Essentials of Contemporary Management 7th Edition Jones Test Bank 1

ESSENTIALS OF CONTEMPORARY
MANAGEMENT 7TH EDITION JONES
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Chapter 08
Control, Change, and Entrepreneurship
True / False Questions
1. Using the controlling function, managers monitor and evaluate the organization's strategy to
evaluate whether it is working as intended.
True False
8-1
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McGraw-Hill Education.
2. Organizational control procedures can give managers feedback about the quantity, but not
the quality, of products produced by the organization.
True False
3. Managers use feedforward control to anticipate problems.
True False
4. During the input stage, the most common type of control procedure is concurrent control,
which gives managers immediate feedback.
True False
5. At the output stage, managers use feedforward control to provide information about
customers' reactions to goods.
True False
6. The first step in the control process is to evaluate results in terms of performance standards.
True False
7. A standard of performance that measures efficiency at the functional level is operating

costs.
True False
8. Standard operating procedures are mechanisms for clan control.
True False
8-2
9. The most commonly used financial performance measure in organizations is the debt-to-
equity ratio.
True False
10. The inventory turnover ratio is an example of the activity ratio of an organization.
True False
11. Output control procedures are used at every management level of an organization.
True False
12. Control by means of a comprehensive system of rules and standard operating procedures
that shape and regulate the behavior of divisions, functions, and individuals is known as
bureaucratic control.
True False
13. Organizational culture makes control possible in situations where managers cannot use
behavior control.
True False
14. An inert culture is one that controls employee behavior and attitudes through its strong and
cohesive organizational culture.
True False
15. Adaptive cultures are those whose values and norms help an organization to build momentum
and to grow and change as needed to achieve its goals and be effective.
True False
8-3
Multiple Choice Questions
16. The process by which managers monitor and regulate how efficiently and effectively an
organization and its members are performing the activities necessary to achieve
organizational goals is known as _______.
A. organizing
B. leading
C. controlling
D. coordinating
17. The 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 are known as ________ systems.
A. operating
B. organizational
C. control
D. recurrent
18. The type of control that managers typically use in the input stage of the process of
transforming raw materials into finished goods is ________ control.
A. feedforward
B. concurrent
C. feedback
D. bureaucratic
8-4
19. Action Explosives gives specifications to its suppliers of raw materials in an attempt to
improve the quality of those raw materials and to minimize and anticipate the problems they
are likely to face in the conversion process. This is an example of ________ control.
A. concurrent
B. feedforward
C. feedback
D. bureaucratic
20. Managers at Zeppel Construction Company set up a stringent job interview process by which
management applicants are carefully screened at different levels of the organization before
they are hired, attempting to increase the chance that newly hired managers will have the
knowledge and skills they need to be successful within the organization. By using this
process, Zeppel is using ________ control.
A. concurrent
B. feedforward
C. feedback
D. MBO
21. Hanover Insurance set up a management information system that gives its regional managers
information about changes in the task environment that may affect the organization at some
future time. By using this system, Hanover is utilizing ________ control.
A. feedforward
B. feedback
C. bureaucratic
D. MBO
8-5
22. The control system that managers use at the conversion stage of transforming raw materials
into finished goods is ________ control.
A. feedforward
B. bureaucratic
C. concurrent
D. feedback
23. The control system that is typically used in a garment plant to solve problems like
substandard inputs, broken machine parts, or a worker's skill deficiency to produce a
particular type of garment is ________ control.
A. feedforward
B. MBO
C. feedback
D. concurrent
24. At the output stage, managers usually utilize ________ control.
A. MBO
B. bureaucratic
C. feedforward
D. feedback
8-6
25. Brennan Manufacturing monitors the number of customer returns for each product model to
track when the organization is producing a large number of defective products. In this case,
Brennan Manufacturing is using ________ control.
A. feedforward
B. concurrent
C. MBO
D. feedback
26. Beswick Widget Ltd. sets up a system to monitor unit sales of its products to measure
changes taking place in customer tastes and the possible resulting impact on future sales.
With this system, Beswick is using ________ control.
A. feedforward
B. feedback
C. MBO
D. bureaucratic
27. Ben, the production manager of Pace Shoes, sets a production target of 220 shoes to be
distributed among 20 employees in a week. In the context of the control process, Ben is
________.
A. establishing the standards of performance
B. measuring the actual level of performance of employees
C. comparing the actual performance against chosen standards of performance
D. evaluating the result of the set standards
8-7
28. The managers of Foodex, a fast food restaurant, record outputs on a daily basis by counting
how many customers their employees serve, the time each transaction takes, and how much
money each customer spends every day. With reference to the control process, the managers
of Foodex are ________.
C. comparing the actual performance against chosen standards
29. The standard of performance that measures efficiency at the corporate level of the
organization is known as ________.
A. cost of goods sold
B. capital costs
C. net sales
D. operating costs
30. The step of the control process utilized by managers to evaluate whether the actual
performance of the organization differs significantly from the standards of performance that
assess the organization is ________.
A. measuring actual performance
B. comparing actual performance to the standards
C. initiating corrective action
D. measuring standards of performance
8-8
31. Brandon, the manager of Flipflop Footwear, checked the weekly records and discovered that
the number of shoes produced in one week by 20 employees was 250 against the set target
of 220 shoes. With reference to the control process, Brandon is ________.
32. The final step in the control process is to ________.
A. evaluate results and initiate corrective action
B. measure actual performance
C. compare actual performance to the standards
D. measure the standards of performance
33. Danny, the manager of Wader Shoes, installed new machinery to speed up the production
process after the assigned targets were not achieved for the third week of the month. With
regard to the control process, Danny is ________.
C. evaluating the result of the set standards
D. initiating corrective actions
8-9
34. A mechanism of control utilized in organizational culture is ________.
A. direct supervision
B. management by objectives
C. socialization
D. organizational goals
35. Management by objectives is a mechanism of control with ________ organizational control

systems.
A. input
B. clan
C. output
D. behavior
36. The manager of Triks Burgers keeps track of the number of customers served at different
periods of the day in an attempt to plan a schedule for workers that matches the demand for
the restaurant's products. By using this tracking system, the manager of Triks Burgers is
utilizing ________ control.
A. output
B. bureaucratic
C. input
D. MBO
8-10
37. The manager of Inkman, a convenience store, keeps track of the average sale amount for
each customer as a way of deciding on the product mix to be carried in the store. This is an
example of ________ control.
A. feedforward
B. output
C. input
D. MBO
38. The performance ratio that measures the efficiency of the organization in terms of how well
the resources of the organization have been used to generate profit is a(n) _______ ratio.
A. activity
B. leverage
C. profit
D. liquidity
39. The most commonly used financial performance measure that allows managers of one
organization to compare performance with that of other organizations is ________.
A. gross profit margin
B. the debt-to-assets ratio
C. the inventory turnover ratio
D. return on investment
8-11
40. An organization's net income before taxes divided by the total assets of the organization is
known as ________.
B. return on investment
C. the debt-to-assets ratio
D. days sales outstanding
41. The financial ratio that measures the ability of the organization to pay its short-term debts is
the ________ ratio.
A. leverage
B. liquidity
C. activity
D. profit
42. The ratio that is computed by dividing the difference between current assets and inventory by
current liabilities is the ________ ratio.
A. inventory turnover
B. quick
C. current
D. debt-to-assets
8-12
43. The current assets of Global Acorn are valued at 25 million dollars and its current liabilities
are at 6 million dollars. If its inventory is worth 1 million dollars, what is its quick ratio?
A. 4
B. 0.25
C. 0.14
D. 3.6
44. The CEO of a company would like to know whether his managers can pay off claims of short-
term creditors without selling inventory. What ratio will help him understand the company's
liquidity?
A. Inventory turnover ratio
B. Quick ratio
C. Current ratio
D. Debt-to-assets ratio
45. The financial ratio that indicates whether or not the organization is capable of paying off its
short-term debts without having to sell its inventory is the ________ ratio.
A. quick
B. current
C. days sales outstanding
D. profit
8-13
46. From the information given below, calculate the organization's return on investment.
Total Liabilities = $300,000; Total Assets = $600,000; Gross Margin = $200,000; Net Income
Before Taxes = $30,000; Total Expenses = $240,000
A. 50 percent
B. 5 percent
C. 10 percent
D. 12.5 percent
47. Calculate the return on investment from the information given below.
Net Income = $18,000; Advertising Expenses = $220,000; Total Liabilities = $120,000; Total
Assets = $160,000; Gross Margin = $80,000; Taxes Paid = $2,000
A. 16.67 percent
B. 15 percent
C. 11.25 percent
D. 12.5 percent
48. Calculate the current ratio of the organization from the information given below.
Sales = $200,000; Gross Profit = $40,000; Total Assets = $450,000; Current Assets =
$250,000; Current Liabilities = $300,000
A. 0.44
B. 0.56
C. 0.67
D. 0.83
8-14
49. From the information given below, calculate the organization's current ratio.
Total Liabilities = $750,000; Current Liabilities = $220,000; Total Assets = $700,000; Current
Assets = $176,000
A. 0.25
B. 0.93
C. 0.29
D. 0.80
50. The financial ratio that indicates the degree to which the organization uses debt or equity to
finance its ongoing operations is the ________ ratio.
A. leverage
B. liquidity
C. activity
D. profit
51. The financial ratio that measures how well the managers of the organization are creating
value from the organization's assets is the ________ ratio.
A. leverage
B. liquidity
C. current
D. activity
8-15
52. The financial ratio that indicates how efficiently the managers of the organization are
collecting the revenue due to the organization from the sale of its products or services is the
________ ratio.
A. debt-to-assets
B. quick
C. current
53. The managers of a division are given a fixed budget and are then evaluated on the basis of
their ability to produce goods or services. This is an example of a(n) ________ budget
approach.
A. expense
B. profit
C. cash flow
D. revenue
54. The manager of a profit center is evaluated on the basis of the amount of sales that have
been generated from the goods or services produced in his/her division. The divisional
manager is being evaluated using the _______ budget approach.
A. expense
B. cash flow
C. revenue
D. profit
8-16
55. When a manager is told to maximize the revenues from the sales of goods and services
produced, this is an example of a(n) ________ budget approach.
A. profit
B. revenue
C. expense
D. cash flow
56. When a manager is evaluated on the difference between sales revenue and the budgeted
cost of making those goods and services, this is an example of a(n) ________ budget
approach.
A. revenue
B. cash flow
C. expense
D. profit
57. A divisional manager's performance is evaluated on the basis of the difference between the
sales revenues generated by that division and the cost of making those goods and services.
The divisional manager is being evaluated using the _______ budget approach.
A. profit
B. revenue
C. cost
D. expense
8-17
58. When a divisional manager is evaluated based on the operating income of his division, this is
an example of a(n) ________ budget approach.
A. capital
B. revenue
C. expense
D. profit
59. The most immediate and potent form of behavior control is ________.
B. clan control
C. bureaucratic control
D. socialization
60. With management by objectives, the first things established are ________.
A. evaluations
B. organizational objectives
C. management goals
D. subordinate goals
61. Rules and SOPs are used to regulate the behavior of workers within the organization with a
________ control system.
A. bureaucratic
B. feedback
C. feedforward
D. concurrent
8-18
62. Rules and SOPs are of little use in telling a scientist how to discover something new. Thus,
which of the following forms of control should not be applied to scientists?
A. feedforward
B. feedback
C. bureaucratic
D. concurrent
63. When actions are performed by employees the same way time and time again and the
outcomes of their work are predictable, employee behavior is ________.
A. generalized
B. standardized
C. maximized
D. minimized
64. A worker at a motorcycle plant comes up with a new way to attach the fuel injection system
to the motor, increasing the efficiency of the assembly process. The managers instruct all
employees to attach fuel injection systems the same way so that every car would come off
the assembly line with its fuel injection system attached in the new way. The managers are
using ________ control.
A. bureaucratic
B. clan
C. output
D. input
8-19
65. The set of values, norms, and expectations of behavior that control the ways in which
workers interact with one another within the organization is known as ________.
A. bureaucratic culture
B. organizational culture
C. feedback control
D. feedforward control
66. The control that is imposed on workers within the organization by the shared values, norms,
standards of behavior, and expectations is ________ control.
A. bureaucratic
B. operating
C. clan
D. leverage
67. When an organization has a strong and cohesive organizational culture that controls
employee attitudes and behaviors, that company has a(n) ________ culture.
A. networked
B. inert
C. adaptive
D. bureaucratic
8-20
68. Top managers in a company decide between themselves to implement an employee stock
ownership plan for all their employees. This is an example of a company taking a ________.
A. top-down approach to promote adaptive culture
B. bottom-up approach to promote adaptive culture
C. top-down approach to promote inert culture
D. bottom-up approach to promote inert culture
69. When an organization has a culture that leads to values and norms that fail to motivate or
inspire employees, which eventually leads to stagnation and often failure over time, that
company has a(n) ________ culture.
A. adaptive
B. inert
C. communal
D. bureaucratic
70. Companies with an inert culture ________.
A. closely supervise their employees within a hierarchical system
B. develop long-term career paths for their employees
C. invest heavily in training and development of employees
D. encourage the development of supportive work attitudes and behaviors
8-21
71. In companies that have an adaptive culture, employees are ________.
A. content to be told what to do during work hours
B. not motivated to perform beyond minimum requirements
C. closely supervised within a hierarchical authority
D. likely to have long-term career paths to follow
72. In an adaptive culture, employees often receive rewards based on their ________.
A. performance
B. contracts
C. length of service
D. organizational commitment
73. Organizational change can affect practically all aspects of organizational functioning,
________.
A. including organizational culture and strategies
B. including response to opportunities but not threats
C. excluding the human resource management system
D. excluding communication, motivation, and leadership
74. Which of the following stages in making organizational change includes benchmarking?
A. Assess the need for change
B. Decide on the change to make
C. Implement the change
D. Evaluate the change
8-22
75. Which of the following stages in making organizational change includes deciding whether
change will occur from the top down or from the bottom up?
76. Which of the following happens in the conversion stage?
A. Anticipating possible problems
B. Managing problems as they occur
C. Dealing with problems that have arisen
D. Managing without correction of problems
77. The company PinnTaxx has opted for a control system policy that deals with problems after
they arise. What type of control should they be using and at what stage?
A. Feedforward control at the input stage
B. Concurrent control at the feedback stage
C. Feedback control at the output stage
D. Feedforward control at the conversion stage
8-23
78. The process through which managers try to increase members' abilities to understand and
appropriately respond to changing conditions is known as ________.
A. clan control
B. socialization
C. organizational learning
D. bureaucratic control
79. In assessing the need for organizational change, managers must ________.
A. identify the obstacles to change at the corporate and individual levels
B. plan how they are going to attain the organization's ideal future state
C. recognize that there is a problem and identify its source
D. implement change from the top down or from the bottom up
80. The process of comparing one company's performance on specific dimensions with the
performance of high-performing organizations, to decide how successful a change effort has
been, is known as ________.
A. socialization
B. diversification
C. social facilitation
D. benchmarking
8-24
81. Entrepreneurship is the mobilization of resources to ________.
A. start a process that ends with the founding of a new business
B. compare two companies on specific dimensions
C. market an old product with a new twist
D. provide customers with new or improved goods and services
82. Members of which of the following groups may be considered intrapreneurs?
A. Employees of an organization who notice opportunities to develop new products
B. Employees of an organization who have worked across various industries
C. Managers who are responsible for two or more departments within a company
D. Managers who ensure interdepartmental transfer of skills
83. Agave Pharma has opted for a top-down approach to changing how the company functions so
that efficiency is increased. What is the change likely to entail?
A. A fast or revolutionary approach involving managers at all levels
B. A gradual or evolutionary approach involving only the top managers
C. A fast or revolutionary approach involving only the top managers
D. A gradual or evolutionary approach involving managers at all levels
84. Stag Plugs, Ltd., opts to take a bottom-up approach in order to draft a new attendance policy.
What will the approach entail?
8-25
85. Top managers at a food chain company consult with middle and first-line managers to revise
their marketing strategy. This approach will lead to ________.
A. top-down changes that can be implemented quickly throughout the organization
B. bottom-up changes to minimize resistance from employees and uncertainty
C. bottom-up changes that can be implemented quickly throughout the organization
D. top-down changes to minimize resistance from employees and uncertainty
Essay Questions
86. Define control systems and mention the three characteristics of an effective control system.
87. What are the four steps in the control process?
8-26
88. Managers typically use three primary measures to assess the output performance of their
organizations. Write a brief note on these three types of measures.
89. The top managers of an organization typically use a variety of financial indicators to assess
the performance of their organizations. Discuss the four major types of financial measures.
90. Behavior control is one way managers attempt to motivate workers. Discuss three ways
managers could use behavior control with subordinates.
8-27
91. Direct supervision is one of the best ways for managers to monitor the behavior of
subordinates, but this method of behavior control can create problems with subordinates.
Discuss the problems that can occur for managers when working with subordinates.
92. Management by objectives (MBO) is one way that managers can use to evaluate the
performance of subordinates. Discuss the steps involved in using this technique.
8-28
93. All organizations make use of bureaucratic control methods in their dealings with the
employees of the organization. This type of control system can, however, create problems for
the subordinates. Discuss these types of problems and explain what an organization's
managers can do to reduce these types of problems within the organization.
94. How does organizational culture help managers exert control over subordinates?
8-29
95. Define adaptive culture and inert culture. Which is better for an organization and why? Give
at least two examples of what organizations with each of these do to develop their cultures.
96. Discuss the need to balance two opposing forces in the control process that influences the
way organizations change.
97. Identify the steps in the organizational change process and describe what occurs in each
step.
8-30
98. Define entrepreneurs and intrapreneurs.
99. List the common problems entrepreneurs have in managing their organizations.
100.Describe evaluation, the fourth and final step in establishing organizational control.
8-31
Chapter 08 Control, Change, and Entrepreneurship Answer Key
True / False Questions
1. Using the controlling function, managers monitor and evaluate the organization's strategy
to evaluate whether it is working as intended.
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.
AACSB: Analytical Thinking

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-01 Define organizational control, and explain how it increases organizational effectiveness.
Topic: Control Systems
8-32
2. Organizational control procedures can give managers feedback about the quantity, but not
the quality, of products produced by the organization.
FALSE
Organizational control helps managers obtain superior efficiency, quality, responsiveness

to customers, and innovation—the four building blocks of competitive advantage.

Blooms: Remember
Difficulty: 1 Easy
3. Managers use feedforward control to anticipate problems.
TRUE
Managers use feedforward control to anticipate problems before they arise so problems
do not occur later during the conversion process.

Blooms: Remember
Difficulty: 1 Easy
Topic: Feedforward Control
8-33
4. During the input stage, the most common type of control procedure is concurrent control,
which gives managers immediate feedback.
FALSE
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.

Blooms: Remember
Difficulty: 1 Easy
Topic: Concurrent Control
5. At the output stage, managers use feedforward control to provide information about
customers' reactions to goods.
TRUE
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.

Blooms: Remember
Difficulty: 1 Easy
8-34
6. The first step in the control process is to evaluate results in terms of performance
standards.
FALSE
The first step in the control process is to establish the standards of performance, goals, or
targets against which performance is to be evaluated.

Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Describe the four steps in the control process and the way it operates over time.
Topic: Control Process Steps
7. A standard of performance that measures efficiency at the functional level is operating

costs.
FALSE
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.

Blooms: Remember
Difficulty: 1 Easy
8-35
8. Standard operating procedures are mechanisms for clan control.
FALSE
Standard operating procedures are mechanisms for behavior control.
Refer: Figure 8.3

Blooms: Remember
Difficulty: 1 Easy
Topic: Clan Control
9. The most commonly used financial performance measure in organizations is the debt-to-
equity ratio.
FALSE
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.

Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify the main output controls, and discuss their advantages and disadvantages as means of
coordinating and motivating employees.
8-36
10. The inventory turnover ratio is an example of the activity ratio of an organization.
TRUE
Activity ratios show how well managers are creating value from organizational assets.
Inventory turnover ratio is an example of the activity ratio that measures how efficiently
managers are turning inventory over so excess inventory is not carried.

Blooms: Apply
Difficulty: 2 Medium
11. Output control procedures are used at every management level of an organization.
TRUE
Output control is used at every level of the organization, and it is vital that the goals set at
each level harmonize with the goals set at other levels so managers and other employees
throughout the organization work together to attain the corporate goals that top managers
have set.

Blooms: Remember
Difficulty: 1 Easy
8-37
12. Control by means of a comprehensive system of rules and standard operating procedures
that shape and regulate the behavior of divisions, functions, and individuals is known as
bureaucratic control.
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.

Blooms: Remember
Difficulty: 1 Easy
Topic: Bureaucratic Control
13. Organizational culture makes control possible in situations where managers cannot use
behavior control.
TRUE
Organizational culture makes control possible in situations where managers cannot use
output or behavior control.

Blooms: Remember
Difficulty: 1 Easy
Topic: Organizational Culture
8-38
14. An inert culture is one that controls employee behavior and attitudes through its strong
and cohesive organizational culture.
FALSE
An adaptive culture is one that controls employee behavior and attitudes through its
strong and cohesive organizational culture.

Blooms: Remember
Difficulty: 1 Easy
Topic: Adaptive Culture
15. Adaptive cultures are those whose values and norms help an organization to build
momentum and to grow and change as needed to achieve its goals and be effective.
TRUE
An adaptive culture is one that controls employee behavior and attitudes through its
strong and cohesive organizational culture. Adaptive cultures are cultures whose values
and norms help an organization to build momentum and to grow and change as needed to
achieve its goals and be effective.

Blooms: Remember
Difficulty: 1 Easy
8-39
Multiple Choice Questions
16. The process by which managers monitor and regulate how efficiently and effectively an
organization and its members are performing the activities necessary to achieve
organizational goals is known as _______.
A. organizing
B. leading
C. controlling
D. coordinating
Controlling is the process whereby managers monitor and regulate how efficiently and
effectively an organization and its members are performing the activities necessary to
achieve organizational goals. Controlling helps 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.

Blooms: Remember
Difficulty: 1 Easy
8-40
17. The 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 are known as ________ systems.
A. operating
B. organizational
C. control
D. recurrent
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. Effective control systems alert managers
when something is going wrong and give them time to respond to opportunities and
threats.

Blooms: Remember
Difficulty: 1 Easy
8-41
18. The type of control that managers typically use in the input stage of the process of
transforming raw materials into finished goods is ________ control.
A. feedforward
B. concurrent
C. feedback
D. bureaucratic
At the input stage, managers use feedforward control to anticipate problems before they
arise so that problems do not occur later, during the conversion process.

Blooms: Remember
Difficulty: 1 Easy
8-42
19. Action Explosives gives specifications to its suppliers of raw materials in an attempt to
improve the quality of those raw materials and to minimize and anticipate the problems
they are likely to face in the conversion process. This is an example of ________ control.
A. concurrent
B. feedforward
C. feedback
D. bureaucratic
Feedforward control is used to anticipate problems before they arise so problems do not
occur later during the conversion process.

Blooms: Apply
8-43
20. Managers at Zeppel Construction Company set up a stringent job interview process by
which management applicants are carefully screened at different levels of the organization
before they are hired, attempting to increase the chance that newly hired managers will
have the knowledge and skills they need to be successful within the organization. By using
this process, Zeppel is using ________ control.
A. concurrent
B. feedforward
C. feedback
D. MBO
Managers can use feedforward control while screening job applicants, often by viewing
their résumés electronically, and using several interviews to select the most highly skilled
people, which can lessen the chance that they will hire people who lack the necessary
skills or experience to perform effectively.

Blooms: Apply
8-44
21. Hanover Insurance set up a management information system that gives its regional
managers information about changes in the task environment that may affect the
organization at some future time. By using this system, Hanover is utilizing ________
control.
A. feedforward
B. feedback
C. bureaucratic
D. MBO
Managers use feedforward control to anticipate problems before they arise so that
problems do not occur later. The development of management information systems
promotes feedforward control that gives managers timely information about changes in
the task and general environments that may impact their organization later on.

Blooms: Apply
8-45
22. The control system that managers use at the conversion stage of transforming raw
materials into finished goods is ________ control.
A. feedforward
B. bureaucratic
C. concurrent
D. feedback
efficiently inputs are being transformed into outputs so that managers can correct
problems as they arise.

Blooms: Remember
Difficulty: 1 Easy
8-46
23. The control system that is typically used in a garment plant to solve problems like
substandard inputs, broken machine parts, or a worker's skill deficiency to produce a
particular type of garment is ________ control.
A. feedforward
B. MBO
C. feedback
D. concurrent
efficiently inputs are being transformed into outputs so that managers can correct
problems as they arise, be it a defective batch of inputs, a machine that is out of
alignment, or a worker who lacks the skills necessary to perform a task efficiently.
AACSB: Reflective Thinking

Blooms: Apply
Difficulty: 3 Hard
8-47
24. At the output stage, managers usually utilize ________ control.
A. MBO
B. bureaucratic
C. feedforward
D. feedback
customers' reactions to goods and services so that corrective action can be taken if
necessary.

Blooms: Remember
Difficulty: 1 Easy
Topic: Feedback Control
8-48
25. Brennan Manufacturing monitors the number of customer returns for each product model
to track when the organization is producing a large number of defective products. In this
case, Brennan Manufacturing is using ________ control.
A. feedforward
B. concurrent
C. MBO
D. feedback
customers' reactions to goods and services so that corrective action can be taken if
necessary. A feedback control system that monitors the number of customer returns alerts
managers when defective products are being produced.

Blooms: Apply
8-49
26. Beswick Widget Ltd. sets up a system to monitor unit sales of its products to measure
changes taking place in customer tastes and the possible resulting impact on future sales.
With this system, Beswick is using ________ control.
A. feedforward
B. feedback
C. MBO
D. bureaucratic
Beswick is attempting to learn about changes in customers' tastes so that it can increase
or decrease production of products as necessary. Thus, this is feedback control. Feedback
control is used to provide information about customers' reactions to goods and services so
corrective action can be taken if necessary.

Blooms: Apply
8-50
27. Ben, the production manager of Pace Shoes, sets a production target of 220 shoes to be
distributed among 20 employees in a week. In the context of the control process, Ben is
________.
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 the performance of the entire
organization or part of it.

Blooms: Apply
8-51
28. The managers of Foodex, a fast food restaurant, record outputs on a daily basis by
counting how many customers their employees serve, the time each transaction takes, and
how much money each customer spends every day. With reference to the control process,
the managers of Foodex are ________.
C. comparing the actual performance against chosen standards
Once managers have decided which standards or targets they will use to evaluate
performance, the next 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.

Blooms: Apply
8-52
29. The standard of performance that measures efficiency at the corporate level of the
organization is known as ________.
A. cost of goods sold
B. capital costs
C. net sales
D. operating costs
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.

Blooms: Remember
Difficulty: 1 Easy
8-53
30. The step of the control process utilized by managers to evaluate whether the actual
performance of the organization differs significantly from the standards of performance
that assess the organization is ________.
A. measuring actual performance
B. comparing actual performance to the standards
C. initiating corrective action
D. measuring standards of performance
Step 3 of the control process compares actual performance against chosen standards of
performance. Managers evaluate whether, and to what extent, the performance of the
organization deviates from the set standards of performance.

Blooms: Understand
8-54
31. Brandon, the manager of Flipflop Footwear, checked the weekly records and discovered
that the number of shoes produced in one week by 20 employees was 250 against the set
target of 220 shoes. With reference to the control process, Brandon is ________.
After measuring the actual level of performance of employees, the next step of the control
process is to compare the actual performance against chosen standards of performance.

Blooms: Apply
8-55
32. The final step in the control process is to ________.
A. evaluate results and initiate corrective action
B. measure actual performance
C. compare actual performance to the standards
D. measure the standards of performance
The final step in the control process is to evaluate the results and bring about change as
appropriate.

Blooms: Remember
Difficulty: 1 Easy
8-56
33. Danny, the manager of Wader Shoes, installed new machinery to speed up the production
process after the assigned targets were not achieved for the third week of the month. With
regard to the control process, Danny is ________.
C. evaluating the result of the set standards
D. initiating corrective actions
If managers find out that the level of performance is unacceptable, they must try to
change how work activities are performed to solve the problem.

Blooms: Apply
8-57
34. A mechanism of control utilized in organizational culture is ________.
B. management by objectives
C. socialization
D. organizational goals
Mechanisms of control for organizational culture include values, norms, and socialization.
Refer: Figure 8.3

Blooms: Remember
Difficulty: 1 Easy
8-58
35. Management by objectives is a mechanism of control with ________ organizational control
systems.
A. input
B. clan
C. output
D. behavior
Management by objectives is a mechanism of control for behavior control.
Refer: Figure 8.3

Blooms: Remember
Difficulty: 1 Easy
Topic: Management by Objectives (MBO)
8-59
36. The manager of Triks Burgers keeps track of the number of customers served at different
periods of the day in an attempt to plan a schedule for workers that matches the demand
for the restaurant's products. By using this tracking system, the manager of Triks Burgers
is utilizing ________ control.
A. output
B. bureaucratic
C. input
D. MBO
Triks Burgers is tracking an output (number of customers served) and will adjust its
production process to try to match demand. This is a form of output control. All managers
develop a system of output control for their organizations. First they choose the goals that
they think will best measure efficiency, quality, innovation, and responsiveness to
customers. Then they measure to see whether the performance goals and standards are
being achieved at the corporate, divisional, functional, and individual employee levels of
the organization.

Blooms: Apply
Difficulty: 3 Hard
8-60
37. The manager of Inkman, a convenience store, keeps track of the average sale amount for
each customer as a way of deciding on the product mix to be carried in the store. This is
an example of ________ control.
A. feedforward
B. output
C. input
D. MBO
Inkman is tracking an output (sales per customer) and will alter its product mix
accordingly. This is a form of output control.

Blooms: Apply
8-61
38. The performance ratio that measures the efficiency of the organization in terms of how
well the resources of the organization have been used to generate profit is a(n) _______
ratio.
A. activity
B. leverage
C. profit
D. liquidity
Profit ratios measure how efficiently managers are using the organization's resources to
generate profits.

Blooms: Remember
Difficulty: 1 Easy
8-62
39. The most commonly used financial performance measure that allows managers of one
organization to compare performance with that of other organizations is ________.
B. the debt-to-assets ratio
C. the inventory turnover ratio
D. return on investment
Return on investment (ROI) is the most commonly used financial performance measure
because it allows managers of one organization to compare performance with that of other
organizations. ROI lets managers assess an organization's competitive advantage.

Blooms: Remember
8-63
40. An organization's net income before taxes divided by the total assets of the organization is
known as ________.
B. return on investment
C. the debt-to-assets ratio
Return on investment = net income before taxes/total assets.
Refer: Table 8.1

Blooms: Remember
8-64
41. The financial ratio that measures the ability of the organization to pay its short-term debts
is the ________ ratio.
A. leverage
B. liquidity
C. activity
D. profit
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.

Blooms: Understand
Topic: Current Ratio
8-65
42. The ratio that is computed by dividing the difference between current assets and inventory
by current liabilities is the ________ ratio.
A. inventory turnover
B. quick
C. current
D. debt-to-assets
Quick ratio = (current assets - inventory)/current liabilities.
Refer: Table 8.1

Blooms: Remember
8-66
43. The current assets of Global Acorn are valued at 25 million dollars and its current liabilities
are at 6 million dollars. If its inventory is worth 1 million dollars, what is its quick ratio?
A. 4
B. 0.25
C. 0.14
D. 3.6
Quick ratio = (current assets - inventory)/current liabilities; refer: Table 8.1.

Therefore, quick ratio = (25 - 1)/6 = 24/6 = 4.

Blooms: Remember
8-67
44. The CEO of a company would like to know whether his managers can pay off claims of
short-term creditors without selling inventory. What ratio will help him understand the
company's liquidity?
A. Inventory turnover ratio
B. Quick ratio
C. Current ratio
D. Debt-to-assets ratio
The quick ratio shows whether managers can pay these claims without selling inventory.
Refer: Table 8.1

Blooms: Remember
8-68
45. The financial ratio that indicates whether or not the organization is capable of paying off
its short-term debts without having to sell its inventory is the ________ ratio.
A. quick
B. current
C. days sales outstanding
D. profit
The quick ratio tells whether managers have the resources available to meet the claims of
short-term creditors without selling inventory.

Blooms: Remember
8-69
46. From the information given below, calculate the organization's return on investment.
Total Liabilities = $300,000; Total Assets = $600,000; Gross Margin = $200,000; Net
Income Before Taxes = $30,000; Total Expenses = $240,000
A. 50 percent
B. 5 percent
C. 10 percent
D. 12.5 percent
ROI = net profit before taxes/total assets = $30,000/$600,000 = .05 = 5 percent.
Refer: Table 8.1

Blooms: Apply
Difficulty: 3 Hard
8-70
47. Calculate the return on investment from the information given below.
Net Income = $18,000; Advertising Expenses = $220,000; Total Liabilities = $120,000;
Total Assets = $160,000; Gross Margin = $80,000; Taxes Paid = $2,000
A. 16.67 percent
B. 15 percent
C. 11.25 percent
D. 12.5 percent
ROI = net profit before taxes + taxes paid/total assets = ($18,000 + $2,000)/$160,000 =
.125 = 12.5 percent.
Refer: Table 8.1

Blooms: Apply
Difficulty: 3 Hard
8-71
48. Calculate the current ratio of the organization from the information given below.
Sales = $200,000; Gross Profit = $40,000; Total Assets = $450,000; Current Assets =
$250,000; Current Liabilities = $300,000
A. 0.44
B. 0.56
C. 0.67
D. 0.83
Current ratio = current assets/current liabilities = $250,000/$300,000 = .83.
Refer: Table 8.1

Blooms: Apply
Difficulty: 3 Hard
8-72
49. From the information given below, calculate the organization's current ratio.
Total Liabilities = $750,000; Current Liabilities = $220,000; Total Assets = $700,000;
Current Assets = $176,000
A. 0.25
B. 0.93
C. 0.29
D. 0.80
Current ratio = current assets/current liabilities = $176,000/$220,000 = .80.
Refer: Table 8.1

Blooms: Apply
Difficulty: 3 Hard
8-73
50. The financial ratio that indicates the degree to which the organization uses debt or equity
to finance its ongoing operations is the ________ ratio.
A. leverage
B. liquidity
C. activity
D. profit
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.

Blooms: Remember
8-74
51. The financial ratio that measures how well the managers of the organization are creating
value from the organization's assets is the ________ ratio.
A. leverage
B. liquidity
C. current
D. activity
Activity ratios provide measures of how well managers are creating value from
organizational assets.

Blooms: Remember
8-75
52. The financial ratio that indicates how efficiently the managers of the organization are
collecting the revenue due to the organization from the sale of its products or services is
the ________ ratio.
A. debt-to-assets
B. quick
C. current
Days sales outstanding provides information on how efficiently managers are collecting
revenue from customers to pay expenses.

Blooms: Remember
8-76
53. The managers of a division are given a fixed budget and are then evaluated on the basis of
their ability to produce goods or services. This is an example of a(n) ________ budget
approach.
A. expense
B. profit
C. cash flow
D. revenue
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.

Blooms: Understand
8-77
54. The manager of a profit center is evaluated on the basis of the amount of sales that have
been generated from the goods or services produced in his/her division. The divisional
manager is being evaluated using the _______ budget approach.
A. expense
B. cash flow
C. revenue
D. profit
In a revenue budget approach, managers are asked to maximize the revenues from the
sales of goods and services produced. Managers are then remunerated on the basis of the
net sales generated by the division.

Blooms: Understand
8-78
55. When a manager is told to maximize the revenues from the sales of goods and services
produced, this is an example of a(n) ________ budget approach.
A. profit
B. revenue
C. expense
D. cash flow
With a revenue budget, managers are asked to maximize the revenues from the sales of
goods and services produced.

Blooms: Remember
8-79
56. When a manager is evaluated on the difference between sales revenue and the budgeted
cost of making those goods and services, this is an example of a(n) ________ budget
approach.
A. revenue
B. cash flow
C. expense
D. profit
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.

Blooms: Understand
8-80
57. A divisional manager's performance is evaluated on the basis of the difference between
the sales revenues generated by that division and the cost of making those goods and
services. The divisional manager is being evaluated using the _______ budget approach.
A. profit
B. revenue
C. cost
D. expense
In a profit budget approach, managers are 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.

Blooms: Remember
Difficulty: 1 Easy
8-81
58. When a divisional manager is evaluated based on the operating income of his division, this
is an example of a(n) ________ budget approach.
A. capital
B. revenue
C. expense
D. profit
With a profit budget, managers are evaluated on the difference between revenues
generated by the sale of goods and services and budgeted cost of making those goods and
services, which is the operating income.

Blooms: Understand
8-82
59. The most immediate and potent form of behavior control is ________.
B. clan control
C. bureaucratic control
D. socialization
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.

Blooms: Remember
Difficulty: 1 Easy
8-83
60. With management by objectives, the first things established are ________.
A. evaluations
B. organizational objectives
C. management goals
D. subordinate goals
Management by objective starts when top managers establish overall organizational

objectives such as specific financial performance targets.

Blooms: Understand
Topic: Management by Objectives (MBO)
8-84
61. Rules and SOPs are used to regulate the behavior of workers within the organization with
a ________ control system.
A. bureaucratic
B. feedback
C. feedforward
D. concurrent

functions, and individuals.

Blooms: Remember
Difficulty: 1 Easy
8-85
62. Rules and SOPs are of little use in telling a scientist how to discover something new. Thus,
which of the following forms of control should not be applied to scientists?
A. feedforward
B. feedback
C. bureaucratic
D. concurrent
An organization thrives when its members are constantly thinking of new ways to increase
efficiency, quality, and customer responsiveness. By definition, new ideas do not come
from blindly following standardized procedures. Similarly, the pursuit of innovation implies
a commitment by managers to discover new ways of doing things; innovation, however, is
incompatible with the use of extensive bureaucratic control.

Blooms: Apply
8-86
63. When actions are performed by employees the same way time and time again and the
outcomes of their work are predictable, employee behavior is ________.
A. generalized
B. standardized
C. maximized
D. minimized
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.

Blooms: Remember
Difficulty: 1 Easy
8-87
64. A worker at a motorcycle plant comes up with a new way to attach the fuel injection
system to the motor, increasing the efficiency of the assembly process. The managers
instruct all employees to attach fuel injection systems the same way so that every car
would come off the assembly line with its fuel injection system attached in the new way.
The managers are using ________ control.
A. bureaucratic
B. clan
C. output
D. input

functions, and individuals. It is the responsibility of a manager to develop rules that allow
employees to perform their activities efficiently and effectively. 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.

Blooms: Apply
Difficulty: 3 Hard
8-88
65. The set of values, norms, and expectations of behavior that control the ways in which
workers interact with one another within the organization is known as ________.
A. bureaucratic culture
B. organizational culture
C. feedback control
D. feedforward control
Organizational culture is the shared set of beliefs, expectations, values, norms, and work
routines that influences how members of an organization relate to one another and work
together to achieve organizational goals.

Blooms: Remember
Difficulty: 1 Easy
8-89
66. The control that is imposed on workers within the organization by the shared values,
norms, standards of behavior, and expectations is ________ control.
A. bureaucratic
B. operating
C. clan
D. leverage
Clan control is the control exerted on individuals and groups in an organization by shared
values, norms, standards of behavior, and expectations.

Blooms: Remember
Difficulty: 1 Easy
Topic: Clan Control
8-90
67. When an organization has a strong and cohesive organizational culture that controls
employee attitudes and behaviors, that company has a(n) ________ culture.
A. networked
B. inert
C. adaptive
D. bureaucratic
An adaptive culture is a strong and cohesive organizational culture that controls employee
attitudes and behaviors.

Blooms: Remember
Difficulty: 1 Easy
8-91
68. Top managers in a company decide between themselves to implement an employee stock
ownership plan for all their employees. This is an example of a company taking a
________.
A. top-down approach to promote adaptive culture
B. bottom-up approach to promote adaptive culture
C. top-down approach to promote inert culture
D. bottom-up approach to promote inert culture
In adaptive cultures employees often receive rewards linked directly to their performance
and to the performance of the company as a whole. Sometimes, employee stock
ownership plans (ESOPs) are developed in which workers as a group are allowed to buy a
significant percentage of their company's stock.

Blooms: Apply
8-92
69. When an organization has a culture that leads to values and norms that fail to motivate or
inspire employees, which eventually leads to stagnation and often failure over time, that
company has a(n) ________ culture.
A. adaptive
B. inert
C. communal
D. bureaucratic
Inert cultures are those that lead to values and norms that fail to motivate or inspire
employees; they lead to stagnation and often failure over time.

Blooms: Remember
Difficulty: 1 Easy
8-93
70. Companies with an inert culture ________.
A. closely supervise their employees within a hierarchical system
B. develop long-term career paths for their employees
C. invest heavily in training and development of employees
D. encourage the development of supportive work attitudes and behaviors
In an inert culture, employees are content to be told what to do and have little incentive or
motivation to perform beyond minimum work requirements. As you might expect, the
emphasis is on close supervision and hierarchical authority, which result in a culture that
makes it difficult to adapt to a changing environment.

Blooms: Remember
Difficulty: 1 Easy
8-94
71. In companies that have an adaptive culture, employees are ________.
A. content to be told what to do during work hours
B. not motivated to perform beyond minimum requirements
C. closely supervised within a hierarchical authority
D. likely to have long-term career paths to follow
Companies with adaptive culture develop long-term career paths for their employees and
invest heavily in training and development to increase employees' value to the
organization. In these ways, terminal and instrumental values pertaining to the worth of
human resources encourage the development of supportive work attitudes and behaviors.

Blooms: Remember
Difficulty: 1 Easy
8-95
72. In an adaptive culture, employees often receive rewards based on their ________.
A. performance
B. contracts
C. length of service
D. organizational commitment
In adaptive cultures, employees often receive rewards linked directly to their performance
and to the performance of the company as a whole.

Blooms: Remember
8-96
73. Organizational change can affect practically all aspects of organizational functioning,
________.
A. including organizational culture and strategies
B. including response to opportunities but not threats
C. excluding the human resource management system
D. excluding communication, motivation, and leadership
Organizational change can affect practically all aspects of organizational functioning,

including organizational structure, culture, strategies, control systems, and groups and
teams, as well as the human resource management system and critical organizational
processes such as communication, motivation, and leadership.

Blooms: Understand
8-97
74. Which of the following stages in making organizational change includes benchmarking?
During evaluation of change, managers also can use benchmarking, comparing their
performance on specific dimensions with the performance of high-performing
organizations, to decide how successful a change effort has been.

Blooms: Understand
Topic: Benchmarking
8-98
75. Which of the following stages in making organizational change includes deciding whether
change will occur from the top down or from the bottom up?
In the stage involving implementation of change, managers decide whether change will
occur from the top down or from the bottom up. Thereafter they introduce and manage
change accordingly.

Blooms: Understand
Topic: Organizational Change
8-99
76. Which of the following happens in the conversion stage?
A. Anticipating possible problems
B. Managing problems as they occur
C. Dealing with problems that have arisen
D. Managing without correction of problems
efficiently inputs are being transformed into outputs so managers can correct problems as
they arise.

Blooms: Understand
8-100
77. The company PinnTaxx has opted for a control system policy that deals with problems
after they arise. What type of control should they be using and at what stage?
A. Feedforward control at the input stage
B. Concurrent control at the feedback stage
C. Feedback control at the output stage
D. Feedforward control at the conversion stage
customers' reactions to goods and services so corrective action can be taken if necessary.

Blooms: Understand
8-101
78. The process through which managers try to increase members' abilities to understand and
appropriately respond to changing conditions is known as ________.
A. clan control
B. socialization
C. organizational learning
D. bureaucratic control
Organizational learning is the process through which managers try to increase

organizational members' abilities to understand and appropriately respond to changing
conditions.

Blooms: Remember
Difficulty: 1 Easy
8-102
79. In assessing the need for organizational change, managers must ________.
A. identify the obstacles to change at the corporate and individual levels
B. plan how they are going to attain the organization's ideal future state
C. recognize that there is a problem and identify its source
D. implement change from the top down or from the bottom up
Assessing the need for change calls for managers to perform two important activities: (1)
recognizing that there is a problem and (2) identifying its source.

Blooms: Understand
8-103
80. The process of comparing one company's performance on specific dimensions with the
performance of high-performing organizations, to decide how successful a change effort
has been, is known as ________.
A. socialization
B. diversification
C. social facilitation
D. benchmarking
Benchmarking is comparing one company's performance on specific dimensions with the

performance of high-performing organizations, to decide how successful a change effort
has been.

Blooms: Remember
Difficulty: 1 Easy
Topic: Benchmarking
8-104
81. Entrepreneurship is the mobilization of resources to ________.
A. start a process that ends with the founding of a new business
B. compare two companies on specific dimensions
C. market an old product with a new twist
D. provide customers with new or improved goods and services
Entrepreneurship is the mobilization of resources to take advantage of an opportunity to

provide customers with new or improved goods and services. Entrepreneurship does not
just end once a new business is founded.

Blooms: Remember
Learning Objective: 08-04 Explain how clan control or organizational culture creates an effective organizational
architecture.
Topic: Entrepreneurship
8-105
82. Members of which of the following groups may be considered intrapreneurs?
A. Employees of an organization who notice opportunities to develop new products
B. Employees of an organization who have worked across various industries
C. Managers who are responsible for two or more departments within a company
D. Managers who ensure interdepartmental transfer of skills
Intrapreneurs are employees of existing organizations who notice opportunities to develop

new or improved products and better ways to make them.

Blooms: Understand
architecture.
Topic: Intrapreneur
8-106
83. Agave Pharma has opted for a top-down approach to changing how the company functions
so that efficiency is increased. What is the change likely to entail?
Top-down change is a fast, revolutionary approach to change in which top managers

identify what needs to be changed and then move quickly to implement the changes
throughout the organization.

Blooms: Understand
architecture.
8-107
84. Stag Plugs, Ltd., opts to take a bottom-up approach in order to draft a new attendance
policy. What will the approach entail?
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.

Blooms: Understand
architecture.
8-108
85. Top managers at a food chain company consult with middle and first-line managers to
revise their marketing strategy. This approach will lead to ________.
A. top-down changes that can be implemented quickly throughout the organization
B. bottom-up changes to minimize resistance from employees and uncertainty
C. bottom-up changes that can be implemented quickly throughout the organization
D. top-down changes to minimize resistance from employees and uncertainty
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.

Blooms: Apply
architecture.
Essay Questions
8-109
86. Define control systems and mention the three characteristics of an effective control
system.
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.
Effective control systems alert managers when something is going wrong and give them
time to respond to opportunities and threats. An effective control system has the following
characteristics:
• It is flexible enough to allow managers to respond as necessary to unexpected events.

• It provides accurate information about organizational performance.
• It gives managers information in a timely manner because making decisions on the basis
of outdated information is a recipe for failure.

Blooms: Understand
8-110
87. What are the four steps in the control process?
The control process, whether at the input, conversion, or output stage, can be broken
down into four steps:
• Establish the standards of performance, goals, or targets against which performance is

to be evaluated.
• Measure actual performance.
• Compare actual performance against chosen standards of performance.
• Evaluate the result and initiate corrective if the standard is not being achieved.
Refer: Figure 8.2

Blooms: Understand
8-111
88. Managers typically use three primary measures to assess the output performance of their
organizations. Write a brief note on these three types of measures.
The three main mechanisms that managers use to assess output or performance are
financial measures, organizational goals, and operating budgets.
• Financial measures of performance: 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.
• Organizational goals: Once top managers consult with lower-level managers and set the
organization's overall goals, they establish performance standards for the divisions and
functions. These standards specify for divisional and functional managers the level at
which their units must perform if the organization is to achieve its overall goals.
• Operating budgets: Once managers at each level have been given a target to achieve, the
next step in developing an output control system is to establish operating budgets that
regulate how managers and workers attain their goals. An operating budget is a blueprint
that states how managers intend to use organizational resources to achieve organizational
goals efficiently. Typically managers at one level allocate to subordinate managers a
specific amount of resources to produce goods and services. Once they have been given a
budget, these lower-level managers must decide how to allocate money for different
organizational activities. They are then evaluated for their ability to stay within the budget
and to make the best use of available resources.

Blooms: Understand
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89. The top managers of an organization typically use a variety of financial indicators to
assess the performance of their organizations. Discuss the four major types of financial
measures.
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.
• 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. ROI lets managers assess an organization's competitive advantage.
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. This measure tells managers how efficiently an organization
is using its resources.
• 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. An organization is highly leveraged if it uses more debt than
equity. Debt can be risky when net income or profit fails to cover the interest on the debt.
• 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 reveal how efficiently managers
are collecting revenue from customers to pay expenses.
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Blooms: Understand
8-114
90. Behavior control is one way managers attempt to motivate workers. Discuss three ways
managers could use behavior control with subordinates.
Managers can attempt to control the behavior of subordinates by direct supervision, by

using management by objectives (MBO), and by the use of rules and standard operating
procedures.
• Direct supervision: 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.
• Management by objectives: 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. MBO involves three specific steps:
◦ Specific goals and objectives are established at each level of the organization.
◦ Managers and their subordinates together determine the subordinates' goals.
◦ Managers and their subordinates periodically review the subordinates' progress toward
meeting goals.
• Bureaucratic control: 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.
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Blooms: Understand
91. Direct supervision is one of the best ways for managers to monitor the behavior of
subordinates, but this method of behavior control can create problems with subordinates.
Discuss the problems that can occur for managers when working with subordinates.
Some of the problems associated with direct supervision are the following:
• Expenses increase because a manager can personally manage only a relatively small
number of subordinates effectively, so more managers need to be employed.
• Direct supervision can demotivate subordinates. This occurs if employees feel they are
under such close scrutiny that they are not free to make their own decisions or if they feel
they are not being evaluated in an accurate and impartial way.
• For many jobs, personal control through direct supervision is simply not feasible. The
more complex a job is, the more difficult it is for a manager to evaluate how well a
subordinate is performing.

Blooms: Understand
8-116
92. Management by objectives (MBO) is one way that managers can use to evaluate the
performance of subordinates. Discuss the steps involved in using this technique.
Management by objectives (MBO) involves three specific steps:
• Specific goals and objectives are established at each level of the organization: MBO
starts when top managers establish overall organizational objectives. Then objective
setting cascades down throughout the organization as managers at the divisional and
functional levels set their goals to achieve corporate objectives. Finally first-level
managers and employees jointly set goals that will contribute to achieving functional
objectives.
• Managers and their subordinates together determine the subordinates' goals: An
important characteristic of MBO is its participatory nature. 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 and bargain over the
budget that the subordinate will need to achieve his/her goals. The participation of
subordinates in the objective-setting process is a way of strengthening their commitment
to achieving their goals and meeting their budgets. Participating in goal setting enables
subordinates to tell managers what they think they can realistically achieve.
• Managers and their subordinates periodically review the subordinates' progress toward
meeting goals: Once specific objectives have been agreed on for managers at each level,
managers are accountable for meeting those objectives. Periodically they sit down with
their subordinates to evaluate their progress. Normally salary raises and promotions are
linked to the goal-setting process, and managers who achieve their goals receive greater
rewards than those who fall short.

Blooms: Understand
8-117
93. All organizations make use of bureaucratic control methods in their dealings with the
employees of the organization. This type of control system can, however, create problems
for the subordinates. Discuss these types of problems and explain what an organization's
managers can do to reduce these types of problems within the organization.
Problems associated with bureaucratic control that can reduce organizational

effectiveness are the following:
• Bureaucratic rules tend not to disappear, and since new rules are often added, the
organization may become sluggish and unresponsive.
• People may become so used to programmed decisions constrained by rules that they
lose their ability to think on their own.
Managers must therefore be sensitive about the way they use bureaucratic control. It is
most useful when organizational activities are routine and well understood and when
employees are making programmed decisions. Bureaucratic control is much less useful in
situations where nonprogrammed decisions have to be made and managers have to react
quickly to changes in the organizational environment.

Blooms: Understand
8-118
94. How does organizational culture help managers exert control over subordinates?
Organizational culture can help managers exert control in situations where output or
behavior control is not feasible, and a strong, positive set of organizational values and
norms can cause employees to focus on what is best for the company. Organizational
culture is not an externally imposed system of constraints, such as direct supervision or
rules and procedures. Rather, employees internalize organizational values and norms and
then let these values and norms guide their decisions and actions.

Blooms: Understand
8-119
8-120
95. Define adaptive culture and inert culture. Which is better for an organization and why?
Give at least two examples of what organizations with each of these do to develop their
cultures.
An adaptive culture is one that controls employee attitudes and behavior. By contrast, an
inert culture is one that leads to values and norms that fail to inspire employees, and lead
to stagnation and often failure over time.
Adaptive cultures are better because they are not only able to motivate and control
employees, but they have values and norms that help an organization to build momentum
and to grow and change as needed to achieve their goals and be effective.
Organizations with strong adaptive cultures invest in their employees. They demonstrate
their commitment to their members by emphasizing the long-term nature of the
employment relationship and trying to avoid layoffs. These companies develop long-term
career paths for their employees and invest heavily in training and development to
increase employees' value to the organization. In these ways, terminal and instrumental
values pertaining to the worth of human resources encourage the development of
supportive work attitudes and behaviors. In adaptive cultures, employees often receive
rewards linked directly to their performance and to the performance of the company as a
whole. Moreover, an adaptive culture develops an emphasis on entrepreneurship and
respect for the employee and allows the use of organizational structures that empower
employees to make decisions and motivate them to succeed.
Some organizations, however, develop cultures with values that do not include protecting
and increasing the worth of their human resources as a major goal. Their employment
practices are based on short-term employment according to the needs of the organization
and on minimal investment in employees who perform simple, routine tasks. Moreover,
employees are not often rewarded based on their performance and thus have little
incentive to improve their skills or otherwise invest in the organization to help it to achieve
goals. If a company has an inert culture, poor working relationships frequently develop
between the organization and its employees, and instrumental values of noncooperation,
laziness, and loafing and work norms of output restriction are common. In an inert culture,
employees are content to be told what to do and have little incentive or motivation to
perform beyond minimum work requirements. In these cultures, the emphasis is on close
8-121
supervision and hierarchical authority, which result in a culture that makes it difficult to
adapt to a changing environment.

Blooms: Understand
Difficulty: 3 Hard
96. Discuss the need to balance two opposing forces in the control process that influences the
way organizations change.
There is a fundamental tension or need to balance two opposing forces in the control
process that influences the way 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.

Blooms: Understand
8-122
97. Identify the steps in the organizational change process and describe what occurs in each
step.
The steps in the organizational change process are as follows:
(1) Assess the need for change: Assessing the need for change calls for two important
activities: recognizing that there is a problem and identifying its source. Managers need to
recognize that there is a problem that requires change. To discover the source of the
problem, managers need to look both inside and outside the organization.
(2) Decide on the change to make: During this step, managers must engage in planning
how they are going to attain the organization's ideal future state. This step in the change
process includes identifying obstacles or sources of resistance to change. Managers must
analyze the factors that may prevent the company from reaching its ideal future state.
Obstacles to change are found at the corporate, divisional, departmental, and individual
levels of the organization.
(3) Implement the change: Generally, managers implement change from the top down or
from the bottom up. Top-down change is implemented quickly: Top managers identify the
need for change, decide what to do, and then move quickly to implement the changes
throughout the organization. Bottom-up change is typically more gradual or evolutionary.
Top managers consult with middle and first-line managers about the need for change.
Then, over time, managers at all levels work to develop a detailed plan for change.
(4) Evaluate the change: The last step in the change process is to evaluate how successful
the change effort has been in improving organizational performance. Using measures such
as changes in market share, in profits, or in the ability of managers to meet their goals,
managers compare how well an organization is performing after the change with how well
it was performing before. Managers also can use benchmarking.
8-123
Blooms: Understand
Difficulty: 3 Hard
98. Define entrepreneurs and intrapreneurs.
Entrepreneurs are people who notice opportunities and take responsibility for mobilizing
the resources necessary to produce new and improved goods and services. Intrapreneurs
are employees of existing organizations who notice opportunities for product or service
improvements and are responsible for managing the development process. They are
people who practice entrepreneurship inside existing organizations.

Blooms: Remember
Difficulty: 1 Easy
architecture.
8-124
99. List the common problems entrepreneurs have in managing their organizations.
The following are the obstacles an entrepreneur faces while managing an organization:
• Lack of skills to control or change the business

• May not recognize the need to change
• Difficulty in delegating authority
• Overload and decline in decision-making quality
• Lack of knowledge of management systems and procedures

Blooms: Understand
architecture.
8-125
100. Describe evaluation, the fourth and final step in establishing organizational control.
The fourth step in organization change Evaluate the result and initiate corrective action
(that is, make changes) if the standard is not being achieved.
The final step in the control process is to evaluate the results and bring about change as
appropriate. Whether or not performance standards have been met, managers can learn a
great deal during this step. If managers decide the level of performance is unacceptable,
they must try to change how work activities are performed to solve the problem.
Sometimes performance problems occur because the work standard was too high—for
example, a sales target was too optimistic and impossible to achieve. In this case,
adopting more realistic standards can reduce the gap between actual performance and
desired performance.
However, if managers determine that something in the situation is causing the problem,
then to raise performance they will need to change how resources are utilized or shared.
Perhaps the latest technology is not being used; perhaps workers lack the advanced
training needed to perform at a higher level; perhaps the organization needs to buy its
inputs or assemble its products abroad to compete against low-cost rivals; perhaps it
needs to restructure itself or reengineer its work processes to increase efficiency.

Blooms: Understand
8-126

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ESSENTIALS OF CONTEMPORARY

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Control, Change, and Entrepreneurship

True / False Questions

3. Managers use feedforward control to anticipate problems.

7. A standard of performance that measures efficiency at the functional level is operating

8. Standard operating procedures are mechanisms for clan control.

24. At the output stage, managers usually utilize ________ control.

A. establishing the standards of performance

B. measuring the actual level of performance of employees

C. comparing the actual performance against chosen standards of performance

D. evaluating the result of the set standards

A. establishing the standards of performance

B. measuring the actual level of performance of employees

C. comparing the actual performance against chosen standards

D. evaluating the result of the set standards

A. cost of goods sold

A. measuring actual performance

B. comparing actual performance to the standards

C. initiating corrective action

D. measuring standards of performance

A. establishing the standards of performance

B. measuring the actual level of performance of employees

C. comparing the actual performance against chosen standards of performance

D. evaluating the result of the set standards

32. The final step in the control process is to ________.

A. evaluate results and initiate corrective action

B. measure actual performance

C. compare actual performance to the standards

D. measure the standards of performance

A. establishing the standards of performance

B. measuring the actual level of performance of employees

C. evaluating the result of the set standards

D. initiating corrective actions

35. Management by objectives is a mechanism of control with ________ organizational control

A. gross profit margin

B. the debt-to-assets ratio

C. the inventory turnover ratio

A. gross profit margin

C. the debt-to-assets ratio

D. days sales outstanding

A. Inventory turnover ratio

C. days sales outstanding

D. days sales outstanding

A. top-down approach to promote adaptive culture

B. bottom-up approach to promote adaptive culture

C. top-down approach to promote inert culture

D. bottom-up approach to promote inert culture

70. Companies with an inert culture ________.

A. closely supervise their employees within a hierarchical system

B. develop long-term career paths for their employees

C. invest heavily in training and development of employees

D. encourage the development of supportive work attitudes and behaviors

A. content to be told what to do during work hours

B. not motivated to perform beyond minimum requirements

C. closely supervised within a hierarchical authority

D. likely to have long-term career paths to follow

A. including organizational culture and strategies

B. including response to opportunities but not threats

C. excluding the human resource management system

D. excluding communication, motivation, and leadership