16Control
TRUE/FALSE Chapter 1. Control is achieved when behavior and work procedures conform to standards and company goals are accomplished. ANS: T 2. The control process begins when managers set goals. ANS: T 3. Companies may determine standards by evaluating their capacity to enable goal achievement, by listening to customers, by observing competitors, or by benchmarking other companies. ANS: T 4. Benchmarking is the process of setting corporate norms. ANS: F Benchmarking is the process of determining other companies standards. 5. Control is an intermittent activity that requires periodic attention from managers once or twice a month. ANS: F Control is not a one-time achievement or result. It continues over time (a dynamic process) and requires daily, weekly, and monthly attention from managers to maintain performance levels at the standard (i.e., cybernetic). 6. Feedback control is a mechanism for gathering information about performance deficiencies before they occur. ANS: F This is the definition of feedforward control. Feedback control gathers information about performance deficiencies after they occur. 7. Concurrent control seeks to prevent or minimize performance deficiencies before they occur. ANS: F This is a characteristic of feedforward control.
8. Feedforward control provides information about performance deficiencies by monitoring inputs, not outputs. ANS: T 9. Sometimes the costs of control exceed its benefits. ANS: T 10. Control loss usually has no effect on goal achievement. ANS: F Control loss usually prevents goal achievement. 11. Control loss occurs when behavior and work procedures merely meet minimally acceptable standards rather than exceeding those minimal standards. ANS: F Control loss occurs when behavior and work procedures do not conform to standards, (i.e., do not meet or are below minimally acceptable standards). 12. Implementing controls is always worthwhile. ANS: F Implementing control isnt always possible or worthwhile
13. Cybernetic feasibility refers to the extent to which it is possible to implement each step in the control process. ANS: T PTS: 1 NAT: Level I Knowledge KEY: Operations Management DIF: Moderate REF: 295 TOP: AACSB Technology
14. While the bureaucratic control model is designed to make companies more efficient, effective, and fair, it frequently has the opposite effect. ANS: T 15. The objective control approach to managerial control manifests itself as either behavior control or output control. ANS: T
16. In the behavioral approach to managerial control, a company's widely shared values and beliefs guide workers' behavior and decisions. ANS: F A company's widely shared values and beliefs guide workers' behavior and decisions in the normative approach to managerial control. In the behavior control approach to objective control, the organization regulates the behaviors and actions that workers perform on the job. 17. Concertive control produces less stress for workers than bureaucratic control. ANS: F Concertive control may lead to even more pressure for workers to conform to expectations than bureaucratic contro (and thus more stress)l, since workers must satisfy all team members rather than only the boss. 18. When self-control is used, leaders and managers provide workers with clear boundaries within which they may guide and control their own goals and behaviors. ANS: T 19. The balanced scorecard approach to control emphasizes measurement of organizational performance in three equally important areas. These areas are finances, internal operations, and innovation and learning. ANS: F The balanced scorecard approach to control emphasizes measurement of organizational performance in four equally important areas: finances, customers, internal operations, and innovation and learning. 20. Generally, it does not matter which of the five approaches to managerial control an organization or individual manager chooses to employ. ANS: F There are more or less appropriate circumstances for using each of these control methods. 21. The balanced scorecard method of control minimizes the chance of suboptimization. ANS: T 22. Budgets are used to project costs and revenues, to prioritize and control spending, and to ensure that expenses don't exceed available funds and revenues. ANS: T 23. The term excessive value appropriated (EVA) refers to the amount by which profits (after expenses) exceed the cost of capital in a given year. ANS: F
EVA stands for economic value added.
24. One significant advantage of economic value added (EVA) is that it clearly states what specific actions managers should or should not take in order to improve financial performance. ANS: F Unlike many kinds of financial controls, EVA doesn't specify what should or should not be done to improve performance. 25. Customer satisfaction surveys are an accurate and effective way to answer the balanced scorecard question: "How do customers see us?" ANS: F Customer satisfaction surveys are often misleadingly positive. 26. The only dimension needed to measure quality is conformance to expectations. ANS: F Quality is typically defined and measured in terms of excellence and value as well as conformance to expectations. 27. The three levels of waste minimization are waste disposal, waste reduction, and recycling. ANS: F Waste minimization has four levels; they are waste disposal, waste treatment, recycle and reuse, and waste prevention and reduction. 28. The European Union is moving toward a requirement that consumers rather than businesses be held responsible for recycling the products companies manufacture. ANS: F The EU will hold companies, not consumers, responsible for recycling the products they manufacture. These products must be designed with recycling in mind.
MULTIPLE CHOICE 1. The basic control process begins with ____. a. either benchmarking or keystoning b. the establishment of clear standards of performance c. the comparison of actual performance to expected performance d. problem identification e. determining what corrective action will be if actual performance does not equal or exceed expected performance ANS: B
See also Exhibit 16.1.
2. ____ is the regulatory process of establishing standards that will achieve organizational goals, comparing actual performance to those standards, and then, if necessary, taking corrective action to restore performance to those standards. a. Implementation b. Goal-setting c. Control d. Suboptimization e. Benchmarking ANS: C 3. ____ are a basis of comparison for measuring the extent to which organizational performance is satisfactory or unsatisfactory. a. Standards b. Potentials c. Autonomous goals d. Degrees of centralization e. Resource goals ANS: A 4. The objective of the company that manufactures Jgermeister liqueur is to grow its international business. It determined its success in the international market in 2005 by comparing its annual exporting data for that year with the data gathered in 1998, the first year it had double digit growth in exports. For this company, the 1998 exporting data provide a(n) ____. a. autonomous measurement b. standard c. value ratio d. dependence measurement e. performance predictor ANS: B Standards are a basis of comparison for measuring the extent to which organizational performance is satisfactory or unsatisfactory. 5. In October 2005, Cadbury Schweppes said higher commodity prices and the bankruptcy of one of its U.S. bottling plants had increased its production costs and led it to scale back its financial projections for the remainder of the year. These financial projections were ____ for the beverage company. a. autonomous measurements b. standards c. value ratios d. dependence measurements e. performance charts ANS: B
Standards are a basis of comparison for measuring the extent to which organizational performance is satisfactory or unsatisfactory.
6. Companies may determine standards by ____. a. benchmarking other companies b. implementing vertical loading c. using outsourcing d. taking corrective action e. doing all of these ANS: A Standards are also determined by goal achievement and by listening to customers. 7. Ford Motor Company has been attacked by its own sustainability committee for failing to do enough to cut vehicular greenhouse gas emissions. According to the committee's 2005 report, "Ford has failed to define a goal for reducing global emissions from the company's products." The report called for the company to set clear targets to improve fuel economy and to cut factory emissions. This committee wants Ford to establish emission control ____. a. autonomous measurements b. standards c. value ratios d. dependence measurements e. performance predictors ANS: B Standards are a basis of comparison for measuring the extent to which organizational performance is satisfactory or unsatisfactory. 8. ____ allows a trucking company not only to compare its safety performance with other companies but to also adopt those practices found to be superior. A trucking company can gather data on how its competitors deal with total accidents per million miles, numbers of high severity accidents by type, missed deliveries, spills, driver out-of-service by type, and vehicle out-of-service by type and use this information to improve its own safety record. a. Benchmarking b. Data decentralization c. Information processing d. Mirroring e. Comparative criterion ANS: A Benchmarking is the process of identifying outstanding practices and standards in other companies and adapting them to your company. 9. When Marriott decided to improve the quality of service it offered its customers, it asked special corporate guests to comment on the good and bad issues of their stay and also to tell what the competition is doing that is better than Marriott. The Marriott acted accordingly. In other words, it used ____. a. benchmarking
b. c. d. e.
data decentralization information processing mirroring comparative criterion
ANS: A Benchmarking is the process of identifying outstanding practices and standards in other companies and adapting them to your company. 10. A chain of specialty fashion stores has interviewed a sample of its female customers and learned that a customer can be expected to visit the store looking for new merchandise every two weeks, on average. As a result, the chain has new merchandise delivered daily. If items have not been sold after a month on display at the store, the items are removed from the store to either be sold at another location or returned to the manufacturer. The chain of stores was able to set this standard through ____. a. evaluating the standard's capacity to enable goal achievement b. benchmarking competitors c. listening to customers d. outsourcing e. value communications ANS: C Listening to customers is one means for establishing standards. 11. Control is a(n) ____ process. a. standardized, periodic, and cybernetic b. flexible, intermittent, and automated c. standardized, periodic, and robotic d. continuous, flexible, and automated e. continuous, dynamic, and cybernetic ANS: E 12. Control is a cybernetic process because it ____. a. has a feedback loop b. is an intermittent process c. is the first management function d. uses automated benchmarks e. can be a completely automated process ANS: A 13. The three basic control methods are ____. a. feedback control, feedforward control, and symmetry control b. balance control, vertical control, and symmetry control c. concurrent control, feedback control, and feedforward control d. feedforward control, presumptive control, and stasis control e. stasis control, feedback control, and simultaneous control ANS: C
14. A manufacturer of automatic locking devices for vehicles shipped 20,000 devices to a car manufacturer that was unable to use them because of a design flaw. If the manufacturer of the devices waited until the parts were returned before determining why it created unusable component parts, it would be using ____ control. a. feedforward b. feedback c. balanced d. dynamic e. concurrent ANS: B Feedback control is a mechanism for gathering information about performance deficiencies after they occur. 15. Caterpillar announced plans to cut its production of construction equipment due to forecasted increases in steel prices and growing concern about a tire shortage. By discovering the problem with product inputs and letting customers know that its output will fall short, Caterpillar used ____ controls. a. feedforward b. feedback c. concurrent d. stasis e. goal-based ANS: A Because Caterpillar monitored its inputs, it realized that a problem with its output would occur in the near future. 16. An accident in at a U.S. refinery operated by Valero killed two workers. By gathering information about how the men died in order to prevent a recurrence, Valero used ____ control. a. concertive b. normative c. feedback d. concurrent e. bureaucratic ANS: C Feedback control is a mechanism for gathering information about performance deficiencies after they occur. 17. A car manufacturer ordered 20,000 window assemblies from a supplier. To make sure the assemblies were made to specifications, the supplier of the window assemblies shipped a sample to the car manufacturer for testing. This is an example of ____ control. a. feedback b. contiguous c. suboptimal d. feedforward e. synergistic ANS: D Feedforward control is a mechanism for monitoring performance inputs rather than outputs to prevent or minimize performance deficiencies before they occur.
18. ____ control is a method of gathering information about performance deficiencies after they occur. a. Feedback b. Stasis c. Concurrent d. Feedforward e. Preemptive ANS: A
19. ____ control is a method of gathering information about performance deficiencies as they occur. a. Feedback b. Simultaneous c. Concurrent d. Feedforward e. Stasis ANS: C 20. ____ control is a method of gathering information about performance deficiencies before they occur. a. Feedback b. Stasis c. Preemptive d. Feedforward e. Concurrent ANS: D 21. Which approach to control monitors inputs rather than outputs? a. feedforward control b. feedback control c. concurrent control d. stasis control e. all of these ANS: A 22. ____ costs are the costs associated with implementing or monitoring control. a. Cybernetic b. Heuristic c. Regulation d. Benchmarked e. Targeted
ANS: C 23. Sony is losing revenue to music pirating. To prevent further illegal copying of its music CDs, Sony has begun placing a software program called Rootkit on its music CDs. When the CD is played in the computer, this program attaches itself to the computer's memory and prevents any music from being illicitly copied. The ____ of this control device has been the software's use by hackers to hide their own activities. a. outsourced corollary b. inadvertent significance c. involuntary result d. deliberate benchmarking e. unintended consequence ANS: E Unintended consequences often occur as a result of increased control. 24. McDonald's fast-food restaurants have a well-designed training program for all new employees. Each new employee is supposed to learn how to perform standardized tasks required to maintain McDonald's service quality. Due to labor shortages in some areas, new employees begin work as soon as they are hired and do not receive any off-the-job training. This nonconformity to standards creates ____. a. ambiguous group norms b. motivational grapevines c. negative benchmarks d. control loss e. monitoring valences ANS: D Control loss occurs when behavior and work procedures do not conform to standards. 25. Which of the following factors can help managers determine whether more or different control is worthwhile? a. regulation costs b. customer flows c. channelization d. synergy e. subordinate empathy ANS: A Regulation costs are the costs associated with implementing or maintaining control. 26. An often overlooked factor in determining the cost of control is ____. a. serendipitous consequences that accompany decreased supervision b. problems with trade barriers c. cybernetic feasibility d. quasi-control options e. unintended consequences that accompany increased control
ANS: E 27. Imagine a manufacturer that has a 99 percent error-free production rate and decides it wants 100 percent error-free production. Its management needs to examine ____ to determine if the costs of increased controls outweigh the benefits of error-free production. a. cybernetic costs b. benchmarks c. financial ratios d. regulation costs e. feedback loops ANS: D Regulation costs are the costs associated with implementing or maintaining control. 28. ____ is the extent to which it is possible to implement each step in the control process. a. Control feasibility b. Cybernetic feasibility c. A quasi-control assessment d. A balanced scorecard assessment e. Information management ANS: B 29. According to the text, which of the following factors can help managers to determine whether more control is possible? a. task downsizing b. cybernetic feasibility c. outsourcing d. channelization e. synergistic intelligence ANS: B Cybernetic feasibility is the extent to which it is possible to implement each step in the control process. 30. Which of the following is a method managers can use to achieve control in their organizations? a. bureaucratic b. self-control c. concertive d. normative e. all of these ANS: E 31. ____ control is top-down control in which managers try to influence employee behavior by rewarding or punishing employees for compliance or noncompliance with organizational policies, rules, and procedures. a. Bureaucratic b. Normative c. Concertive
d. Objective e. Administrative ANS: A 32. Companies that rely on bureaucratic control tend to ____. a. have no contingency plans b. rely on group norms rather than formalized rules and regulations c. value their human resources above all others d. be extremely responsive to their customers' needs e. be highly resistant to change ANS: E These companies are highly committed to following rules and procedures. 33. When the local fast-food restaurant manager caught one of her employees giving free food to his friends, she fired him on the spot. When another employee stayed late after work one night to help a woman start her car, the manager rewarded him. What type of control did the restaurant manager use in these two instances? a. bureaucratic b. objective c. self-control d. autocratic e. connotative ANS: A Bureaucratic control is defined as top-down control in which managers try to influence employee behavior by rewarding or punishing employees for compliance or noncompliance with organizational policies, rules, and procedures. 34. An organization that relies heavily on ____ controls is likely to be highly resistant to change and slow to respond to customers and competitors. a. behavior b. bureaucratic c. subjective d. normative e. output ANS: B 35. The two types of objective controls managers use are ____. a. output and input b. administrative and participative c. self-control and organizational control d. autonomous and individualized e. behavior and output ANS: E
36. A sales manager requires each member of his sales force to make three calls per day on current customers, to call on two potential customers every week, and to sell a minimum of $10,000 worth of merchandise weekly. Which of the following control methods does this indicate the sales manager is using? a. normative b. market-oriented c. industrial betterment d. objective e. administrative ANS: D Objective control is the use of observable measures of worker behaviors or inputs to assess performance and influence behavior. 37. ____ control regulates workers' actions and routines on the job, while ____ control measures the results of their efforts. a. Input; behavior b. Motivation; output c. Concertive; normative d. Behavior; output e. Input; output ANS: D 38. Marriott's top management decided that there was need for a serious effort to put democracy back in the company and make employees feel involved in the success of the company. Managers adopted the theme Ladies and Gentlemen serving Ladies and Gentlemen. This was the rule its employees were told to use when dealing with customers. Employees asked special corporate guests to comment on the good and bad issues of their stay and also to tell what the competition is doing that is better than Marriott. Then the employees acted accordingly. Marriott adopted ____ control. a. autonomous b. concertive c. normative d. control e. focus ANS: C Normative control refers to regulation of workers behavior and decisions through widely shared organizational values and beliefs. 39. Which of the following statements about normative control is true? a. Normative control tends to create an organization that is highly resistant to change. b. With normative control, managers focus on work behavior or outputs. c. Normative control leads to an emphasis on very selective hiring. d. Normative control arises when companies give autonomous work groups complete responsibility for task completion. e. None of these statements about normative control is true.
ANS: C Normative control refers to regulation of workers behavior and decisions through widely shared organizational values and beliefs. One way for an organization to implement normative controls is to have very selective hiring practices. 40. ____ control is associated with autonomous work groups. a. Objective b. Normative c. Behavior d. Concertive e. Output ANS: D 41. Ironically, ____ control may lead to even more pressure for workers to conform to expectations than ____ control. a. concertive; normative b. normative; concertive c. bureaucratic; concertive d. concertive; bureaucratic e. behavior; concertive ANS: D Under bureaucratic control, workers worry about pleasing the boss. Under concertive control, their behavior has to satisfy the rest of their team members. 42. Instead of individual sales people calling on its business customers, Cedartree Tech uses sales teams composed of marketing personnel, engineers, human resources personnel, and buyer-seller liaisons. The sales team is given complete responsibility for developing long-term partnering relationships with each customer. What kind of control would the company's sales managers most likely approve? a. human resources control b. participative control c. self-control d. administrative control e. concertive control ANS: E Concertive control is regulation of workers behaviors and decisions through work group values and beliefs. 43. Rafe's manager has instructed Rafe and his fellow workers to develop a daily theme such as patience, empathy, and kindness. Each day, the workers are to try to emphasize the theme as they work with customers, suppliers, and each other. What kind of a control is system Rafe's manager using? a. self-control b. human resources control c. non-administrative control d. output control e. bureaucratic control
ANS: A Self-control is a control system in which managers and workers control their own behavior by setting their own goals and monitoring their own progress toward achieving those goals. 44. ____ is a control method that encourages managers to look beyond traditional measures to evaluate four different perspectives on company performance. a. Optimization b. Customer churn c. Balanced scorecard d. Customer defection e. Financial ratio analysis ANS: C 45. Which of the following is NOT one of the four perspectives measured in the balanced scorecard approach to control? a. financial perspective b. policies and procedures perspective c. customer perspective d. internal business perspective e. innovation and learning perspective ANS: B See Exhibit 18.3.
46. A provider of computer technical support that is using the balanced scorecard approach to control would look at ____. a. the percentage of its employees that have received training during the last year b. customer defections c. its cash flow d. percentage of computer owners that requested support more than five times in a month e. all of these and more ANS: E See Exhibit 18.3. 47. Which of the following statements about the balanced scorecard approach to control is true? a. The customer perspective is the most important in the control process. b. The company's analysis of its controllable environment is most important to the company's success. c. The innovation and learning perspective is the most important in the control process. d. The company's analysis of its noncontrollable environment is most important to the company's success. e. All of the perspectives examined by the balanced scorecard approach are of equal importance to a company's success.
ANS: E 48. ____ should be used when it is difficult to create good measures of worker behavior and output and when organizational culture, values, and beliefs are strong. a. Bureaucratic control b. Normative control c. Concertive control d. Self-control e. Input control ANS: B 49. Normative controls should be used when ____. a. cause-and-effect relationships are clear b. workers have been taught self-control skills c. responsibility for task accomplishment is given to autonomous work groups d. it is necessary to standardize all operations e. organizational culture, values, and beliefs are strong ANS: E 50. ____ controls should be used when it is necessary to standardize operating procedures and establish limits. a. Bureaucratic b. Normative c. Concertive d. Input e. Output ANS: A 51. ____ occurs when performance improvement is attained in one part of an organization but only at the expense of decreased performance in another part. a. Suboptimization b. Control loss c. Cybernetic infeasibility d. Feedforward control e. sacrificing ANS: A The balanced scorecard minimizes the chances of suboptimization. 52. A large university library is concerned about possible pilferage of documents from its special collection of Civil War memorabilia. It has decided to make it nearly impossible for all but the most renowned Civil War experts to access the collection. The librarian in charge of the special collection feels that this new policy will adversely influence the use of the collection in research on the experiences of everyday people during the war. This is an example of the use of control creating ____.
a. b. c. d. e.
suboptimization control loss cybernetic infeasibility feedforward control sacrificing
ANS: A Suboptimization occurs when performance improvement is attained in one part of an organization but only at the expense of decreased performance in another part. 53. One of the advantages the balanced scorecard has over traditional control processes that rely solely on financial measures is that it ____. a. encourages control delegation b. eliminates problems with regulation costs c. minimizes the chances of suboptimization d. allows companies to determine the ideal control methods e. creates functional independence ANS: C Suboptimization occurs when performance improvement is attained in one part of an organization but only at the expense of decreased performance in another part. 54. The balanced scorecard approach to control ____. a. forces managers at each level of the company to set specific goals and measure performance in each of four areas b. places greatest priority on the most important aspect of control, the financial perspective c. maximizes the chances of suboptimization d. only looks at factors within a company's controllable environment e. has no real advantages over traditional control techniques ANS: A This is one of the advantages inherent in the use of the balanced scorecard.
55. When implementing the financial perspective, managers would use ____. a. financial ratios b. customer defections c. employee turnover d. value analyses e. competitive audits ANS: A Budgets, income statements, and balance sheets would also be used. 56. In the traditional control systems used at most companies, ____ measures are used to assess performance. a. financial b. customer
c. value/quality d. quality/profit e. optimization ANS: A 57. The traditional approach to controlling financial performance does NOT examine ____. a. financial ratios b. customer defections c. cash flow d. income statements e. budgets ANS: B 58. Which of the following statements about economic value added (EVA) is true? a. EVA is one of the best ways to answer the question, "Are we providing our customers with expected value?" b. EVA is the amount by which profits (after expenses) exceed the cost of capital in a given year. c. EVA is only useful to top managers. d. The final step in calculating EVA is to compute the net operating profit after taxes. e. All of these statements about economic value added are true. ANS: B EVA is the amount by which company profits exceed the cost of capital in a given year. EVA allows managers at all levels to examine their performances in terms of the organizational performance. The last step in the EVA calculation is to subtract the total dollar cost of capital from net profit after taxes. 59. When it comes to finances, the balanced scorecard focuses on one simple question. That question is ____. a. How are we performing for our shareholders? b. How do we look to our customers? c. Are we making a profit? d. What is the bottom line? e. Are we retaining enough earnings to allow for market growth? ANS: A 60. Economic value added (EVA) is so important because it ____. a. demonstrates the importance of a business or subset of a business to customers b. makes managers at all levels pay much closer attention to how they run their segment of the business c. causes managers and workers to maintain the status quo d. determines if a business or unit of a business is a star, question mark, cash cow, or dog and the necessary action to follow e. is an improved form of the balanced scorecard approach to control
ANS: B This is because EVA for subsets of the organization can be so easily calculated. 61. An article on public libraries contained the following statement: "The balanced scorecard helps organize and run the library according to a specific strategic plan, while demonstrating the library's value to the community as a whole." When dealing with the customer area of the balanced scorecard, the article advised librarians to use customer surveys. Why might this be a poor strategy to use? a. It could create information overload. b. Customer surveys are never reliable. c. Stakeholders should not be involved in the creation of a balanced scorecard. d. Results may only reveal halo effects. e. Customer surveys are typically misleading, skewed to positive feedback. ANS: E Most unhappy customers don't want to discuss why they are dissatisfied. 62. Quality is typically defined and measured in three ways. They are ____. a. costs, profitability, and customer satisfaction b. value, customer satisfaction, and conformance to expectations c. profitability, reliability, and conformance d. excellence, value, and conformance to expectations e. performance, conformance, and reliability ANS: D 63. ____ is a performance assessment in which companies identify which customers are leaving and the rate at which customers are leaving. a. Customer subjectivity b. Customer satisfaction c. Customer defection d. Customer objectivity e. Customer benefitizing ANS: C
64. An article on public libraries contained the following statement: "The balanced scorecard helps organize and run the library according to a specific strategic plan, while demonstrating the library's value to the community as a whole." When dealing with the ____ area of the balanced scorecard, the article advised librarians to ask, "How can the library continue to improve and create value?" a. financial perspective b. policies and procedures perspective c. customer perspective d. internal business perspective e. innovation and learning perspective ANS: E
65. An article on public libraries contained the following statement: "The balanced scorecard helps organize and run the library according to a specific strategic plan, while demonstrating the library's value to the community as a whole." Standards suggested to use with the ____ area of the balanced scorecard include how quickly and effectively a new service can be offered and how the training staff responds to its introduction. a. financial perspective b. policies and procedures perspective c. customer perspective d. internal business perspective e. innovation and learning perspective ANS: E This innovation and learning perspective has to do with how able the company is implementing improvements. 66. When a company emphasizes ____ as its quality goal, managers must simultaneously control excellence, price, durability, or other features of a product or service that customers strongly associate with it. a. excellence b. value c. conformance to expectations d. profitability e. performance ANS: B Value is the customer perception that the product quality is excellent for the price offered. 67. Jgermeister liqueur is the only product made by its manufacturer. The company is carefully evaluating what it learned in becoming such a success to see if it could use the same strategy to expand its international market. Which perspective of the balanced scorecard is the liqueur manufacturer emphasizing? a. financial perspective b. policies and procedures perspective c. customer perspective d. internal business perspective e. innovation and learning perspective ANS: E This perspective addresses the question, Can we continue to improve and create value?
68. According to the text, which of the following levels produces the greatest minimization of waste? a. waste prevention and reduction b. recycle and reuse c. waste treatment d. waste disposal e. waste remarketing
ANS: A 69. Several extended-stay hotel chains ask guests to hang their towels so they can be reused as a way to help the environment. This request reflects which stage of waste minimization? a. waste prevention and reduction b. recycle and reuse c. waste treatment d. waste disposal e. waste remarketing ANS: B Waste from laundering is reduced by reusing towels. 70. Process modification, material/product substitution, and ____ are the three strategies used for waste prevention and reduction. a. collective reuse b. modification of organizational culture c. process diversification d. good housekeeping e. product innovation ANS: D C&K Brewing Company C&K Brewing Company is a microbrewery in western Canada. It produces Maidens Honor brand ale, a dark beer called Warriors Cry, and several seasonal beers under the brand name Hearthfire. Its owners George Claiborne and Pete Kunard both believe the brewerys competitive advantage comes from the duo having hired an experienced German brewmaster to oversee the production of its beers. The brewmaster checks all of the ingredients before they are mixed together to make sure that each component is of the highest possible quality and rejects those that are not. After the beer has brewed, the brewmaster runs several tests on the beer to check for taste and clarity and throws out barrels that are cloudy and/or bitter. 71. Refer to C&K Brewing. The brewmaster is in charge of which classical management function? a. leading b. organizing c. motivating d. controlling e. planning ANS: D
72. Refer to C&K Brewing. The brewmaster has ____ which he uses to determine the quality of the beer by comparing its clarity to that of the finest beer. a. standards b. benchmarks c. motivational cues
d. informational cues e. undefined heuristics ANS: A 73. Refer to C&K Brewing. The brewmaster uses ____ control when he tests the raw materials. a. concurrent b. incipient c. feedforward d. introductory e. simultaneous ANS: C 74. Refer to C&K Brewing. The brewmaster uses ____ control when he tests the beer to see how it tastes. a. simultaneous b. feedback c. concurrent d. reactive e. bureaucratic ANS: B 75. Refer to C&K Brewing. To maintain the reputations of the brewery and the brewmaster, the company typically destroys about 8 percent of its production because the beer is not of a high enough quality. This would be an example of ____ control. a. objective b. concertive c. bureaucratic d. sacrificing e. administrative ANS: A 76. Refer to C&K Brewing. The company is considering using the balanced scorecard to evaluate performance. As an integrated system, the balanced scorecard will ____. a. maximize the possibility of suboptimization b. make only production managers responsible for making a positive impact on the scorecard c. measure five different perspectives of organizational performance d. examine performance from a financial perspective as well as other perspectives e. be used as a concurrent control with financial measures ANS: D The balanced scorecard approach to controlling includes financial and non-financial measures of performance.
77. Refer to C&K Brewing. Which of the following statements about the balanced scorecard is true? a. The innovation and learning perspective of the balanced scorecard examines such activities as how quickly the brewery can get a new beer to market. b. The balanced scorecard does not examine the brewerys financial performance. c. The stakeholder perspective of the balanced scorecard looks at the brewerys code of ethics. d. Like the income statement, the balanced scorecard simply provides a snapshot of the brewerys performance. e. One of the major advantages associated with the balanced scorecard is its ability to remove uncertainty from the brewerys environment. ANS: A The balanced scorecard approach to control includes financial and non-financial measures of performance. Interpublic Interpublic, the world's third-biggest marketing services group, informed the SEC that it "had found accounting errors resulting from incompetence as well as falsified books and records, violations of the laws and company policies, and inappropriate customer charges" that required it to restate its earnings for every year in the decade. Interpublic is guilty of overstating both its expenses and its revenues in its earning reports. Interpublic blames its faulty revenue reporting on "inadequate procedures for review of customer contracts." This fraudulent activity will more than likely result in a default on the company's debt and the loss of its stock market listing. 78. Refer to Interpublic. Which traditional management function was Interpublic not using effectively prior to its discovery of fraudulent activities? a. implementation b. goal-setting c. control d. suboptimization e. benchmarking ANS: C Effective financial controls should have helped Interpublic to spot the fraudulent activity earlier. 79. Refer to Interpublic. It appears that the control method Interpublic believed it should have used was one that focused on whether rules and policies were being followed. This approach is called ____. a. bureaucratic control b. objective control c. suboptimal d. self-control e. concertive control ANS: A 80. Refer to Interpublic. Why should Interpublic consider implementing the balanced scorecard? a. to eliminate the need for restructuring b. to maximize benchmarking opportunities c. to track internal and external environmental changes d. to minimize the chances of suboptimization e. for all of these reasons
ANS: D Minimizing the chances of suboptimization is a major reason for using the balanced scorecard approach. Walgreens Despite thirty straight years of increased revenues and profits, Walgreens found itself facing intense competition from Costco, Wal-Mart, and CVS. However, the biggest and newest threat to Walgreens business was mail-order prescription sales managed by pharmacy benefit managers (PBMs) who work closely with companies, insurers, and health maintenance organizations to reduce pharmaceutical costs, which have been increasing an average of 13% per year. With Costcos rock bottom prices, WalMarts incredible volume-based purchasing power, and PBMs able to sell brand-name drugs and generic drugs 27% and 53% cheaper than traditional drug stores (according to a government study), Walgreens will have to tightly control its expenses to continue to be competitive. In terms of efficiency, it costs Walgreens less to fill a prescription order (i.e., fulfillment costs) than any other retailer in the business. PBMs, however, can still fill a prescription for half as much as Walgreens. To get its fulfillment costs down, Walgreens reduced its pharmaceutical inventory supply from 68 days (that is, if Walgreens quit ordering pharmaceuticals, it would be able to fill prescriptions for 68 days before running out) to 41 days. This reduction saves the company nearly $2 billion a year. Other steps to reduce expenses include no longer accepting American Express cards at Walgreens stores. Every time a customer uses an American Express card to make a payment, the store pays American Express a fee of 2.05%. By contrast, Visa and MasterCard charge 1.55%. While the difference seems small, the savings amount to $50,000 on every $10 million of sales, which can add up quickly given Walgreens $40 billion in annual sales. Finally, Walgreens keeps costs low in its stores with one of the best employee retention rates in the industry. Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm, says, Their pharmacists don't turn over, which increases consumer trust in the pharmacist. The retention rate of store and district managers is also high. This is such an advantage. Walgreens is also using technicians who are paid $16 an hour to fill more prescriptions. While pharmacists, who are paid $42 an hour, still review all filled prescriptions, using technicians who are paid $16 an hour to fill more prescriptions clearly reduces expenses. Walgreens started its Advantage 90 program, which it now offers through its mail-order system and its stores. Walgreens believes that Advantage 90 will help it take sales away from other PBMs and from other retail pharmacies, which have higher fulfillment costs. Advantage 90 is now used by 150 companies including Southwest Airlines, and Walgreens CEO maintains that it is cheaper than mailorder PBMs. 81. Refer to Walgreens. If you managed a pharmacy chain that was trying to compete with Walgreen's, you should use ____ to determine ways to improve business efficiency. a. benchmarking b. data decentralization c. information processing d. mirroring e. comparative criterion ANS: A 82. Refer to Walgreens. Walgreens elected to reduce expenses by no longer accepting American Express cards at Walgreens stores. This occurred during which step of the control process? a. situational analysis b. taking corrective action c. benchmarking d. minimizing suboptimization
e. setting standards ANS: B 83. Refer to Walgreens. Walgreens implementation of a mail-order pharmacy business is only one change that it will need to make as it contends with increasing costs and new competition. This statement underlies the ____ nature of control. a. synergistic b. static c. reciprocal d. autonomous e. dynamic, cybernetic ANS: E 84. Refer to Walgreens. When Walgreens managers responded to the threat of PBMs by creating Walgreens Health Initiatives, its own PBM business, they were using ____ control. a. concurrent b. intermittent c. feedback d. feedforward e. synergistic ANS: C Feedback control is defined as gathering information about performance deficiencies after they occur. 85. Refer to Walgreens. When Walgreens managers changed how much inventory the company holds at a time, they were affecting the ____ perspective of the balance scorecard. a. customer b. innovation and learning c. internal d. feedback e. external relations ANS: C The internal perspective involves a companys operations, which include manufacturing and inventory. The latter also affects a companys financial performance.
SHORT ANSWER 1. List the steps in the basic control process. How would you respond to the statement, "Control is a process that should be employed intermittently?" ANS: The basic regulatory process of control: (1) begins with the establishment of clear standards of performance that will achieve organizational goals, (2) involves a comparison of actual performance to performance standards, and (3) identifies and corrects performance deviations. Because control is a continuous, dynamic, cybernetic process rather than a onetime achievement or result, it should be employed all the time, not intermittently. 2. Define benchmarking. List the three steps in this process. ANS: Benchmarking is the process of determining how well other companies (and not just competitors) perform business functions or tasks. In other words, benchmarking is the process of determining other companies' standards. The three steps in benchmarking are: (1) determining what to benchmark, (2) identifying the companies against which to benchmark your standards, and (3) collecting data to determine other companies' performance standards. 3. Identify and briefly define the three basic control methods. ANS: The three basic control methods are: 1) Feedback control (after-the-fact performance information, or gathering information about performance deficiencies after they occur), 2) Concurrent control (simultaneous performance information, or gathering information about performance deficiencies as they occur), and 3) Feedforward control (preventive performance information, or gathering information about performance deficiencies before they occur).