve them because they are certain they will fail.


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24. (p. 366) The least powerful form of behavior control is direct supervision of a subordinate by a manager. FALSE

The most immediate and potent form of behavior control is direct supervision.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-04 Identify the main behavior controls; and discuss their advantages and disadvantages as a means of coordinating and motivating employees.Topic: Behavior Control

25. (p. 366) When managers personally supervise subordinates, they lead by example and in this way can help subordinates develop and increase their own skill levels. TRUE

When managers personally supervise subordinates, they lead by example and in this way can help subordinates develop and increase their own skill levels.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-04 Identify the main behavior controls; and discuss their advantages and disadvantages as a means of coordinating and motivating employees.Topic: Behavior Control

26. (p. 366) The more complex a job is, the more difficult it is for a manager to evaluate how well a subordinate is performing. TRUE

The more complex a job is, the more difficult it is for a manager to evaluate how well a subordinate is performing.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-04 Identify the main behavior controls; and discuss their advantages and disadvantages as a means of coordinating and motivating employees.Topic: Behavior Control

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27. (p. 367) Management by objectives (MBO) is a formal system of evaluating subordinates on their ability to achieve specific organizational goals or performance standards and to meet operating budgets. TRUE

Management by objectives (MBO) is a formal system of evaluating subordinates on their ability to achieve specific organizational goals or performance standards and to meet operating budgets.


28. (p. 367) During the objective-setting process of the MBO, it is the sole responsibility of managers to establish the goals for the employees. FALSE

The participation of subordinates in the objective-setting process of MBO is a way of strengthening their commitment to achieving their goals and meeting their budgets.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-04 Identify the main behavior controls; and discuss their advantages and disadvantages as a means of coordinating and motivating employees.Topic: Behavior Control

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29. (p. 369) Bureaucratic control is control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals. TRUE

Bureaucratic control is control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals.


30. (p. 374) Output control and behavior control are appropriate for many of the most important and significant organizational activities. FALSE

For many of the most important and significant organizational activities, however, output control and behavior control are inappropriate for several reasons.


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31. (p. 374) Clan control keeps organizational members goal-directed, while they are still open to new opportunities. TRUE

One source of control increasingly being used by organizations is clan control, which takes advantage of the power of internalized values and norms to guide and constrain employee attitudes and behavior in ways that increase organizational performance.


32. (p. 374) Organizational culture functions as a kind of control system. TRUE

Organizational culture functions as a kind of control system because managers can deliberately try to influence the kind of values and norms that develop in an organization.


33. (p. 376) Organizational dynamics is the movement of an organization away from its present state toward some preferred future state to increase its efficiency and effectiveness. FALSE

Organizational change is the movement of an organization away from its present state toward some preferred future state to increase its efficiency and effectiveness.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: MediumLearning Objective: 11-05 Discuss the relationship between organizational control and change; and explain why managing change is a vital management task.Topic: Organizational Change

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34. (p. 378) Evolutionary change involves a bold attempt to quickly find new ways to be effective. FALSE

Revolutionary change involves a bold attempt to quickly find new ways to be effective.


35. (p. 380) Top-down change is typically more gradual or evolutionary than bottom-up change. FALSE

Bottom-up change is typically more gradual or evolutionary.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: MediumLearning Objective: 11-05 Discuss the relationship between organizational control and change; and explain why managing change is a vital management task.Topic: Organizational Change

Multiple Choice Questions

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36. (p. 355) The process by which managers monitor and regulate the efficiency and effectiveness of the workers in an organization is called: A. PlanningB. OrganizingC. LeadingD. ControllingE. Coordinating

Controlling is the process by which managers monitor and regulate the organization in order to determine if the organization is operating efficiently and effectively.


37. (p. 357) The formal monitoring, evaluation, and feedback systems that allow managers to determine if the organization's strategy and structure are working according to plans are known as: A. Organizational socializationB. Clan controlC. Control systemsD. Concurrent systemsE. Market control

Control systems are formal target-setting, monitoring, evaluation, and feedback systems that provide managers with information about whether the organization's strategy and structure are working efficiently and effectively.


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38. (p. 357) Which type of control allows managers to anticipate problems before they arise? A. Feedforward controlB. Concurrent controlC. Feedback controlD. Bureaucratic controlE. Clan control

Feedforward control is control that allows managers to anticipate problems before they arise.


39. (p. 357) At the __________ stage of the process of transforming raw materials into finished goods, managers typically use __________ control procedures to anticipate problems before they occur. A. input; concurrentB. conversion; feedforwardC. output; concurrentD. input; feedforwardE. conversion; feedback

At the input stage, managers use feedforward control to anticipate problems before they arise so problems do not occur later during the conversion process.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: HardLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

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40. (p. 357) RST Consulting diligently screens job applicants, often by viewing their résumés electronically and using several interviews to select the most highly skilled people. This is an example of: A. Concurrent controlB. Feedforward controlC. Feedback controlD. Bureaucratic controlE. Market control


AACSB: Reflective ThinkingBloom's: ApplyDifficulty: HardLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

41. (p. 357) Starling Manufacturing Inc. has carefully set up strict specifications for its raw materials and goes through a three-step approval process when selecting its suppliers to ensure its raw materials are the best possible quality. This is an example of: A. Concurrent controlB. Feedforward controlC. Feedback controlD. Bureaucratic controlE. Clan control



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42. (p. 358) At the __________ stage of the process of transforming raw materials into finished goods, managers typically use __________ control procedures to obtain immediate feedback about how efficiently the raw materials are being transformed into finished goods. A. conversion; concurrentB. conversion; feedbackC. output; feedforwardD. input; concurrentE. output; concurrent

At the conversion stage, concurrent control gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise.


43. (p. 358) Which type of control do managers typically use at the conversion stage of transforming raw materials into finished goods? A. Feedforward controlB. Bureaucratic controlC. Concurrent controlD. Feedback controlE. Market control

At the conversion stage, concurrent control gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise.


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44. (p. 358) Which type of control is at the heart of total quality management programs? A. Feedforward controlB. Concurrent controlC. Feedback controlD. Bureaucratic controlE. Clan control

Concurrent control is at the heart of total quality management.


45. (p. 358) What type of control do managers typically use at the output stage of transforming raw materials into finished goods? A. Behavioral controlB. Concurrent controlC. Bureaucratic controlD. Feedforward controlE. Feedback control

At the output stage, managers use feedback control to provide information about customers' reactions to goods and services so corrective action can be taken if necessary.


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46. (p. 358) At the __________ stage of transforming raw materials into finished goods, managers typically use __________ control methods to determine customers' reactions to the organization's goods and services. A. output; feedforwardB. input; feedbackC. conversion; feedforwardD. output; feedbackE. conversion; feedback



47. (p. 358) An organization monitors the number of customer returns for each product model to attempt to recognize when the organization is producing a large number of defective products. This is an example of: A. Feedforward controlB. Concurrent controlC. Clan controlD. Feedback controlE. Bureaucratic control



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48. (p. 358) Price Buster Retail has invested in a management information system (MIS) that measures increases or decreases in relative sales of different products alerts managers to changes in customer tastes. This is an example of: A. Feedforward controlB. Feedback controlC. MBO controlD. Bureaucratic controlE. Concurrent control



49. (p. 358) Which step of the control process deals with establishing the standards of performance? A. Step 1B. Step 2C. Step 3D. Step 4E. Step 5

At step 1 in the control process managers decide on the standards of performance, goals, or targets that they will use in the future to evaluate performance.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-02 Describe the four steps in the control process and the way it operates over time.Topic: Control Process

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50. (p. 358) The standard of performance that measures efficiency at the corporate level of the organization is: A. Cost of goods soldB. Operating profitC. Net salesD. Operating costsE. Net income after taxes

At the corporate level, a standard of performance that measures efficiency is operating costs, the actual costs associated with producing goods and services, including all employee-related costs.


51. (p. 359) At what stage of the control process do managers evaluate actual outputs and behavior outputs? A. Step 1B. Step 2C. Step 3D. Step 4E. Step 5

The second step in the control process is to measure actual performance. In practice, managers can measure or evaluate two things: (1) the actual outputs that result from the behavior of their members and (2) the behaviors themselves.


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52. (p. 359) When an organization and its members perform ______ activities, it is ______ challenging for managers to measure outputs or behavior. A. nonroutine, moreB. nonroutine, lessC. routine, moreD. programmed, moreE. nonprogrammed, less

When an organization and its members perform complex, nonroutine activities that are intrinsically hard to measure, it is more challenging for managers to measure outputs or behavior.


53. (p. 359) Trevor, the regional manager for Taylor Dairies, tracks the average sale of each dairy product sold in order to determine the quantity of each type of product to be carried on the fleet. This is an example of: A. Bureaucratic controlB. Feedforward controlC. Output controlD. Input controlE. Clan control

The second step in the control process is to measure actual performance. In practice, managers can measure or evaluate two things: (1) the actual outputs that result from the behavior of their members and (2) the behaviors themselves.

AACSB: Reflective ThinkingBloom's: ApplyDifficulty: HardLearning Objective: 11-02 Describe the four steps in the control process and the way it operates over time.Topic: Control Process

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54. (p. 360) At Step 3 of the control process, managers: A. Measure actual performanceB. Compare actual performance to the standardsC. Establish the standards of performanceD. Initiate corrective actionE. Develop goals

During step 3, managers evaluate whether-and to what extent-performance deviates from the standards of performance chosen in step 1.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-02 Describe the four steps in the control process and the way it operates over time.Topic: Control Process

55. (p. 360) The final step in the control process is to: A. Initiate corrective actionB. Measure actual performanceC. Establish the standards of performanceD. Compare actual performance to the standardsE. Provide feedback

The final step in the control process is to evaluate the results and bring about change as appropriate.


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56. (p. 361) Top managers are most concerned with overall organizational performance and use various financial measures to evaluate it. The most common include all EXCEPT: A. Activity ratiosB. Leverage ratiosC. Profit ratiosD. Liquidity ratiosE. Cash flow ratios

Top managers are most concerned with overall organizational performance and use various financial measures to evaluate it. The most common are profit ratios, liquidity ratios, leverage ratios, and activity ratios.


57. (p. 362) Which of the following is the most commonly used financial performance measure when evaluating an organization's performance? A. Gross profit marginB. Debt-to-equity ratioC. Days sales outstanding ratioD. Inventory turnover ratioE. Return on investment

Return on investment (ROI), an organization's net income before taxes divided by its total assets, is the most commonly used financial performance measure because it allows managers of one organization to compare performance with that of other organizations.


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58. (p. 362) What is the result of dividing a company's operating profit (the amount it has left after all the costs of making the product and running the business have been deducted) by sales revenues? A. Gross profit marginB. Return on investmentC. Net profitD. Operating marginE. Operating costs

Operating margin is calculated by dividing a company's operating profit (the amount it has left after all the costs of making the product and running the business have been deducted) by sales revenues.


59. (p. 362) The direct and indirect costs associated with producing a specific product are subtracted from the net revenues received from the sale of this product. The resulting figure is called: A. Net incomeB. Operating profitC. Cash flowD. Gross profit marginE. The liquidity ratio

Operating profit is the amount it has left after all the costs of making the product and running the business have been deducted.


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60. (p. 362) Which type of financial ratios measures the ability of the organization to pay its short-term debts? A. Leverage ratiosB. Liquidity ratiosC. Activity ratiosD. Profit ratiosE. Inventory turnover ratios

Liquidity ratios measure how well managers have protected organizational resources to be able to meet short-term obligations.


61. (p. 362) Which type of financial ratio is computed by dividing the organization's current assets by its current liabilities? A. Inventory turnover ratioB. Days sales outstanding ratioC. Profit ratioD. Current ratioE. Debt-to-assets ratio

The current ratio (current assets divided by current liabilities) tells managers whether they have the resources available to meet the claims of short-term creditors.


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62. (p. 362) Which type of financial ratio indicates whether or not the organization is capable of paying off its short-term debts without having to sell any of its inventories? A. Quick ratioB. Current ratioC. Days sales outstanding ratioD. Inventory turnover ratioE. Profit ratio

The quick ratio shows whether they can pay these claims without selling inventory.


63. (p. 362) The times-covered ratio, which measures the degree to which managers use debt or equity to finance ongoing operations, is a type of financial ratio known as: A. Current ratioB. Liquidity ratioC. Leverage ratioD. Activity ratioE. Profit ratio

Leverage ratios, such as the debt-to-assets ratio and the times-covered ratio, measure the degree to which managers use debt or equity to finance ongoing operations.


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64. (p. 363) Which types of financial ratios measure how well the managers of the organization are creating value from the organization's assets? A. Leverage ratiosB. Liquidity ratiosC. Profit ratiosD. Current ratiosE. Activity ratios

Activity ratios show how well managers are creating value from organizational assets.


65. (p. 363) Inventory turnover is a type of: A. Leverage ratiosB. Liquidity ratiosC. Profit ratiosD. Activity ratiosE. Quick ratios

Activity ratios show how well managers are creating value from organizational assets.


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66. (p. 363) What is the reason why so many managers use financial measures to assess the efficiency and effectiveness of their organizations? A. ObjectivityB. SubjectivityC. FeasibilityD. Ease of useE. Creativity

The objectivity of financial measures of performance is the reason why so many managers use them to assess the efficiency and effectiveness of their organizations.


67. (p. 365) As the regional manager, Ted's performance is evaluated on the basis of the difference between the sales revenues generated by his region and the cost of making those goods and services. Ted is being evaluated using: A. A profit budget approachB. A revenue budget approachC. A cash flow budget approachD. A cost budget approachE. An expense budget approach

Managers may be evaluated on the difference between the revenues generated by the sales of goods and services and the budgeted cost of making those goods and services (a profit budget approach).

AACSB: Reflective ThinkingBloom's: ApplyDifficulty: HardLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

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68. (p. 365) As a regional manager, Dwight is given an operating budget of $1 million for the coming year and is evaluated on the basis of the amount of paper the region can sell based on that budget. Dwight's performance will be evaluated on: A. A revenue budget approachB. A cash flow budget approachC. An expense budget approachD. A profit budget approachE. A capital budget approach

Managers of a division may be given a fixed budget for resources and be evaluated on the amount of goods or services they can produce using those resources (this is a cost or expense budget approach).

AACSB: Reflective ThinkingBloom's: ApplyDifficulty: HardLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

69. (p. 365) A division manager is told to "maximize the sales of the division" and is then evaluated on the basis of the net sales generated by the division. This is an example of: A. A profit budget approachB. A revenue budget approachC. An expense budget approachD. A cash flow budget approachE. A capital budget approach

Managers may be asked to maximize the revenues from the sales of goods and services produced (a revenue budget approach).

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

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70. (p. 365) A division manager is evaluated based on his division's revenues less the budgeted cost of his division. This is an example of: A. A cash flow budget approachB. A capital budget approachC. A revenue budget approachD. An expense budget approachE. A profit budget approach

Managers may be evaluated on the difference between the revenues generated by the sales of goods and services and the budgeted cost of making those goods and services (a profit budget approach).

AACSB: Reflective ThinkingBloom's: RememberDifficulty: HardLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

71. (p. 366) What is the most immediate and potent form of behavior control? A. SOPsB. An MBO systemC. RulesD. Direct supervisionE. Return on investment

The most immediate and potent form of behavior control is direct supervision.


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72. (p. 366) What allows managers at all levels to become personally involved with their subordinates and allows them to mentor subordinates and develop their management skills? A. Clan controlB. MBO systemsC. Market controlD. Output controlE. Direct supervision

Direct supervision allows managers at all levels to become personally involved with their subordinates and allows them to mentor subordinates and develop their management skills.


73. (p. 366) All of the following are problems associated with direct supervision EXCEPT: A. ExpensiveB. Demotivation of subordinatesC. Not feasible for some jobsD. Employees may feel scrutinizedE. Personal involvement with subordinates

A benefit of direct supervision is that it allows managers at all levels to become personally involved with their subordinates and allows them to mentor subordinates and develop their management skills.


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74. (p. 366) The use of direct supervision as a control mechanism: A. Is the least expensive form of controlB. Can demotivate subordinatesC. Is feasible for complex jobsD. Is preferred over output controlsE. Is preferred over behavior controls

Direct supervision can demotivate subordinates.


75. (p. 367) A system for evaluating subordinates' behavior by their ability to achieve specific goals is called: A. An SOPB. Performance appraisalC. MBOD. TQME. Clan control

Management by objectives (MBO) is a formal system of evaluating subordinates on their ability to achieve specific organizational goals or performance standards and to meet operating budgets.


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76. (p. 367) MBO starts when top managers: A. Establish lines of communicationB. Develop behavior controlsC. Develop output controlsD. Establish organizational objectivesE. Establish individual performance objectives

MBO starts when top managers establish overall organizational objectives, such as specific financial performance goals or targets.


77. (p. 367) In MBO: A. Subordinates set goals for themselvesB. Managers set goals for subordinatesC. Subordinates set goals for managersD. Managers and subordinates set goals togetherE. Managers and subordinates goals are unrelated

Managers at every level sit down with each of the subordinate managers who report directly to them, and together they determine appropriate and feasible goals for the subordinate.


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78. (p. 369) Control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals is known as: A. A bureaucratic control systemB. Management by objectiveC. Output controlD. Clan controlE. Market control

Bureaucratic control is control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals.


79. (p. 370) ___________ guide behavior and specify what an employee should do when they confront a problem that needs a solution. A. GoalsB. SOPsC. RulesD. Rules and SOPs, but not goalsE. Rules, SOPs, and goals

Rules and SOPs guide behavior and specify what employees are to do when they confront a problem that needs a solution.


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80. (p. 370) The workers of an organization perform the same activities in the same way over and over again, based on rules that managers have developed. We say that the behavior of these workers has been: A. CompromisedB. StandardizedC. MaximizedD. MinimizedE. Simplified

When employees follow the rules that managers have developed, their behavior is standardized-actions are performed the same way time and time again-and the outcomes of their work are predictable.


81. (p. 372) Too much ______ can actually ______ the level of learning taking place in an organization and get the organization off track if managers and workers focus on the wrong issues. A. standardization; reduceB. standardization; increaseC. innovation; reduceD. innovation; increaseE. stability; increase

Thus too much standardization can actually reduce the level of learning taking place in an organization and get the organization off track if managers and workers focus on the wrong issues.


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82. (p. 372) Bureaucratic control should be used when organizational activities are ________________; it is less useful when _________. A. routine; nonprogrammed decisions must be madeB. routine; programmed decisions must be madeC. nonroutine; programmed decisions must be madeD. nonstandardized; nonprogrammed decisions must be madeE. standardized; programmed decisions must be made

Bureaucratic control is most useful when organizational activities are routine and well understood and when employees are making programmed decisions.


83. (p. 374) The set of values, norms, and expectations of behavior which control the ways in which workers interact with one another within the organization is known as: A. Bureaucratic cultureB. Organizational cultureC. An MBO cultureD. SOPsE. Rules

Organizational culture is values and norms that specify appropriate and inappropriate behaviors and so determine the way its members behave.


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84. (p. 374) The type of control that is imposed on workers within the organization by the shared values and standards of behavior for workers within that organization is known as: A. Bureaucratic controlB. Feedforward controlC. Clan controlD. Feedback controlE. Output control

Clan control is the control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations.


85. (p. 374) Which type of control keeps organizational members goal-directed while open to new opportunities by taking advantage of the power of organizational culture? A. Bureaucratic controlB. Feedforward controlC. Market controlD. Clan controlE. Output control

Clan control serves this dual function of keeping organizational members goal-directed while open to new opportunities because it takes advantage of the power of organizational culture.


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86. (p. 376) Many researchers believe that the highest-performing organizations are those that are constantly: A. ChangingB. StandardizingC. StabilizingD. ControllingE. Minimizing

Many researchers believe that the highest-performing organizations are those that are constantly changing.

AACSB: Reflective ThinkingBloom's: RememberDifficulty: EasyLearning Objective: 11-05 Discuss the relationship between organizational control and change; and explain why managing change is a vital management task.Topic: Organizational Change

87. (p. 377) What theory states that a wide variety of forces arise from the way an organization operates that make organizations resistant to change? A. TQMB. Force-fieldC. BenchmarkingD. Evolutionary changeE. Revolutionary change

According to force-field theory, a wide variety of forces arise from the way an organization operates that make organizations resistant to change.


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88. (p. 377) When the forces are evenly balanced, the organization is in a state of ______ and does not change. A. equilibriumB. balanceC. stagnationD. inertiaE. stability

When the forces are evenly balanced, the organization is in a state of inertia and does not change.


89. (p. 377) Which theory deals with understanding organizational change? A. Maslow's HierarchyB. Lewin's Force-Field TheoryC. Scientific ManagementD. TQME. MBO

According to his force-field theory, a wide variety of forces arise from the way an organization operates that make organizations resistant to change.


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90. (p. 378) What type of change is gradual, incremental, and narrowly focused? A. Force-fieldB. CultureC. StructuralD. RevolutionaryE. Evolutionary

Evolutionary change is gradual, incremental, and narrowly focused.


91. (p. 378) What type of change is rapid, dramatic, and broadly focused? A. Force-fieldB. CultureC. StructuralD. RevolutionaryE. Evolutionary

Revolutionary change is rapid, dramatic, and broadly focused.


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92. (p. 378) The first step managers must take to manage change effectively is: A. Evaluate the changeB. Decide on the change to makeC. Implement the changeD. Assess the need to changeE. Identify obstacles to change

During the first step in the change process, managers need to recognize that there is a problem that requires change.


93. (p. 380) A change that is gradual, in which managers at all levels work together to develop a detailed plan for change, is called a __________ change. A. top-downB. management-directedC. bottom-upD. revolutionaryE. restructuring

Bottom-up change is a gradual or evolutionary approach to change in which managers at all levels work together to develop a detailed plan for change.


Essay Questions

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94. (p. 356-357) Explain the relationship between organizational control and the four building blocks of competitive advantage.

To determine how efficiently they are using their resources, managers must be able to accurately measure how many units of inputs are being used to produce a unit of output. Managers also must be able to measure how many units of outputs are being produced. A control system contains the measures or yardsticks that let managers assess how efficiently the organization is producing goods and services. Today much of the competition among organizations centers on increasing the quality of goods and services. Organizational control is important in determining the quality of goods and services because it gives managers feedback on product quality. Effective managers create a control system that consistently monitors the quality of goods and services so they can continuously improve quality-an approach to change that gives them a competitive advantage. Managers can help make their organizations more responsive to customers if they develop a control system, such as a CRM system, that allows them to evaluate how well customer contact employees perform their jobs. Finally, controlling can raise the level of innovation in an organization. Successful innovation takes place when managers create an organizational setting in which employees feel empowered to be creative and in which authority is decentralized to employees so they feel free to experiment and take control of their work activities.

AACSB: Reflective ThinkingBloom's: AnalyzeDifficulty: HardLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

95. (p. 357) Discuss the three characteristics of an effective control system in an organization. Illustrate each characteristic with a specific example from an organization of your choosing.

An effective control system should be flexible so that managers can respond to unexpected events, should provide accurate information about the organization's performance, and should provide this information in time for managers to use it to make decisions. Students' examples will vary.

AACSB: Reflective ThinkingBloom's: ApplyDifficulty: MediumLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

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96. (p. 357-358) Discuss the type of control used at each stage in process of transforming inputs into finished goods or services. Provide examples of each type of control.

At the input stage, managers use feedforward control to anticipate problems before they arise so problems do not occur later during the conversion process. At the conversion stage, concurrent control gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise. At the output stage, managers use feedback control to provide information about customers' reactions to goods and services so corrective action can be taken if necessary. Students' examples will vary.

AACSB: Reflective ThinkingBloom's: ApplyDifficulty: MediumLearning Objective: 11-01 Define organizational control and explain how it increases organizational effectiveness.Topic: Organizational Control

97. (p. 358-360) Describe the four steps in the control process.

Step 1: Establish the standards of performance, goals, or targets against which performance is to be evaluated. Step 2: Measure actual performance. Step 3: Compare actual performance against chosen standards of performance. Step 4: Evaluate the result and initiate corrective action (that is, make changes) if the standard is not being achieved.


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98. (p. 361-363) The top managers of an organization typically use a variety of financial indicators to assess the performance of their organization. Discuss the four major types of financial measures and give one specific example of how each would be computed.

Profit ratios measure how efficiently managers are using the organization's resources to generate profits. Return on investment (ROI), an organization's net income before taxes divided by its total assets, is the most commonly used financial performance measure because it allows managers of one organization to compare performance with that of other organizations. Operating margin is calculated by dividing a company's operating profit (the amount it has left after all the costs of making the product and running the business have been deducted) by sales revenues. Liquidity ratios measure how well managers have protected organizational resources to be able to meet short-term obligations. The current ratio (current assets divided by current liabilities) tells managers whether they have the resources available to meet the claims of short-term creditors. The quick ratio shows whether they can pay these claims without selling inventory. Leverage ratios, such as the debt-to-assets ratio and the times-covered ratio, measure the degree to which managers use debt (borrow money) or equity (issue new shares) to finance ongoing operations. Activity ratios show how well managers are creating value from organizational assets. Inventory turnover measures how efficiently managers are turning inventory over so excess inventory is not carried. Days sales outstanding reveals how efficiently managers are collecting revenue from customers to pay expenses.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: HardLearning Objective: 11-03 Identify the main output controls; and discuss their advantages and disadvantages as means of coordinating and motivating employees.Topic: Output Control

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99. (p. 366-369) Discuss three ways in which managers can attempt to control the behavior of subordinates.

The most immediate and potent form of behavior control is direct supervision by managers who actively monitor and observe the behavior of their subordinates, teach subordinates the behaviors that are appropriate and inappropriate, and intervene to take corrective action as needed. Moreover, when managers personally supervise subordinates, they lead by example and in this way can help subordinates develop and increase their own skill levels. To provide a framework within which to evaluate subordinates' behavior and, in particular, to allow managers to monitor progress toward achieving goals, many organizations implement some version of management by objectives. Management by objectives (MBO) is a formal system of evaluating subordinates on their ability to achieve specific organizational goals or performance standards and to meet operating budgets. When direct supervision is too expensive and management by objectives is inappropriate, managers might turn to another mechanism to shape and motivate employee behavior: bureaucratic control. Bureaucratic control is control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals.


100. (p. 367) Discuss the steps involved in the management by objective process.

The steps are: (1) Establish specific goals and objectives at each organizational level; (2) Determine subordinates' goals, together with subordinates; (3) Periodically review subordinates' progress toward goals, with subordinates.


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101. (p. 371-372) Discuss the problems associated with bureaucratic control.

First, establishing rules is always easier than discarding them. Organizations tend to become overly bureaucratic over time as managers do everything according to the rule book. If the amount of red tape becomes too great, decision making slows and managers react sluggishly to changing conditions. Second, because rules constrain and standardize behavior and lead people to behave in predictable ways, people might become so used to automatically following rules that they stop thinking for themselves. Thus too much standardization can actually reduce the level of learning taking place in an organization and get the organization off track if managers and workers focus on the wrong issues.


102. (p. 374) What is "clan control"? How can a manager use clan control to influence employees' work behaviors?

Clan control is the control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations. Managers can use clan control indirectly by enabling the formation of a strong culture with strong, appropriate values and norms.


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103. (p. 376) Discuss the two opposing forces in the control process that influence how organizations change.

There is a fundamental tension or need to balance two opposing forces in the control process that influences how organizations change. Organizations and their managers need to be able to control their activities and make their operations routine and predictable. At the same time, however, organizations have to be responsive to the need to change, and managers and employees have to "think on their feet" and realize when they need to depart from routines to be responsive to unpredictable events. In other words, even though adopting the right set of output and behavior controls is essential for improving efficiency, because the environment is dynamic and uncertain employees also need to feel that they have the autonomy to depart from routines as necessary to increase effectiveness.


104. (p. 377) Describe Lewin's Force-Field Theory.

According to his force-field theory, a wide variety of forces arise from the way an organization operates-from its structure, culture, and control systems-that make organizations resistant to change. At the same time a wide variety of forces arise from changing task and general environments that push organizations toward change. These two sets of forces are always in opposition in an organization. When the forces are evenly balanced, the organization is in a state of inertia and does not change. To get an organization to change, managers must find a way to increase the forces for change, reduce resistance to change, or do both simultaneously. Any of these strategies will overcome inertia and cause an organization to change.


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105. (p. 378) Define evolutionary and revolutionary change. When is each appropriate?

Evolutionary change is gradual, incremental, and narrowly focused. It is appropriate when there is a need to adjust or improve. Revolutionary change is rapid, dramatic, and broadly focused. It is appropriate when there are drastic, unexpected changes in the environment, and the organization needs to quickly find new ways to be effective.

AACSB: Reflective ThinkingBloom's: UnderstandDifficulty: EasyLearning Objective: 11-05 Discuss the relationship between organizational control and change; and explain why managing change is a vital management task.Topic: Organizational Change

106. (p. 378-382) Describe the steps in the organizational change process.

The steps are summarized in Figure 11.7.


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