Test Bank for Organization Theory & Design 13th Edition by Richard Daft

Test Bank for Organization Theory & Design 13th Edition by Richard Daft

Test Bank for Organization Theory & Design 13th Edition by Richard Daft

Test Bank for Organization Theory & Design 13th Edition by Richard Daft

TEST BANK Organization Theory & Design 13th Edition by Richard Daft

TABLE OF CONTENTS Chapter 01: Organizations and Organization Design Chapter 02: Strategy, Organization Design, and Effectiveness Chapter 03: Fundamentals of Organization Structure Chapter 04: The External Environment Chapter 05: Interorganizational Relationships Chapter 06: Designing Organizations for the International Environment Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics Chapter 08: Designs for Manufacturing and Service Technologies Chapter 09: Designs for Digital Organizations and Big Data Analytics Chapter 10: Organization Size, Life Cycle, and Decline Chapter 11: Organization Culture and Control Chapter 12: Innovation and Change Chapter 13: Decision Making Processes Chapter 14: Conflict, Power, and Politics

Test Bank for Organization Theory & Design 13th Edition by Richard Daft

Test Bank for Organization Theory & Design 13th Edition by Richard Daft

Chapter 01: Organizations and Organization Design Indicate whether the statement is true or false.

1. The growing global interdependence means that the environment for companies has become less complex and competitive. a. True b. False 2. Organizations are social entities that are only linked to the internal environment. a. True b. False 3. An organization exists when people interact with one another to perform essential functions that help attain goals. a. True b. False 4. An organization obtains inputs from the external environment, adds value through a transformation process, and discharges products and services back to the environment. a. True b. False 5. Financial resources for government and charity nonprofits typically come from the sale of products or services to customers rather than from government appropriations, grants, and donations. a. True b. False 6. If specialization is low, each employee performs only a narrow range of tasks. a. True b. False 7. Vertical complexity is the number of departments or occupational specialties existing horizontally across an organization. a. True b. False 8. Scientific management focuses primarily on design and functioning of an organization as a whole. a. True b. False 9. With decentralization, decision-making authority is pushed up to higher organizational levels. a. True b. False 10. Organizational behavior is concerned with people aggregated into departments and organizations and with the differences in structure and behavior at the organization level of analysis. a. True b. False Powered by Cognero

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Chapter 01: Organizations and Organization Design

Indicate the answer choice that best completes the statement or answers the question.

11. Organization design: a. encompasses larger elements that influence structural dimensions, including the organization’s size, technology, environment, culture, and goals. b. gives us the tools to evaluate and understand how and why some organizations grow and succeed while others do not. c. obtains inputs from the external environment, adds value through a transformation process, and discharges products and services back to the environment. d. provides labels to describe the internal characteristics of an organization.

12. refers to economic development that generates wealth and meets the needs of the current generation while saving the environment so future generations can meet their needs as well. a. Centralization b. Formalization c. Contingency d. Sustainability 13. Pendant Inc., a retail chain based in England, has implemented an energy-efficient trucking fleet. It is increasing its use of green materials in buildings, and aims to dispose all the waste of the company by 2025. Which of the following measures is Pendant Inc. focusing its efforts on? a. Going green b. Scientific management c. Contingency d. Centralization 14. refers to technologies, skills, and processes for searching and examining massive sets of data to uncover hidden patterns and correlations. a. Scientific management b. Social business c. A social media program d. Big data analytics 15. Which of the following is a difference between for-profit businesses and nonprofit organizations? a. Financial resources for for-profit businesses come from government appropriations, grants, and donations, while nonprofit organizations are funded by the sale of products or services to customers. b. In for-profit businesses, managers focus on improving an organization’s products and services to increase sales revenues, while in nonprofit organizations, however, services are typically provided to nonpaying clients. c. For-profit businesses are committed to servicing clients with limited funds, while nonprofit organizations have access to unlimited funds to service clients. d. In for-profit businesses, services are typically provided to nonpaying clients, while in nonprofit organizations, services are typically provided to paying clients.

16.

provide labels to describe the internal characteristics of an organization. a. Functional dimensions b. Administrative principles

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Chapter 01: Organizations and Organization Design c. Contingency factors d. Structural dimensions 17. encompass larger elements that influence structural dimensions, including an organization’s size, technology, environment, culture, and goals. a. Functional dimensions b. Administrative principles c. Contingency factors d. Structural dimensions 18. Which of the following is true of contingency factors? a. They describe the organizational setting that influences and shapes the structural dimensions. b. They create a basis for measuring and comparing organizations. c. They provide labels to describe the internal characteristics of an organization. d. They describe who reports to whom and the span of control for each manager.

19.

pertains to the amount of written documentation in an organization. a. Centralization b. Specialization c. Decentralization d. Formalization

20.

is the degree to which organizational tasks are subdivided into separate jobs. a. Centralization b. Specialization c. Decentralization d. Formalization

21.

describes who reports to whom and the span of control for each manager. a. Organizational technology b. Scientific management c. Hierarchy of authority d. Administrative principles

22.

refers to the number of distinct departments or activities within an organization. a. Complexity b. Specialization c. Decentralization d. Formalization

23.

complexity is the number of levels in the hierarchy of an organization. a. Spatial b. Vertical c. Lateral

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Chapter 01: Organizations and Organization Design d. Horizontal 24.

complexity is the degree to which an organization’s departments and personnel are dispersed geographically. a. Spatial b. Vertical c. Lateral d. Horizontal

25.

refers to the tools, techniques, and actions used to transform inputs into outputs. a. Organization design b. Organizational performance c. Organizational technology d. Organizational behavior

26.

refers to the amount of resources used to achieve an organization’s goals. a. Effectiveness b. Contingency c. Sustainability d. Efficiency

27.

is the degree to which an organization achieves its goals. a. Effectiveness b. Contingency c. Sustainability d. Efficiency

28.

primarily focus on the design and functioning of an organization as a whole. a. Structural dimensions b. Administrative principles c. Contingency factors d. Functional dimensions

29. emphasize designing and managing organizations on an impersonal, rational basis through such elements as clearly defined authority and responsibility, formal recordkeeping, and uniform application of standard rules. a. Structural dimensions b. Administrative principles c. Contingency factors d. Bureaucratic organizations 30. A(n) design means that an organization is much looser, free-flowing, and adaptive. a. organic b. specialized c. vertical d. mechanistic Powered by Cognero

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Chapter 01: Organizations and Organization Design 31. Subzero Enterprises is a publishing company based in the United States of America. The company has 70 employees.

Information flows in all directions within and across departments and hierarchical levels. The rules and regulations at Subzero Enterprises are flexibly applied. Subzero Enterprises follows a(n) design. a. vertical b. specialized c. organic d. mechanistic 32. Which of the following contingency factors will influence whether an organization is more effective with a primarily mechanistic organization design? a. Service technology b. Large size c. Adaptive culture d. Innovation strategy 33. Which of the following contingency factors will influence whether an organization is more effective with a primarily organic design? a. Manufacturing technology b. Stable environment c. Adaptive culture d. Efficiency strategy 34. At Infosoft Solutions, employees are encouraged to take care of their problems by working with one another and with customers, using their discretion to make decisions. From this information, it can be understood that Infosoft Solutions is a organization. a. decentralized b. centralized c. mechanistic d. bureaucratic 35. A is a narrowly defined piece of work assigned to a person. a. task b. role c. job d. designation 36. A has discretion and responsibility, allowing a person to use his or her judgment and ability to achieve an outcome or meet a goal. a. task b. role c. structure d. system 37. Which of the following types of communication is emphasized by mechanistic organizations? a. Lateral communication Powered by Cognero

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Chapter 01: Organizations and Organization Design b. Spatial communication c. Horizontal communication d. Vertical communication 38. Which of the following types of communication is emphasized by organic organizations? a. Lateral communication b. Spatial communication c. Horizontal communication d. Vertical communication 39. is the micro approach to organizations because it focuses on the individuals within organizations as the relevant units of analysis. a. Organizational behavior b. Organization design c. Organization theory d. Organizational culture 40. Which of the following is a difference between organization design and organizational behavior? a. Organization design focuses on individuals within organizations, while organizational behavior analyzes the whole organization as a unit. b. Organization design is concerned with cognitive and emotional differences among people within organizations, while organizational behavior is concerned with the differences in structure and behavior at the organization level of analysis. c. Organization design is concerned with lower management, while organizational behavior is concerned with top- and middle-management. d. Organization design might be considered the sociology of organizations, while organizational behavior is the psychology of organizations.

41. Under Jeff Immelt’s leadership at General Electric, managers were encouraged to find ways to reduce emissions, invest in clean energy, and develop products that had a lower impact on the environment. Which of the following global challenges was GE responding to? a. Speed and responsiveness b. Going green c. Intense competition d. Big data analytics 42. Kodak, once considered the leading film and camera producer, was one of the first to invest in developing digital cameras, yet the organization’s managers decided against launching the product because they feared it would detract from sales of its existing photographic products. Kodak ultimately declared bankruptcy and no longer produces photographic equipment. Which of the following global challenges did Kodak fail to address? a. Speed and responsiveness b. Going green c. Big data analytics d. Globalization 43. You’ve just been named the CEO of a struggling snack manufacturer. Sales of some of the company’s bestselling Powered by Cognero

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Chapter 01: Organizations and Organization Design products have dropped off considerably in recent years, and you know you need to make some changes to the organization’s product lines soon or the firm will go under. Which of the following most likely provides the best opportunities for making immediate changes that will increase demand for your firm’s products? a. Engaging in “green” manufacturing b. Entering new markets around the globe c. Using data analytics to determine current consumer preferences d. Acquiring a competing organization 44. You are the production manager for a men’s clothing manufacturer. Several years ago, under intense pressure to cut costs, you made the decision to outsource production of your organization’s t-shirts to a low-cost facility in Cambodia.

The move significantly reduced expenses and increased profits, enabling your firm to better compete against similar apparel manufacturers. Recently, however, the media has brought attention to the poor working conditions in some Cambodian factories, and there has been a public outcry against companies that take advantage of workers by manufacturing goods under unfair working conditions. You’re now concerned that consumers will stop buying your firm’s Cambodian-made products. Which of the following best describes the challenge you’re facing? a. Intense competition b. Globalization c. Sustainability and ethics issues d. Big data analytics 45. ABC Construction is a regional organization divided into separate groups working under one name. One group focuses on installing heating and air conditioning systems in new homes, another group installs roofing, and yet another group is dedicated to installing plumbing systems. To which of the following elements of an organization is this information related? a. Being a social entity b. Goals c. A deliberately structured and coordinated system d. Links to the external environment 46. Poppy, a small boutique, specializes in clothing for the mature woman who wants to look fashionable without looking too young or trendy. The organization’s ideal customer comes from a higher income bracket, is 40+ years old, and seeks unique fashions. To which of the following elements of an organization is this information related? a. Being a social entity b. Goals c. A deliberately structured and coordinated system d. Links to the external environment 47. In Bangladesh, Nobel Peace Prize-winning economist Muhammad Yunus designed an organization that would manufacture a low-cost, fortified yogurt for toddlers to help lower the high mortality rate among two- and threeyear-old children in that country. The organization would also provide jobs to those who worked in the plant, as well as to women who would sell the product door-to-door, keeping a small percentage of each sale as their commission. Which of the following best describes this organization? a. For-profit organization b. Nonprofit organization c. Social organization d. Hybrid organization Powered by Cognero

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Chapter 01: Organizations and Organization Design 48. As the Operations Manager of a manufacturing plant, you have recently become aware of a conflict. The purchasing department wants to switch to a foreign supplier of a particular component part in order to save money, but the manufacturing floor manager says the new supplier’s parts are lower in quality, break more easily, and thus, fewer pieces pass the final inspection, lowering overall production. Which of the following challenges are you facing? a. Solving an ethical dilemma b. Motivating employees to work together to achieve organizational goals c. Creating a more diverse workforce d. Adapting to conducting business in a global environment 49. At a certain automotive manufacturing plant, each line worker is required to perform three specific actions or steps on an automobile before it moves on to the next person on the line. At a different computer manufacturer, each line worker performs fifteen to eighteen actions on each laptop and tests his or her work before sending the units on to the next station.

These two manufacturers are very different in terms of: a. formalization. b. specialization. c. complexity. d. centralization.

50. Maxi’s Magical Mystery Tour is a nonprofit organization operated by a group of six actors, singers, and dancers. They intend to bring the arts to school-aged children by performing at a minimum of nine grade schools in the tri-state region each school year. To which of the following elements is this information related? a. Being a social entity b. Goals c. A deliberately structured and coordinated system d. Links to the external environment 51. As the newly hired production manager at a small but growing solar panel manufacturing firm, you were shocked to discover that there is virtually no written documentation detailing the production of various types of panels. The owner explained it by saying that he “trusts his people to know what they’re doing.” You see potential problems with this approach, so which of the following structural dimensions do you think you should focus on addressing first? a. Formalization b. Specialization c. Centralization d. Documentation 52. During the first week of his new job as a sales representative for a national auto parts distributor, Tyler attended a regional sales conference. He couldn’t help but notice that of the 400 or so sales reps there, nearly all of them were goodlooking men under 35, like himself. He began to wonder if he got the job because of his skill in sales or because he fit a certain profile. Which aspect of organizational design is Tyler concerned about? a. The hierarchy of authority b. Specialization c. Organizational culture d. Organizational environment 53. The CEO of a chemical manufacturing plant is reviewing the organization’s effectiveness over the past year. Among other things, she is looking at the plant’s profitability, the volume of chemicals produced, the number of accidents within the plant, the rate of employee turnover, and the degree to which the firm is complying with federal regulations regarding Powered by Cognero

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Chapter 01: Organizations and Organization Design the plant’s impact on the environment. This CEO is taking a(n) a. Stakeholder b. Goal-oriented c. Comprehensive d. Efficient

approach to measuring effectiveness.

54. In some organizations, in which everyone has access to the information they need and the training to make good decisions, it no longer makes sense to have layers of managers. This is particularly true of organizations. a. knowledge-based b. global c. highly centralized d. diversified 55. Phoenix Software employs fewer than 20 employees. They do not have job titles, and they typically organize themselves into collaborative work teams as new projects arise. Which of the following best describes Phoenix Software? a. Mechanistic b. Centralized c. Informal d. Bossless

56. In today’s rapidly changing global business environment, managers face many challenges. Briefly summarize the five major challenges discussed in the text.

57. Differentiate between for-profit businesses and nonprofit firms.

58. Briefly discuss the contingency factors of an organization.

59. Discuss in detail the stakeholder approach.

60. What is scientific management? How is it used?

61. What is a mechanistic design?

62. Differentiate between specialized tasks and empowered roles.

63. Discuss how communication takes place in mechanistic and organic organizations.

64. Describe the levels of analysis of an organization.

65. What is organization theory and design?

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Chapter 01: Organizations and Organization Design Answer Key 1. False 2. False 3. True 4. True 5. False 6. False 7. False 8. False 9. False 10. False 11. b 12. d 13. a 14. d 15. b 16. d 17. c 18. a 19. d 20. b 21. c 22. a 23. b 24. a 25. c Powered by Cognero

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Chapter 01: Organizations and Organization Design 26. d 27. a 28. b 29. d 30. a 31. c 32. b 33. c 34. a 35. a 36. b 37. d 38. c 39. a 40. d 41. b 42. a 43. c 44. c 45. c 46. d 47. d 48. b 49. b 50. b 51. a Powered by Cognero

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Chapter 01: Organizations and Organization Design 52. c 53. a 54. a 55. d 56. Due to globalization, managers are expected to help their organizations adapt to a business environment in which markets, technologies, and organizations are increasingly interconnected. This growing global interdependence creates new opportunities for organizations, but it has also led to intense competition in an increasingly complex environment.

Stakeholders around the globe are demanding that organizations commit to balancing profit with public interest, thus managers must place a new focus on sustainability, the green movement, and ethics. A fourth significant challenge for managers is to respond quickly and decisively to environmental changes, organizational crises, and shifting customer expectations. And finally, due to the digital revolution, managers must learn to use big data analytics to uncover hidden patterns and correlations that can enhance their organizations’ performance.

57. The primary difference between for-profit businesses and nonprofit firms is that managers in businesses direct their activities toward earning money for the company and its owners, whereas managers in nonprofits direct much of their effort toward generating some kind of social impact. Financial resources for government and charity nonprofits typically come from government appropriations, grants, and donations rather than from the sale of products or services to customers. In businesses, managers focus on improving the organization’s products and services to increase sales revenues. In nonprofits, however, services are typically provided to nonpaying clients, and a major problem for many organizations is securing a steady stream of funds to continue operating. Nonprofit managers, committed to serving clients with limited funds, must focus on keeping organizational costs as low as possible and demonstrating a highly efficient use of resources. Moreover, for-profit firms often compete with nonprofits for limited donations through their own philanthropic fundraising efforts.

58. Contingency factors include size, organizational technology, the external environment, goals and strategy, and organizational culture. a. Size can be measured for the organization as a whole or for specific components, such as a plant or division. b. Organizational technology refers to the tools, techniques, and actions used to transform inputs into outputs. c. The environment includes all elements outside the boundary of the organization. d. The organization’s goals and strategy define the purpose and competitive techniques that set it apart from other organizations. e. An organization’s culture is the underlying set of key values, beliefs, understandings, and norms shared by employees.

59. Achieving effectiveness is not always a simple matter because different people want different things from an organization. For customers, the primary concern is high-quality products and services provided in a timely manner at a reasonable price, whereas employees are mostly concerned with adequate pay, good working conditions, and job satisfaction. Managers carefully balance the needs and interests of various stakeholders in setting goals and striving for effectiveness. This is referred to as the stakeholder approach, which integrates diverse organizational activities by looking at various organizational stakeholders and what they want from the organization. A stakeholder is any group within or outside of the organization that has a stake in the organization’s performance. The satisfaction level of each group can be assessed as an indication of the organization’s performance and effectiveness.

60. Pioneered by Frederick Winslow Taylor, scientific management emphasizes scientifically determined jobs and management practices as the way to improve efficiency and labor productivity. Taylor proposed that workers “could be retooled like machines, their physical and mental gears recalibrated for better productivity.” He insisted that management itself would have to change and emphasized that decisions based on rules of thumb and tradition should be replaced with Powered by Cognero

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Chapter 01: Organizations and Organization Design precise procedures developed after careful study of individual situations. To use this approach, managers develop precise, standard procedures for doing each job, select workers with appropriate abilities, train workers in the standard procedures, carefully plan work, and provide wage incentives to increase output.

61. A mechanistic design means that an organization is characterized by machine-like standard rules, procedures, and a clear hierarchy of authority. Organizations are highly formalized and are also centralized, with most decisions made at the top.

62. A task is a narrowly defined piece of work assigned to a person. With a mechanistic design, tasks are broken down into specialized, separate parts, as in a machine, with each employee performing activities according to a specific job description. A role, in contrast, is a part in a dynamic social system. A role has discretion and responsibility, allowing a person to use his or her judgment and ability to achieve an outcome or meet a goal.

63. Mechanistic organizations emphasize vertical communication up and down the hierarchy. Top managers pass information downward to employees about goals and strategies, job instructions, procedures, and so forth, and in turn ask that employees provide information up the hierarchy concerning problems, performance reports, financial information, suggestions and ideas, and so forth. In an organic organization, there is greater emphasis on horizontal communication, with information flowing in all directions within and across departments and hierarchical levels. The widespread sharing of information enables all employees to have complete information about the company so they can act quickly. In addition, organic organizations maintain open lines of communication with customers, suppliers, and even competitors to enhance learning capability.

64. Each organization is a system that is composed of various subsystems. Organization systems are nested within systems, and one level of analysis has to be chosen as the primary focus. Four levels of analysis normally characterize organizations. The individual human being is the basic building block of organizations. The human being is to the organization what a cell is to a biological system. The next higher system level is the group or department. These are collections of individuals who work together to perform group tasks. The next level of analysis is the organization itself.

An organization is a collection of groups or departments that combine into the total organization. Organizations themselves can be grouped together into the next higher level of analysis, which is the interorganizational set and community. The interorganizational set is the group of organizations with which a single organization interacts. Other organizations in the community make up an important part of an organization’s environment.

65. Organization theory and design is a macro examination of organizations because it analyzes a whole organization as a unit. Organization design is concerned with people aggregated into departments and organizations and with the differences in structure and behavior at the organization level of analysis. Organization design might be considered the sociology of organizations, while organizational behavior is the psychology of organizations.

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Chapter 02: Strategy, Organization Design, and Effectiveness

Indicate whether the statement is true or false.

1. The direction-setting process typically begins with the administration and execution of the strategic plan. a. True b. False 2. Operating goals provide direction for day-to-day decisions and activities within departments in an organization. a. True b. False 3. For nonprofit organizations, resource goals might include recruiting dedicated volunteers and expanding the organization’s funding base. a. True b. False 4. In the context of Porter’s strategy model, managers take a more organic, learning approach to organization design with a low-cost leadership strategy. a. True b. False 5. According to Miles and Snow’s strategy typology, the prospector strategy is concerned with stability or even retrenchment. a. True b. False 6. According to Miles and Snow’s strategy typology, the defender strategy can be successful when an organization exists in a declining industry or a stable environment. a. True b. False 7. According to Miles and Snow’s strategy typology, managers have left the organization with no direction and no clear approach to design with a reactor strategy. a. True b. False 8. In the context of the competing values model, the internal process approach considers external factors while measuring an organization’s health and efficiency. a. True b. False 9. In the context of the competing values model, the stability dimension reflects a management value for learning and change. a. True b. False 10. In the context of the competing values model, the internal process emphasis is more concerned with human resources than with other internal processes that lead to efficiency.

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Chapter 02: Strategy, Organization Design, and Effectiveness a. True b. False

Indicate the answer choice that best completes the statement or answers the question.

11. A represents a result or end point toward which organizational efforts are directed. a. goal b. strategy c. resource d. structure 12. Which of the following is an internal factor that is examined by top management to study an organization’s effectiveness? a. Opportunities b. Weaknesses c. Uncertainty d. Resource availability 13. means that all the organization's energies and resources are directed toward a focused, unifying, and compelling overall goal. a. Strategic intent b. The resource-based approach c. Coalitional management d. The stakeholder approach 14. The overall goal for an organization is also called the: a. operating goal. b. decision guideline. c. mission. d. strategy.

15. Which of the following describes an organization's shared values and beliefs and its reason for being? a. Strategy b. The mission c. Policy d. Procedure 16. refers to what sets an organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace. a. Operational plan b. A social construct c. The mission statement d. Competitive advantage 17. A company's

refers to something an organization does especially well in comparison to its competitors.

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Chapter 02: Strategy, Organization Design, and Effectiveness a. strategic intent b. mission statement c. core competence d. balanced scorecard 18.

goals describe specific measurable outcomes and are often concerned with the short run. a. Official b. Visionary c. Strategic d. Operating

19. Which of the following operating goals pertains to the acquisition of needed material and capital from the environment? a. Resource goals b. Performance goals c. Market goals d. Productivity goals 20.

pertains to the training, promotion, safety, and growth of individuals working in an organization. a. Market share b. Innovation c. Industrial expansion d. Employee development

21.

goals pertain to internal flexibility and readiness to adapt to unexpected changes in the environment. a. Market b. Profitability c. Innovation d. Productivity

22.

goals and mission statements describe a value system for an organization and set an overall purpose and vision. a. Profitability b. Official c. Operational d. Productivity

23. Phoenix Software has won three international awards for innovative software design in the last five years. Innovation is obviously one of the organization’s: a. strengths. b. weaknesses. c. opportunities. d. threats.

24. A is a plan for interacting with the competitive environment to achieve organizational goals. a. vision statement Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness b. mission statement c. policy d. strategy 25. In the context of Porter’s strategy model, a(n) strategy can reduce rivalry with competitors and fight off the threat of substitute products because customers are loyal to a company's brand. a. low-cost leadership b. consolidative c. integration d. differentiation 26. In the context of Porter’s strategy model, a(n) strategy is concerned primarily with stability rather than taking risks or seeking new opportunities for innovation and growth. a. prospector b. low-cost leadership c. differentiation d. innovation 27. In Miles and Snow’s strategy typology, the prospector strategy: a. attempts to maintain a stable business environment by finding a middle ground between stability and innovation. b. most closely resembles Porter's low-cost leadership strategy. c. responds to environmental threats in an ad hoc fashion without revealing a clear strategy. d. seeks innovation or risk taking and is therefore best suited to a dynamic environment.

28. According to Miles and Snow’s strategy typology, the a. defender b. prospector c. differentiation d. innovation

strategy is concerned with stability or retrenchment.

29. According to Miles and Snow’s strategy typology, the innovating on the periphery. a. reactor b. prospector c. analyzer d. defender

strategy tries to maintain a stable business while

30. Organizational a. efficiency b. adaptability c. productivity d. effectiveness

is the degree to which an organization realizes its goals.

31. Organizational effectiveness is a

, meaning that it is created and defined by an individual or group rather than

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Chapter 02: Strategy, Organization Design, and Effectiveness existing independently in the external world. a. strategic intent b. core competence c. competitive advantage d. social construct 32. The approach to organizational effectiveness is concerned with the output side and whether an organization achieves its goals in terms of desired levels of output. a. goal b. resource-based c. analytical d. internal process 33. When using the goal approach to effectiveness, it is best to use a. official b. operating c. strategic d. visionary

goals.

34. The resource-based approach to effectiveness emphasizes the: a. sales targets of an organization. b. output of an organization. c. achievement of profitability. d. input into an organization.

35. Which of the following approaches is most likely to be used when one is measuring work climate, group loyalty, and worker-management communication as measures of effectiveness? a. Quality control approach b. External process approach c. Internal process approach d. Stakeholder approach 36. The model tries to balance a concern with various parts of an organization rather than focusing on one part. a. internal process b. rational goal c. open systems d. competing values 37. The two value dimensions of the competing values model are the: a. internal and external environment of an organization. b. low-cost leadership and differentiation strategies. c. focus and structure of an organization. d. productivity strategies of an organization.

38. In the context of the competing values model, a combination of external focus and flexible structure leads to a(n) Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness emphasis where management’s primary goals are growth and resource acquisition. a. rational goal b. open systems c. internal process d. human relations 39. Jason is employed at Cloover Inc. At Cloover Inc., management’s primary goals are increasing the ratio of output to input, using the resources used to produce a unit of output efficiently, and generating more revenue than the expenses.

Cloover Inc.’s management values are represented by the emphasis. a. rational goal b. open systems c. internal process d. human relations 40. In the context of the competing values model, the primary outcome of the setting that maintains itself in an orderly way. a. rational goal b. open systems c. internal process d. human relations

emphasis is a stable organizational

41. As the world’s supply of oil diminishes and the demand for alternative, renewable energy resources, such as solar and wind power, increases, oil drilling companies are seeing a steep decline in demand for their services. This shift in consumer preferences represents a significant for oil drilling companies. a. strength b. weakness c. opportunity d. threat 42. Claire is the purchasing manager for a large manufacturing plant, and it’s her responsibility to make sure the plant always has all of the supplies it needs at the right times. Although she’s happy with her current set of suppliers, she is researching alternate suppliers, just in case one of her existing suppliers is suddenly unable to deliver the needed materials at the expected times and costs. Claire is engaged in planning. a. resource b. scenario c. alternative d. organizational 43. You are the VP of Automotive Design at a major automobile manufacturer. You’ve been analyzing both the internal and external environments, looking for competitive openings that will allow your organization to remain competitive well into the future. Which of these ideas is most likely to give your organization the competitive advantage it needs? a. Immediately switching to producing electric vehicles exclusively b. Enhancing the safety features on your organization’s vehicles c. Rolling out a new selection of trendy paint colors d. Developing a self-driving vehicle Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness 44. Quite a few years ago, Performance Plastics, a plastics molding plant, bought the chemical manufacturer that produces the raw materials Performance uses in its products. This means that Performance has immediate access to its materials, spends far less on them, and can be much more efficient in its production, unlike its competitors. Given its core competencies of efficiency and cost savings, what strategy do you think Performance should pursue to become more profitable? a. Differentiation strategy b. Low-cost leader strategy c. Combination differentiation/low-cost leader strategy d. Global strategy 45. Paige, an experienced restaurant manager, and her partner Guillermo, an award-winning chef, are planning to open their own restaurant. With more than 20 years of experience between them, the pair are known for producing extraordinary meals in stunning environments. Given their core competencies for quality and customer service, what strategy do you think Paige and Guillermo should pursue with their new restaurant? a. Differentiation strategy b. Low-cost leader strategy c. Combination differentiation/low-cost leader strategy d. Global strategy 46. Fifteen years ago, when your father founded a roofing installation business during a construction boom in your region, the new organization had almost more business than it could handle just with new home construction. Now you’re in charge of the business. New home construction has dropped off fairly steadily in recent years, although your organization is still considered the leader in your region. As you look to the future, however, you see opportunities to make up for shortfalls by branching out into roofing repair and replacement, and even into the installation of solar panels. Given these circumstances, which of the Miles and Snow strategies do you think you should pursue? a. Prospector b. Defender c. Analyzer d. Reactor 47. You’ve just been hired to run a faltering, family-run toy manufacturing business. The family members who’ve been managing the organization freely admit they’re in over their heads and don’t know how to turn around the declining business. You immediately start asking for sales, production, and inventory reports, and you soon discover that the organization has not been tracking any key metrics. Instead, year after year, the design team develops new items, the plant foreman figures out how to produce seemingly random amounts of products, and the marketing and sales team do the best they can to sell as much as they can. Using Miles and Snow’s typology, which strategy would you say the organization has been pursuing? a. Prospector b. Defender c. Analyzer d. Reactor 48. You’ve just been named the new operations manager for Precision-Made Auto Parts, and you couldn’t be happier.

This organization is considered to be one of the most reliable producers of standardized small parts used in the production of engines for all types of vehicles. The organization has an average of 15 steady clients whose orders keep the plant, which runs like a well-oiled machine, producing parts 24/7. Given the circumstances, which of Miles and Snow’s strategies would be best for your organization?

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Chapter 02: Strategy, Organization Design, and Effectiveness a. Prospector b. Defender c. Analyzer d. Reactor 49. You and your best friend from high school have always been into fashion. Now that you’ve earned your degree in business and she’s earned her degree in fashion design, you’d like to start your own clothing design and manufacturing organization. You both know it’ll be essential for your products to be constantly changing so you can deliver “the next big thing.” Which of the Miles and Snow strategies is right for your organization? a. Prospector b. Defender c. Analyzer d. Reactor 50. GoLow.com, a budget travel website, was founded three years ago with a handful of employees. In the early days, there were no managers, and teams of employees would form organically to work on projects together. Communication flowed freely throughout the organization. Fortunately, the organization’s innovative business model has been a huge hit, and the organization has grown dramatically to 300 employees to accommodate its operations. But there have been some issues with the way things have continued to operate. Employees frequently complain that they’re not kept informed of key decisions, and there have been a number of occasions of wasted duplicate efforts. Which contingency factor most needs to be addressed in a redesign of the organization? a. Technology b. Culture c. Environment d. Strategy 51. Midland Savings & Loan was once a small but thriving banking organization in the Midwest with about 30 branches.

It was a tightly structured organization, and all employees knew their roles and were well-trained to do their jobs.

Occasionally, upper management would respond to customer requests by making a small change in operations or developing a new product, but no one was formally assigned to develop innovations. Over time, the bank’s customers dwindled, and the bank has just announced it will be closing its doors. Which contingency factor should have been addressed earlier in this organization? a. Size b. Culture c. Environment d. Strategy 52. Along with several other members of the upper management team, you’ve just completed an assessment of your organization’s manufacturing plant. To meet demand for product, the group has determined that the plant must operate at a minimum of 75% capacity for at least 250 working days each year with no more than a total of 50 hours of down time due to accidents or other disruptions. The plant must produce 20,000 parts annually, with a cap of 2.5% of parts rejected after inspection. What approach should your team use to measure effectiveness of plant operations? a. Goal approach b. Resource-based approach c. Internal process approach d. Strategic constituents approach Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness 53. As the Executive Director of Explore the Arts, a nonprofit organization, you’ve spent years developing close connections with artists in your area, as well as with the wealthier residents in the region. Once a year, you invite the artists to create works of art on a unique theme. The artwork is then auctioned off at a black-tie gala, and the proceeds go to fund arts education in local schools. Which approach should you use to measure the effectiveness of your fundraising approach? a. Goal approach b. Resource-based approach c. Internal process approach d. Strategic constituents approach 54. As the new production manager of a small manufacturing plant in Tennessee, you’ve been charged with making beneficial changes to the production line. After interviewing nearly all of the workers, you’ve developed a number of ideas for improving employee satisfaction with internal jobs, reducing turnover, and minimizing the number of on-the-job injuries. Additionally, these changes should increase productivity and reduce waste. Once you’ve implemented these changes, which approach should you use to measure their effectiveness? a. Goal approach b. Resource-based approach c. Internal process approach d. Strategic constituents approach 55. When you were first offered the job as the new CEO of a large grocery store chain a few months ago, you weren’t sure if you should take it. The organization does not have a good reputation in general, and poor performance is reflected in falling stock prices. However, after studying the organization, you have a lot of ideas for improving the products, services, and the stores themselves that you feel confident will boost sales, increase customer satisfaction, and enhance employee morale. Eventually, you expect to see improvements in the stock prices, which should make the organization’s investors happier, too. Which is the best approach for you to use in measuring the effectiveness of your changes? a. Goal approach b. Resource-based approach c. Internal process approach d. Strategic constituents approach

56. Explain the role of top management in an organization and why it is important.

57. Briefly explain an organization’s mission.

58. Briefly explain operating goals. List the various operating goals in an organization.

59. Compare and contrast Michael E. Porter’s two main types of strategies described in the text.

60. Naveen has an opportunity to buy an older, somewhat rundown hotel located in a beach resort town on the Oregon coast. Explain how he could apply each of Porter’s two basic strategies to create a profitable business.

61. Describe Miles and Snow’s strategy typology.

62. Describe the goal approach to measure effectiveness.

63. Explain the resource-based approach to measure effectiveness. List the various indicators that can be tracked with the Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness resource-based approach.

64. Write a brief note on the internal process approach.

65. In the context of the competing values model, explain the four approaches to effectiveness values.

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Chapter 02: Strategy, Organization Design, and Effectiveness Answer Key 1. False 2. True 3. True 4. False 5. False 6. True 7. True 8. False 9. False 10. False 11. a 12. b 13. a 14. c 15. b 16. d 17. c 18. d 19. a 20. d 21. c 22. b 23. a 24. d 25. d Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness 26. b 27. d 28. a 29. c 30. c 31. d 32. a 33. b 34. d 35. c 36. d 37. c 38. b 39. a 40. c 41. d 42. b 43. d 44. b 45. a 46. c 47. d 48. b 49. a 50. b 51. c Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness 52. a 53. b 54. c 55. d 56. Top executives decide the end purpose an organization will strive for and determine the direction it will take to accomplish it. It is this purpose and direction that shapes how the organization is designed and managed. The primary responsibility of top management is to determine an organization’s goals, strategy, and design, thereby adapting the organization to a changing environment. The direction-setting process typically begins with an assessment of the opportunities and threats in the external environment, including the amount of change, uncertainty, and resource availability. Top managers also assess internal strengths and weaknesses to define the company’s distinctive competence compared with other firms in the industry. This competitive analysis of the internal and external environments is one of the central concepts in strategic management.

57. The overall goal for an organization is often called the mission—the organization’s reason for existence. The mission describes the organization’s shared values and beliefs and its reason for being. The mission is sometimes called the official goals, which refers to the formally stated definition of business scope and outcomes the organization is trying to achieve. Official goal statements typically define business operations and may focus on values, markets, and customers that distinguish the organization.

Whether called a mission statement or official goals, the organization’s general statement of its purpose and philosophy is often written down in a policy manual or the annual report. One of the primary purposes of a mission statement is to serve as a communication tool. The mission statement communicates to current and prospective employees, customers, investors, suppliers, and competitors what the organization stands for and what it is trying to achieve. A mission statement communicates legitimacy to internal and external stakeholders, who may join and be committed to the organization because they identify with its stated purpose and values. Most top leaders want employees, customers, competitors, suppliers, investors, and the local community to look on the organization in a favorable light, and the concept of legitimacy plays a critical role.

58. An organization’s mission and overall goals provide a basis for developing more specific operating goals. Operating goals designate the ends sought through the actual operating procedures of the organization and explain what the organization is actually trying to do. Operating goals describe specific measurable outcomes and are often concerned with the short run. Operating goals typically pertain to the primary tasks an organization must perform. Specific goals for each primary task provide direction for the day-to-day decisions and activities within departments.

Typical operating goals that define what an organization is trying to accomplish include performance goals, resource goals, market goals, employee development goals, productivity goals, and goals for innovation and change.

59. Michael E. Porter defined two basic strategies: the differentiation strategy and the low-cost leadership strategy. Both strategies can vary in scope from broad to narrow. Organizations using the differentiation strategy attempt to distinguish their products or services from others in the industry. Managers may use advertising, distinctive product features, exceptional service, or new technology to achieve a product or service perceived as unique. This strategy usually targets customers who are not particularly concerned with price, so it can be quite profitable, although it can also be a costly strategy to pursue. Differentiation often creates loyal customers. Organizations using the low-cost leadership strategy compete on price. With this strategy, organizations aggressively seek efficient facilities, pursue cost reductions, and use tight controls to produce products or services more efficiently than competitors. Low-cost leaders avoid risk and rarely seek out new opportunities.

60. Michael E. Porter studied a number of business organizations and proposed that managers can make an organization Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness more profitable and less vulnerable by adopting either a differentiation strategy or a low-cost leadership strategy. Both of these options are available to Naveen. If he adopted the differentiation strategy, he would want to invest in dramatically upgrading and updating the hotel. He would also want to ensure the hotel offers unique amenities that travelers find desirable. This approach would allow him to charge premium prices to luxury-minded travelers. Alternatively, he could choose the low-cost leader approach. He could redesign the hotel with simple, streamlined rooms and few amenities so that the hotel can be operated efficiently at a low cost. This approach would allow him to attract the budget-conscious traveler.

61. The Miles and Snow typology is based on the idea that managers seek to formulate strategies that will be congruent with the external environment. Organizations strive for a fit among internal organization characteristics, strategy, and the external environment. The four strategies that can be developed are the prospector, the defender, the analyzer, and the reactor. ∙ Prospector: The prospector strategy is to innovate, take risks, seek out new opportunities, and grow. This strategy is suited to a dynamic, growing environment, where creativity is more important than efficiency. ∙ Defender: The defender strategy is almost the opposite of the prospector. Rather than taking risks and seeking out new opportunities, the defender strategy is concerned with stability or even retrenchment. ∙ Analyzer: The analyzer tries to maintain a stable business while innovating on the periphery. It seems to lie midway between the prospector and the defender. ∙ Reactor: The reactor strategy is not really a strategy at all. Rather, reactors respond to environmental threats and opportunities in an ad hoc fashion. With a reactor strategy, top management has not defined a long-range plan or given the organization an explicit mission or goal, so the organization takes whatever actions seem to meet immediate needs.

62. The goal approach to effectiveness consists of identifying an organization’s output goals and assessing how well the organization has attained those goals. This is a logical approach because organizations do try to attain certain levels of output, profit, or client satisfaction.

Indicators tracked with the goal approach include: ∙ Profitability—the positive gain from business operations or investments after expenses are subtracted. ∙ Market share—the proportion of the market the firm is able to capture relative to competitors. ∙ Growth—the ability of the organization to increase its sales, profits, or client base over time. ∙ Social responsibility—how well the organization serves the interests of society as well as itself. ∙ Product quality—the ability of the organization to achieve high quality in its products or services.

63. The resource-based approach looks at the input side of the transformation process. It assumes organizations must be successful in obtaining and managing valued resources in order to be effective because strategically valuable resources give an organization a competitive edge. From a resource-based perspective, organizational effectiveness is defined as the ability of the organization, in either absolute or relative terms, to obtain scarce and valued resources and successfully integrate and manage them.

In a broad sense, resource indicators of effectiveness encompass the following dimensions: ∙ Bargaining position—the ability of the organization to obtain from its environment scarce and valued resources, including tangible resources such as a prime location, financing, raw materials, and quality employees, and intangible assets such as a strong brand or superior knowledge. ∙ The abilities of the organization’s decision makers to perceive and correctly interpret the real properties of the external environment and supply forces. ∙ The abilities of managers to use tangible (e.g., supplies, people) and intangible ∙ (e.g., knowledge, corporate culture) resources and capabilities in day-to-day organizational activities to achieve superior performance. ∙ The ability of the organization to respond to changes in resource sectors of the environment.

64. In the internal process approach, effectiveness is measured as internal organizational health and efficiency. An effective organization has a smooth, well-oiled internal process. Employees are happy and satisfied. Department activities mesh with one another to ensure high productivity. This approach does not consider the external environment. The Powered by Cognero

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Chapter 02: Strategy, Organization Design, and Effectiveness important element in effectiveness is what the organization does with the resources it has, as reflected in internal health and efficiency.

Internal process indicators include: ∙ A strong, adaptive corporate culture and positive work climate ∙ Confidence and trust between employees and management ∙ Operational efficiency, such as using minimal resources to achieve outcomes ∙ Undistorted horizontal and vertical communication ∙ Growth and development of employees ∙ Coordination among the organization’s parts, with conflicts resolved in the interest of the larger organization 65. The combination of dimensions provides four approaches to organizational effectiveness, which, though seemingly different, are closely related. In real organizations, these competing values can and often do exist together. Each approach reflects a different management emphasis with respect to structure and focus.

A combination of external focus and flexible structure leads to an open systems emphasis. Management’s primary goals are growth and resource acquisition. The organization accomplishes these goals through the subgoals of flexibility, readiness, and a positive external evaluation.

The rational goal emphasis represents management values of structural control and external focus. The primary goals are productivity, efficiency, and profit. The organization wants to achieve output goals in a controlled way. Subgoals that facilitate these outcomes are internal planning and goal setting, which are rational management tools.

The internal process emphasis reflects the values of internal focus and structural control. The primary outcome is a stable organizational setting that maintains itself in an orderly way. Organizations that are well established in the environment and simply want to maintain their current position would reflect this emphasis. Subgoals include mechanisms for efficient communication, information management, and decision making.

The human relations emphasis incorporates the values of an internal focus and a flexible structure. Here, management concern is for the development of human resources. Employees are given opportunities for autonomy and development.

Management works toward the subgoals of cohesion, morale, and training opportunities. Organizations adopting this emphasis are more concerned with employees than with the environment.

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Chapter 03: Fundamentals of Organization Structure

Indicate whether the statement is true or false.

1. An organization chart is the visual representation of a whole set of underlying activities and processes in an organization. a. True b. False 2. Managers create information linkages to facilitate communication and coordination among organizational elements. a. True b. False 3. Integrators have a lot of authority. a. True b. False 4. As organizations grow larger, and more complex, managers find that less functions need to be performed for company's growth. a. True b. False 5. For the organization to be effective, departments should be located together in one geographic location rather than being spread all over the world. a. True b. False 6. A functional structure is also called an M-form (multidivisional) structure. a. True b. False 7. A weakness of functional structures is that they seldom enable in-depth knowledge and skill development. a. True b. False 8. When functional and divisional structures do not work for a particular function or product, then matrix structure will not work either. a. True b. False 9. One disadvantage of the matrix is that some employees experience dual authority, reporting to two bosses and sometimes juggling conflicting demands. a. True b. False 10. The biggest strength of virtual network structures is that managers have hands-on control over every activity and employee. a. True Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure b. False

Indicate the answer choice that best completes the statement or answers the question.

11. Vertical control is associated with goals of efficiency and stability, while horizontal coordination is associated with: a. structure and organization. b. levels of communication. c. learning, innovation, and flexibility. d. inputs and outputs.

12. Which of the following is true of effective information sharing in an organization? a. Information should be shared vertically, but not horizontally. b. Vertical linkages are designed primarily for coordination and collaboration. c. The structure should fit the information requirements of the organization. d. It is not possible to give people a lot of information.

13.

means that decision authority is located near the top of the organization. a. Centralization b. Decentralization c. Joint collaboration d. Horizontal linkage

14. With , decision authority is pushed downward to lower organization levels. a. centralization b. decentralization c. full-time integration d. task forces 15. are used to coordinate activities between the top and bottom of an organization and are designed primarily for control of the organization. a. Vertical linkages b. Functional groups c. Horizontal linkages d. Divisional groups 16. Which of the following strategies includes periodic reports, written information, and computer-based communications? a. Rules and plans b. Task forces c. Vertical information systems d. Hierarchical referral 17. A liaison role exists when: a. there is direct contact between managers affected by a problem. b. there is an exchange of paperwork during a hiring process.

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Chapter 03: Fundamentals of Organization Structure c. a temporary committee composed of representatives from each department affected by a problem is formed. d. a person located in one department has the responsibility for communicating and achieving coordination with another department.

18. Brian is the brand manager for Bake ‘n Bite Pastries. His job requires him to coordinate several aspects of the brand, right from the design to the distribution of the product. Although he does not report to any of the teams being coordinated, he still plays an active role in managing the product. In the context of horizontal linkages, Brian is: a. a liaison. b. a full-time integrator. c. the head of a task force. d. a team leader.

19. A full-time integrator: a. improves vertical linkages in an organization. b. has a title such as brand manage or product manager. c. reports to one of the functional departments being coordinated. d. has the responsibility of coordinating only one department.

20. Which of the following is true of full-time integrators? a. They have a lot of authority but little responsibility. b. They communicate with and are responsible for one department. c. They need excellent people skills. d. They are usually a part of the team being coordinated.

21. Which of the following is true of teams? a. Teams tend to be the weakest horizontal linkage mechanism. b. Teams are the first device in a variety of structural devices to achieve vertical linkage. c. Teams provide a standard information source enabling employees to be coordinated without actually communicating about every task. d. Teams are often used in conjunction with a fulltime integrator.

22. A(n) is a group that is made up of organizationally or geographically dispersed members who are linked primarily through advanced information and communications technologies. a. vertical linkage b. functional department c. organizational committee d. virtual team 23. The highest level of horizontal coordination is: a. relational coordination. b. departmental grouping. c. hierarchical referral. d. functional grouping.

24.

refers to frequent, timely, problem-solving communication carried out through relationships of shared goals,

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Chapter 03: Fundamentals of Organization Structure shared knowledge, and mutual respect. a. Relational coordination b. Departmental grouping c. Hierarchical referral d. Functional grouping 25. Which of the following is true of relational coordination? a. Relational coordination is the lowest level of horizontal coordination. b. Relational coordination is the first device in the variety of structural devices to achieve vertical linkage. c. Relational coordination provides a standard information source enabling employees to be coordinated without actually communicating about every task. d. Relational coordination is not a device or mechanism like other elements, but rather is part of the very fabric and culture of the organization.

26. Due to its large size and complexity, Starbucks uses several different structural approaches. Marketing, legal, and supply chain are centralized under the functional approach, but other aspects are divided according to the location of its customers under the approach. a. divisional b. geographic c. virtual network d. holacracy team 27. grouping places together employees who perform similar functions or work processes or who bring similar knowledge and skills to bear. a. Functional b. Divisional c. Multifocused d. Holacracy team 28.

grouping means people are organized according to what the organization produces. a. Functional b. Divisional c. Multifocused d. Holacracy team

29.

grouping means an organization embraces two or more structural grouping alternatives simultaneously. a. Functional b. Divisional c. Multifocused d. Matrix

30. It’s 10 p.m., and Kelli, the production manager, is still in her office, frustrated because she can’t move forward with so many projects. The CFO has been nagging her relentlessly to submit her annual budget, but the people reporting to her have not given her their numbers. Also, the head of sales has been emailing her daily to get her approval on his sales projections, even though he hasn’t responded to the few questions she’s asked about it. And worst of all, the number of defective parts is up, and no one can tell her why, making it impossible for her to solve the problem. It was never like this Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure in her old job at a different plant, she thinks to herself. This is an example of which symptom of structural deficiency? a. An absence of collaboration among units b. Slow or poor quality decision-making c. A lack of innovation in the face of a changing environment d. Declining performance 31. In grouping, departments are separate organizations that are electronically connected for the sharing of information and completion of tasks. a. functional b. virtual network c. divisional d. holacracy team 32. In a structure, activities are grouped together by common function from the bottom to the top of the organization. a. functional b. divisional c. geographic d. horizontal linkage 33. Which of the following is a strength of a functional structure? a. It has fast response time to environmental changes. b. It leads to excellent horizontal coordination among departments. c. It results in more innovation. d. It allows economies of scale within functional departments.

34. Which of the following is a weakness of a functional structure? a. It has slow response time to environmental changes. b. It restricts economies of scale within functional departments. c. It restricts in-depth knowledge and skill development. d. It restricts organizations from accomplishing functional goals.

35. Which of the following is true of a functional structure? a. It reacts quickly to environmental changes. b. It has a strong need for horizontal coordination. c. It often results in hierarchy overload. d. It cannot work in small organizations.

36. With a structure, separate divisions can be organized with responsibility for individual products, services, product groups, major projects or programs, divisions, businesses, or profit centers. a. functional b. divisional c. geographic d. horizontal linkage Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure 37. Which of the following is true of a divisional structure? a. It is also known as chain of command. b. It is also called a U-form (unitary) structure. c. It is a centralized structural form. d. It is used to promote flexibility and change.

38. The matrix structure is the correct structure when three conditions are met. Which of the following is one of these three conditions? a. Pressure exists to share scarce resources across product lines. b. Technical quality is not very important. c. The environmental domain of the organization is simple. d. The environmental domain of the organization is certain and stable.

39. Ten years ago, at the height of the cupcake craze, Patty, a baking enthusiast and entrepreneur, opened Patty’s Cakes Cupcake Bakery. Her business was a huge success, and at one point she had twelve employees. In recent years, business has steadily declined and Patty has had to reduce her workforce to just six people. Occasionally, one of the bakers or customer service clerks has suggested that perhaps it’s time for the organization to branch out into other baked goods, now that the cupcake fad is waning, but Patty always answers, “I don’t have time to think about that now. I’m running a business!” This is an example of which symptom of structural deficiency? a. An absence of collaboration among units b. Slow or poor quality decision-making c. A lack of innovation in the face of a changing environment d. Declining performance 40. Tempers definitely flared at the department managers’ meeting earlier today. Dion, the head of marketing, is frustrated because his people aren’t getting information about new products early enough to design marketing campaigns in a timely manner. But Cassie, who oversees new product development, says she’s not comfortable giving out information about new products until they’re more fully developed because her team has been criticized for giving out inaccurate information in the past. The argument ended with each manager saying they would take this problem to their respective VPs. This is an example of which symptom of structural deficiency? a. An absence of collaboration among units b. Slow or poor quality decision-making c. A lack of innovation in the face of a changing environment d. Declining performance 41. Clinton has only been in his new job as the production manager for a manufacturing plant for a week, and he’s already concerned with what he sees as an “us-versus-them” mentality among the various units on the floor. When he looked back at past performance over the last five years, he noticed that the same number of employees used to be far more productive, but when he started asking questions, he heard nothing but blame and finger-pointing from unit managers, who all have very different priorities and goals. This is an example of which symptom of structural deficiency? a. An absence of collaboration among units b. Slow or poor quality decision-making c. A lack of innovation in the face of a changing environment d. Declining performance 42. Your solar system installation business has taken off like a rocket in the last three years. You started with a couple of people helping you out, and now you’ve got more than twenty employees working multiple job sites every day. It’s very Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure hard to manage so many projects at once, and you feel pulled in a dozen different directions at the same time. Recently, problems have emerged. Some of your longtime employees sometimes take it upon themselves to give orders, and their orders have conflicted with your directives, so a few employees have complained about the confusion. One guy added he doesn’t like to be “bossed around” by someone who isn’t his boss. Which of the following components of organizational structure do you urgently need to address first? a. Formal positions and reporting relationships b. Number of levels in the hierarchy and each manager’s span of control c. Individuals grouped into departments d. Systems for effective communication and coordination 43. Lately, you’ve begun to wonder if your organization’s structure needs a few tweaks. As your online gift business grew, you recognized the need to create some kind of hierarchy, so you promoted your three best employees to management positions over three departments: floral gifts, food gifts, and miscellaneous gifts. But the business has continued to grow, and now the department heads have anywhere from twelve to eighteen people reporting to them. All three have complained that they are struggling with balancing the demands of managing so many people with their other responsibilities for guiding their respective parts of the business. Which of the following components of organizational structure do you need to address? a. Formal positions and reporting relationships b. Number of levels in the hierarchy and each manager’s span of control c. Individuals grouped into departments d. Systems for effective communication and coordination 44. Pria is a customer service agent at an online travel agency. One of the organization’s customers has made a very unusual request, and Pria isn’t quite sure what to do. She needs guidance on whether to honor the request and how to respond to the request appropriately, especially if the answer is no. Which linkage device should Pria use to communicate and resolve this issue? a. Hierarchical referral b. Rules and plans c. Vertical information system d. Horizontal communication 45. Layla is the head of customer service at an online travel agency. Over the last few months, several unique situations with customers have been brought to her attention, prompting her to establish two new policies. Which linkage device would be the best method for Layla to use to communicate these new policies to the customer service supervisors and representatives? a. Hierarchical referral b. Rules and plans c. Vertical information system d. Horizontal communication 46. In his first week as production manager for a manufacturing plant, Clinton has already noticed an “us-versus-them” mentality among the various units on the floor. When he looked back at past performance over the last five years, he could see that the same number of employees used to be far more productive, but when he started asking questions about the decline, he heard nothing but blame and finger-pointing from unit managers. Clinton wants to bring together representatives from all of the units to discuss the issues and make recommendations for solutions. Which horizontal linkage device would work best in this situation? a. A liaison Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure b. A task force c. A full-time integrator d. A cross-functional team 47. Six months ago, Clinton, a production manager for a manufacturing plant, pulled together a group of employees representing each of the various units on the plant floor. Employee morale and production had been steadily declining for years, and Clinton wanted to know why it was happening and how to fix it. Based on the group’s recommendations, Clinton implemented quite a few changes that have since resulted in some improvements, but he thinks operations could get even better with ongoing employee input. Which horizontal linkage device would work best in this situation? a. A liaison b. A task force c. A full-time integrator d. A cross-functional team 48. As the CEO of a rapidly growing fast-casual restaurant chain, you see tremendous potential for taking your organization global. However, you recognize that your products and the way they’re served may have to be modified to suit the local tastes of different regions around the world. As you consider how to structure your organization to best meet your organization’s needs as it grows in the future, which structure should you choose? a. Functional structure b. Divisional structure c. Geographic structure d. Matrix structure 49. For 30 years, the functional structure has worked just fine for Southwestern Foods, an organization that now manufactures and sells various food products nationally and in limited foreign markets. But as the CEO, you’re aware of some emerging problems. The organization is manufacturing everything from canned goods to snack foods to organic items, all of which involve different materials, different distribution methods, and different consumers, and you can see that you’re not operating as efficiently as you could. As you consider how to restructure your organization to best meet your organization’s needs as it grows in the future, which structure should you choose? a. Virtual network structure b. Divisional structure c. Geographic structure d. Matrix structure 50. You’re the CEO of a mid-sized educational publisher that creates textbooks and other educational tools for grade school, high school, and college students. Your organization is under constant pressure to deliver new products with the latest functions and the best in educational technology every year. In a perfect world, you would have separate designers, content developers, and engineers assigned to each of these three categories of products, but your annual revenues simply don’t support that yet. Instead, you believe you can find a structure that works with limited resources. After all, your team has demonstrated strengths in internal communication and planning. Which structure is right for your organization as it is right now? a. Virtual network structure b. Divisional structure c. Geographic structure d. Matrix structure 51. Ingrid is a programmer at an online travel agency headquartered in Berlin. After a recent trip to Paris, she recognized Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure an untapped opportunity to develop a short-term vehicle rental service on behalf of her employer. She shared her idea for the new service with several colleagues, and they’ve now formed a group to explore and develop this concept. Ingrid will take the lead on organizing the group’s efforts. Based on this information, which type of structure is Ingrid’s organization using? a. Functional structure b. Geographic structure c. Matrix structure d. Holacracy team structure 52. Now that virtual teams functioning in a virtual network structure are commonplace, it is no longer necessary for some teams to be part of the organization. Organizations can hand off certain functions, such as human resources or back-office operations, to virtual teams outside the organization through: a. delegation. b. externalization. c. freelancing. d. outsourcing.

53. When Michael lost his job as a Senior Project Engineer at an app development company six months ago, he decided to view it as an opportunity to start fresh. So, when he was offered a job at a software developer that uses the holacracy team structure, he was excited to try something that is—at least for him—entirely different. But now, as he’s sitting through his new team’s first meeting, he feels like he’s made a huge mistake. Everyone is talking and engaged, but no one is taking the lead, roles are not being clearly defined, and he’s not even sure what their objective is. Which weakness in the holacracy team structure does this example demonstrate? a. Determining individual and team responsibilities is time consuming b. Changes in management philosophy and culture, especially among traditional managers, is required c. Employees may need significant training in social skills d. In-depth skill development in a specific function may be limited 54. When you started your clothing design and manufacturing business eight years ago, you had limited financial resources so your only option was to set up a virtual team structure and outsource manufacturing to plants in Asia. Since then, your organization has grown rapidly and become extremely successful, but you’ve also seen just how volatile this business can be. Your sales revenues have varied widely due to evolving consumer preferences, swings in the economy, and other factors. Now you’ve decided to continue on with the virtual network structure and outsourcing. Which benefit of this structure is most important to you now? a. Access to worldwide talent and resources b. Access to scale and reach without huge investments c. The ability to be flexible and responsive to changing needs d. Reduction in administrative overhead costs 55. Healthy Home is a mid-sized manufacturer of a wide range of items for the home, including furniture, bedding, lighting, and more. Under the matrix structure, employees on Healthy Homes’ marketing department are not dedicated to any one product line, but rather shift from one product line to another as needed to meet the various annual cycles of the organization’s marketing campaigns. Eleven people are able to do the work that otherwise might require twenty or more.

Which benefit of the matrix structure is Healthy Home enjoying? a. Ability to meet dual demands from customers b. Flexible sharing of human resources across products c. Adaptation to frequent changes in an unstable environment Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure d.

Opportunity for both functional and product skill development

56. Explain the three components that define organizational structure.

57. What do organizational charts reflect?

58. Discuss how rules and plans can be used to achieve vertical linkage.

59. Explain collaboration with an example.

60. Compare liaison roles with task forces.

61. Discuss the role of a full time integrator.

62. Compare divisional grouping with multifocused grouping.

63. Discuss the strengths of functional structures.

64. A dual hierarchy may seem an unusual way to design an organization, but the matrix is the correct structure when certain conditions are present. What are those conditions?

65. What are the symptoms of structural deficiency?

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Chapter 03: Fundamentals of Organization Structure Answer Key 1. True 2. True 3. False 4. False 5. False 6. False 7. False 8. False 9. True 10. False 11. c 12. c 13. a 14. b 15. a 16. c 17. d 18. b 19. b 20. c 21. d 22. d 23. a 24. a 25. d Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure 26. b 27. a 28. b 29. c 30. b 31. a 32. a 33. d 34. a 35. c 36. b 37. d 38. a 39. c 40. a 41. d 42. a 43. b 44. a 45. c 46. b 47. d 48. c 49. b 50. d 51. d Powered by Cognero

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Chapter 03: Fundamentals of Organization Structure 52. d 53. b 54. c 55. b 56. The following three key components define organization structure: 1. Organization structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors.

2. Organization structure identifies the grouping together of individuals into departments and of departments into the total organization.

3. Organization structure includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments.

57. Organization structure is reflected in the organization chart. It is not possible to see the internal structure of an organization the way we might see its manufacturing tools, offices, website, or products. Although we might see employees going about their duties, performing different tasks, and working in different locations, the only way to actually see the structure underlying all this activity is through the organization chart. The organization chart is the visual representation of a whole set of underlying activities and processes in an organization. An organizational chart can be quite useful in understanding how a company works. It shows the various parts of an organization, how they are interrelated, and how each position and department fits into the whole.

58. To the extent that problems and decisions are repetitious, a rule or procedure can be established so employees know how to respond without communicating directly with their manager. Rules and procedures provide a standard information source enabling employees to be coordinated without actually communicating about every task. At PepsiCo’s Gemesa cookie business in Mexico, for example, managers carefully brief production workers on goals, processes, and procedures so that employees themselves do most of the work of keeping the production process running smoothly, enabling the plants to operate with fewer managers. Plans also provide standing information for employees. The most widely used plan is the budget. With carefully designed and communicated budget plans, employees at lower levels can be left on their own to perform activities within their resource allotment.

59. Collaboration means a joint effort between people from two or more departments to produce outcomes that meet a common goal or shared purpose and that are typically greater than what any of the individuals or departments could achieve working alone. To understand the value of collaboration, consider the 2011 U.S. mission to raid Osama bin Laden’s compound in Pakistan. The raid could not have succeeded without close collaboration between the Central Intelligence Agency (CIA) and the U.S. military. There has traditionally been little interaction between the nation’s intelligence officers and its military officers, but the war on terrorism has changed that mindset. During planning for the bin Laden mission, military officers spent every day for months working closely with the CIA team in a remote, secure facility on the CIA campus. “This is the kind of thing that, in the past, people who watched movies thought was possible, but no one in the government thought was possible,” one official later said of the collaborative mission.

60. A liaison role is one of the devices used to achieve horizontal linkage. A liaison person is located in one department but has the responsibility for communicating and achieving coordination and collaboration with another department.

Liaison roles often exist between engineering and manufacturing departments because engineering has to develop and test products to fit the limitations of manufacturing facilities. An engineer’s office might be located in the manufacturing area so the engineer is readily available for discussions with manufacturing supervisors about engineering problems with the manufactured products. A research and development person might sit in on sales meetings to coordinate new product development with what salespeople think customers are wanting.

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Chapter 03: Fundamentals of Organization Structure Liaison roles usually link only two departments. When linkage involves several departments, a more complex device such as a task force is required. A task force is a temporary committee composed of representatives from each organizational unit affected by a problem. Each member represents the interest of a department or division and can carry information from the meeting back to that department. Task forces are an effective horizontal linkage device for temporary issues.

They solve problems by direct horizontal collaboration and reduce the information load on the vertical hierarchy.

Typically, they are disbanded after their tasks are accomplished. Organizations have used task forces for everything from organizing the annual company picnic to solving expensive and complex manufacturing problems. One example comes from Georgetown Preparatory School in North Bethesda, Maryland, which used a task force made up of teachers, administrators, coaches, support staff, and outside consultants to develop a flu preparedness plan. When the H1N1 flu threat hit several years ago, Georgetown was much better equipped than most educational institutions to deal with the crisis because they had a plan in place.

61. The position of a full-time integrator was created solely for the purpose of coordination. A full-time integrator frequently has a title, such as product manager, project manager, program manager, or brand manager. Unlike a liaison person, the integrator does not report to one of the functional departments being coordinated. He or she is located outside the departments and has the responsibility for coordinating several departments. The brand manager for Planters Peanuts, for example, coordinates the sales, distribution, and advertising for that product. The integrator can also be responsible for an innovation or change project, such as coordinating the design, financing, and marketing of a new product. Integrators need excellent people skills. Integrators in most companies have a lot of responsibility but little authority. The integrator has to use expertise and persuasion to achieve coordination. He or she spans the boundary between departments and must be able to get people together, maintain their trust, confront problems, and resolve conflicts and disputes in the interest of the organization.

62. Divisional grouping means people are organized according to what the organization produces. All the people required to produce toothpaste—including personnel in marketing, manufacturing, and sales—are grouped together under one executive. In huge corporations, such as Time Warner Corporation, some product or service lines may represent independent businesses, such as Warner Brothers Entertainment (movies and videos), Time Inc. (publisher of magazines such as Sports Illustrated, Time, and People), and Turner Broadcasting (cable television networks).

Multifocused grouping means an organization embraces two or more structural grouping alternatives simultaneously. An organization may need to group by function and product division simultaneously or might need to combine characteristics of several structural options.

63. One strength of the functional structure is that it promotes economy of scale within functions. Economy of scale results when all employees are located in the same place and can share facilities. Producing all products in a single plant, for example, enables the plant to acquire the latest machinery. Constructing only one facility instead of separate facilities for each product line reduces duplication and waste. The functional structure also promotes in-depth skill development of employees. Employees are exposed to a range of functional activities within their own department. One interesting example comes from India, where Dr. Devi Shetty runs a hospital that performs open heart surgery for about 10 percent of the cost charged by hospitals in the United States, without reduced quality, by applying standardized operating procedures and principles of mass production.

64. A dual hierarchy may seem an unusual way to design an organization, but the matrix is the correct structure when the following conditions are present: Condition 1. Pressure exists to share scarce resources across product lines. The organization is typically medium-sized and has a moderate number of product lines. It feels pressure for the shared and flexible use of people and equipment across those products. For example, the organization is not large enough to assign engineers full-time to each product line, so engineers are assigned part-time to several products or projects.

Condition 2. Environmental pressure exists for two or more critical outputs, such as for in-depth technical knowledge (functional structure) and frequent new products (divisional structure). This dual pressure means a balance of power is needed between the functional and product sides of the organization, and a dual-authority structure is needed to maintain that balance.

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Chapter 03: Fundamentals of Organization Structure Condition 3. The environmental domain of the organization is both complex and uncertain. Frequent external changes and high interdependence between departments require a large amount of coordination and information processing in both vertical and horizontal directions.

Under these three conditions, the vertical and horizontal lines of authority must be given equal recognition. A dualauthority structure is thereby created so the balance of power between them is equal.

65. As a general rule, when organization structure is out of alignment with organization needs, one or more of the following symptoms of structural deficiency appear. ∙ There is an absence of collaboration among units. Organization structure should encourage collaboration when and where it is needed to meet organizational goals. It should enable resolution of conflicting departmental needs and goals into a single set of goals for the entire organization. When departments act at cross-purposes or are under pressure to achieve departmental goals at the expense of organizational goals, the structure is often at fault. Horizontal linkage mechanisms are not adequate. ∙ Decision making is delayed or lacking in quality. Decision makers may be overloaded because the hierarchy funnels too many problems and decisions to them. Delegation to lower levels may be insufficient. Another cause of poor-quality decisions is that information may not reach the correct people. Information linkages in either the vertical or horizontal direction may be inadequate to ensure decision quality. ∙ The organization does not respond innovatively to a changing environment. One reason for lack of innovation is that departments are not coordinated horizontally. The identification of customer needs by the marketing department and the identification of technological developments in the research department must be coordinated. Organization structure also has to specify departmental responsibilities that include environmental scanning and innovation. ∙ Employee performance declines and goals are not being met. Employee performance may decline because the structure does not provide clear goals, responsibilities, and mechanisms for coordination and collaboration. The structure should reflect the complexity of the market environment yet be straightforward enough for employees to effectively work within.

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Chapter 04: The External Environment

Indicate whether the statement is true or false.

1. Economic conditions are included in the general environment. a. True b. False 2. Environmental complexity refers to heterogeneity, or the number and dissimilarity of external elements that affect an organization’s operations. a. True b. False 3. The greatest uncertainty for an organization occurs in the complex, stable environment. a. True b. False 4. Boundary spanners prevent an organization from stagnating by keeping top managers informed about environmental changes. a. True b. False 5. Business intelligence refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant. a. True b. False 6. In organizations characterized by very simple, stable environments, almost no managers are assigned to integration roles. a. True b. False 7. In rapidly changing environments, the internal organization was much looser, free-flowing, and adaptive, with a loose hierarchy and decentralized decision making. a. True b. False 8. As environmental uncertainty increases, organizations tend to become more mechanic. a. True b. False 9. Resource dependence means that organizations depend on the environment but strive to acquire control over resources to minimize their dependence. a. True b. False 10. Cooptation occurs when leaders from important sectors in the environment are made part of an organization. a. True Powered by Cognero

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Chapter 04: The External Environment b. False

Indicate the answer choice that best completes the statement or answers the question.

11. An organization’s a. domain b. strategy c. mission d. policy

is the chosen environmental field of action.

12. Melissa works in the fashion industry. Her job is to research, by analyzing social media, the growing trends among youth. Her company designs and manufactures clothing based on her analysis. Melissa is a part of the sector of the task environment. a. industry b. market c. raw material d. international 13. The sector is a part of the task environment because of globalization and intense competition. a. government b. technology c. international d. natural 14. A fast food chain in the United States, Simpson’s Kitchen, got its supply of chicken from a local farm. Its business was adversely affected when the country faced an epidemic of bird flu. The epidemic adversely affected Simpson’s Kitchen’s environment. a. international b. general c. global d. task 15. Which of the following is a characteristic of the general environment? a. It includes those sectors that will indirectly impact a firm. b. It includes the raw materials and human resources sectors. c. It includes sectors with which the organization interacts directly. d. It includes sectors that are internally controlled by an organization.

16. Leo Burton is the CEO of a cigarette manufacturing company. He and his employees suffered a major loss when tobacco products were banned in his country. Leo’s organization was affected by changes in the . a. technological environment b. government sector c. international sector d. economic environment Powered by Cognero

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Chapter 04: The External Environment 17. The sociocultural sector of an organization is concerned with issues such as: a. the impact of the company’s products and policies on the environment. b. strategies to be undertaken in times of adverse economic conditions. c. the working conditions of workers hired by contractors. d. trending issues on social media sites.

18. Percy developed a new accounting system which processed data that was previously computed by ten accountants. As a result, the new technology replaced ten employees. Due to Percy’s innovation, the technological sector impacted the environment of the organization. a. external b. international c. global d. general 19. The two ways in which the environment influences organizations are the need for information about changes in the environment and the need for: a. opposition from the environment. b. information about future requirements of customers. c. resources from the environment. d. information about competitors’ activities.

20. Besides dynamism and abundance, the third dimension that contributes to the changes in an organization’s environment is . a. transparency b. hierarchy c. variability d. complexity 21. Determining an organization’s environmental uncertainty generally means focusing on sectors of the environment. a. general b. task c. natural d. technological 22. Environmental a. dynamics b. complexity c. uncertainty d. compatibility

refers to heterogeneity, or the number and dissimilarity of external elements.

23. Which of the following is an external element that contributes to environmental complexity? a. Managers b. Employees c. Suppliers Powered by Cognero

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Chapter 04: The External Environment d. Board of directors 24. Which of the following statements is true of environmental complexity? a. It refers to homogeneity. b. The number of companies in an organization’s domain do not affect its complexity. c. Industry changes do not contribute to environmental complexity. d. It refers to the number and dissimilarity of external elements.

25. A complex environment is one in which an: a. organization interacts with and is influenced by numerous diverse external elements. b. organization struggles with a compound chain of command. c. organization’s performance is negatively affected by internal conflicts. d. organization markets a broad range of products.

26. Which of the following is one of the dimensions of the framework for assessing environmental uncertainty? a. Dispersion–contiguity b. Simple–complex c. Certain–uncertain d. Internal–external 27. Which of the following environments has the lowest level of uncertainty? a. The simple, unstable environment b. The complex, unstable environment c. The simple, stable environment d. The complex, stable environment 28. Which of the following is a characteristic of the complex, stable environment? a. It has a lower uncertainty level than the simple, stable environment. b. It has only a few external environments. c. Only a few elements need to be considered for an organization to perform well. d. External elements do not change rapidly in this environment.

29. When several sectors change simultaneously, the environment becomes a. turbulent b. complex c. stable d. predictable

.

30. Which of the following functions in the simple, unstable environment? a. The music industry b. Oil companies c. Chemical companies d. The insurance industry

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Chapter 04: The External Environment 31. Universities function in the a. simple, unstable b. complex, stable c. simple, stable d. complex, unstable

environment.

32. Which of the following is a characteristic of the simple, stable environment? a. It has many external elements that change rapidly. b. It has few external elements that change rapidly. c. It has many external elements that change slowly. d. It has few external elements that change slowly.

33. The traditional approach to coping with environmental uncertainty was: a. to lay off employees. b. to merge existing departments into one. c. to establish buffer departments. d. to replace human resource with technology.

34.

link and coordinate an organization with key elements in the external environment. a. Market analysts b. Human resource executives c. Strategic-planning roles d. Boundary-spanning roles

35. gives top executives a systematic way to collect and analyze public information about rivals and use it to make better decisions. a. Trend analysis b. Competitive intelligence c. Due diligence d. Demand forecasting 36.

is the quality of collaboration among departments. a. Integration b. Certainty c. Departmentalization d. Dependency

37. Organizations in rapidly changing environments tend to have a(n) a. differentiated b. integrated c. mechanic d. organic

management processes.

38. The primary contingency that shapes whether an organization will function best with an organic or a mechanistic design is: Powered by Cognero

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Chapter 04: The External Environment a. the degree of stability in the organization. b. the degree of uncertainty in the external environment. c. the levels of hierarchy in the organization. d. the ease of communication in the internal environment.

39. A(n) involves the purchase of one organization by another so that the buyer assumes control. a. merger b. joint venture c. consolidation d. acquisition 40. A(n) occurs when a director of company A and a director of company B are both directors of company C. a. cooptation b. merger c. indirect interlock d. direct interlock 41. Divya is the purchasing agent for Chiara’s Chocolates, a company that uses only fair-trade cocoa beans to manufacture a selection of gourmet chocolate bars and candies sold across North America. Divya typically buys cocoa beans from suppliers in western Africa and South America. She has just learned that the U.S. government has levied new tariffs on imported cocoa beans, which drives up their cost. Which sector is having the biggest impact on Chiara’s Chocolates right now? a. Industry sector b. Raw materials sector c. Government sector d. Natural sector 42. In the early 2000s, consumers became increasingly aware that in a number of countries possessing diamond mines, some governments and other organizations were mining diamonds under deplorable conditions and selling them to finance their war efforts. Suddenly, the sale of diamonds dropped as consumers became suspicious of the source of all diamonds available on the market and feared being party to the “blood diamond” trade. Organizations involved in the international diamond trade had to work hard to document the sources of diamonds and ensure the buying public that they were not involved in conflict diamonds. Which sector would you say had the greatest impact on international diamond organizations at that time? a. International sector b. Raw materials sector c. Government sector d. Sociocultural sector 43. Located in central California’s agricultural region, South Coast Fruits processes locally grown fruits of all kinds.

Growers transport their crops to South Coast’s facilities, and the organization then cleans, prepares, and packages the fruit for sale to grocery stores and other commercial buyers. Into which quadrant of the environmental uncertainty framework does South Coast Fruits fall? a. Simple and unstable with moderate to high uncertainty b. Simple and stable with low uncertainty c. Complex and unstable with high uncertainty Powered by Cognero

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Chapter 04: The External Environment d. Complex and stable with low to moderate uncertainty 44. Over the last five years Omnitech Games, an app developer that creates games that can be played on smartphones, has released one new game app each year. Three of them have become huge hits, earning the company more revenues than the co-owners ever imagined. This year, however, it looks like a recently released app from one of the dozens of new competitors that enter the market every year is going to be the big hit of the season. Into which quadrant of the environmental uncertainty framework does Omnitech Games fall? a. Simple and unstable with high-moderate uncertainty b. Simple and stable with low uncertainty c. Complex and unstable with high uncertainty d. Complex and stable with low-moderate uncertainty 45. You are one of the co-founders of Omnitech Games, an app developer that creates games that can be played on smartphones. Your organization has had three major successes, but it has also developed a couple of duds that didn’t sell at all. You and your partner recognize you’re operating in a challenging, ever-changing environment. You want to make sure you’re creating new games that will take advantage of technological changes, appeal to evolving consumer preferences, and beat the growing number of competitors. What step should you take to help cope with the uncertainty? a. Hire additional programmers to develop more games b. Hire an HR manager who can quickly address the need for more programmers c. Create two boundary-spanning roles to monitor technological advances and consumer preferences d. Research and analyze the organization’s past sales data 46. As the CEO of a furniture manufacturer in Michigan, you are painfully aware that sales have been dropping off in recent years, forcing you to lay off some employees and decrease production. You aren’t sure why, but you thought it was due to competition from foreign manufacturers entering the U.S. market. The HR manager just told you something that has made you pause. She says that a number of employees have recently quit their jobs in your factory to go work for two other manufacturers in the same area, both of which are increasing production. What step should you take to cope with the uncertainty? a. Hire additional furniture designers to develop a new line of products b. Make some changes in the purchasing department, which acts as a buffer department c. Contract with a business intelligence company that can analyze large amounts of sales data d. Form a competitive intelligence team to study your organization’s competitors 47. Lawrence and Lorsch’s research shows that different departments within an organization facing a lot of uncertainty tend to evolve and develop specific traits. Which characteristics would best describe the R&D department in a typical pharmaceutical organization? a. An informal, task-oriented group focused on quality in the long term horizon b. A formal, task-oriented group focused on efficiency in the short term c. A formal, socially oriented group focused on service in the short term d. A formal, socially oriented group focused on quality in the long term 48. You are one of the top executives for a growing healthcare system. With two medical centers, one hospital, and more than two thousand employees providing all kinds of medical services, it is a complex organization. Changing technology, regulations, legal requirements, and more add up to an unstable environment with a high degree of uncertainty. What should you and your fellow executives do to help address this uncertainty? a. Encourage department heads to differentiate their departments b. Encourage centralization and formalization and enforce formal rules and procedures Powered by Cognero

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Chapter 04: The External Environment c. Engage in more forecasting and scenario planning d. Abandon long-range plans in favor of immediate responses to change 49. Your company, Omnitech Games, produces nothing but game apps for smartphones, so it’s a fairly simple organization. However, constantly changing technology, evolving consumer preferences, and a continuous stream of new competitors create instability, which means your organization is facing high-moderate uncertainty. As one of the cofounders, what should you do to help your organization deal with the uncertainty? a. Restructure the organization to be more organic, participative, and decentralized b. Create more differentiated departments c. Create a variety of integrating roles to coordinate the many departments d. Abandon long-range plans in favor of immediate responses 50. Erin is the CEO of a large organization that manufactures all types of plastic containers. She feels it would be beneficial for her to form a communications link with Rob, who is the CEO of a chemical manufacturing organization.

Recently, she saw an opportunity to form an indirect interlock with Rob by: a. inviting Rob to sit on her organization’s board of directors. b. securing a seat on Rob’s organization’s board of directors. c. securing a seat on a certain insurance company’s board of directors, which happens to be the same board Rob already sits on. d. recruiting Rob to assume an executive position at her organization.

51. Artisan Home designs and manufactures furniture and other home décor items, such as bedding and dishware.

Approximately every other year, it rolls out a new set of product lines designed by famous artists and designers to capitalize on their well-known names. What is the best way Artisan Home can work with these artists and designers? a. Hire each artist or designer for a couple of years, but then terminate their employment when the product lines are ready for sale b. Merge each artist’s or designer’s business into the Artisan Home family c. Hire a small number of artists and designers to produce new designs every two years on an ongoing basis d. Set up license agreements that allow Artisan Home to use a limited number of designs 52. When you started your custom home building business twenty years ago, your region was largely undeveloped and land was cheap. Business boomed, and your organization grew to more than 80 employees. But things have changed dramatically since then. Large housing developers moved in, bought up all the land, and built thousands of new homes, driving up the cost of land along the way. As a result, demand for custom homes has declined, and you’re down to 35 employees with more layoffs expected. What is your best option for influencing the key sector that is impacting your organization? a. Relocate your business to a less developed, yet growing area b. Increase your advertising budget c. Influence local politicians to change housing regulations d. Join a trade association for custom home builders 53. Imagine the day when artificial intelligence will enable all of us to drive fully autonomous vehicles that can navigate directions on their own and respond to the movement of surrounding vehicles. Our cars and trucks will take us wherever we want to go while we talk, read, watch streaming media, or even take naps on the way. Of the following industries, which will be most affected by this dramatic change in the technology sector? a. The entertainment industry b. Car insurance providers Powered by Cognero

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Chapter 04: The External Environment c. Gasoline producers d. Cell phone service providers 54. You’ve just started your new job as the Operations Manager of an organization that manufactures wooden toys and other household items made from wood, and now you’re hearing about all kinds of issues. Demand for the organization’s products has grown so rapidly that the production plant can barely keep up. Plus, the plant’s foreman says he doesn’t receive the right raw materials at the right times, and you’ve discovered that there isn’t a good system in place for ordering these supplies. To top it all off, the sales team is worried that the organization won’t be able to fill all the orders, now that they’ve worked so hard to find great customers. What is the first step you should take to cope with the uncertainty? a. Hire a crew of seasonal or temporary workers to help catch up on production and meet demand b. Establish a materials purchasing department, which will act as a buffer department c. Contract with a business intelligence company that can analyze large amounts of production data d. Form a competitive intelligence team to study your organization’s competitors to learn their best practices 55. Uber, one of the biggest peer-to-peer ridesharing and delivery organizations, has recognized that self-driving vehicles would eliminate the organization’s need for human drivers, which are its biggest operating expense. Thus, the organization set up a new division dedicated to developing self-driving vehicles and sought out investments of $1 billion.

Toyota then committed to contributing somewhere between $500 and $800 million to Uber’s product development. Why is Toyota such a good ally for Uber? a. They are both global organizations, so they both understand the unique pressures of operating in the international sector. b. Toyota’s investment allows Uber to cope with uncertainty in the technology sector. c. Toyota can meet most of Uber’s financial needs, which means Uber won’t need to find as many additional investors. d. Toyota is able to offer valuable financial and technological resources.

56. What comprises an organization’s environment?

57. Describe the dimensions of the patterns and events occurring in the environment that influence organizations.

58. Explain the framework used for assessing environmental uncertainty on the dimensions of complexity and stability.

59. Elaborate on buffering roles.

60. Describe boundary-spanning roles and the different approaches to these roles.

61. Discuss organizational differentiation. How is integration connected to differentiation?

62. How do organizations use planning, forecasting, and responsiveness in stable and unstable environments?

63. Explain the concept of resource dependence.

64. Describe acquisitions, mergers, joint ventures, and contracts.

65. What are the four techniques used to change a firm’s environment?

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Chapter 04: The External Environment Answer Key 1. True 2. True 3. False 4. True 5. True 6. True 7. True 8. False 9. True 10. True 11. a 12. b 13. c 14. d 15. a 16. b 17. c 18. d 19. c 20. d 21. b 22. b 23. c 24. d 25. a Powered by Cognero

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Chapter 04: The External Environment 26. b 27. c 28. d 29. a 30. a 31. b 32. d 33. c 34. d 35. b 36. a 37. d 38. b 39. d 40. c 41. c 42. d 43. b 44. a 45. c 46. d 47. a 48. c 49. a 50. c 51. d Powered by Cognero

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Chapter 04: The External Environment 52. a 53. b 54. b 55. d 56. Organizational environment is defined as everything that exists outside the boundary of an organization and has the potential to affect all or part of an organization. The environment of an organization can be understood by analyzing its domain within external sectors. An organization’s domain is the chosen environmental field of action. The environment comprises several sectors or subdivisions that contain similar elements. Eleven sectors can be analyzed for each organization: industry, raw materials, human resources, financial resources, market, technology, economic conditions, government, natural, sociocultural, and international.

57. As the environment becomes more complex, events become less stable, and financial resources become less available, the level of uncertainty increases. The patterns and events occurring in the environment can be described along three primary dimensions: dynamism (whether events in the environment are stable or unstable), complexity (whether the environment is simple or complex), and abundance (amount of financial resources available to support an organization’s growth). These dimensions boil down to two essential ways the environment influences organizations: (1) the need for information about changes in the environment and (2) the need for resources from the environment.

58. The simple–complex and stable–unstable dimensions are combined into a framework for assessing environmental uncertainty. In the simple, stable environment, uncertainty is low. There are only a few external elements in a limited number of environmental sectors to contend with, and they tend to remain stable. The complex, stable environment represents somewhat greater uncertainty. A large number of elements have to be scanned, analyzed, and acted upon for an organization to perform well. External elements do not change rapidly or unexpectedly in this environment. Even greater uncertainty is felt in the simple, unstable environment. Rapid change creates uncertainty for managers. The greatest uncertainty for the organization occurs in the complex, unstable environment. A large number of elements in numerous environmental sectors impinge upon the organization, and they shift frequently or react strongly to organizational initiatives.

59. The traditional approach to coping with environmental uncertainty was to establish buffer departments. The purpose of buffering roles is to absorb uncertainty from the environment. The technical core performs the primary production activity of an organization. Buffer departments surround the technical core and exchange materials, resources, and money between the environment and the organization. They help the technical core function efficiently. The purchasing department buffers the technical core by stockpiling supplies and raw materials. The human resource department buffers the technical core by handling the uncertainty associated with finding, hiring, and training production employees.

60. Boundary-spanning roles link and coordinate an organization with key elements in the external environment.

Boundary spanning is primarily concerned with the exchange of information to detect and bring into an organization information about changes in the environment and to send information into the environment that presents an organization in a favorable light. Boundary spanners prevent an organization from stagnating by keeping top managers informed about environmental changes. The greater the uncertainty in the environment, the greater the importance of boundary spanners.

One approach to boundary spanning is business intelligence, which refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant. Business intelligence is related to another important area of boundary spanning, known as competitive intelligence (CI). CI gives top executives a systematic way to collect and analyze public information about rivals and use it to make better decisions.

61. Organizational differentiation refers to the differences in cognitive and emotional orientations among managers in Powered by Cognero

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Chapter 04: The External Environment different functional departments, and the difference in formal structure among these departments. When the external environment is complex and rapidly changing, organizational departments become highly specialized to handle the uncertainty in that part of the external environment each department works with. One outcome of high differentiation is that coordination and collaboration among departments become difficult. Integration is the quality of collaboration among departments. Research concluded that organizations perform better when the levels of differentiation and integration match the level of uncertainty and complexity in the environment. Organizations that performed well in uncertain environments had high levels of both differentiation and integration, while those performing well in less uncertain environments had lower levels of differentiation and integration.

62. In uncertain environments, planning and environmental forecasting become very important as a way to keep an organization geared for a coordinated, speedy response. With increasing environmental uncertainty, planning and forecasting become necessary. Indeed, surveys of multinational corporations have found that as environments become more turbulent, managers increase their planning activities. Planning can soften the adverse impact of external shifts.

Organizations that have unstable environments often establish a separate planning department. Planning, however, cannot substitute for other actions, such as effective boundary spanning and adequate internal integration and coordination. The organizations that are most successful in uncertain environments are those that keep everyone in close touch with the environment so they can spot threats and opportunities, enabling the organization to respond immediately.

63. Resource dependence means that organizations depend on the environment but strive to acquire control over resources to minimize their dependence. Organizations are vulnerable if vital financial resources are controlled by other organizations, so they try to be as independent as possible. Organizations do not want to become too vulnerable to other organizations because of negative effects on performance. Although companies like to minimize their dependence, when costs and risks are high, they also team up to share scarce resources and be more competitive on a global basis. Formal relationships with other organizations present a dilemma to managers. Organizations seek to reduce vulnerability with respect to resources by developing links with other organizations, but they also like to maximize their own autonomy and independence. To maintain autonomy, organizations that already have abundant financial resources will tend not to establish new linkages. Organizations that need resources will give up independence to acquire those resources.

64. An acquisition involves the purchase of one organization by another so that the buyer assumes control. A merger is the unification of two or more organizations into a single unit. When there is a high level of complementarity between the business lines, geographical positions, or skills of two companies, the firms often go the route of a strategic alliance rather than ownership through merger or acquisition. Such alliances are formed through contracts and joint ventures. Contracts and joint ventures reduce uncertainty through a legal and binding relationship with another firm. Joint ventures result in the creation of a new organization that is formally independent of the parents, although the parents will have some control.

65. There are four techniques for influencing or changing a firm’s environment: ∙ Change Where You Do Business: An organization’s domain is not fixed. Managers make decisions about which business to be in; the markets to enter; and the suppliers, banks, employees, and location to use; and this domain can be changed if necessary, to keep the organization competitive. An organization can seek new environmental relationships and drop old ones. ∙ Get Political: Political activity includes techniques to influence government legislation and regulation. Political strategy can be used to erect regulatory barriers against new competitors or to squash unfavorable legislation. Corporations also try to influence the appointment to agencies of people who are sympathetic to their needs. ∙ Unite with Others: Much of the work to influence the external environment is accomplished jointly with other organizations that have similar interests. ∙ Don’t Fall into Illegitimate Activities: Illegitimate activities represent the final technique companies sometimes use to control their environmental domain, but this technique typically backfires. Conditions such as low profits, pressure from senior managers, or scarce environmental resources may lead managers to adopt behaviors not considered legitimate.

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Chapter 05: Interorganizational Relationships

Indicate whether the statement is true or false.

1. In the changing role of management, managers think about vertical processes rather than horizontal structures. a. True b. False 2. According to the resource-dependence perspective, when threatened by greater dependence, organizations will assert control over external resources to minimize that dependence. a. True b. False 3. A strategic alliance is more formal and binding than a joint venture. a. True b. False 4. One of the main reasons for interorganizational collaboration is sharing risks when entering new markets. a. True b. False 5. In the partnership-orientation view, dependence on another company is seen to increase rather than reduce risks. a. True b. False 6. Selection is the preservation and institutionalization of selected organizational forms. a. True b. False 7. When excessive resources are available to an organization, that organization will be “selected out.” a. True b. False 8. Given their flexibility, specialists are able to reallocate resources internally to adapt to a changing environment, whereas generalists are not. a. True b. False 9. The social basis for the mimetic process is that the innovations are culturally supported. a. True b. False 10. Companies accept normative pressures to become like one another through a sense of obligation or duty to high standards of performance. a. True b. False

Indicate the answer choice that best completes the statement or answers the question.

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Chapter 05: Interorganizational Relationships 11. Relatively enduring resource transactions, flows, and linkages that occur among two or more organizations are called: a. intraorganizational networks. b. interorganizational relationships. c. internal processes. d. regulation processes.

12. A system formed by the interaction of a community of organizations and their environment is referred to as a(n): a. organizational ecosystem. b. interorganizational network. c. collaboration network. d. institutional environment.

13. In which of the following approaches do businesses, governments, and nonprofit organizations join together across sectors and industries to tackle huge, compelling problems of mutual interest? a. The Behavioral approach b. The Internal process approach c. The Megacommunity approach d. The Open innovation approach 14. Which of the following is true of collaborative roles played by managers? a. They have direct control over people and resources. b. They are accountable for specific business results. c. They are rigid and passive. d. They have direct authority over horizontal colleagues.

15. Which of the following theories argues that organizations try to minimize their reliance on other organizations for the supply of important resources and try to influence the environment to make resources available? a. The Resource-retention theory b. The Environmental resource theory c. The Resource-dependence theory d. The Economic supply theory 16. Organizations operating under the resource-dependence philosophy will: a. withdraw control over external resources, thereby maximizing dependence. b. succeed by emphasizing interdependence with other companies, thereby establishing lasting relationships. c. do whatever is needed to avoid dependence on the environment, thereby reducing uncertainty. d. set up dependencies when they become more self-reliant, thereby maximizing autonomy.

17. Arkal Corp. manufactures wooden chairs and Borston Corp. manufactures plastic chairs. Arkal Corp. wants to enter into a resource-dependence relationship with Borston Corp. Which of the following types of resource-dependence relationships is most likely to result in Arkal Corp. gaining full control over the joint outcome? a. Acquisition b. Joint Venture c. Strategic Alliance d. Interlock Powered by Cognero

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Chapter 05: Interorganizational Relationships 18. In the , companies join together to become more competitive and to share scarce resources. a. institutional perspective b. resource-dependence perspective c. population-ecology perspective d. collaborative-network perspective 19. Getwel Corp. and Sebastian Inc. are two computer manufacturers that share with each other the details of commonly occurring issues and customer complaints. This enables them to work together and provide better service to their customers and also saves the time required to diagnose the issues. Which of the following does this scenario illustrate? a. A Collaborative network b. Resource dependence c. Normative forces d. A Trade association 20. Which of the following is a characteristic of the new orientation to interorganizational relationships? a. Equity and fair dealing b. Contract limiting the relationship c. Minimal up-front investment d. Legal resolution of conflict 21. Which of the following statements is true about the population-ecology perspective? a. It focuses on organizational diversity and adaptation within organizations. b. It focuses on the alliance of companies to share scarce resources. c. It focuses on minimizing the dependence of an organization on other organizations. d. It focuses on the congruence between an organization and the expectations from its environment.

22. Which of the following is an assumption of the population-ecology perspective? a. Management competence is the biggest factor in the survival of organizations. b. Individual organizations find it difficult to adapt to environmental changes. c. Principles of evolution are not applicable to organizations because the fittest do not survive. d. A community of organizations is a closed system.

23. In today’s economy, organizations think of themselves as teams that compete with all others. a. create value jointly b. produce unique products c. produce similar products d. engage in mergers and acquisitions

rather than autonomous companies that

24. Which of the following stages of the population-ecology model of organizations refers to the preservation and institutionalization of selected organizational forms? a. Retention b. Variation c. Exertion Powered by Cognero

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Chapter 05: Interorganizational Relationships d. Selection 25. Organizations with a wide niche or domain, that is, those that offer a broad range of products and services or that serve a broad market are: a. specialists. b. generalists. c. mutualists. d. pacifists.

26. In the context of the population-ecology perspective, which of the following best illustrates a generalist strategy? a. Maffles Inc. sells books, electronic equipment, furniture, and fashion accessories. b. Harpors Inc. sells fiction novels in Canada. c. Tradcom Corp. sells music DVDs over the Internet. d. Togyon Corp. sells toys manufactured from recycled plastic and discarded toys.

27. In the population-ecology model of organizations, of organizations. a. retention b. selection c. variation d. legitimacy

means the appearance of new, diverse forms in a population

28. In the context of the population-ecology perspective, which of the following is a difference between specialists and generalists? a. Specialists offer a broader range of products or services than generalists. b. Specialists move slower than generalists and are less flexible. c. Specialists are generally more competitive than generalists. d. Specialists are generally larger than generalists.

29. is defined as the general perspective that an organization's actions are desirable, proper, and appropriate within the environment's system of norms, values, and belief. a. Variation b. Legitimacy c. Niche d. Retention 30. is the process that causes one unit in a population to resemble other units that face the same set of environmental conditions. a. Allomorphism b. Chromaticism c. Isomorphism d. Isochronism 31. Garin Corp., an automobile manufacturing company, tried to increase its sales by releasing car models with new colors. In the light of its huge success, other automobile manufacturers began doing the same. Which of the following Powered by Cognero

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Chapter 05: Interorganizational Relationships mechanisms for institutional adaptation is best illustrated in this scenario? a. Mimetic forces b. Coercive forces c. Normative forces d. Generic forces 32. Which of the following statements is true about mimetic forces? a. Organizations are forced to behave similarly in order to maintain productive relationships. b. Political and governmental processes force organizations to become similar. c. In the face of uncertainty, organizations copy or model each other. d. Diversity is maintained in order for organizations to find and maintain a marketing niche.

33. means identifying who is best at something in an industry and then duplicating the technique for creating excellence, perhaps even improving it in the process. a. Retention b. Benchmarking c. Ballooning d. Variation 34. In the context of mechanisms for institutional adaptation, benchmarking is a: a. mimetic process. b. coercive process. c. normative process. d. generic process.

35. Which of the following is a reason for a mimetic process to occur in an organization? a. Managers face high risks by supporting innovation. b. Managers are old-fashioned and stick to their original approach. c. Managers are unaware of the innovations occurring in the environment. d. Managers face high uncertainty.

36. are the external pressures exerted on an organization to adopt structures, techniques, or behaviors similar to other organizations. a. Mimetic forces b. Coercive forces c. Normative forces d. Generic forces 37. Organizational changes that result from coercive forces occur due to a. dependence b. obligation c. uncertainty d. professionalism 38.

.

are pressures to achieve standards of professionalism and to adopt techniques that are considered by the

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Chapter 05: Interorganizational Relationships professional community to be up to date and effective. a. Mimetic forces b. Coercive forces c. Normative forces d. Generic forces 39. Companies accept normative pressures to become like one another due to a. dependence b. obligation c. uncertainty d. independence

.

40. A company may use any or all of the mechanisms of mimetic, coercive, or normative forces to change itself for greater in the institutional environment. a. profit b. market share c. resource dependency d. legitimacy 41. Tesla’s top managers aligned with Panasonic Corporation’s top managers to jointly invest in a $5 billion lithium-ion battery plant. This is an example of executive-level managers: a. looking down to enforce order and unity. b. building horizontal relationships with suppliers. c. building horizontal relationships that allow companies to charge higher prices. d. forming a cooperative relationship with another contributor to the ecosystem.

42. Peyton is thinking about restructuring her organization in a way she believes will lead to enhanced collaboration, streamlined communication, and a more efficient use of resources. Peyton is currently performing a(n) role. a. organizational b. partnership c. operations d. collaborative 43. Brian makes a habit of attending monthly city council meetings to ensure that he’s always aware of local governmental changes that could affect his manufacturing business. At last night’s meeting, he heard a proposal that could have a powerful impact on his organization, so he wants to learn more. He remembers that Carol, a city council member, is also a board member of a regional bank. Brian is a member of the same board, so he reaches out to Carol to ask for more information on the proposal. Brian is currently performing a(n) role. a. organizational b. partnership c. operations d. collaborative 44. As one of the largest retailers, Walmart purchases huge quantities of wholesale products from its suppliers. This enables the organization to negotiate lower prices on these products, which it passes along to customers in the form of “price rollbacks.” Which type of interorganizational relationship does this describe?

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Chapter 05: Interorganizational Relationships a. Resource dependence b. Population ecology c. Collaborative network d. Institutionalism 45. A small aerospace start-up intends to design and build a new type of jet. Boeing, one of the largest commercial airplane manufacturers in the world, has decided to partner with the new start-up by sharing some of its proprietary jet engine technology. Which type of interorganizational relationship does this describe? a. Resource dependence b. Population ecology c. Collaborative network d. Institutionalism 46. A relatively small grocery store chain operates 35 stores in three New England states. Recently, the organization has been facing intensified competition from resource-rich dominant players like Kroger and Walmart, new players with innovative services like Amazon, and new low-cost leaders like Aldi. This small chain is seeing declining sales because it cannot offer consumers the same or better products, services, or prices as any of these competitors. Which type of interorganizational relationship does this describe? a. Resource dependence b. Population ecology c. Collaborative network d. Institutionalism 47. For years, Wells Fargo’s tellers and bankers were instructed to convince customers to take on as many products and services—such as opening additional checking accounts and credit cards—as they could, whether the customers needed them or not. In fact, bank employees were pushed so hard to “sell” these products that some of them illegally set up new products in customers’ names without the customers’ir approval. Managers were aware of the problem but did little to stop it. Many of the banks customers switched to other banks when the “hard sell” tactics began, and thousands more terminated their accounts when the illegal activity was revealed. Which type of interorganizational relationship does this describe? a. Resource dependence b. Population ecology c. Collaborative network d. Institutionalism 48. You are the CEO of a digital camera manufacturer. Although your organization’s products are moderately priced, they are known for their high quality, and as a result, sales and profits have skyrocketed. Lately, you’ve been having trouble with your supplier for lenses. That organization produces excellent quality, but delivery is unreliable and prices are rising.

Plus, the organization has been unwilling to make minor modifications that would better fit your products. Following the resource-dependence theory, which strategy would you choose to reduce dependence on other organizations and maintain control of resources? a. Make an acquisition b. Enter into a joint venture c. Join a trade association d. Establish a board interlock 49. Now that you’ve earned a second Michelin star for your cuisine, your three high-end restaurants are more popular than Powered by Cognero

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Chapter 05: Interorganizational Relationships ever. But naturally, you’d like to reach an even larger audience. A high-end international hotel chain has approached you to see if you’d like to be involved in opening a restaurant in the chain’s newest hotel located in Dubai. You’re drawn to the idea of reaching more people, but you’re also concerned about whether the hotel chain will dictate how you run the new restaurant. Following the resource-dependence theory, which strategy would you choose to reduce dependence on other organizations and maintain control of resources? a. Form a strategic alliance b. Enter into a joint venture c. Join a trade association d. Establish a board interlock 50. Pacific Packaging has been supplying shipping materials and packaging for your garden supply manufacturing firm for more than 10 years. Pacific’s salesperson is practically a member of your team. She knows your products inside and out, and she often solves problems for you. However, you’ve noticed that Pacific’s prices have increased an average of 4% each year, which is troubling since resources are already so tight. Following the resource-dependence theory, which strategy would you choose to reduce dependence on other organizations and maintain control of resources? a. Make an acquisition b. Enter into a joint venture c. Renew the supply chain contract d. Investigate other packaging suppliers 51. Two American clothing manufacturers decided to create a joint venture, a new manufacturer in India. They both felt it would allow them to enter a new market while minimizing the risks. Despite an extensive and detailed operations agreement and carefully monitored performance indicators, neither organization is happy with the results. Communication has broken down, and both firms are considering suing the other for failure to adhere to the terms of the contract. How would you characterize this interorganizational relationship? a. Adverserial b. Litigious c. Collaborative d. Strategic 52. In the early years of Acme’s strategic alliance with Zenith, the two organizations hit a few rough spots, but they were able to work them out. Representatives from both sides approached the alliance with enthusiasm and a willingness to resolve issues. Acme and Zenith now expect to work together profitably for many years to come. How would you describe this interorganizational relationship? a. Adverserial b. Growth c. Partnership d. Strategic 53. In business for two years, Bay City Coffee has been a great success. But three months ago, Marina Mochas and Lattes opened its doors just down the street, and suddenly even the most loyal Bay City customers have been spotted at Marina Mochas. Bay City’s manager decided to figure out why her new competitor is so appealing by visiting Marina Mochas in disguise. She was alarmed to discover that Marina has a far more extensive coffee bar menu, plus it offers snacks and sandwiches. In this instance, which type of forces could cause institutional adaptation? a. Mimetic b. Coercive c. Normative Powered by Cognero

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Chapter 05: Interorganizational Relationships d. Social 54. Dave, the operations manager at a paper mill, is deeply concerned. The Environmental Protection Agency has just tightened restrictions on the amount of pollution mills can legally emit into the environment. He’s not sure his mill will meet the new restrictions, and the last time he had to make modifications like this, it cost the mill more than a million dollars. In this instance, which type of forces could cause institutional adaptation? a. Mimetic b. Coercive c. Normative d. Social 55. Trained by his father, Bob Butler is an excellent appliance repair person. Under Bob’s guidance, Butler Appliance Repair has grown, and Bob now employs several other repair technicians, which he’s personally trained. However, more and more often, potential clients are asking whether Butler’s repair techs are licensed and bonded. They’re not, which has caused Bob to lose a growing amount of business. Bob is wondering if it would be worth it for him and his three repair techs to take a course and get licensed. In this instance, which type of forces could cause institutional adaptation? a. Mimetic b. Coercive c. Normative d. Social

56. What is an organizational ecosystem? How does this concept impact the changing role of management?

57. Summarize the perspectives for understanding interorganizational relationships.

58. Explain in brief the different types of resource-dependence relationships.

59. Describe the power implications of resource-dependence relationships.

60. Explain how collaborative-network perspective is an emerging alternative to resource-dependence theory.

61. Compare and contrast the traditional adversarial orientation with the new partnership orientation of interorganizational relationships.

62. What is the impact of rapid environmental changes on organizations?

63. Explain how finding an appropriate niche is important for the survival of an organization.

64. In the context of the population-ecology perspective, compare and contrast specialists and generalists.

65. Describe the essential dimensions of organizations according to the institutional view.

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Chapter 05: Interorganizational Relationships Answer Key 1. False 2. True 3. False 4. True 5. False 6. False 7. False 8. False 9. True 10. True 11. b 12. a 13. c 14. b 15. c 16. c 17. a 18. d 19. a 20. a 21. a 22. b 23. a 24. a 25. b Powered by Cognero

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Chapter 05: Interorganizational Relationships 26. a 27. c 28. c 29. b 30. c 31. a 32. c 33. b 34. a 35. d 36. b 37. a 38. c 39. b 40. d 41. d 42. c 43. d 44. a 45. c 46. b 47. d 48. a 49. a 50. d 51. a Powered by Cognero

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Chapter 05: Interorganizational Relationships 52. a 53. a 54. b 55. c 56. An organizational ecosystem is a system formed by the interaction of a community of organizations and their environment. Within business ecosystems, managers have to look beyond the boundaries of their own company and build relationships with a network of partners by focusing on horizontal processes rather than vertical structures. In this changing environment, rather than trying to force suppliers into low prices or customers into high prices, managers strive to strengthen the larger system evolving around them, finding ways to understand this big picture and how to contribute.

They need to adhere to either an operations role or a collaborative role in order to achieve success.

57. Relationships among organizations can be characterized by whether the organizations are dissimilar or similar and whether relationships are competitive or cooperative. By understanding these perspectives, managers can assess their environment and adopt strategies to suit their needs. The first perspective is called resource-dependence theory, which describes rational ways organizations deal with each other to reduce their dependence on the environment. The second perspective is about collaborative networks, wherein organizations allow themselves to become dependent on other organizations to increase value and productivity for all. The third perspective is population ecology, which examines how new organizations fill niches left open by established organizations and how a rich variety of new organizational forms benefits society. The final approach is called institutionalism, which explains why and how organizations legitimate themselves in the larger environment and design structures by borrowing ideas from each other.

58. Organizations operating under the resource-dependence philosophy will do whatever is needed to avoid excessive dependence on other organizations and maintain control of resources and outcomes, thereby reducing their uncertainty.

They use the following types of resource dependence relationships in order for them to maintain an autonomy: a. Acquisition/Merger: This type of relationship offers the greatest amount of control over joint outcomes because the acquiring firm absorbs all of the resources, assets, and liabilities of the target organization. b. Joint Venture: A joint venture offers less control than full ownership. It is a new and distinct organizational entity set up by two or more organizations to jointly develop an innovative product or shared technology. c. Strategic Alliance: A strategic alliance is less formal and binding than a joint venture. It is a collaborative agreement between two or more organizations that contribute resources to a common endeavor while maintaining their individuality. d. Supply Sourcing: Many organizations establish contracts with key suppliers to acquire resources to supplement inhouse resources and capabilities. The goal is to reduce risk and overdependence on one company in the supply chain. e. Trade Association. A trade association is a federation that allows organizations, often in the same industry, to meet, share information, and monitor one another’s activities. A trade association can also use collective resources to lobby for government policies to protect the industry. f. Board Interlock: A board interlock occurs when a director serves on the boards of multiple companies, creating connections among the companies.

59. In resource-dependence relationships, large independent companies have power over smaller suppliers or partners.

When a large company asks the small companies that it dominates for deals or lower prices, then the small companies have to oblige. Resource dependence can work in the opposite direction too. When the smaller companies produce or supply resources required by the larger companies, the smaller companies have power over the larger companies. Thus, the power relationships in various industries are always shifting.

60. The collaborative-network perspective is an emerging alternative to resource-dependence theory. Companies join together to become more competitive and to share scarce resources. Large aerospace firms partner with one another and Powered by Cognero

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Chapter 05: Interorganizational Relationships with smaller companies and suppliers to design next-generation jets. Large pharmaceutical companies join with small biotechnology firms to share resources and knowledge and spur innovation. Consulting firms, investment companies, and accounting firms may join in an alliance to meet customer demands for expanded services. Some companies have moved away from the idea of remaining independent to allow themselves to develop mutually dependent relationships with other organizations and accomplish things none of the organizations could do alone.

61. The traditional model is characterized by suspicion and competition. It involves detailed performance measures and provision of limited information and feedback. Any conflict is resolved legally, and there is a minimal involvement in the partner’s product design and production. It involves short-term contracts that limit the relationship with the partners. On the other hand, the partnership orientation is based on independence and trust. People try to add value to both sides and believe in high commitment rather than suspicion and competition. The new model is characterized by lots of shared information, including electronic linkages and face-to-face discussions to provide feedback and solve problems. Partners develop equitable solutions to conflicts rather than relying on legal contracts and lawsuits. Contracts may be loosely specified, and it is not unusual for business partners to help each other outside whatever is specified in the contract.

62. Large, established firms often have tremendous difficulty adapting to a rapidly changing environment. Hence, new organizational forms that fit the current environment emerge, fill a new niche, and over time take away business from established companies. According to the population-ecology view, when looking at an organizational population as a whole, the changing environment determines which organizations survive or fail. The assumption is that individual organizations suffer from structural inertia and find it difficult to adapt to environmental changes. Thus, when rapid change occurs, old organizations are likely to decline or fail, and new organizations emerge that are better suited to the needs of the environment.

63. The population-ecology model is concerned with organizational forms. Organizational form is an organization’s specific technology, structure, products, goals, and personnel, which can be selected or rejected by the environment. Each new organization tries to find a niche (i.e., a domain of unique environmental resources and needs) sufficient to support it.

The niche is usually small in the early stages of an organization but may increase in size over time if the organization is successful. If the organization does not find an appropriate niche, it will decline and may perish.

64. In the population-ecology perspective, generalist and specialist strategies distinguish organizational forms in the struggle for survival. Organizations with a wide niche or domain—that is, those that offer a broad range of products or services or that serve a broad market—are generalists. Organizations that provide a narrower range of goods or services or that serve a narrower market are specialists. Specialists are generally more competitive than generalists in the narrow area in which their domains overlap. However, the breadth of the generalist’s domain serves to protect it somewhat from environmental changes. Though demand may decrease for some of the generalist’s products or services, it usually increases for others at the same time. In addition, because of the diversity of products, services, and customers, generalists are able to reallocate resources internally to adapt to a changing environment, whereas specialists are not. However, because specialists are often smaller companies, they can sometimes move faster and be more flexible in adapting to changes.

65. The institutional view also sees organizations as having two essential dimensions—technical and institutional. The technical dimension is the day-to-day work, technology, and operating requirements. The institutional structure is that part of an organization most visible to the outside public. Moreover, the technical dimension is governed by norms of rationality and efficiency, but the institutional dimension is governed by expectations from people and organizations in the external environment. As a result of pressure to conduct business in a proper and correct way, the formal structures of many organizations reflect the expectations and values of the environment rather than the demand of work activities. This means that an organization may incorporate positions or activities (e.g., e-commerce division, chief compliance officer, social media director) perceived as important by the larger society to increase its legitimacy and survival prospects, even though these elements may decrease efficiency.

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Chapter 06: Designing Organizations for the International Environment

Indicate whether the statement is true or false.

1. Companies that have a presence in multiple countries gain marketing power and synergy compared to the same-size firm that has a presence in fewer countries. a. True b. False 2. Trickle-up innovation involves companies paying attention more than ever to the need for mechanisms that encourage sharing across a domestic enterprise. a. True b. False 3. A global matrix structure works best when coordination to share resources is less important. a. True b. False 4. Global teams are cross-border work groups made up of multiskilled, multinational members whose activities span multiple countries. a. True b. False 5. In intercultural teams, members remain in separate locations around the world and conduct their work electronically. a. True b. False 6. Without strong leadership, highly autonomous divisions can begin to act like coordinated parts of a global whole rather than independent companies. a. True b. False 7. Network coordinators coordinate information and activities related to key customer accounts. a. True b. False 8. The transnational model is useful for large, multinational companies with subsidiaries in many countries that try to exploit both global and local advantages. a. True b. False 9. In a transnational structure, managers have a strategic role only for their division. a. True b. False 10. In traditional structures, various centers and subsidiaries can shape the company from the bottom up by developing creative responses. a. True Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment b. False

Indicate the answer choice that best completes the statement or answers the question.

11. refers to the number and variety of products and services a company offers as well as the number and variety of regions, countries, and markets it serves. a. Integrator b. Cooptation c. Domain d. Scope 12. In the stage of international development, market potential is limited and is primarily in the home country. a. domestic b. international c. multinational d. global 13. Hill Fog is a brand of bottled water in India. Asif, the marketing manager at Hill Fog, is aware of the global environment and is considering initial foreign involvement in the United States to expand production volume and realize economies of scale. Hill Fog is in the stage of international development. a. multinational b. international c. domestic d. global 14. In the context of international development, means competitive issues in each country are independent of other countries; a company deals with each country individually. a. domestic b. multidomestic c. multinational d. global 15. Which of the following is a difference between the domestic and international stages of international development? a. The domestic stage is export-oriented, while the international stage is globally oriented. b. In the domestic stage, the market potential is limited, while in the international stage, the market potential is large. c. In the domestic stage, managers are concerned about international competitive positioning, while in the international stage, managers consider initial foreign involvement. d. The domestic stage is structural, while the international stage is functional.

16. In the stage of international development, a company has extensive experience in a number of international markets and has established marketing, manufacturing, or research and development (R&D) facilities in several foreign countries. a. domestic b. international c. multinational Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment d. global 17. Quidpro, a food and beverage company based in Germany, gets most of its sales from outside its home country. Its employees are spread all over the world. The CEO is Belgian, the chairman was born in Austria, and more than half of the company’s managers are non-Germans. The company has hundreds of brands and has production facilities or other operations in almost every country in the world. Quidpro is in the stage of international development. a. multinational b. international c. domestic d. global 18. Penrose Inc. is an American corporation that provides business consulting, information technology, and outsourcing services. The company has extensive experience in a number of international markets and has established facilities in several foreign countries. Penrose Inc. is in the stage of international development. a. multinational b. international c. domestic d. global 19. In the stage of international development, a company transcends any single country. a. domestic b. international c. multinational d. global 20.

refers to the quality of collaboration across organizational units. a. Contingency b. Standardization c. Coordination d. Sustainability

21. The strategy means that product design, manufacturing, and marketing strategy are standardized throughout the world, which is less costly than creating different products for different markets. a. globalization b. standardization c. export d. multidomestic 22. Which of the following is true of a globalization strategy? a. It encourages product design, assembly, and marketing tailored to the specific needs of each country. b. It can save a company money because it helps reap economy-of-scale efficiencies by standardizing product design and manufacturing. c. It divides the world into geographic regions, with each geographic division reporting to the CEO. d. It works best when pressure for decision making balances the interests of both product standardization and geographic localization.

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Chapter 06: Designing Organizations for the International Environment 23. A(n) strategy means that competition in each country is handled independently of competition in other countries. a. globalization b. standardization c. export d. multidomestic 24. Which of the following is true of a multidomestic strategy? a. It allows a company to take responsibility for global operations in its specific product area. b. It encourages product design, assembly, and marketing tailored to the specific needs of each country. c. It delegates responsibility and decision-making authority in some areas, such as adapting products or services to meet local needs. d. It enables an organization to achieve multinational flexibility and rapid response.

25. Which of the following is true of international divisions? a. They are typically organized along functional or product lines. b. They move organizations from more sophisticated international operations to domestic divisions. c. They have their own hierarchy to handle businesses in various countries. d. They sell products and services created by international operations in domestic markets.

26. Which of the following is a difference between the international division and the domestic division of a company? a. The international division uses a global matrix structure, while the domestic division does not use a global matrix structure. b. The international division is organized according to geographic interests, while the domestic division is typically organized along functional or product lines. c. The international division is placed above other divisions and departments within the company, while the domestic division has a status equal to other major departments or divisions within the company. d. The international division does not have its own hierarchy to handle business, while the domestic division has its own hierarchy to handle business.

27. Which of the following structures is great for standardizing production and sales around the globe? a. Global matrix structure b. Global product structure c. Global dynamic structure d. Global geographic structure 28. Which of the following is true of a global product structure? a. It provides a fairly straightforward way to effectively manage a variety of businesses and products around the world. b. It provides a way to achieve vertical and horizontal coordination simultaneously along two dimensions. c. It works best when pressure for decision making balances the interests of both product standardization and geographic localization. d. It enables a global firm to achieve aspects of both global uniformity and local diversification and responsiveness.

29. Companies that use a global

structure have typically been those with mature product lines and stable

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Chapter 06: Designing Organizations for the International Environment technologies. a. dynamic b. geographic c. matrix d. product 30. Which of the following is true of a global matrix structure? a. It coordinates sales and marketing initiatives across all geographic locations. b. It divides the world into geographic regions, with each geographic division reporting to the CEO. c. It provides a fairly straightforward way to effectively manage a variety of businesses and products around the world. d. It provides a way to achieve vertical and horizontal coordination simultaneously along two dimensions.

31. In a global structure, for multinational corporations, the geographic distances for communication are greater and coordination is more complex than in other structures. a. matrix b. geographic c. product d. dynamic 32. The members of a. multidomestic b. work c. virtual global d. intercultural

teams come from different countries and meet face to face.

33. In which of the following teams do members remain in separate locations around the world and conduct their work electronically? a. Virtual global teams b. Work teams c. Multidomestic teams d. Intercultural teams 34. Which of the following is true of functional managers in successful international firms? a. They are involved in identifying and linking an organization’s expertise and resources worldwide. b. They coordinate various functional activities located within the country to meet the problems, opportunities, needs, and trends in the local market. c. They enable an organization to achieve multinational flexibility and rapid response. d. They help with the transfer of ideas, trends, products, and technologies that arise in one country.

35. Which of the following is a difference between functional managers and country managers? a. Functional managers provide integrated solutions for a large retail customer, while country managers provide integrated solutions for a small retail customer. b. Functional managers enable an organization to achieve multinational flexibility and rapid response, while country managers identify and link an organization’s expertise and resources worldwide.

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Chapter 06: Designing Organizations for the International Environment c. Functional managers coordinate information and activities related to key customer accounts, while country managers provide coordination on a regional basis that might include several countries. d. Functional managers coordinate across countries, while country managers coordinate across functions.

36. Which of the following is true of country managers? a. They identify and link an organization’s expertise and resources worldwide. b. They enable a manufacturing organization to provide knowledge and integrated solutions across multiple businesses, divisions, and countries for a large retail customer. c. They enable an organization to achieve multinational flexibility and rapid response. d. They reach out to various parts of the organization to resolve problems and coordinate activities across groups, divisions, or countries.

37.

provide coordination on a regional basis that might include several countries. a. Business integrators b. Network coordinators c. Functional managers d. Country managers

38. The model reflects the ultimate in both organizational complexity, with many diverse units, and organizational coordination, with mechanisms for integrating the varied parts. a. transformative b. transnational c. global d. multidomestic 39. With the transnational model, the management philosophy is based on or units being wholly reliant on headquarters for decision making. a. linkages b. interdependence c. collaboration d. competition 40. The transnational model operates on a principle of a. flexible centralization b. dynamic centralization c. global standardization d. local responsiveness

rather than either autonomous divisions

.

41. Your organization, which is located in the U.S., manufactures inexpensive cell phones. In recent years, competition and changing consumer preferences in the domestic market have driven sales down, which is why you’re considering entering the African market, where the demand for inexpensive cell phones is high. Which of the following provides the strongest motivation for you to expand globally? a. Economies of scale b. Economies of scope c. Low-cost production factors Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment d. Innovation 42. In addition to manufacturing paper and plastic cups that are sold directly to consumers, your organization makes plastic and paper cups used in fast-food restaurants. Yum! Brands, a huge international organization that owns KFC and other chains, is your biggest customer in the U.S. However, you’ve realized that if you could set up manufacturing and distribution centers in strategic locations around the globe, you could potentially become Yum!’s sole supplier of cups world-wide. Which of the following provides the strongest motivation for you to expand globally? a. Economies of scale b. Economies of scope c. Low-cost production factors d. Innovation 43. In business for more than 30 years, you’ve seen the market for the engine parts you manufacture fluctuate, and you’ve learned the hard way that you’ve got to run a cost-effective business to weather the lean years. Recently, you’ve been wondering if you should invest in a new manufacturing plant in Asia or South America, where local raw materials and labor are less expensive. But then you’ll have to balance that with the cost of the new plant, as well as the expense of shipping the finished goods back to your customers in the U.S. Which of the following provides the strongest motivation for you to expand globally? a. Economies of scale b. Economies of scope c. Low-cost production factors d. Innovation 44. When Walmart tried to enter the German market, it encountered a variety of obstacles. Among other things, managers instructed employees to smile at customers, but German employees were uncomfortable with the practice because smiling is interpreted as flirting in the German business culture. This problem is due to a lack of: a. cultural bias. b. management sensitivity. c. employee training. d. cultural intelligence.

45. Initially, you thought moving into the Chinese market would be a snap. The technological components you manufacture are universal, so there is no need for you to adapt your products to local needs. You thought it would be as simple as setting up a distribution center and a sales force. But now the Chinese government has hit you with huge fines because, they say, you’ve failed to secure the proper licenses and pay appropriate tariffs. You’re wondering what else you’ve done wrong. What can you do to cope with the increased complexity stemming from your move into China? a. Set up boundary-spanning legal and financial departments within the Chinese distribution center b. Improve your cultural intelligence with language and customs training for yourself and all managers c. Establish an intercultural engineering team d. Withdraw from the Chinese market 46. Hanging up the phone after talking to the VP of Asia, you feel dismayed. You’re the new CEO of a global organization that has four fairly autonomous divisions in Asia, North America, the Middle East, and Europe. You had asked the Asia VP if he would take over manufacturing capacitors for sale in Europe—the same capacitors he produces for the Asian market—so that you can shut down an expensive plant located in France. He refused because he said high shipping costs to Europe would make the production of the items less profitable and would therefore reflect badly on his division’s bottom line. And sadly, this is just one example of resistance you’ve been getting from managers across all four Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment independent divisions. Looking ahead, what should you do to address the need for better coordination in your global organization? a. Replace all four division heads with more cooperative managers b. Restructure the organization along global product lines, rather than geographic divisions c. Set up a global product development system d. Maintain the management and structure as they stand 47. As the Chief Product Officer of an organization that produces personal and home care items, you are always on the lookout for growth opportunities. Last year, your organization decided to market its laundry detergent—one of your bestselling products across Europe—in several African nations, but sales have been dismal. The product manager hired a market research firm to find out why, and it turns out that consumers in that market object to the packaging, the scent, and the price. Despite this failure, you still believe there is a high demand for detergent products like yours in Africa, so what could you do apply your organization’s knowledge to this market? a. Conduct an advertising campaign to educate African consumers on the benefits of your product b. Make minor modifications to the product that you think will be more appealing to African consumers c. Invest in a home care manufacturing organization located in Africa d. Use reverse innovation to develop a laundry detergent more suitable to local needs and preferences 48. Whether you call them AAs or LR6s, batteries are the same the world over. And as the CEO of a battery manufacturer, that makes you happy. That means you can produce and sell the same products in every market in the world. Which strategy makes the most sense for your organization to use to expand globally? a. Globalization strategy b. Multidomestic or localization strategy c. Glocalization strategy d. Standardization strategy 49. As the product manager for the pudding product line of a growing snack foods manufacturer in the U.S., you were excited to learn that senior leadership is thinking about going global. However, initial research into new markets has revealed that consumers in Great Britain think your puddings are too sweet, while consumers in Bangladesh think your products aren’t sweet enough. Plus, the target audience changed depending on the market, which means a unique marketing strategy for each. You’re starting to doubt that entering foreign markets will work for your product and others made by your organization. Which strategy makes the most sense for your organization to use to expand globally? a. Globalization strategy b. Multidomestic or localization strategy c. Glocalization strategy d. Standardization strategy 50. The little sandwich shop founded by your grandfather 50 years ago has turned into a vast network of franchised sandwich shops across the U.S. As the current CEO, you’d like to see the organization continue to grow into foreign markets, yet you’re aware that consumers in some markets won’t be interested in some of the chain’s standardized menu items. You’re wondering if you can capitalize on the successful structure and reputation you’ve established while appealing to consumers outside the U.S. Which strategy makes the most sense for your organization to use to expand globally? a. Globalization strategy b. Multidomestic or localization strategy c. Glocalization strategy d. Standardization strategy Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment 51. Four management-level candidates have applied to work on a global team within your organization. Which one seems best suited for this role? a. Paolo, who worked in production for a year before moving into operations two years ago, speaks three languages and has a broad network of industry associates b. Gemma has more than 20 years of sales and marketing experience with the organization and says she loves to travel c. Wolfgang holds a PhD in engineering and has worked in both German and American facilities within the organization d. Relatively new to the organization, Ivana is the great-granddaughter of the company’s founder 52. Over the years, Phoenix Electronics has grown through international acquisitions. The organization’s many businesses are grouped into three geographic units: North America, South America, and Asia. Unfortunately, the three division presidents don’t communicate, often compete for resources, and usually fight for dominance in the eyes of the CEO. What is the primary benefit Phoenix would get from establishing a global coordination group at the organization’s headquarters? a. Greater economies of scale b. Product innovation c. Better decision making and control d. Localized product adaptation 53. Global Health Inc. is a multibillion-dollar pharmaceutical company with R&D and manufacturing facilities scattered across Europe and North America. Francesca, who works in the Milan R&D facility, is responsible for ensuring that all research data and analysis is catalogued and stored in a database where all members of the organization, especially those in R&D, can access it. She also facilitates virtual team meetings where research is shared and discussed and future research needs are determined. Francesca’s role can best be described as a manager. a. functional b. country c. business d. network 54. Over time, Google grew from an Internet search company to a global mass of related and unrelated businesses operating around the globe. Google’s founders decided to give the organization a new name, Alphabet, to reflect its current diversity. They also gave it a new structure that would allow the highly specialized operations to function interdependently, meaning that there is flexibility and some autonomy but also unification and coordination. What type of structure is Alphabet using? a. International divisions b. Global product structure c. Global geographic structure d. Transnational model 55. You are the CEO of a global financial services organization with more than 100,000 employees operating in nearly 95 countries. You recognize the need for flexibility and autonomy among the different operating units, yet you want to unify and coordinate the organization’s efforts so you’ve chosen to adopt a transnational model. How will you succeed in coordinating worldwide units? a. By decentralizing all functions among the many geographically dispersed operations b. By encouraging subsidiary managers to share strategies and innovations across the corporation Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment c. By creating and communicating a common strategic vision and values d. By emphasizing vertical communications through the hierarchical structure

56. Discuss in detail the three primary factors that motivate companies to expand internationally.

57. Describe the four stages of international development.

58. What is a joint venture? Explain why companies seek joint ventures.

59. Why are functional structures used less frequently worldwide?

60. What is a global product structure?

61. What are global teams? What are the two types of global teams?

62. Discuss in detail the role of country managers.

63. Discuss the benefits of inter-unit coordination.

64. Discuss the challenges addressed by the transnational model of organization.

65. List the characteristics that distinguish the transnational organization from other global organization forms such as the matrix.

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Chapter 06: Designing Organizations for the International Environment Answer Key 1. True 2. False 3. False 4. True 5. False 6. False 7. True 8. True 9. False 10. False 11. d 12. a 13. c 14. b 15. b 16. c 17. d 18. a 19. d 20. c 21. a 22. b 23. d 24. b 25. c Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment 26. b 27. b 28. a 29. b 30. d 31. a 32. d 33. a 34. a 35. d 36. c 37. a 38. b 39. b 40. a 41. a 42. b 43. c 44. d 45. a 46. b 47. d 48. a 49. b 50. c 51. a Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment 52. c 53. a 54. d 55. c 56. In general, three primary factors motivate companies to expand internationally: economies of scale, economies of scope, and low-cost production factors.

Economies of Scale—Building a global presence expands an organization’s scale of operations, enabling it to realize economies of scale. The trend toward large organizations was initially sparked by the Industrial Revolution, which created pressure in many industries for larger factories that could seize the benefits of economies of scale offered by new technologies and production methods. Through large-volume production, these industrial giants were able to achieve the lowest possible cost per unit of production. However, for many companies, domestic markets no longer provide the high level of sales needed to maintain enough volume to achieve scale economies.

Economies of Scope—A second factor is the enhanced potential for exploiting economies of scope. Scope refers to the number and variety of products and services a company offers as well as the number and variety of regions, countries, and markets it serves.

Low-Cost Production Factors—The third major force motivating global expansion relates to factors of production. One of the earliest, and still one of the most powerful, motivations for U.S. companies to invest abroad is the opportunity to obtain raw materials, labor, and other resources at the lowest possible cost. Organizations have long turned overseas to secure raw materials that were scarce or unavailable in their home country.

57. The four stages of international development are the domestic stage, the international stage, the multinational stage, and the global stage.

In stage one, the domestic stage, the company is domestically oriented, but managers are aware of the global environment and may want to consider initial foreign involvement to expand production volume and realize economies of scale.

Market potential is limited and is primarily in the home country. The structure of the company is domestic, typically functional or divisional, and initial foreign sales is handled through an export department. The details of freight forwarding, customs problems, and foreign exchange are handled by outsiders.

In stage two, the international stage, the company takes exports seriously and begins to think multidomestically.

Multidomestic means competitive issues in each country are independent of other countries; the company deals with each country individually. The concern is with international competitive positioning compared with other firms in the industry.

At this point, an international division has replaced the export department, and specialists are hired to handle sales, service, and warehousing abroad. Multiple countries are identified as a potential market.

In stage three, the multinational stage, the company has extensive experience in a number of international markets and has established marketing, manufacturing, or research and development (R&D) facilities in several foreign countries. The organization obtains a large percentage of revenues from sales outside the home country. Explosive growth occurs as international operations take off, and the company has business units scattered around the world along with suppliers, manufacturers, and distributors.

The fourth and ultimate stage is the global stage, which means the company transcends any single country. The business is not merely a collection of domestic industries; rather, subsidiaries are interlinked to the point where competitive position in one country significantly influences activities in other countries. Truly global companies no longer think of themselves as having a single home country and, indeed, have been called stateless corporations. This represents a new and dramatic evolution from the multinational company of the 1960s and 1970s. At this stage, ownership, control, and top management tend to be dispersed among several nationalities.

58. A joint venture is a separate entity created with two or more active firms as sponsors. This is a popular approach to Powered by Cognero

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Chapter 06: Designing Organizations for the International Environment sharing development and production costs and penetrating new markets. Joint ventures may be with either customers or competitors. For example, competing firms Sprint, Deutsche Telecom, and Telecom France cooperate with each other and with several smaller firms in a joint venture that serves the telecommunication needs of global corporations in 65 countries.

Companies often seek joint ventures to achieve production cost savings through economies of scale, to share complementary technological strengths, to distribute new products and services through another country’s distribution channels, or to take advantage of a partner’s knowledge of local markets.

59. Although functional structures are often used domestically, they are less frequently used to manage a worldwide business. Lines of functional hierarchy running around the world would extend too long, so some form of product or geographic structure is used to subdivide the organization into smaller units. Firms typically start with an international department and, depending on their strategy, later use product or geographic division structures or a matrix.

60. In a global product structure, the product divisions take responsibility for global operations in their specific product area. This is one of the most commonly used structures through which managers attempt to achieve global goals because it provides a fairly straightforward way to effectively manage a variety of businesses and products around the world.

Managers in each product division can focus on organizing for international operations as they see fit and directing employees’ energy toward their own division’s unique set of global problems or opportunities. In addition, the structure provides top managers at headquarters with a broad perspective on competition, enabling the entire corporation to respond more rapidly to a changing global environment.

61. Global teams, also called transnational teams, are cross-border work groups made up of multiskilled, multinational members whose activities span multiple countries. Typically, teams are of two types: intercultural teams, whose members come from different countries and meet face to face, and virtual global teams, whose members remain in separate locations around the world and conduct their work electronically.

62. A country manager for an international firm has to coordinate all the various functional activities located within the country to meet the problems, opportunities, needs, and trends in the local market, enabling the organization to achieve multinational flexibility and rapid response. The country manager in Venezuela for a global consumer products firm such as Colgate-Palmolive would coordinate everything that goes on in that country, from manufacturing to HR to marketing, to ensure that activities meet the language, cultural, government, and legal requirements of Venezuela. The country manager in Ireland or Canada would do the same for those countries. Country managers also help with the transfer of ideas, trends, products, and technologies that arise in one country and might have significance on a broader scale.

63. Benefits that result from inter-unit collaboration include the following: Cost savings—Collaboration can produce real, measurable results in the way of cost savings from the sharing of best practices across global divisions.

Better decision making—By sharing information and advice across divisions, managers can make better business decisions that support their own unit as well as the organization as a whole.

Greater revenues—By sharing expertise and products among various divisions, organizations can reap increased revenues.

Increased innovation—The sharing of ideas and technological innovations across units stimulates creativity and the development of new products and services.

64. The units of a transnational organization network are far-flung. Achieving coordination, a sense of participation and involvement by subsidiaries, and a sharing of information, knowledge, new technology, and customers is a tremendous challenge. In addition, some subsidiaries become so large that they no longer fit a narrow strategic role defined by headquarters. While being part of a larger organization, individual units need some autonomy for themselves and the ability to have an impact on other parts of the organization. The transnational model addresses these challenges by creating an integrated network of individual operations that are linked together to achieve the multidimensional goals of the overall organization.

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Chapter 06: Designing Organizations for the International Environment 65. The following characteristics distinguish the transnational organization from other global organization forms such as the matrix: 1. Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships.

2. Structures are flexible and ever-changing. The transnational operates on a principle of flexible centralization.

3. Subsidiary managers initiate strategy and innovations that become strategy for the corporation as a whole.

4. Unification and coordination are achieved primarily through corporate culture, shared vision and values, and management style, rather than through formal structures and systems.

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics

Indicate whether the statement is true or false.

1. A hybrid organization is best served by a structure in which employees are divided into two departments: one focused on social welfare and the other focused on profit goals. a. True b. False 2. An organization that wants to work toward both financial goals and positive social contributions must incorporate as a benefit corporation, the correct legal status for such an organization. a. True b. False 3. In a hybrid organization, employees are required to hold two logics—the commercial logic and the social welfare logic—which is challenging for many employees. a. True b. False 4. Sustainability refers to an organization’s ability to focus on meeting the current financial and social needs of shareholders, employees, customers, suppliers, and other stakeholders. a. True b. False 5. With the triple bottom line approach, organizations measure three types of performance: social, environmental, and financial. a. True b. False 6. The bottom of the pyramid refers to the approximately one billion people who earn less than US$1 a day. a. True b. False 7. Given that sustainability efforts add an extra burden of responsibility for most employees, it is better for an organization to create a separate department that designs, implements, and monitors sustainability programs. a. True b. False 8. A situation concerning right and wrong in which values are in conflict and cannot easily be resolved is called an ethical dilemma. a. True b. False 9. Although written codes of ethics and value statements are important, they hold little value because managers have no means of enforcing the guidelines contained in these documents. a. True b. False 10. Supply chains are a source of ongoing ethical challenges for global organizations because they are so broad and Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics diffuse that managers cannot monitor the actions of all supply chain contractors and subcontractors. a. True b. False

Indicate the answer choice that best completes the statement or answers the question.

11. An organization that pursues both profit and social missions simultaneously is called a a. business b. philanthropic c. hybrid d. benefit

organization.

12. Which of the following statements best describes “mission drift”? a. The organization’s employees giving less emphasis to the social mission and placing more importance on generating revenue and profit b. The organization’s employees giving less emphasis to generating revenue and profit and placing more importance on the social mission c. The organization’s leadership failing to clearly communicate and remind employees of the social mission d. The organizational leaders’ decision to change the social mission of the organization 13. When mission drift occurs, it is usually because profits and revenues: a. are too challenging to obtain. b. are the source of employees’ incomes and job security. c. are easier to achieve. d. offer clearer, measurable goals.

14. A person’s basic assumptions, values, and beliefs that he or she things should direct and influence an organization’s behavior are known as: a. ethics. b. a set of guiding principles. c. morals. d. a logic.

15. The commercial profit logic values , while the social welfare logic emphasizes a. employee needs; societal needs b. legitimacy; service c. hierarchical control; democratic governance d. stakeholder participation; shareholder participation

.

16. Village Greens, an organic, farm-to-table restaurant, is a hybrid organization. In addition to serving delicious food, the organization wants to educate the public on the health benefits of organic eating. What is one technique Village Greens could use to avoid “mission drift”? a. Hire servers with a deep knowledge of organic foods but no restaurant experience b. Collaborate with organic food growers that supply ingredients to the restaurant c. Bring in a nutritionist to develop the educational component of the restaurant Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics d. Ask customers to refrain from giving their servers any tips 17. Inter-organizational research has shown that organizations tend to develop institutional partners or competitors in their organizational population, industry, or value chain. a. equality b. compatibility c. parity d. similarity

with their significant

18. Now authorized in more than 20 states and the District of Columbia, a corporation is a for-profit entity that specifies positive social and environmental impact as well as profit in its legally chartered goals. a. benefit b. social c. sustainable d. philanthropic 19. You are in the process of starting up a hybrid organization that supports women in the emerging African nation of Namibia. You are supplying about 25 women with yarn and knitting needles, and they will knit hats and scarves from these materials. The women will then ship the finished goods back to the U.S., where your sales team will sell them to outlets across North America. Of course, some of the proceeds of the sales will go back to the women in Africa. Which of the following is the best way to structure your new organization? a. Set up a division in the U.S. and another in Namibia b. Establish a single department to manage all aspects of the organization c. Create two departments, one for production and one for sales d. Build an international office 20. You are in the process of starting up a hybrid organization that supports women in the emerging African nation of Namibia. You are supplying about 25 women with yarn and knitting needles, and they will knit hats and scarves from these materials. The women will then ship the finished goods back to the U.S., where your sales team will sell them to outlets across North America. As you start to hire your team members, what will be the best way to ensure they have the right mindset to work in a hybrid organization? a. Hire only those candidates who have a strong background in sales b. Hire only those candidates who have worked in nonprofit organizations c. Hire only those candidates who have worked in other hybrid organizations d. Hire only those candidates who have unrelated experience who can be trained to have a balanced mindset 21. Your art gallery is actually a hybrid organization, as part of your proceeds are used to support a variety of different arts programs in your community. What is the best way you could keep that mission alive in the minds of your three employees? a. Require them to become familiar with at least one local arts organization by volunteering b. Buy them art supplies so they can make their own art c. Give them complimentary tickets to arts-related performances so they experience the benefits of arts programs for themselves d. Institute a sliding-scale commission that will incentivize them to sell more art and raise more money for the programs

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 22. You were brought in from another organization to assume the CEO position at Renew, a hybrid employment agency focused on putting the unemployed and underemployed back to work. Now that you’re on the job, however, you can see that this organization is suffering from an extreme case of mission drift. Which of the following is the first technique you should employ to start restoring balance right away? a. Replace all of the managers with new employees who have a balanced mindset b. Set clear goals, establish performance measurements, and communicate them out to the entire organization c. Identify like-minded organizations to collaborate with d. Assemble a task force to determine the types of incentives and rewards that will keep the mission alive in employees’ minds 23. Corporate social responsibility refers to an organization’s contributions to the welfare and interests of: a. shareholders. b. shareholders and employees. c. shareholders, employees, and customers. d. shareholders, employees, customers, members of the community, and the environment.

24. Organizations’ commitment to corporate social responsibility can now be assessed and measured on ESG dimensions, which stands for: a. economic, social, and governance. b. environmental, social, and governance. c. environmental, social, and gross profits. d. economic, sustainability, and governance.

25. When an organization is concerned about its social performance, its environmental performance, and its financial performance, it measures its actions using the: a. shareholder approach. b. shared value approach. c. triple bottom line. d. balanced scorecard.

26. Which of the following is the best example of a sustainability effort? a. A hospital and health care system creating an ad campaign that educates people on the dangers of recreational drug use b. A paper mill redesigning the mill to use less water and lower the amount of emissions it releases into the environment c. A department store operating a clothing drive to gather gently used winter coats for people in need d. A refrigerator manufacturer supplying new refrigerators to Habitat for Humanity 27. Organizations that engage in the “green movement” should be: a. small to medium in size. b. related to the environment in some way. c. in the technology sector. d. of any size or type.

28. The shared value approach, which refers to organizational policies and practices that both enhance the economic success of the organization while advancing the economic and social conditions in the communities in which the company Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics operates, is also known as: a. conscious capitalism. b. a benefit corporation. c. the stakeholder approach. d. the hybrid approach.

29. Operating with only 12 employees, Bay City Tax Associates is a privately owned, family-operated organization that provides tax and accounting services. Which of the following represents Bay City’s three most important stakeholder groups? a. Owners, employees, the community b. Owners, employees, customers c. Stockholders, employees, customers d. Owners, customers, the union 30. Hillary is the operations manager at HealthTrans, an organization that uses a fleet of about 30 vehicles to transport sick and elderly people to doctor and hospital appointments. The company uses a sophisticated computer system to combine trips and use its resources as efficiently as possible. Employees are reasonably well-paid with decent benefits, and they all value their contribution to the community. Recently, Hillary used an ESG scorecard to evaluate HealthTrans.

She was somewhat surprised to find that the organization scored lower than she expected. Of the following, which step should Hillary take to raise the score? a. Create an ad campaign that educates the community on common ailments, such as diabetes and cancer b. Increase the number of vehicles and drivers to serve more people c. Give all employees a 5% raise d. Start replacing company vehicles with hybrids or electric cars 31. You’re the CEO of a sports apparel manufacturer. Two months ago, you assembled a task force of various department leaders and asked them to conduct an audit of your organization’s performance using the triple bottom line. At a meeting with the task force today, they reported to you that the organization is doing well in terms of planet and profit, but not as well as it could be in terms of people. Which of the following recommendations do you think will best improve your organization’s social performance? a. Look for organizational efficiencies that will maximize the organization’s resources and save on operations expenses b. Invite consumers to take a survey on their needs and expectations regarding sports apparel, and use this data to inform next year’s product lines c. Look for operational efficiencies that will reduce the amount of energy and other resources used by the organization’s headquarters, distribution centers, and manufacturing plants d. Ensure that workers in the organization’s Cambodian manufacturing plant are treated fairly and paid appropriately 32. Lately, Guillermo has been wondering if his pet supply retail chain is delivering on the needs and expectations of the various stakeholder groups related to his organization. In particular, he feels there are some conflicts between certain groups, and he wants to ensure that he is sensitively weighing the needs and importance of each group. Which of the following methods should Guillermo use to answer his questions? a. ESG scorecard b. Triple bottom line c. Stakeholder mapping d. Stakeholder value audit Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 33. There are about four billion people around the globe who earn less than US$1,500 per year. These people who make up the “bottom of the pyramid” obviously have some unique needs. Many organizational leaders who embrace corporate social responsibility believe they: a. shouldn’t bother with the BOP as there is no benefit or profit to be gained from them, even though those people need assistance. b. should try to offer the same products and services to the BOP, but acknowledge they may not be successful in doing so. c. may be able to serve the unique needs of the BOP while still earning a profit. d. should donate a portion of their products or services to the BOP. 34. You’ve got a big problem on your hands. As the director of the local passport office, you are well aware of the many forms that your office is required to process to grant passports to U.S. citizens. However, word has filtered up through the ranks that the systems for processing these forms is inefficient and frustrating. People often have to wait in line for hours to get their documents processed, and it’s not unusual for them to express their anger to frontline employees. After conducting a stakeholder mapping exercise, you’ve concluded that a set of stakeholder groups are in conflict. Which groups are they? a. Employees, customers, management, government b. Community, employees, customers, management c. Customers, employees, suppliers d. Employees, customers, management 35. Which of the following statements about the relationship between CSR and financial performance is true? a. In general, consumers are more concerned with saving money than saving the planet, so they typically buy goods from the cheapest source, not the organization that engages in CSR. b. Most people want to work for ethically run companies, so socially responsible organizations can choose to hire the best and the brightest, who in turn may guide these organizations to financial success. c. More often than not, an organization’s CSR actions consume financial and other resources, which detracts from profits and lowers the organization’s financial performance. d. Studies conducted at the Drucker Institute demonstrated conclusively that organizations with superior reputations always enjoy superior financial performance.

36. When all employees are involved in sustainability efforts, it affects the organization. Which of the following statements is true regarding the impact of employee involvement and sustainability programs? a. Sustainability programs have no effect on employee loyalty or turnover. b. Because employee loyalty is stronger in organizations with sustainability programs, employee turnover is usually reduced by 5 to 10 percent. c. Employee morale is significantly higher in organizations that have strong sustainability programs. d. While sustainability programs raise employee morale, they have no effect on productivity.

37. Which employees are in the best position to identify opportunities for sustainability efforts and develop innovative solutions? a. Employees closest to the daily operations of the organization b. Frontline managers or supervisors c. Department or division heads d. Top-level executives Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 38. Separate sustainability departments are good for: a. initiating and designing sustainability programs. b. managing sustainability programs once they’re established. c. initiating, designing, and managing sustainability programs. d. handling administrative details related to sustainability programs, such as reports.

39. When it comes to solving complex supply-chain issues, such as deforestation, climate change, and the depletion of scarce resources, an organization: a. has no obligation or reason to get involved. b. cannot contribute to the solution because it will be too costly. c. should cooperate with the government in finding a solution. d. should collaborate with competitors, related organizations, government agencies, and social enterprises to find a solution.

40. Which of the following is one of the United Nations’ Sustainable Development Goals related to the health of the biosphere? a. Empower women and girls b. Conserve and sustain marine resources c. Promote full and productive employment for all d. Grow enough organic food to end hunger 41. The CEO has asked you to devise a way to generate ideas that will facilitate sustainability. Which of the following is the first step you would take to start designing a sustainability program in your organization? a. Establish a separate sustainability department b. Hold a sustainability development retreat for all department managers c. Conduct a contest encouraging all employees to submit their sustainability ideas by the end of the year, with the winner getting a $1,000 prize d. Set up multiple sustainability task forces made up of employees from all levels and all departments 42. You own a small fleet of commercial fishing boats, which you and your crews use to fish for bass, walleye, and catfish in the Mississippi River. In recent years, however, your annual catch has diminished due to both overfishing and pollution from industrial activity. You know that your business can’t survive for many years into the future unless this extremely far-reaching problem is resolved, but you have this crazy idea that you could reverse some of the damage if you collaborated with others. Which of the following best describes your situation? a. Other fishing operations and other types of organizations located along the Mississippi would never agree to collaborate with you, but you might be able to get some assistance from the government or nonprofit organizations concerned about the environment. b. Other fishing operations and other types of organizations located along the Mississippi would never agree to collaborate with you, and the government and nonprofit organizations concerned about the environment would not help you because they see you as part of the problem. c. If you could establish a sense of trust and shared purpose with other related organizations, you may be able to collaborate with them, the government, and environmentally oriented nonprofits in developing a workable, sustainable solution. d. In today’s economy, organizations understand that collaborating with others is in their best interest, so you should have no trouble convincing competitors, other organizations, and other stakeholders to work with you on finding a workable, sustainable solution.

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 43. As the operations manager of a home appliance manufacturer, you’ve been asked to set key performance indicators to measure your organization’s sustainability efforts. You’ve asked each department head to submit at least one sustainability KPI, and now you’re in the process of reviewing their submissions. Some managers have done a great job, while others have missed the mark. Which of the following is an appropriate KPI? a. To reduce the amount of electric energy used in the manufacturing plants by 3% each year over the next 10 years b. To reengineer refrigerators to use less refrigerant, which is a dangerous chemical and can be toxic c. To reduce carbon dioxide emissions from the manufacturing plants over the next 5 years d. To increase the production of gas stoves by 8% over the next 3 years 44. Which of the following is one of the United Nations’ Sustainable Development Goals related to the health of the world’s economy? a. Sustainably manage water and sanitation b. Promote peace and justice c. Ensure sustainable consumption and production patterns d. End hunger and achieve food security for all 45. Which of the following refers to the set of moral principles and values that governs the behavior of a person or group with respect to what is right or wrong? a. Personal ethics b. Rule of law c. Organizational ethics d. Code of ethics 46. Which of the following arises from a set of codified principles and regulations that describe how people are required to act, that are generally accepted in society, and that are enforceable in the courts? a. Code of law b. Rule of law c. Organizational law d. Code of ethics 47. Which of the following refers to the principles that guide the decisions and behaviors of managers with regard to whether they are right or wrong? a. Personal ethics b. Rule of law c. Organizational law d. Code of ethics 48. Which of the following refers to a formal statement of the company’s values concerning ethics and social responsibility? a. Mission statement b. Organizational ethics c. Vision statement d. Code of ethics 49. At the Navy’s nuclear-reactor training center in Charleston, South Carolina, an investigation revealed that at least 34 Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics senior enlisted sailors had been cheating on qualification exams. This is an example of: a. whistle-blowing. b. an ethical violation. c. a legal violation. d. both a legal and ethical violation.

50. Elyse works for a large online travel company. She is facing an ethical dilemma involving her supervisor, and even after consulting the organization’s ethics handbook, she is still not sure what to do. Which of the following actions should Elyse take? a. Do nothing and avoid retaliation from her boss b. Confront her supervisor c. Ask several friends for advice and get a consensus d. Report the problem through the organization’s ethics hotline 51. Some years ago, Wells Fargo was caught up in a far-reaching and devastating scandal. Top-level executives wanted to increase the number of accounts and credit cards opened through the bank, so they set high quotas for bank tellers and bankers. In order to meet those quotas, employees began engaging in unethical behavior by convincing bank customers to open accounts and credit cards that they really didn’t need or want. Some employees reported the problem to their managers, but the unethical practice continued, even though the organization’s code stated that bank employees should operate in the best interest of the customers. Of the following, which is the most likely explanation of this widespread problem? a. The organization’s code didn’t clearly explain the appropriate behavior in this situation. b. Wells Fargo must not have had an ethics hotline set up to guide behavior. c. The organization’s culture favored financial performance over ethical behavior. d. Wells Fargo must not have had an ethics committee overseeing company ethics.

52. The online business you started three years ago has been a huge success. Your organization has grown rapidly, and you now employ more than 60 people. Twice in the last six months, you’ve been informed that employees have been engaging in some ethically questionable behavior, so you’ve decided it’s time to set up a formal ethics program in your company. Which of the following seems like the best first step? a. Ask a team of three mid-level managers to write a code of ethics b. Establish an ethics hotline c. Hire a chief ethics officer d. Assemble a cross-functional ethics committee 53. You are the manager of a cell phone store, part of a highly successful nationwide chain. Yesterday, your boss, the district manager, pulled you aside to explain the new management bonus policy. Basically, she said, the two of you could earn big bonuses if you instruct your salespeople to “forget” about older phone models stored in the stockroom and sell only the newest, most expensive models. You’re confused because the company motto is to give customers what they need, but it seems like the new corporate policy is encouraging you to sell only the most expensive products, which would be unethical. What should you do? a. Ask your supervisor for clarification b. Contact someone in your organization’s ethics committee c. Ignore your boss’s instructions and continue to sell all products d. Consult with your sales team and make a group decision as to whether you should sell all products or just some Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 54. You were thrilled when your employer named you the new Southeast Asia manager and put you in charge of setting up the organization’s office there. But in only your second week at the new location, you encountered something unusual.

A local government worker informed you that he would process your permit applications and other paperwork more quickly if you were willing to give him a cash payment, otherwise it may take up to 18 months to process them. Where you come from, that’s a bribe, which is both unethical and illegal. Your career is riding on this promotion, so what should you do? a. Make the decision based on your personal sense of ethics b. Make the decision based on your understanding of your organization’s ethics c. Consult your organization’s code of ethics and act accordingly d. Consult with your organization’s ethics committee and act accordingly 55. Organizations operating on a global basis often face particularly tough ethical challenges due to the complexity of the environment. Which of the following statements about global ethical challenges is true? a. Broad, diffuse supply chains are the primary source of ethical challenges for organizations doing business globally. b. Cultural differences among employees of different nationalities are the primary source of ethical challenges for organizations doing business globally. c. Cultural differences among employees of different nationalities and conflicting national regulations are the two primary sources of ethical challenges for organizations doing business globally. d. Broad, diffuse supply chains and cultural differences among employees of different nationalities are the two primary sources of ethical challenges for organizations doing business globally.

56. Explain the difference between a hybrid organization, a business organization, and a nonprofit organization.

57. Explain how logics can contribute to conflict and mission drift.

58. Summarize at least four of the six techniques hybrid organizations can use to avoid mission drift and achieve their dual commercial and social welfare goals.

59. Explain the concept of the “triple bottom line.” Then choose some type of organization (such as an auto manufacturer, pharmaceutical company, etc.) and explain how the organization’s managers might apply this concept. Be sure to address all three aspects of the term.

60. In your opinion, do large corporations have an obligation to create products and services for those people who live at the “bottom of the pyramid.” What are the consequences if organizations do not recognize and adapt to the needs of the BOP? Provide a solid argument for your opinion.

61. Managers and scholars alike debate the relationship between corporate social responsibility and an organization’s financial performance. Some say socially responsible actions enhance an organization’s financial performance, while others say CSR has little effect on an organization’s financial success. What is your opinion? What evidence can you provide to support your opinion?

62. Explain the three steps an organization can take to ensure the successful design and implementation of a sustainability program.

63. In terms of designing and implementing sustainability programs, why is listening to stakeholders important? Why is talking to stakeholders important?

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 64. Summarize the difference between individual ethics and organizational ethics. What do you think is the source of each type of ethics?

65. Describe the structure, disclosure mechanisms, and credos organizations can use to shape ethical values among its employees.

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics Answer Key 1. False 2. False 3. True 4. False 5. True 6. False 7. False 8. True 9. False 10. True 11. c 12. a 13. b 14. d 15. c 16. b 17. d 18. a 19. c 20. d 21. c 22. b 23. d 24. b 25. c Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 26. b 27. d 28. a 29. b 30. d 31. d 32. c 33. c 34. a 35. b 36. c 37. a 38. d 39. d 40. b 41. d 42. c 43. a 44. c 45. a 46. b 47. c 48. d 49. b 50. d 51. c Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 52. d 53. b 54. d 55. d 56. Business organizations are set up to provide some type of product or service while generating profits or dividends for shareholders. Nonprofit organizations, which typically operate on contributions gained through fundraising, provide products or services that address social issues and benefit a community. A hybrid organization is a combination of the two: an organization that provides products or services for the welfare of the public while at the same time generating a profit.

57. A logic means a person’s basic assumptions, values, and beliefs that he or she thinks should guide an organization’s behavior. These values and beliefs give meaning to people’s daily lives. In traditional business or nonprofit organizations, employees are typically required to hold one logic. But in the case of hybrid organizations, employees must be able to adhere to two logics simultaneously—the commercial logic and the social welfare logic. This can be very challenging, and it is not uncommon for individuals and groups of employees to “drift” toward one or the other, called mission drift. Unless the two logics are equally balanced, conflict within the organization can arise.

58. 58.

1. Choose the right structure. When a hybrid organization has a workflow and clients that readily divide into separate parts, it is best to separate employees into separate departments. However, some hybrid organizations are best served by having all employees coordinated in one department.

2. Hire employees with a balanced mindset. In the hiring process, hybrid organizations must be able to screen and identify those candidates who will be able to hold two logics (the commercial logic and the social welfare logic) simultaneously.

3. Set clear goals and measure effectiveness. Clear goals communicate and continue to remind employees of the dual purpose of the organization, while performance measures reveal what’s working and what’s not.

4. Collaborate with like-minded organizations. As a hybrid organization seeks to gain market share, it may feel pressured to mimic the systems and values of other organizations in the same population, industry, or value chain.

By choosing to work with other organizations that share the same values, the organization will be encouraged to stay focused on those values and its social mission.

5. Keep the social mission alive in the minds of employees. Leaders need to keep the organization’s mission everpresent to avoid conflict. One way to achieve this is to offer employees benefits and incentives that are related to the organization’s social mission.

6. Choose the correct legal framework. Organizations that are serious about their social missions may want to consider legalizing it by incorporating as a benefit corporation.

59. In an organization that embraces sustainability, managers can use the “triple bottom line” to measure how well the organization is performing. Meeting sustainability goals is broken down into three categories: social performance, environmental performance, and financial performance.

Students’ examples should incorporate all three categories and demonstrate their understanding of performance measurement. Specifically, examples should discuss how well the organization is earning a profit and benefitting shareholders. They should also discuss how well the organization is treating its employees, customers, suppliers, and other stakeholders. And finally, examples should describe measures the organization is or should take to protect the environment.

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics 60. Students’ answers to this opinion question will vary, but they should demonstrate a thorough understanding of the concepts. The bottom of the pyramid refers to the approximately 4 billion people around the world who earn less than US$1,500 per year. Some people believe that large corporations have an obligation to serve this portion of the population by simultaneously trying to alleviate poverty while still earning profits for themselves. For example, these large corporations could find ways to provide products and services that are more affordable and more accessible to the BOP. They might also look for ways to involve members of this segment of the population in the creation, sale, and delivery of goods and services. Without the assistance of large corporations, some believe, more of these people will succumb to disease and starvation.

61. Students’ answers to this opinion question will vary, but they should demonstrate a thorough understanding of the concepts. Many students will say that studies have shown a positive relationship between CSR and financial performance.

Other evidence may include the idea that individuals want to work for ethical, responsible companies, so these organizations are attracting the best and the brightest employees. Also, many individuals prefer to do business with ethically run companies, and they support the idea of buying products and services that benefit people and the planet.

However, none of this research has been conclusive, so some students will state that CSR has little effect on an organization’s financial performance.

62. First, an organization must involve all employees in developing sustainability initiatives. The employees who are closest to the day-to-day operations of the organization are in the best position to recognize opportunities and develop innovative solutions. Involving all employees also ensures that sustainability becomes woven into the organization’s culture, which will yield positive benefits for the organization’s morale and performance. Second, an organization needs to involve external stakeholders to ensure that sustainability efforts are meeting true needs and benefitting all concerned.

Collaborating with others in the industry as well as governmental agencies and NGOs can also help offset the cost of initiatives. And finally, an organization should set specific sustainability goals, define metrics used to measure performance, and reward and incentivize all of the people who contribute to achieving those goals.

63. Both aspects of communication are important to the successful design and implementation of a sustainability program.

By listening to stakeholders, an organization can make sure it is looking at its own performance in a holistic manner.

Listening to stakeholders also allows for sharing ideas and innovations, solving related issues, and clarifying the intended benefits of the sustainability actions and programs. On the other hand, an organization should publicize its actions and programs through annual reports and other forms of communication. Stakeholders need to be informed of an organization’s efforts and provided specific evidence of the benefits of the organization’s programs. If an organization does not educate stakeholders about its programs, it will not reap the full reward of such actions.

64. Individual ethics refers to the code of moral principles and values that governs the behavior of a person or group with respect to what is right and wrong. Each individual’s personal code of ethics is influenced by a combination of factors, including national heritage, religious heritage, historical background, community, family, place of work, and society in general. Organizational ethics are principles that guide the decisions and managers with regard to whether they are right or wrong. Organizational ethics are most likely a combination of the founders’ and leaders’ personal ethics, as well as the corporate culture of the organization.

65. Many experts agree that organizations should have some type of formal ethics program. The program might include an ethics committee, a cross-functional group of executives who oversee company ethics. The committee provides rulings on questionable ethical issues and assumes responsibility for disciplining wrongdoers. Larger organizations may even set up ethics departments that manage and coordinate all corporate ethics activities. These departments should be led by a chief ethics or compliance officer, a high-level company executive who oversees all aspects of the organization’s ethics program.

Organizations also need to provide some means for employees to report ethical violations within the organization, called whistle-blowing, without suffering retaliation or other negative consequences. Many organizations choose to set up Powered by Cognero

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Chapter 07: Designs for Societal Impact: Dual-Purpose Organizations, Corporate Sustainability, and Ethics confidential hotlines, which can double as a resource for employees who want assistance with ethical dilemmas.

At a minimum, every company should develop a code of ethics, which is a formal statement of the company’s values concerning ethics and social responsibility. The code of ethics should clarify to employees what the company stands for and its expectations for employee conduct, and thus it serves as a set of guidelines regarding decisions and behaviors.

Some organizations also choose to create a values statement.

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Chapter 08: Designs for Manufacturing and Service Technologies

Indicate whether the statement is true or false.

1. Perrow's study is classified as pertaining to organization-level technology, while Woodward's is classified as pertaining to department-level technology. a. True b. False 2. Small-batch production is highly mechanized, whereas continuous-process production relies heavily on the human operator. a. True b. False 3. Failing to adopt appropriate new technologies to support strategy, or adopting a new technology and failing to realign strategy to match it, can lead to poor performance. a. True b. False 4. Computer-aided manufacturing enables the production line to quickly honor customer requests for changes in product design and product mix. a. True b. False 5. Service technologies are considered to be labor- and knowledge-intensive, while manufacturing technologies tend to be capital asset-intensive. a. True b. False 6. In a service firm, the quality of a service is perceived and cannot be directly measured and compared in the same way that the quality of a tangible product can. a. True b. False 7. Craft technologies are characterized by a fairly stable stream of activities, but the conversion process is not analyzable or well understood. a. True b. False 8. In routine technologies, most decision making about task activities is decentralized throughout an organization. a. True b. False 9. A mediating technology provides products or services that mediate or link clients from the external environment and, in doing so, allows each department to work independently. a. True b. False 10. Sequential interdependence exists when the output of operation A is the input to operation B, and the output of Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies operation B is the input back again to operation A. a. True b. False

Indicate the answer choice that best completes the statement or answers the question.

11. An organization's a. core b. mediating c. long-linked d. noncore

technology is the work process that is directly related to the organization's mission.

12. Teaching in a high school and medical services in a health clinic are referred to as an organization’s technology. a. technical b. core c. craft d. reciprocal 13. Which one of the following basic technology groups relies heavily on the human operator and is not highly mechanized? a. Large-batch production b. Assembly line production c. Continuous-process production d. Small-batch production 14. production is a manufacturing process characterized by long production runs of standardized parts, and output often goes into inventory from which orders are filled because customers do not have special needs. a. Continuous-process b. Unit c. Large-batch d. Small-batch 15. Chemical plants, oil refineries, liquor producers, pharmaceuticals, and nuclear power plants are examples of production. a. unit b. mass c. large-batch d. continuous-process 16. Hans is the CEO of a women’s shoe manufacturer. For many years, his organization has been very successful at producing huge quantities of the most popular shoe styles, which are then sold in shoe and department stores across the country. A few years ago, in response to increasing competition, Hans decided his company should also produce specialty, “on trend” shoes, which typically sell for just one season. The demand for these shoes is far lower than it is for the classic styles, but his projected profit margins for these highly desirable styles are quite appealing. Since then, however, the plant has struggled to adapt to the new strategy. Using Woodward’s theories, how would Hans diagnose the problem?

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Chapter 08: Designs for Manufacturing and Service Technologies a. The plant’s employees do not have the tools or training to adapt to manufacturing the new shoe styles. b. The plant cannot be easily reconfigured to accommodate the small-batch specialty items. c. The plant’s technology was aligned with a mass production strategy, but now the plant is expected to simultaneously engage in a small-batch production strategy. d. The sales and profit projections for the specialty items have proven to be inaccurate and do not cover the extra costs of production.

17. In the component of a smart factory, computers are used to assist in the drafting, creation, and engineering of new parts. a. manufacturing processes management b. computer-aided manufacturing c. computer-aided design d. product life cycle management 18.

is a technology that builds objects one successive layer of material at a time. a. Additive manufacturing b. CAD c. CAM d. Lean manufacturing

19. A laptop computer manufacturer allows customers to order laptops with their preferred combination of hard drive capacities, processing chip speeds, and software packages. This ability to meet the demands of individual customers on a large scale is called: a. mass customization. b. personalization. c. craft manufacturing. d. custom manufacturing.

20. The awesome advantage of a smart factory is that: a. little training is required. b. employee involvement is very less. c. one product can be produced at a time, making it easier for employees to operate the machines involved in production. d. products of different sizes, types, and customer requirements freely intermingle on the assembly line.

21. Which of the following statements is true about smart factories? a. The span of control is wide in smart factories. b. The decision making is centralized in smart factories. c. The customer demand is stable in smart factories. d. The tasks are adaptive and craftlike in smart factories.

22. Inside the manufacturing plant of the leading producer of tractors, a team is working on producing 10 special-order tractors for a customer. The customer has asked for a unique feature to be added to the 10 tractors. With a couple of keystrokes, Marla, the team leader, resets the metal cutting machine so that this special feature is included in the pieces for the new tractors. This must be a smart factory because Marla’s team is using: Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies a. computer-aided design. b. computer-aided manufacturing. c. robots. d. 3-D printing.

23. At a major automobile manufacturing plant, Damini is using a machine to craft 100 copies of a metal part that will be used in an engine block. She intends to test the parts under extreme conditions to make sure they have the required strength to withstand real road conditions. Damini is using: a. computer-aided design. b. computer-aided manufacturing. c. robots. d. 3-D printing.

24.

means providing exactly the service each customer wants and needs. a. Service complexity b. Customized output c. Mass customization d. Joint optimization

25. Service organizations can achieve their greatest economies through: a. centralization of services. b. geographic concentration. c. disaggregation into small units located close to customers. d. centralized decision making with a high formalization.

26. Which of the following did Perrow specify? a. Two dimensions of departmental activities: variety and analyzability b. Three types of interdependence: pooled, sequential, and reciprocal c. Two aspects of the environment that call for a particular organizational structure d. Three categories of technical complexity present in organizations 27. The frequency of unexpected and novel events that occur in the conversion process is known as: a. complexity. b. accountability. c. variety. d. analyzability.

28. The Verification Department of the Internal Revenue Service checks the calculations on returns and notes any discrepancies. According to Perrow, this department fits into the category of technologies. a. craft b. routine c. engineering d. nonroutine Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies 29.

technologies have high task variety, and the conversion process is not analyzable or well understood. a. Nonroutine b. Routine c. Engineering d. Craft

30. You’ve just joined the board of directors of Carolina Furniture Co., a well-respected furniture maker that’s been in business for more than 80 years. Located in a rural area, it’s the main employer in town with a loyal workforce proud of their contributions to quality craftsmanship. At the first board meeting, you discover a major conflict. The CEO, who assumed the role 18 months ago, is frustrated because she sees tremendous opportunity for mass customization, which is why she’s invested a significant amount of money in computer-aided manufacturing equipment. The VP of production, however, says that all of his mid-level managers and supervisors have reported a powerful resistance to this new approach, which is why productivity is down. Based on what little you know, what do you suspect could be the main source of the problem? a. The VP of production and the rest of the organization resent the new CEO and the way she has handled change. b. Front-line employees have not received the proper training to use the new equipment. c. Mass customization is not an appropriate strategy for furniture manufacturing. d. Longtime employees are accustomed to specialized roles in a hierarchical organization, and management has not found a way to help them adapt to working in a smart factory.

31. Baxton Burgers is a chain of fast-food restaurants. It has outlets throughout the world. Each of the outlets is independent and does not communicate with each other, but each of them contributes to the growing success of the restaurant. In this context, the outlets of Baxton Burgers have interdependence. a. sequential b. pooled c. reciprocal d. successive 32. A technology provides products or services that link clients from the external environment and, in so doing, allows each department to work independently. a. craft b. pooled c. routine d. mediating 33. Jenson Motors, a car manufacturing company, decides to change its production operations strategy. In the company, an employee adds a part to the car frame and then sends it to another employee to add another part. This process continues until they get the final product, a complete car. The management wants to divide the employees into teams where each team is responsible for building an entire car. If Jenson Motors implements the change, the interrelationships would change from interdependence on the line to interdependence between the teams. a. pooled; reciprocal b. reciprocal; sequential c. sequential; pooled d. sequential; reciprocal 34. Vintichic, a fashion house, plans to launch its new collection for summer. Each department has a part to play in Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies producing the final product. The designers send the fabric and designs to the tailors, the tailors send the sewed clothes to the department that accessorize the clothes, the accessorizing department sends the clothes to the packaging and shipping department, and finally the packaging and shipping department transports the clothes to their various outlets throughout the world. In this scenario, the type of interdependence exhibited by the departments of the fashion house is interdependence. a. pooled b. reciprocal c. sequential d. autonomous 35. Sequential interdependence occurs in organizations with what Thompson called a. long-linked b. mediating c. intensive d. routine

technology.

36. In football, the interdependence tends to be: a. pooled because management must select individual players and develop their skills. b. sequential because plays are run sequentially and events during the plays occur sequentially. c. reciprocal because mutual adjustments must be made by the players. d. sporadic because it is really a game of individual talents.

37. interdependence is the highest level of interdependence and exists when the output of operation A is the input to operation B, and the output of operation B is the input back again to operation A. a. Reciprocal b. Pooled c. Sequential d. Routine 38. Reciprocal interdependence tends to occur in organizations with what Thompson called provide a variety of products or services in combination to a client. a. craft b. mediating c. intensive d. long-linked

technologies, which

39. In the manufacturing process, technical complexity means most of the work is performed by machines, and technical complexity means workers play a larger role in the production process. a. routine; nonroutine b. mechanized; humanized c. advanced; early d. high; low 40. In some work environments that involve extremely complex and dangerous technologies, everyone looks for and reports small problem or unsafe conditions so they can be resolved before they pose a substantial risk. This type of work environment is known as a: Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies a. hazardous risk organization. b. high responsibility operation. c. high reliability organization. d. high risk operation.

41. In an HRO, employees focus on finding and correcting small errors they might have missed. They’re taught to never be satisfied simply because there has not been an accident for months or years. This quality of heightened awareness can best be described as: a. a reluctance to simplify their observations. b. a preoccupation with failure. c. sensitivity to operations. d. commitment to resilience.

42. In an HRO, mindful attention to events is the norm, as opposed to mindless repetition. Situational awareness is essential because the early indicators of threats to organizational performance typically appear as small changes. This quality can best be described as: a. a reluctance to simplify their observations. b. a preoccupation with failure. c. sensitivity to operations. d. commitment to resilience.

43. Which of the following is true about HROs? a. HROs are typically decentralized structures, organized according to areas of expertise. b. HROs are tightly run, hierarchical structures due to the hazardous nature of their operations. c. During routine operations, HRO employees operate in a decentralized structure, but when confronted with a new threat, team members and leaders defer to the designated authority. d. During routine operations, HRO employees defer to hierarchical authority, but when confronted with a new threat, team members and leaders defer to the person or group with relevant expertise.

44. One key distinction between products and services is that services are characterized by: a. sequential production and consumption. b. tangible outputs. c. simultaneous production and consumption. d. being capital intensive.

45. After Natalie earned her degrees and became a certified dentist, she decided to return to the rural town in Arkansas where she grew up to open the town’s only dental practice. In the early days, it was just her. She saw all the patients, handled her own appointments and billing, and even cleaned the instruments. But word has spread, and Natalie now has too many patients scheduled each day to continue operating this way. Which of the following is her best option? a. Bring in more dentists because all patients need direct contact with skilled technical core service providers just like her b. Delegate all services to people in boundary spanning roles, such as dental hygienists, while Natalie manages and coordinates their work c. Limit the number of patients she sees because there are no boundary spanning roles in service organizations d. Delegate some services to people in boundary spanning roles, such as dental hygienists, while still providing some services directly to patients Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies 46. Kerry Anne is a talented graphic designer, and now that she’s had several years of experience in the profession, she wants to start her own graphic design firm. Which of the following statements about the location of Kerry Anne’s service business is true? a. Consumers want to have direct contact with service providers, so Kerry Anne will need to locate her business in a city that’s large enough to support the business. b. Kerry Anne could locate her business in a small town, but she’ll need to open several offices in dispersed locations, such as other nearby towns. c. Although consumers like to have direct contact with service providers, Kerry Anne could provide services to clients virtually anywhere by using communication technology. d. Kerry Anne can locate her business anywhere she chooses, but she must be willing to travel so that she can provide services wherever her customers want to be served.

47. Which of the following statements comparing manufacturing technology with service technology is true? a. Quality is readily measured in both manufacturing technology and service technology, although different metrics are used. b. Manufacturing technology and service technology are both labor intensive. c. The human element is extremely important in both manufacturing technology and service technology. d. Manufacturing technology and service technology have almost nothing in common.

48. Andrew and his team work for a large poultry producer in Georgia. Each month they process orders, track payments, report on inventories, calculate profit and loss, and the like. All of these tasks must be done according to protocol, otherwise their reports to both shareholders and the government could be inaccurate, which could have serious repercussions. How would Perrow categorize this work environment? a. Routine b. Craft c. Engineering d. Nonroutine 49. Bob, Tina, and Hailey make up a three-person team on an assembly line making safety helmets for motorcyclists. Bob rivets the main components in place, Tina attaches the padding and interior fabric, and Hailey provides the finishing elements, such as the trim. How would Perrow categorize this work environment? a. Routine b. Craft c. Engineering d. Nonroutine 50. Steve, Oliver, and Chrissy make up the planning department at a large commercial construction company. They all say they enjoy their jobs because every project is a little different, which challenges them to solve problems as they purchase materials, negotiate with subcontractors, and map out the logistics of building each new hotel, office building, or parking structure. What they don’t like is that their supervisor, Tamara, requires them to run all of their plans and decisions by her, which requires lengthy meetings in which they have to explain and justify their actions. According to Perrow’s model, what is causing conflict in this work environment? a. A mostly mechanistic department design requiring more written documentation would be better suited for this engineering technology work environment. b. An organic department design with low centralization and less vertical communication would work better for Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies this nonroutine technology work environment. c. A mostly organic department design with moderate centralization and less vertical communication would work better for this craft technology work environment. d. A mechanistic department design requiring more written documentation and formalization would be better suited for this routine technology work environment.

51. You have just been named the new president of a small chain of 12 restaurants, so you decide to tour each facility. At one stop, you discover that the staff there is extremely efficient due to a great kitchen design. At another, you’ve discovered innovative menu items developed by that team. And at another, you learn that location is known for its excellent customer service. You wonder why these qualities aren’t consistent across all locations. What have you observed? a. Pooled interdependence has prevented the organization from sharing valuable knowledge. b. Reciprocal interdependence has failed, and valuable knowledge has not been shared among units. c. Valuable knowledge has not been passed along through long-linked technology. d. Intensive technologies with clients is strong, but is not functioning as well among units.

52. You have just been named the new president of a small chain of 12 restaurants. After touring each of the 12 facilities, you realized that several locations have developed their own strengths and innovations that have dramatically increased performance. These ideas are so outstanding that you’d like to see them used in all 12 locations. Given the interdependencies in your organization, how could you facilitate greater consistency across the board? a. Due to pooled interdependence, you could use a mediating technology to increase workflow and knowledge sharing. b. With pooled interdependence, you could implement standardized procedures that facilitate more consistent outcomes across all units. c. You could shift to sequential interdependence, in which knowledge is passed along from one unit to the next. d. Due to reciprocal interdependence, you could use intensive technologies to share knowledge and best practices.

53. Your new job is going to be stressful, to say the least. You’re in charge of a brand new nuclear power plant, and if anything ever goes wrong, it would be a true catastrophe. Part of your plan to turn this facility into an HRO is to design an organizational structure that utilizes the expertise of your crew. Which of the following actions will you choose to do? a. Create a hierarchical structure with all of your experts in leadership positions b. Create a hierarchical structure with the understanding that in a time of crisis, organizational leaders defer to the person or group with the most relevant knowledge c. Create a decentralized structure and put decision-making authority in the hands of front-line employees d. Create a bossless work environment with all employees working in organically formed teams 54. When you started working at the nuclear power plant, your trainers stressed that every employee was instrumental in maintaining the plant’s long-standing safety record. Your job is to monitor temperature levels within various components of the plant, which you do every 15 minutes. In your last reading, you noticed that the temperature was up .3 degrees from normal levels. Based on your training, what should you do? a. Accept that fluctuations are normal, and continue to monitor the readings every 15 minutes. b. Accept that fluctuations are normal, but increase the frequency of your readings to every 5 minutes. c. Take note of the fluctuation and alert your supervisor so the team can start examining potential causes. d. Send the plant into high alert.

55. When you started working at the nuclear power plant, your trainers stressed that every employee was instrumental in Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies maintaining the plant’s long-standing safety record. Your job is to monitor temperature levels within various components of the plant, which you do every 15 minutes. In your last reading, you noticed that the temperature was up .3 degrees from normal levels. Which of the following thoughts is most likely going through your mind? a. You’re nervous about reporting this to your supervisor because you know she’ll expect an explanation, which you don’t have. b. You’re reluctant to say anything because everyone is so busy, and you don’t want them to be mad at you for interrupting their work. c. You’re motivated to report this to your supervisor because it will demonstrate that you’re paying attention and performing well. d. You’re motivated to report this to your supervisor and co-workers because management encourages this type of report.

56. Explain the difference between core technology and noncore technology.

57. Discuss the three basic technology groups as categorized in Woodward's scale of technical complexity.

58. Explain mass customization and its advantage. Give examples.

59. Compare the configuration and structural characteristics of service firms with that of product organizations.

60. Contrast the two dimensions of departmental activities, specified by Perrow, that were relevant to organization structure and process.

61. Discuss each of the categories of Perrow's framework. Give examples of each.

62. Compare the specific design characteristics of formalization, centralization, employee kill level, span of control, and communication and coordination for routine technology and nonroutine tasks.

63. Discuss the three types of interdependence defined by James Thompson that influence organization structure.

64. Describe a smart factory, including at least three of the four subcomponents commonly found in a smart factory.

65. High reliability organizations (HROs) have developed techniques for managing highly complex and potentially hazardous technologies in a safe and reliable manner. Briefly describe the five techniques or traits that characterize an HRO.

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Chapter 08: Designs for Manufacturing and Service Technologies Answer Key 1. False 2. False 3. True 4. True 5. True 6. True 7. True 8. False 9. True 10. False 11. a 12. b 13. d 14. c 15. d 16. c 17. c 18. a 19. a 20. d 21. d 22. b 23. d 24. b 25. c Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies 26. a 27. c 28. b 29. a 30. d 31. b 32. d 33. c 34. c 35. a 36. b 37. a 38. c 39. d 40. c 41. b 42. c 43. d 44. c 45. d 46. c 47. d 48. c 49. a 50. b 51. a Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies 52. b 53. b 54. c 55. d 56. An organization’s core technology is the work process that is directly related to the organization’s mission, such as teaching in a high school or medical services in a health clinic. Core technology consists of raw material inputs, a transformation work process (e.g., milling, inspection, assembly) that changes and adds value to the raw material and produces the ultimate product or service output that is sold to consumers in the environment. In today’s large, complex organizations, core work processes vary widely and sometimes can be hard to pinpoint. A core technology can be partly understood by examining the raw materials flowing into the organization, the variability of work activities, the degree to which the production process is mechanized, the extent to which one task depends on another in the workflow, or the number of new product or service outputs.

Organizations are also made up of many departments, each of which may use a different work process (technology) to provide a good or service within the organization. A noncore technology is a department work process that is important to the organization but is not directly related to its primary mission.

57. Technical complexity represents the extent of mechanization of the manufacturing process. High technical complexity means most of the work is performed by machines. Low technical complexity means workers play a larger role in the production process. Woodward’s scale of technical complexity originally had 10 categories. These categories were further consolidated into three basic technology groups, as follows: ∙ Group I: Small-batch and unit production. These firms tend to be job shop operations that manufacture and assemble small orders to meet specific needs of customers. Custom work is the norm. Small-batch production relies heavily on the human operator; it is thus not highly mechanized. ∙ Group II: Large-batch and mass production. Large-batch production is a manufacturing process characterized by long production runs of standardized parts. Output often goes into inventory from which orders are filled because customers do not have special needs. ∙ Group III: Continuous-process production. In continuous-process production, the entire process is mechanized. There is no starting and stopping. This represents mechanization and standardization one step beyond those in an assembly line.

Automated machines control the continuous process, and outcomes are highly predictable.

58. Lean manufacturing and the smart factory have paved the way for mass customization, which refers to using massproduction technology to quickly and cost-effectively assemble goods that are uniquely designed to fit the demands of individual customers. The goal is to provide customers with exactly what they want when they want it. Mass customization has been applied to products as diverse as farm machinery, water heaters, clothing, computers, and industrial detergents. A customer can order a Sony laptop with one of several hard drive capacities, processing chip speeds, and software packages, or a BMW automobile with the exact combination of features and components desired.

About 60 percent of the cars BMW sells in Europe are built to order. Oshkosh Truck Company thrived during an industrywide slump in sales by offering customized fire, cement, garbage, and military trucks. Firefighters often travel to the plant to watch their new vehicle take shape, sometimes bringing paint chips to customize the color of their fleet.

The awesome advantage of the smart factory is that products of different sizes, types, and customer requirements freely intermingle on the assembly line, enabling large factories to deliver a wide range of custom-made products at low massproduction costs. Computerized machines can make instantaneous changes—such as putting a larger screw in a different location—without slowing the production line. A manufacturer can turn out an infinite variety of products in unlimited Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies batch sizes.

59. The differences in the structural characteristics of service organizations and product organizations are as follows: ∙ Boundary roles are used extensively in manufacturing firms to handle customers and to reduce disruptions for the technical core. They are used less in service firms because a service is intangible and cannot be passed along by boundary spanners, so service customers must interact directly with technical employees, such as doctors or brokers. ∙ A service firm deals in information and intangible outputs and does not need to be large. Its greatest economies are achieved through disaggregation into small units that can be located close to customers. Stockbrokers, doctors’ clinics, consulting firms, and banks disperse their facilities into regional and local offices. Manufacturing firms, on the other hand, tend to aggregate operations in a single area that has raw materials and an available workforce. A large manufacturing firm can take advantage of economies derived from expensive machinery and long production runs. ∙ Service technology also influences internal organization characteristics used to direct and control the organization. For one thing, the skills of technical core employees typically need to be higher. These employees need enough knowledge and awareness to handle customer problems rather than just enough to perform mechanical tasks. Employees need social and interpersonal skills as well as technical skills. Due to higher skills and structural dispersion, decision making often tends to be decentralized in service firms, and formalization tends to be low. Decision making tends to be more centralized and formalization tends to be higher in manufacturing firms than service firms.

60. Perrow specified two dimensions of departmental activities that were relevant to organization structure and processes which are as follows: ∙ The first is the number of exceptions in the work. This refers to task variety, which is the frequency of unexpected and novel events that occur in the conversion process. Task variety concerns whether work activities are performed the same way every time or differ from time to time as employees transform an organization’s inputs into outputs. When individuals encounter a large number of unexpected situations, with frequent problems, variety is considered high. When there are few problems, and when day-to-day job requirements are repetitious, technology contains little variety. Variety in departments can range from repeating a single act, such as on a traditional assembly line, to working on a series of unrelated problems, such as in a hospital emergency room. ∙ The second dimension of technology concerns the analyzability of work activities. When the conversion process is analyzable, the work can be reduced to mechanical steps and participants can follow an objective, computational procedure to solve problems. Problem solution may involve the use of standard procedures, such as instructions and manuals, or technical knowledge, such as that in a textbook or handbook. On the other hand, some work is not analyzable.

When problems arise, it is difficult to identify the correct solution. There is no store of techniques or procedures to tell a person exactly what to do. The cause of or solution to a problem is not clear, so employees rely on accumulated experience, intuition, and judgment. The final solution to a problem is often the result of wisdom and experience and not the result of standard procedures.

61. The dimensions of variety and analyzability that were specified by Perrow form the basis for four major categories of technology: routine, craft, engineering, and nonroutine. ∙ Routine technologies are characterized by little task variety and the use of objective, computational procedures. The tasks are formalized and standardized. Examples include an automobile assembly line and a bank teller department. ∙ Craft technologies are characterized by a fairly stable stream of activities, but the conversion process is not analyzable or well understood. Tasks require extensive training and experience because employees respond to intangible factors on the basis of wisdom, intuition, and experience. Although advances in machine technologies seem to have reduced the number of craft technologies in organizations, craft technologies are still important. For example, steel furnace engineers continue to mix steel based on intuition and experience, pattern makers at fashion houses such as Louis Vuitton, Zara, or H&M convert rough designers’ sketches into saleable garments, and teams of writers for television series such as “Glee” or “The Mentalist” convert ideas into story lines. ∙ Engineering technologies tend to be complex because there is substantial variety in the tasks performed. However, the various activities are usually handled on the basis of established formulas, procedures, and techniques. Employees normally refer to a well-developed body of knowledge to handle problems. Engineering and accounting tasks usually fall in this category.

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Chapter 08: Designs for Manufacturing and Service Technologies ∙ Nonroutine technologies have high task variety, and the conversion process is not analyzable or well understood. In nonroutine technology, a great deal of effort is devoted to analyzing problems and activities. Several equally acceptable options typically can be found. Experience and technical knowledge are used to solve problems and perform the work.

Basic research, strategic planning, and other work that involves new projects and unexpected problems are nonroutine.

The biotechnology industry also represents a nonroutine technology. Breakthroughs in understanding metabolism and physiology at a cellular level depend on highly trained employees who use their experience and intuition, as well as scientific knowledge.

62. The specific design characteristics of formalization, centralization, employee kill level, span of control, and communication and coordination for routine technology and nonroutine tasks are as follows: ∙ Formalization. Routine technology is characterized by standardization and division of labor into small tasks that are governed by formal rules and procedures. For nonroutine tasks, the structure is less formal and less standardized. When variety is high, as in a research department, fewer activities are covered by formal procedures. ∙ Decentralization. In routine technologies, most decision making about task activities is centralized to management. In engineering technologies, employees with technical training tend to acquire moderate decision authority because technical knowledge is important to task accomplishment. Production employees who have years of experience obtain decision authority in craft technologies because they know how to respond to problems. Decentralization to employees is greatest in nonroutine settings, where many decisions are made by employees. ∙ Employee skill level. Work staff in routine technologies typically require little education or experience, which is congruent with repetitious work activities. In work units with greater variety, staff members are more skilled and often have formal training in technical schools or universities. Training for craft activities, which are less analyzable, is more likely to be through job experience. Nonroutine activities require both formal education and job experience. ∙ Span of control. Span of control is the number of employees who report to a single manager or supervisor. This characteristic is normally influenced by departmental technology. The more complex and nonroutine the task, the more problems arise in which the supervisor becomes involved. Although the span of control may be influenced by other factors, such as skill level of employees, it typically should be smaller for complex tasks because on such tasks the supervisor and subordinate must interact frequently. ∙ Communication and coordination. Communication activity and frequency increase as task variety increases. Frequent problems require more information sharing to solve problems and ensure proper completion of activities. The direction of communication is typically horizontal in nonroutine work units and vertical in routine work units. The form of communication varies by task analyzability. When tasks are highly analyzable, statistical and written forms of communication (e.g., memos, reports, rules, and procedures) are frequent. When tasks are less analyzable, information typically is conveyed face to face, over the telephone, or in group meetings.

63. The three types of interdependence defined by James Thompson that influence organization structure are as follows: ∙ Pooled. Pooled interdependence is the lowest form of interdependence among departments. In this form, work does not flow between units. Each department is part of the organization and contributes to the common good of the organization, but works independently. Subway restaurants or Bank of America branches are examples of pooled interdependence. An outlet in Chicago need not interact with an outlet in Urbana. Pooled interdependence may be associated with the relationships within a divisional structure. . ∙ Sequential. When interdependence is of serial form, with parts produced in one department becoming inputs to another department, it is called sequential interdependence. The first department must perform correctly for the second department to perform correctly. This is a higher level of interdependence than pooled interdependence because departments exchange resources and depend on others to perform well. Sequential interdependence creates a greater need for horizontal mechanisms such as integrators or task forces. ∙ Reciprocal. The highest level of interdependence is reciprocal interdependence. This exists when the output of operation A is the input to operation B, and the output of operation B is the input back again to operation A. The outputs of departments influence those departments in reciprocal fashion.

64. A smart factory is one in which computer-guided machines handle many of the routine tasks, and factory plants are digitally connected to one another and to suppliers and customers in a digital supply chain network. The four types of Powered by Cognero

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Chapter 08: Designs for Manufacturing and Service Technologies technology commonly found in a smart factory are: computer-aided design (computers used to assist in the drafting, design, and engineering of new parts), computer-aided manufacturing (computer-controlled machines in materials handling, fabrications, production, and assembly), robots (used to communicate and collaborate with human employees and help with every phase of the manufacturing process), and 3-D printing (used for efficient prototyping and production).

65. The five techniques or traits that characterize an HRO are: ∙ Preoccupation with failure. Failure is not an option with an HRO, which is why they focus on preventing and eliminating catastrophes by finding and correcting small errors, rather than reacting to events after they happen. ∙ Reluctance to simplify their observations. The human mind often simplifies observations by inferring conclusions with minimal data, which increases the likelihood of a future error. In HROs, people are trained to avoid making assumptions or inferences, and are encouraged to pay close attention and voice opinions. ∙ Sensitivity to operations. In an HRO, people recognize that manuals and policies change along with the complexity of their work systems, so they stay alert rather than fall into expected routines. Mindful attention to operations is essential. ∙ Deference to expertise. When confronted with a new threat, HROs have mechanisms in place to identify the individuals with the greatest expertise relevant to handling the event. They place decision-making authority in the hands of that person or group in those situations, rather than relying on hierarchical authority. ∙ Commitment to resilience. HRO employees are trained to respond quickly to small mistakes with situational assessments and improvised solutions, yet people are prepared and trained to maintain normal operations, even when something has gone wrong and is being addressed. Additionally, managers create a comfortable environment in which front-line employees can report errors and unsafe conditions without fear of being met with skepticism or rejection.

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Chapter 09: Designs for Digital Organizations and Big Data Analytics

Indicate whether the statement is true or false.

1. Data mining software is designed to print out data from the government sector, particularly from census reports. a. True b. False 2. Even platform organizations need a hierarchical structure for some aspects of the core business. a. True b. False 3. One of the underlying assumptions in a platform organization is that managers should be promoted into positions of increasing responsibility as they gain experience and show talent for making bigger and better decisions for the organization. a. True b. False 4. One of the risks associated with using a centralized approach to data analytics is that innovative solutions may not be shared across all unit boundaries and critical mass on organization-wide problems and opportunities may not be achieved. a. True b. False 5. If an organization does not have the resources to collect and analyze big data, it can outsource the process or use data intermediaries. a. True b. False 6. One of the major advantages to using artificial intelligence algorithms for decision making is that they are completely unbiased and consistent. a. True b. False 7. Artificial intelligence is already widely used in core manufacturing operations but has not been used for noncore departments, such as HR or accounting. a. True b. False 8. Tacit knowledge is formal, systematic knowledge that can be written down and passed on to others. a. True b. False 9. Peripheral players have the fewest number of connections and operate on the boundaries of a network. a. True b. False 10. Perhaps one of the greatest outcomes of digital IT is its potential to improve coordination, communication, and collaboration across the firm. a. True Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics b. False

Indicate the answer choice that best completes the statement or answers the question.

11. A(n) system collects data from sales, purchases from suppliers, and inventory changes and stores them in a database. a. inventory control b. automated analysis c. transaction processing d. decision support 12. The use of huge databases that combine all of a company's data and allow users to access the data directly, create reports, and obtain responses to what-if questions is referred to as: a. data mining. b. data processing. c. transaction processing. d. data warehousing.

13. The Internet used to be dependent on for its supply of information, but now it can also obtain it from , which is how we derived the name “the Internet of Things.” a. data; things b. humans; connected devices c. data; robots d. computers; humans 14. means searching out and analyzing data from multiple sources across the enterprise, and increasingly from outside sources as well, to identify patterns and relationships that might be significant. a. Data warehousing b. Data processing c. Data entry d. Data mining 15. Which of the following provides the best example of internal business intelligence? a. At a baby monitor manufacturing plant, Nick is analyzing data collected from the organization’s “smart” devices, such as how often the monitors are activated and how quickly parents respond. b. Jessica is applying statistical data on how parents choose daycare providers to the development of a marketing campaign for her daycare center. c. Dani is using software to analyze data on the site’s customer behavior, such as how many pages viewed, average time spent on the site, number of products purchased, and total sales volume. d. Jamie is reviewing sales data on a seasonal, “limited time offer” menu item to determine whether to make it a permanent menu item available at all times.

16. Which of the following facilitates one-to-many interactions among members? a. Exchange platforms b. Maker platforms c. Crowd platforms Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics d. Personal platforms 17. Which of the following would be an example of an exchange platform organization? a. Uber b. Facebook c. Pinterest d. Kickstarter 18. In a platform organization, a. highly trained managers b. digital IT experts c. algorithmic systems d. data analytics

make more consistent, impartial, and faster decisions.

19. Which of the following statements about capital assets in pipe and platform organizations is true? a. Both pipe and platform organizations require a large number of capital assets. b. Pipe organizations focus on increasing capital assets to gain competitive advantage, while platform organizations actually minimize the need for capital assets. c. Neither pipe nor platform organizations require a large number of capital assets. d. There is no relationship between the type of organization and the number of capital assets; the number varies widely in both types of organizations.

20. As the president of a small publishing company, you’ve seen plenty of signs over the last few years that your organization must transition to producing digital products or you will not survive. Your book-loving employees are resistant, but you know you must lead them through this transition. Of the following actions you could take, which one is the most recommended by change management consultants? a. Communicate the consequences of failing to embrace a technology-based culture b. Create a corporate culture that prioritizes technology and data-driven decision making c. Create a corporate culture that values agility, collaboration, and risk taking d. Focus on learning and skill development first, and a new corporate culture will emerge naturally 21. As the CEO of a massive, multinational conglomerate, you see tremendous potential in using big data to enhance performance in many divisions and business units within your organization, but it’s challenging to create a workable system. On the one hand, you have to factor in the many different sources of data, language variations, and differing— sometimes conflicting—needs and priorities across all divisions. On the other hand, you’re certain that there will be a lot of crossover, in that data from some parts of the organization can benefit other parts. What is your best option for taking advantage of big data? a. Outsource to a data analytics firm that is designed to accommodate variations and conflicting priorities b. Invest in a centralized data analytics department in your organization’s headquarters c. Take a decentralized data analytics approach by establishing small data analytics units within each division d. Create a hybrid data analytics unit by establishing small data analytics units within each division, which then report up to a centralized unit at headquarters that coordinates, assists, and aggregates data 22. You own a chain of 12 fast-casual restaurants in the Midwest. You’ve heard a lot about big data analytics, and you know that an analysis of data on your customers could help you operate your organization more efficiently. However, you realize that collecting and analyzing enough data to be useful will be time consuming and expensive. What is your best Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics option for taking advantage of big data? a. Outsource to a data intermediary that can collect data from other similar organizations and analyze the combined data b. Invest in creating a small, centralized data analytics department in your main office c. Build a decentralized data analytics unit by asking each manager to collect and analyze data for each restaurant d. Create a hybrid data analytics unit by asking each manager to collect data, which is then aggregated and analyzed by an in-house data analysis group at the main office 23. Which of the following represents the elements of big data function? a. Collect massive data, use sample data, eliminate incomplete data, adopt a new mindset, choose the appropriate organization structure b. Collect massive samples of data, use relevant data, adopt a new mindset c. Collect massive data, use all data, use messy data, adopt a new mindset, choose the appropriate organization structure d. Collect massive data, use all data, use messy data, choose the appropriate organization structure 24. Which of the following approaches to data analytics organizational structure ensures a critical mass of analysts who can obtain the necessary data and develop the necessary expertise to efficiently test and use the data? a. Centralized approach b. Balanced design c. Decentralized approach d. Managerial approach 25. A form of outsourcing is to use data for them. a. hubs b. peripheral players c. data summarizers d. data intermediaries

, firms that collect data from multiple organizations and analyze the combined

26. With the ability to make decisions equal to or better than human beings, computer-based artificial intelligence is being rapidly adopted: a. only in core manufacturing technologies. b. strictly for mundane administrative tasks. c. as a tool used exclusively by trained HR professionals. d. for core manufacturing and management functions.

27. You’ve just landed a new job as the chief artificial intelligence officer for a global corporation using AI. The CEO has already given you an important mandate: eliminate obvious biases in the organization’s AI algorithms. Of the following, which step should you take to follow this directive? a. Expand the number of decision-making criteria used in AI algorithms b. Ensure your team is using data sets that represent people of all ages c. Assemble a diverse team of employees to develop and revise the algorithms d. Test new algorithms more thoroughly before deploying them 28. You are the CEO of a major restaurant conglomerate that owns several national restaurant chains. Several years ago, Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics you invested in AI to monitor service employees’ performance, and since then you have seen an increase in hourly sales and a decrease in employee theft. These promising results have motivated you to expand the use of AI in your organization, but first you’d like to create a new chief artificial intelligence officer role. What is the main reason you’d like to create this new position? a. You need an independent person who can collect and analyze the data, and provide your managers and the HR team with meaningful reports. b. You need someone to manage AI from a strategic standpoint and recommend uses for this impressive tool. c. You feel there is a need for an organizational insider who can develop the most relevant and appropriate algorithms for your organization. d. You see the potential to misuse AI in unethical ways, so you want a high-level manager to maintain ethical conduct in this area.

29. An AI coaching program that applies insights from the behavioral sciences to advise managers to take certain actions, such as asking employees more questions or seeking input from colleagues, is using a concept known as: a. on-the-job coaching. b. management prompts. c. nudge management. d. management mentorship.

30. The rapid growth of artificial intelligence applications in organizations suggests adjustments to organization design, such as decentralizing authority to employees doing work. a. craft and engineering b. managerial control c. core manufacturing technology d. nonroutine 31. refers to technologies, skills, and processes for searching and examining massive, complex sets of data that traditional data processing applications cannot handle to uncover hidden patterns and correlations. a. Social business b. Data warehousing c. Big data analytics d. Business intelligence 32. are a newer type of organization that connect and enable users to both create and consume something of value, as opposed to organizations that acquire resources and produce products or services from them. a. Platforms; pipe b. Platforms; manufacturer c. Conduits; pipe d. Conduits; manufacturer 33. As the president of a small publishing company, you’ve become very aware over the last few years that your organization must transition to producing digital products or you will not survive. Your book-loving employees have many talents but they lack the technical skills the organization will need to make this transition. What should you do in terms of managing human resources? a. Actively replace your current employees with people with technology skills b. Wait for your current employees to leave the organization—statistics show they will within the next three Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics years—and replace them with digitally skilled employees c. Add technologically skilled employees to the mix to supplement the work of your existing employees d. Provide ongoing training for existing employees to develop their technology skills while also bringing in new digital talent 34. As you lead your organization through a technological transformation, you want to make sure your employees have the right skills and the right mindset to function in a digitally driven organization. Which of the following skills and mindset characteristics do you most want to encourage in employees? a. Coding and programming skills so they develop a passion for technology and digital products b. Group facilitation skills so they can effectively work in teams c. Communication and networking skills so they can engage in cross-functional collaboration d. Exploration and risk-taking abilities so they can focus on creativity and innovation 35. In big data analytics, computer scientists use a. all b. only complete c. only relevant d. samples of

data.

36. Which of the following about big data analytics in business is true? a. Not only does the analysis of big data sets reveal correlations, it also identifies underlying causes and purposes. b. In order for the analysis of big data sets to be meaningful, inaccurate or incomplete data must be thrown out so that only consistent data is accurately analyzed. c. Experts say that if all the data available today were printed in books, the books would cover the entire surface of the United States with just over 100 layers. d. Managers who believe in what data analytics indicates or predicts sometimes clash with those managers who put their faith in historical information and manager experience.

37. Which of the following approaches to big data analytics organizational structure is in use when an organization locates a small number of its data scientists in a center of excellence while disbursing the remainder among various departments or business units? a. centralized approach b. balanced design c. decentralized approach d. managerial approach 38. The package delivery company you work for uses AI algorithms to monitor everything from the drivers’ time spent at each stop to safety measures such as seatbelt use. As the district manager, you are well aware that drivers resent this kind of close scrutiny of their every move. Yet you support the use of AI to monitor behavior. What is the primary benefit you see? a. AI algorithms allow your organization to maintain quality standards. b. AI algorithms enhance your organization’s ability to exceed production quotas. c. AI algorithms are an efficient means of monitoring drivers’ performance so that you can provide quality feedback. d. AI algorithms have demonstrated a significant financial payoff for your organization.

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Chapter 09: Designs for Digital Organizations and Big Data Analytics 39. Artificial intelligence algorithms have been criticized for containing subtle biases, which could be overcome if AI developers would address: a. preferences for certain characteristics in appearance. b. variations in levels of intelligence. c. racial and gender differences. d. age differences.

40. Which of the following is the primary role of the chief artificial intelligence officer? a. Developing and implementing strategic uses for AI within an organization b. Ensuring the ethical use of AI within an organization c. Analyzing the data collected through AI devices used within an organization d. Developing the AI algorithms used by the organization 41. Which of the following technology tools provides a private means for members of an organization to share information and keep track of what’s happening within the organization? a. Digital message board b. Social media group c. Internet d. Intranet 42. All corporate employees use social network analysis, whether it’s done formally with the help of technology or informally. As a new employee in a corporate environment, what is the first step you should take to utilize the organization’s social network? a. Make friends with the peripheral players in your department b. Identify the managers in your department and related departments c. Identify the hubs and brokers in your department d. Establish who are allies and who are adversaries in your department 43. A valuable technique enabled by IT is called analysis, which can help managers learn about informal relationships and network structures within an organization. a. social network b. internal network c. social structure d. relative network 44. are people who are at the center of an information network. These are people who are sought out for their knowledge and information. a. Brokers b. Peripheral players c. Hubs d. Communicators 45. The sum of an organization’s information, experience, understanding, relationships, processes, innovations, and discoveries is known as: Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics a. corporate knowledge. b. intellectual capital. c. codified knowledge. d. tacit knowledge.

46. knowledge is formal, systematic knowledge, whereas expertise, and individual insight and experience. a. Codified; intuitive b. Codified; tacit c. Classified; intuitive d. Classified; tacit

knowledge includes professional know-how,

47. This morning you received some bad news at your advertising and PR firm, which is considered one of the best in the city. The account manager working with your best client has resigned due to a serious illness, and you’re going to have to replace her with someone new. This client has been difficult to work with, and you’re very nervous about changing account managers so suddenly. It could jeopardize the account and send your client running to your closest competitor.

Which knowledge management strategy should you use to facilitate the transition? a. Assemble your team of people, including the former account manager, who’ve been working on the account for a meeting where they can share knowledge with the new account manager b. Ask the former account manager to write a report containing everything she knows about the client and give it to the new account manager c. Plan a weekend retreat with the new account manager and people from the client’s organization so they can get to know each other d. Instruct the new account manager to research as much as possible about the new client and compile a written report 48. Within a nation-wide construction company, Jeanette, who works out of the Phoenix office, has been assigned to work on a job in Dallas because the company’s nearest office in Houston is overwhelmed with work. She’s having trouble locating a reliable concrete supplier in that region, so she reaches out to Shelley, her friend and colleague who works in the St. Louis office, for help. Shelley introduces Jeanette to Juan, who works in the Houston office, because he can provide her with the names of several local suppliers. What role does Shelley play in this social network? a. Hub b. Broker c. Peripheral player d. Manager 49. Within a nation-wide construction company, Jeanette, who works out of the Phoenix office, has been assigned to work on a job in Dallas because the company’s nearest office in Houston is overwhelmed with work. She’s having trouble locating a reliable concrete supplier in that region, so she reaches out to Shelley, her friend and colleague who works in the St. Louis office, for help. Shelley introduces Jeanette to Juan, who holds the same position as Jeanette in the Houston office, because he can provide her with the names of several local suppliers. What role does Juan play in this social network? a. Hub b. Broker c. Peripheral player d. Manager Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics 50. As the production manager for Snowbound, a company that makes ski and snowboarding equipment, you have struggled with the dramatic seasonal fluctuations in production that your organization faces every year. Production is at its peak in spring and summer in preparation for the fall and winter selling seasons, but then you drop way back in fall and winter. That means you have to either hire seasonal help, meaning you’re training a whole new crew every year, or you’re paying year-round employees to stand idle during the slow season. Recently, you’ve realized that digital IT could help solve your dilemma. Which of the following options should you choose? a. Reduce the size of your organization by making better use of technology in production b. Create a network structure in which you outsource some of your production during the peak seasons c. Decentralize your organization’s structure so that front-line production supervisors have greater decisionmaking authority and can more quickly respond to changes in production output d. Use technology to improve horizontal coordination and collaboration within your organization during the peak seasons 51. You’ve built your business from the ground up, and now you operate one of the largest plumbing contracting organizations in the construction industry. Your organization works with commercial and residential construction companies throughout the Southwest, and you’ve got numerous teams installing plumbing systems at dozens of job sites at any given time. Your team leaders routinely encounter problems in the construction plans, however, and they have to relay these issues to your management team at headquarters, carefully document each situation, and then wait for answers, all of which wastes valuable time. They are frustrated with the system because some of these issues are quite simple and could easily be resolved, but there’s no escaping the need for documentation. Recently, however, you’ve been thinking that digital IT may provide a solution to this dilemma. Which of the following is your best option? a. Create a system by which team leaders quickly document smaller problems and the solutions they’ve developed b. Use technology to improve horizontal coordination and collaboration, giving team leaders the ability to share knowledge and consult with each other c. Rely more heavily on technology solutions so that you can reduce the size of your workforce d. Transition to an enhanced network structure by outsourcing some of the plumbing installation work to others 52. Due to the impact of digital IT, a growing number of organizations are: a. financially successful. b. service-oriented. c. operated by entrepreneurs. d. smaller in size.

53. How has digital IT led to decentralization? a. Managers in varied business divisions or offices now have the information they need to make important decisions quickly rather than waiting for decisions from headquarters. b. Due to improved communication technologies, top-level managers now have more trust in lower-level managers’ training and decision-making abilities. c. Digital IT has caused many organizations to grow so large that a centralized structure is no longer feasible. d. Due to improved communication technologies, large corporations can be broken up into smaller divisions that are located more strategically, such as near customers or business partners.

54. Researchers have stated that one of the most significant ways digital IT has impacted today’s organization is by improving: a. the alignment between strategy and structure. b. horizontal coordination and collaboration.

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Chapter 09: Designs for Digital Organizations and Big Data Analytics c. innovation capabilities. d. performance metrics and goals.

55. Thanks to digital technology that can tie companies together into a seamless information flow, major trend. a. sequential interdependence b. cross-organization collaboration c. outsourcing d. industry-wide data analysis

has become a

56. Discuss transaction processing systems, and give an example of how a company utilizes the system.

57. Explain big data analytics with an example.

58. Summarize the three assumptions associated with pipe organizations and the three assumptions associated with platform organizations.

59. Explain the concept of decentralized control with an example.

60. What is meant by big data?

61. Discuss the working of a balanced design.

62. Some organizations are using artificial intelligence to monitor employees whose work is measurable and somewhat routine. Discuss the advantages and disadvantages to this form of control.

63. Briefly explain social network analysis.

64. Of the four major ways digital IT is impacting organizations—smaller organizations, decentralized structures, improved horizontal coordination and collaboration, and enhanced network structures—which do you think is the most significant? Use an example to explain your answer.

65. Use an example of a platform-based organization to briefly explain the three steps leaders should take in developing this type of organizations.

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Chapter 09: Designs for Digital Organizations and Big Data Analytics Answer Key 1. False 2. True 3. False 4. False 5. True 6. False 7. False 8. False 9. True 10. True 11. c 12. d 13. b 14. d 15. d 16. b 17. a 18. c 19. b 20. c 21. d 22. a 23. c 24. a 25. d Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics 26. d 27. c 28. b 29. c 30. d 31. c 32. a 33. d 34. c 35. a 36. d 37. b 38. d 39. c 40. a 41. d 42. c 43. a 44. c 45. b 46. b 47. a 48. b 49. c 50. b 51. a Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics 52. d 53. a 54. b 55. c 56. Students' examples may vary. Initially, IT systems in organizations were applied to operations. These initial applications were based on the notion of machine-room efficiency—that is, current operations could be performed more efficiently with the use of computer technology. The goal was to reduce labor costs by having computers take over some tasks. These systems became known as transaction processing systems (TPSs), which automate the organization’s routine, day-to-day business transactions. A TPS collects data from transactions such as sales, purchases from suppliers, and inventory changes, and stores them in a database. For example, at Enterprise Rent-A-Car, a computerized system keeps track of the 1.4 million transactions the company logs every hour. The system can provide front-line employees with upto-the-minute information on car availability and other data, enabling them to provide exceptional customer service.

(Students’ examples may vary.)

57. Students’ examples may vary. Big data analytics refers to technologies, skills, and processes for searching and examining massive, complex sets of data that traditional data processing applications cannot handle to uncover hidden patterns and correlations. Walmart collects more than 2.5 petabytes of data every hour from customer transactions and uses those data to make better decisions. Facebook uses the personal data on a user’s page and tracks and monitors the user’s online behavior, and then searches through all those data to identify and suggest potential “friends.”

58. Three basic assumptions underlie a traditional “pipe” organization: First, the goal of traditional organizations is to create competitive advantage through increasing the size of capital assets, such as buildings, manufacturing facilities, and support structures. Second, in traditional organizations, information flows toward the center and up to the top levels of the hierarchical organization for decision-making. Third, managers are promoted into positions of increasing responsibility as they gain experience and demonstrate their ability to make bigger decisions that benefit the organization.

The three basic assumptions underlying the more modern platform organization are almost completely the opposite. First, platforms actually minimize the capital assets needed by both the organization and its users, which reduces the need for costly resources. Second, in the digital realm of a platform organization, information travels fast and wide, often even more efficiently than traditional methods of organizational communication. And third, platforms have the ability to make decisions more quickly and accurately because they rely on algorithmic systems embedded in the platform software for some decision-making.

59. Students’ examples may vary. Decentralized control is based on values and assumptions that are almost opposite to those of hierarchical control. Rules and procedures are used only when necessary. Managers rely instead on shared goals and values to control employee behavior. The organization places great emphasis on the selection and socialization of employees to ensure that workers have the appropriate values needed to influence behavior toward meeting company goals. No organization can control employees 100 percent of the time, and self-discipline and self-control are what keep people performing their jobs up to standard. Empowerment of employees, effective socialization, and training all can contribute to internal standards that provide self-control. Nick Sarillo, who owns two Nick’s Pizza & Pub shops in Illinois, says his management style is “trust and track,” which means giving people the tools and information they need, telling them the result they need to achieve, and then letting them get there in their own way. At the same time, Sarillo keeps track of results so the company stays on solid ground.

60. One of the hottest terms in information technology is big data. Big data refers to any massive data set that exceeds the boundaries and conventional processing capabilities of IT. Big data requires a nontraditional approach; it requires that Powered by Cognero

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Chapter 09: Designs for Digital Organizations and Big Data Analytics managers throw out the old way of thinking and take a totally new approach.

Big data includes data sets with sizes beyond the ability of traditional software tools to manage and process the data within an acceptable time frame. Big data analytics refers to the process of examining these large data sets to uncover hidden patterns, correlations, and other useful information and make better decisions. Because the data sets are so massive, big data analytics often cannot be done with existing advanced analytics tools; thus a new class of big data technology has emerged.

61. A balanced or hybrid design is an in-house approach which places a small number of data scientists in a “center of excellence” led by a chief data officer while the remainder stay in the various functional departments or business units.

The Center of Excellence plays a coordination role, assessing needs, prioritizing projects, and so forth. This might be thought of as a hub and spoke design, such that a team of experts in a central unit is available to provide coordination, answer questions, and provide assistance concerning data analytics to various departments and business units. This design recognizes that each unit has its own analytics priorities, such as strengthening promotional efforts for marketing or optimizing inventory levels for operations. However, it also honors the need for building up analytics expertise that can be applied organization-wide and coordinating the data analytics strategy. An analyst from the Center of Excellence might be assigned to one of the units for a specific project, which helps to build expertise within the unit.

62. Some organizations are using artificial intelligence to monitor the behavior of workers whose jobs are measurable and somewhat routine. Using algorithmic control, as it is called, allows organizations to set targets, measure performance, provide feedback, and decide rewards for employees. The approach pays off financially because it reduced variations in employees’ work and it cuts down on slack. However, most employees resent being monitored so closely and comprehensively, some even saying that they feel as if they’re treated like robots. This negative reaction could lead to low morale and high turnover.

63. A valuable technique enabled by IT is called social network analysis (SNA), which can help managers learn about informal relationships and network structures within an organization. With SNA they can know who has influence and who does not, who people turn to for answers, who has the knowledge and technical capability to be innovative, and who has leadership potential. SNA was developed by scientists as a social theory to diagram relationships among people that differ from the formal hierarchy. Social networks include people who turn to one another for help, advice, information, and support, whether or not they are in the same work group. It is within these networks that much of an organization’s work gets done.

64. Students’ answers and examples will vary but should demonstrate their understanding of the four main types of impact. Digital IT is leading to smaller organizations requiring fewer employees who can work virtually, meaning that for some organizations there are no buildings, offices, or desks involved. Decentralization means that managers in varied business divisions or offices now have the information they need to make important decisions more quickly rather than waiting for decisions from headquarters. Decisions making is becoming more distributed among autonomous groups. IT applications can also connect people in ways that improve coordination, communication, and collaboration across firms, better utilizing the organization’s resources. And finally, digital IT has led to network structures, meaning that many of the organization’s functions are outsourced, which enhances the organization’s flexibility and ability to respond to changing environmental factors.

65. Students’ examples may vary but should demonstrate their understanding of the three steps: 1. Envision a constructive culture. The technical/digital mindset within a platform business should not overwhelm or take priority over corporate culture. 2. Invest in digital talent. There is a scarcity of digital talent, so platform organizations must become magnets for the right talent with the right digital skills and mindset. 3. Promote soft skills and team building. The companies best prepared to handle digital transformation and growth tend to focus on developing employees’ human skills, such as communication and networking.

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Chapter 10: Organization Size, Life Cycle, and Decline

Indicate whether the statement is true or false.

1. In the collectivity stage of an organizational life cycle, communication and control are mostly informal, although a few formal systems begin to appear. a. True b. False 2. In the formalization stage of an organizational life cycle, management may attack the bureaucracy and streamline it. a. True b. False 3. Increased training substitutes for bureaucratic rules and procedures that can constrain the creativity of employees. a. True b. False 4. Rational–legal authority is the basis for both creation and control of most government organizations and is the most common base of control in organizations worldwide. a. True b. False 5. Organizational decline is used to define a condition in which a substantial, absolute decrease in an organization’s resource base occurs over time. a. True b. False 6. Vulnerable organizations typically need to redefine their environmental domain to enter new industries or markets. a. True b. False 7. During the first stage of decline of an organizational life cycle, leaders may try to persuade employees and other stakeholders that all is well. a. True b. False 8. Actions like retrenchment and downsizing personnel are considered in the final stage of decline of an organizational life cycle. a. True b. False 9. The dissolution stage is not irreversible, major organizational restructuring can still turn things around. a. True b. False 10. Open communication about a pending layoff is always harmful. a. True b. False Powered by Cognero

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Chapter 10: Organization Size, Life Cycle, and Decline

Indicate the answer choice that best completes the statement or answers the question.

11. is accused of many sins, including inefficiency, rigidity, and demeaning routinized work that alienates both employees and the customers an organization tries to serve. a. An organic structure b. Bureaucracy c. An entrepreneurial start-up d. Delegation 12.

are the lifeblood of the U.S. economy. a. Multi-nationals b. Established organizations c. Entrepreneurial start-ups d. Joint ventures

13. Which of the following reasons has spurred budding entrepreneurs to take a chance on starting their own company? a. The high rate of success of small businesses b. Economic woes and layoffs at many large firms c. Easy availability of financial resources d. Lucrative outsourcing prospects 14. Which of the following is a characteristic of large organizations? a. Vertical hierarchy b. Flat structure c. Responsiveness d. Flexibility 15. Steve, an entrepreneur, started a breakfast-on-the-go business that focused on providing customized breakfast packages to students and executives in his neighborhood. He had fifty people working for him who had the liberty to make decisions and propose improvement plans. Which of the following would most likely be a characteristic of Steve’s business? a. Mechanistic management b. "Organization men" c. Flat structure d. A stable market 16. Huge resources and economies of scale and scope are needed for many organizations to a. carve out a niche b. compete globally c. have an organic structure d. reduce bureaucracy

.

17. Which of the following is true of large firms? a. They are badly affected by disasters and take time to recover. b. They are generally more customized.

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Chapter 10: Organization Size, Life Cycle, and Decline c. They have lower productivity compared to small firms. d. They are able to weather economic woes more efficiently.

18. The competing argument says small is beautiful because the crucial requirements for success in a global economy are: a. longevity and stability in an unstable environment. b. huge resources and economies of scale. c. responsiveness and flexibility in fast-changing markets. d. labor force and productivity.

19. Which of the following is true of small businesses? a. They represent a large percentage of exporters. b. They represent 40 percent of all businesses in the United States. c. They often experience lesser employee commitment. d. They are generally slow to adapt to changing customer needs.

20. Small companies become a victim of their own success: a. as they grow large and shift to a complex structure. b. when they cannot manage their profits and make incorrect decisions. c. when they overestimate the demand and block funds in inventory storage. d. as they spawn entrepreneurs rather than “organization men.”

21. A(n) implies incorporating structures and processes that are appropriate for both small-company creativeness and large-company systems for exploiting innovations. a. joint venture b. dual structure c. ambidextrous approach d. paradoxical practice 22. Alphacone Inc. is a multinational plasticware manufacturing company. It operates in nine countries, and employs around 7000 people. The large firm is difficult to manage, and the director is looking for a way to capture the mindset and advantages of small businesses to turn the management process around. Which of the following approaches should the director of Alphacone Inc. use? a. He should hire managers from small organizations to implement their strategies. b. He should reorganize his organization into groups of small companies. c. He should cut down his business and limit it to one country. d. He should lay off employees and maintain a manageable number.

23. What is the major goal of an organization during the entrepreneurial stage of the organizational life cycle? a. Profit maximization b. Reputation c. Growth d. Survival 24. Which of the following statements is true of the entrepreneurial stage of an organizational life cycle? a. There is limited control on the employees, and they make their own decisions.

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Chapter 10: Organization Size, Life Cycle, and Decline b. The organization is formal and bureaucratic. c. The growth comes from a creative new product or service. d. The founders devote all their time to strategic planning.

25. Which of the following crises is faced by organizations in the entrepreneurial stage? a. The need to deal with too much red tape b. The need for delegation c. The need for revitalization d. The need for leadership 26. During the stage, an organization begins to develop clear goals and direction. a. entrepreneurial b. elaboration c. collectivity d. formalization 27. Nicholas started a computer assembling business with fifteen employees. All employees were responsible for the complete assembling of a unit. As his start-up grew overtime, he created departments and appointed a supervisor for each department. This signifies that Nicholas’s business is in the stage. a. collectivity b. formalization c. elaboration d. entrepreneurial 28. Which of the following is true of managers in the collectivity stage of an organization? a. Top managers may get replaced during this period as the organization reaches maturity. b. Middle management may resent the intrusion of staff. c. Strong managers are hired at this level to deal with issues. d. Lower-level managers begin to acquire more confidence and want more discretion.

29. The formalization stage of an organizational life cycle involves: a. the installation and use of rules, procedures, and control systems. b. the establishment of a hierarchy of authority, job assignments, and division of labor. c. the birth of the organization, and creation of a new product or service. d. the simplification of the formal system as it gets replaced by manager teams and task forces.

30. Carter is a middle-level manager in his organization. He was satisfied with his job for the first three years, but he has decided to quit as he feels stifled by the bureaucracy and lack of innovation. Carter’s organization is most likely in the stage of the organizational life cycle. a. elaboration b. entrepreneurial c. formalization d. collectivity 31. Which of the following statements best describes the elaboration stage of organizational life cycle?

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Chapter 10: Organization Size, Life Cycle, and Decline a. It is a mature stage of the life cycle in which a red tape crisis is resolved through the development of a new sense of teamwork and collaboration. b. It is the life cycle stage in which an organization is born and its emphasis is on creating a product and surviving in the marketplace. c. It is the life cycle stage that involves the installation and use of rules, procedures, and control systems. d. It is the life cycle stage in which employees identify with the mission of the organization and spend long hours helping the organization succeed.

32. The reward and control system during the entrepreneurial stage of an organization is a. impersonal b. paternalistic c. extensive d. customized 33. The goal of a company in the elaboration stage is a. survival b. growth c. reputation d. expansion 34. The systematic study of bureaucracy was launched by a. Max Weber b. Georg Simmel c. Abraham Maslow d. Jean Baudrillard

.

.

.

35. refers to rules, procedures, and written documentation, such as policy manuals and job descriptions, that prescribe the rights and duties of employees. a. Monopolization b. Centralization c. Formalization d. Liberalization 36. As organizations increase in size, the a. administrative b. personnel c. profitability d. clerical

ratio declines and the ratios for other support groups increase.

37. Bureaucracy provides for: a. easy access to top level managers for grievance redressal. b. effective ways to increase profit margins for an organization c. systematic and rational ways to organize and manage tasks. d. secure provisions to protect whistle-blowing employees.

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Chapter 10: Organization Size, Life Cycle, and Decline 38. Which of the following statements is true of a professional partnership? a. It is a joint venture between two highly specialized organizations. b. It strongly believes in the effectiveness of bureaucratic principles. c. It works on consensus orientation rather than top-down direction. d. It comprises a mixed group of employees with varying skills and qualifications.

39. control occurs when price competition is used to evaluate the output and productivity of an organization or its major departments and divisions. a. Clan b. Market c. Bureaucratic d. Economic 40. Organizational atrophy occurs when: a. an organization loses to its competitors in the market. b. organizations are over-staffed, which gives rise to internal conflict. c. organizations grow older and become inefficient and overly bureaucratized. d. an organization chooses the wrong target market, and is unable to deliver to it.

41. Oculus VR is dedicated to developing virtual reality and augmented reality technologies for use in a wide range of applications. The organization’s products are cutting edge, requiring significant financial investments that are risky, in that many of the early, innovative concepts do not pan out. What would be the ideal organizational size and structure for Oculus VR? a. A large organization b. A small organization c. A small subsidiary or division of a large organization d. A large, global organization 42. Fifteen years ago, your father, who was a surgeon, invented a unique type of hip replacement hardware. He founded a company to manufacture and sell this surgical hardware, and you have since turned his successful start-up into a thriving, 600-employee business that now manufactures and sells many types of surgical items, including hardware, implements, and diagnostic tools. As fulfilling as it is to know that your organization’s products help save lives, there are aspects of the company you don’t like. Your biggest concern is the lack of creativity internally. Without radical innovations or even incremental improvements to the product lines, the organization could stagnate and lose ground to competitors. What is your best course of action? a. Sell off some product lines to other companies to reduce the size of your organization so you can become more flexible and innovative again b. Grow the organization to an even larger size so that you can afford to hire more innovative designers and engineers c. Move to a boss-less work environment, in which employees collaborate in teams to generate innovative products and services d. Adopt an ambidextrous approach, incorporating structures and processes that combine small-company creativity with large-company systems 43. Future Renewable Energy Sources has grown rapidly since its founding two years ago. Its 200 dedicated employees believe in the organization’s mission, and some formal systems of communication have begun to develop. However, much of the internal communication is still largely informal, and department heads all want to interact directly with the CEO. Powered by Cognero

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Chapter 10: Organization Size, Life Cycle, and Decline She is overwhelmed with the rapid growth of her start-up and all the many decisions and activities that it entails, so she doesn’t always relay information or connect people the way she should. The resulting communication gaps between departments have resulted in some costly errors. What would you advise Future’s CEO to do? a. Hire a general manager to improve coordination and communication among departments b. Establish a monthly meeting in which all department heads are required to communicate directly with each other c. Create an intranet and wiki where department heads and others can record important information d. Focus on formalizing the organization through written documentation 44. For as long as anyone can remember, Tyler has been generating ideas. Friends and family have teased him about his obsession with “the next new thing,” but he thrives on it. As a kid, he was always finding new things to do and learn with his siblings, friends, and schoolmates. As an adult, he has started up a succession of three lucrative companies so far, each with different products and services, and then sold off each one. Which of the following best explains Tyler’s actions? a. Tyler prefers to continue functioning in the entrepreneurial stage b. Tyler hates the bureaucracy and red tape associated with the formalization stage c. Tyler is incapable of delegating, a key component of the collectivity stage d. Tyler loves the revitalization process associated with the elaboration stage 45. You were honored to be offered a seat on the board of directors for Heartland Regional Bank three years ago. This organization has been in operation for more than 100 years, and has always enjoyed a sterling reputation. For the past several years, however, Heartland has been losing a small but steadily increasing number of customers to newer and larger competitors. The bank seems to have lost its luster in the eyes of the region’s residents, and employees are dissatisfied with the work environment, leading to an increased turnover rate. You and the other board members have made recommendations to the executive team, but no one seems clear on what to do to stop the declines. What do you plan to recommend at the next board meeting? a. Assemble a task force to research the decline in customers and employees and to make recommendations on solutions b. Hire a new operations manager who can cut through the bureaucracy and restore an entrepreneurial spirit c. Contract with an advertising/PR agency that can rebrand the organization d. Replace the executive team with new leaders who have fresh ideas 46. What needs to happen for an organization to transition from the entrepreneurial stage to the collectivity stage? a. The entrepreneur must adjust the structure of the organization to accommodate continued growth b. The entrepreneur must develop new management skills c. The entrepreneur must hire one or more employees d. The entrepreneur must formalize the organization by creating written policies, plans, and systems 47. A mid-sized health and auto insurance company processes about 8,000 claims annually. Each claim is first researched by one of 10 claims investigators. The investigators then make recommendations about honoring or denying each claim before turning them over to a senior-level claims handler. How would you characterize the authority within this department? a. Formalized b. Decentralized c. Centralized d. Bureaucratic 48. At a growing technology company, developers in the R&D unit are frustrated. As a group, they’re great at spinning Powered by Cognero

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Chapter 10: Organization Size, Life Cycle, and Decline out creative ideas, but then they have to wait for team leaders, then the department head, and finally the Chief Technology Officer to approve the creation of a new project team. This can cause delays of weeks or even months. Which of the following would be a reasonable first step in solving the problem? a. Set shorter deadlines for the department head and CTO to give their approval b. Give team leaders the authority to assemble, reconfigure, and dismantle project teams as needed c. Give the department head the authority to assemble, reconfigure, and dismantle project teams as needed d. Create a boss-less work environment and allow teams to assemble, reconfigure, and dissolve naturally 49. Village Greens is an organic farm-to-table restaurant. Joy, a co-founder and co-owner, is responsible for purchasing all of the raw ingredients used in meal preparation. Joy has received pricing from a wide range of regional farms, but she has chosen to purchase most of the organization’s vegetables from three nearby organic farmers, even though their prices are higher than others. Which form of control is most likely driving Joy’s decisions? a. Bureaucratic b. Charismatic c. Market d. Clan 50. Rumor has it that a barista at a coffee store got into a shouting match with a customer who wanted to pick up her order at the store’s ordering station. The barista had been told to always hand over orders at the pick-up station—never at the ordering station—so he forced the customer to walk an extra five feet to the pick-up station to get her coffee. What kind of authority would motivate this barista to engage in this behavior? a. Bureaucratic b. Rational-legal c. Traditional d. Charismatic 51. In North America, authority and control have been changing in the 21st century. Many companies are adopting a approach more in line with control. a. hierarchical; market b. centralized; clan c. decentralized; clan d. decentralized; bureaucratic 52. Another disappointing day. The reports on your desk indicate that sales of your organization’s cookware and cooking utensils are down again… for the sixth quarter in a row! The sales manager was in your office earlier today, trying desperately to make things sound better than they are, but you know something is very wrong. What is your best course of action? a. Hire a new design team to revitalize the product lines b. Conduct market research to determine why consumers no longer find your products desirable c. Replace the sales manager and sales team d. Start laying off employees in all departments 53. When you joined the board of directors of Whidbey Enterprises last year, you had no idea this organization was in so much trouble. Production and sales are at all-time lows, employee morale has hit rock bottom, and the company could be facing bankruptcy next year. But you and other board members still believe in this company that once had a sterling reputation, so you’ve brought in an entirely new executive management team. What do you recommend they do?

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Chapter 10: Organization Size, Life Cycle, and Decline a. Encourage managers and employees at all levels to adopt new problem-solving approaches b. Reduce uncertainty among employees by clarifying values and providing information c. Prepare employees for massive layoffs by offering severance packages and outplacement services d. Develop a new strategy that aligns with a revitalized structure 54. You’re proud to be the CEO of a company that has been in business for more than 70 years and is still thriving.

However, you’re well aware that changes can occur in both the internal and external environment that could send your organization into a tailspin. To avoid being blinded to the signals of decline, what should you do? a. Routinely lay off a small percentage of employees to prevent excess and keep the organization lean b. Build in extra layers of management reporting and decision-making to stay on top of changes c. Develop effective scanning and control systems to monitor the environment d. Adjust the company’s strategy and structure in response to environmental changes 55. Which of the following is the only appropriate course of action when a company reaches a stage-4 crisis? a. Adopt new problem-solving techniques and increase decision-making participation among managers b. Reduce employee uncertainty by clarifying values and providing information c. Reorganize with a new executive team combined with changes in structure, strategy, and culture d. Close down the organization and reduce the separation trauma for employees

56. What are the benefits and drawbacks of a large organization?

57. Explain the size-related paradox that companies face.

58. Describe the entrepreneurial stage of an organizational life cycle.

59. Explain the concepts of formalization and centralization.

60. Explain the role of personnel ratios in an organization’s structure.

61. How are temporary systems useful in eradicating the problems of bureaucracy?

62. What steps are organizations taking in reducing bureaucracy? Define professionalism.

63. What is clan control?

64. Describe the role of atrophy in an organization’s decline.

65. Describe the crisis stage in an organization’s decline.

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Chapter 10: Organization Size, Life Cycle, and Decline Answer Key 1. True 2. False 3. True 4. True 5. True 6. True 7. False 8. False 9. False 10. False 11. b 12. c 13. b 14. a 15. c 16. b 17. d 18. c 19. a 20. a 21. c 22. b 23. d 24. c 25. d Powered by Cognero

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Chapter 10: Organization Size, Life Cycle, and Decline 26. c 27. a 28. d 29. a 30. c 31. a 32. b 33. c 34. a 35. c 36. a 37. c 38. c 39. b 40. c 41. c 42. d 43. a 44. a 45. d 46. a 47. c 48. b 49. d 50. b 51. c Powered by Cognero

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Chapter 10: Organization Size, Life Cycle, and Decline 52. b 53. d 54. c 55. c 56. Companies in all industries, from retail, to aerospace, to media, strive for growth to acquire the size and resources needed to compete on a global scale, to invest in new technology, and to control distribution channels and guarantee access to markets. There are a number of other pressures for organizations to grow. Many executives have found that firms must grow to stay economically healthy. To stop growing is to stagnate. To be stable means that customers may not have their demands fully met or that competitors will increase market share at the expense of one’s company.

57. The size-related paradox is that the advantages of small companies sometimes enable them to succeed and, hence, grow large. Small companies can become victims of their own success as they grow, shifting to a mechanistic design emphasizing vertical hierarchy and spawning “organization men” rather than entrepreneurs. Big companies become committed to their existing products and technologies and have a hard time supporting innovation for the future.

58. The entrepreneurial stage is the first stage of the organizational life cycle. When an organization is born, the emphasis is on creating a product or service and surviving in the marketplace. The founders are entrepreneurs, and they devote their full energies to the technical activities of production and marketing. The organization is informal and non-bureaucratic.

The hours of work are long. Control is based on the owners’ personal supervision. Growth is from a creative new product or service.

59. Formalization refers to rules, procedures, and written documentation, such as policy manuals and job descriptions, which prescribe the rights and duties of employees. Evidence supports the conclusion that large organizations are more formalized. The reason is that large organizations rely on rules, procedures, and paperwork to achieve standardization and control across their large numbers of employees and departments, whereas top managers can use personal observation to control a small organization.

Centralization refers to the level of hierarchy with authority to make decisions. In centralized organizations, decisions tend to be made at the top. In decentralized organizations, similar decisions would be made at a lower level. The research on organization size indicates that larger organizations permit greater decentralization.

60. A characteristic of bureaucracy relates to personnel ratios for administrative, clerical, and professional support staff.

The most frequently studied ratio is the administrative ratio. Two patterns have emerged. The first is that the ratio of top administration to total employees is typically smaller in large organizations, indicating that organizations experience administrative economies as they grow larger. The second pattern concerns clerical and professional support staff ratios.

These groups tend to increase in proportion to organization size. The clerical ratio increases because of the greater communication and reporting requirements needed as organizations grow larger. The professional staff ratio increases because of the greater need for specialized skills in larger, complex organizations.

61. Temporary systems or structures are used to respond to an emergency or crisis situation. This approach is often used by organizations such as police and fire departments or other emergency management agencies to maintain the efficiency and control benefits of bureaucracy yet prevent the problem of slow response. The basic idea is that an organization can glide smoothly between a highly formalized, hierarchical structure that is effective during times of stability and a more flexible, loosely structured one needed to respond well to unexpected and demanding environmental conditions.

62. Organizations are taking a number of steps to reduce bureaucracy, often driven by top leaders. Many are cutting layers of the hierarchy, keeping headquarters staff small, and giving lower-level employees greater freedom to make decisions Powered by Cognero

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Chapter 10: Organization Size, Life Cycle, and Decline rather than burdening them with excessive rules and regulations. The commitment of top leadership is essential when an organization needs to reduce bureaucracy and become more flexible and responsive.

Professionalism is defined as the length of formal training and experience of employees. Companies enhance this trend when they provide ongoing training for all employees. Increased training substitutes for bureaucratic rules and procedures that can constrain the creativity of employees in solving problems and also enhances individual and organizational capability.

63. Clan control is the use of social characteristics, such as shared values, commitment, traditions, and beliefs, to control behavior. Organizations that use clan control have strong cultures that emphasize shared values and trust among employees. Clan control is important when ambiguity and uncertainty are high. High uncertainty means an organization cannot put a price on its services, and things change so fast that rules and regulations are not able to specify every correct behavior. Under clan control, people may be hired because they are committed to the organization’s purpose, such as in a religious organization or an organization focused on a social mission. New employees are typically subjected to a long period of socialization to gain acceptance by colleagues.

64. Atrophy occurs when organizations grow older and become inefficient and overly bureaucratized. The organization’s ability to adapt to its environment deteriorates. Often, atrophy follows a long period of success because an organization takes success for granted, becomes attached to practices and structures that worked in the past, and fails to adapt to changes in the environment. Some warning signals for organizational atrophy include excess administrative and support staff, cumbersome administrative procedures, lack of effective communication and coordination, and outdated organizational structure.

65. Crisis stage: In the fourth stage, the organization still has not been able to deal with decline effectively and is facing a panic. The organization may experience chaos, efforts to go back to basics, sharp changes, and anger. It is best for managers to prevent a stage-4 crisis; at this stage, the only solution is major reorganization. The social fabric of the organization is eroding, and dramatic actions are necessary, such as replacing top administrators and instituting revolutionary changes in structure, strategy, and culture. Workforce downsizing may be severe.

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Chapter 11: Organization Culture and Control

Indicate whether the statement is true or false.

1. In the context of corporate culture, internal integration means that members develop a collective identity and know how to work together effectively. a. True b. False 2. Symbols are narratives based on true events that are frequently shared among organizational employees and told to new employees to inform them about an organization. a. True b. False 3. Physical symbols are avoided in organizations because they focus on all items in general rather than a specific item. a. True b. False 4. The visible artifacts and behaviors can be used by managers to shape company values and to strengthen the desired corporate culture. a. True b. False 5. In an achievement culture, managers shape behavior by envisioning and communicating a desired future state for the organization. a. True b. False 6. In an organization that follows the achievement culture, bonuses and promotions are based on seniority rather than performance. a. True b. False 7. The bureaucratic culture is characterized by high personal involvement and low levels of consistency, conformity, and collaboration among members. a. True b. False 8. In large organizations, culture is always uniform throughout the organization. a. True b. False 9. When organizations are successful, the values, ideas, and practices that helped attain success become institutionalized. a. True b. False 10. The feedback control model is broken down into three steps: set strategic goals, establish metrics and standards of performance, and compare metrics of actual performance to standards. a. True Powered by Cognero

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Chapter 11: Organization Culture and Control b. False 11. On a balanced scorecard, business process indicators measure the degree of formalization within the organization, meaning the amount of written documentation on business processes. a. True b. False

Indicate the answer choice that best completes the statement or answers the question.

12.

refers to the quality of interactions among people and whether they share a common perspective. a. Social capital b. Interpersonal skill c. Mission culture d. Clan culture

13. Which of the following is true of organizational culture? a. It is initially expressed by the low-level managers. b. It cannot help an organization adapt to the external environment. c. It provides people with a sense of identity. d. It is invariant with time and change in leadership.

14. Which of the following is a critical function of cultures? a. To help organizations adapt to the external environment b. To enforce the policies of the organization in the work environment c. To project a positive image to competitors d. To enable the members to work independently 15. Which of the following refers to how an organization meets goals and deals with outsiders? a. External adaptation b. Conscious capitalism c. Internal integration d. Mission culture 16. Which of the following is the purpose of holding rites and ceremonies in an organization? a. To help the growth of sales and improve the profit margin b. To ensure the abolition of competitors c. To provide employees with moral guidance d. To provide dramatic examples of what a company values 17. Korston Inc., a software development firm, makes its new hires walk a marathon across the city of Cidville in order to demonstrate the determination of the employees. After the marathon, they are made to recount their experiences and describe how this event has motivated them to work hard. This scenario illustrates a . a. rite of passage b. mission culture c. clan culture Powered by Cognero

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Chapter 11: Organization Culture and Control d. rite of renewal 18. Which of the following rites in an organization facilitates the transition of employees into new social roles? a. Rite of passage b. Rite of renewal c. Rite of enhancement d. Rite of degradation 19. Which of the following rites in an organization creates common bonds and good feelings among employees and increases commitment to the organization? a. Rite of renewal b. Rite of degradation c. Rite of integration d. Rite of enhancement 20. Which of the following is a reason for some stories to be considered as legends? a. The events are historic and may have been embellished with fictional details. b. They encapsulate key cultural values in the form of mottos or mantras. c. The content of the stories is relevant and accurately based on true events. d. They are rumors circulated in organizations to mislead competitors.

21. Ringmart is a fast-food joint that has a motto “Fast food, fast delivery”. This is an example of a a. legend b. myth c. story d. saying

.

22. At Open Road Vehicle Rentals, leaders have developed a culture that reinforces the values of cooperation and tradition. Which type of culture has Open Road embraced? a. adaptability culture b. mission culture c. clan culture d. bureaucratic culture 23. The culture is characterized by strategic focus on the external environment through flexibility and change to meet customer needs. a. adaptability b. achievement c. clan d. bureaucratic 24. Which of the following types of organizations is best suited to the achievement culture? a. One that is concerned with the involvement and participation of the organization’s members b. One that is concerned with the rapidly changing expectations from the external environment c. One that is concerned with serving specific customers in the external environment but without the need for Powered by Cognero

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Chapter 11: Organization Culture and Control rapid change d. One that is concerned with the internal operations and a consistency orientation for a stable environment 25. Which of the following does the achievement culture emphasize? a. The involvement and participation of the organization’s members b. The rapidly changing expectations from the external environment c. A consistency orientation for a stable environment d. A clear vision of the organization’s purpose 26. Which of the following is the main focus of the clan culture? a. The involvement and participation of the organization’s members b. The external environment and customer needs c. A consistency orientation for a stable environment d. A clear vision of the organization’s purpose 27. Most managers are shifting away from bureaucratic cultures because of a need for: a. greater flexibility. b. better decision-making techniques. c. easier communication channels. d. reducing employee participation.

28. The degree of agreement among members of an organization about the importance of specific values is referred to as: a. bureaucratic culture. b. culture strength. c. internal integration. d. social responsibility.

29. develop to reflect the common problems, goals, and experiences that members of a team, department, or other unit share. a. Legends b. Rites c. Subcultures d. Clan cultures 30. The culture is characterized by teamwork, friendliness, and consideration. a. adaptability b. achievement c. clan d. bureaucratic 31. Managers want a corporate culture that: a. communicates the organization’s priorities to stakeholders. b. reinforces the strategy and structure needed to be effective within its environment. c. is stable and independent from the external environment.

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Chapter 11: Organization Culture and Control d. shows employees their place in the organization’s hierarchical structure.

32. The two types of culture that share an external strategic focus are a. clan; bureaucratic b. achievement; clan c. adaptability; clan d. adaptability; achievement

and

.

33. Research has shown that culture has a significant impact on: a. employee morale. b. the ability to meet sales goals. c. performance. d. productivity.

34. Successful companies are those in which managers are evaluated and rewarded for paying careful attention to both and . a. cultural values; business performance b. goal setting; performance metrics c. vertical communication; horizontal communication d. employee morale; business performance 35. Which of the following is one of the key characteristics of a high-performance culture? a. Consistent, unchanging values that form the bedrock of the organization b. Individual employee ownership of both results and cultural values c. A flexible, adaptive mission that responds to changes in the external environment d. Stretch goals that motivate employee performance 36. In the 10 years that you’ve been serving as the CEO of an organization that designs and manufactures medical devices and tools for surgeons, you’ve marveled at the advances in technology in the industry. In fact, your organization has been one of the leaders in innovative products, and you’re quite pleased with the company’s steady growth in sales and productivity. You’re also inspired by your employees’ dedication to quality craftsmanship and innovation. What should you do as you lead your organization into the future? a. You should re-evaluate how your organization’s cultural values are related to performance goals. b. You should leverage the culture of quality and innovation into even higher performance goals. c. You should develop rituals, symbols, or sayings that will preserve and promote the organization’s culture in the long term. d. You should continue to promote the shared vision and cultural values and set high performance standards for the organization.

37. About two years ago, Veejay started up an online retailer that sells photographic equipment at a discount. Customers enjoy the low prices, of course, but they also appreciate that the organization has knowledgeable customer service reps who will answer the most complicated questions in detail. Unfortunately, though, sales appear to have dropped off, and Veejay is wondering if he’ll have to eliminate a couple of the sales rep positions. What should Veejay do as he leads his organization into the future? a. Veejay should re-evaluate his organization’s cultural values. b. Veejay should leverage the culture of expertise and service into specific performance goals.

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Chapter 11: Organization Culture and Control c. Veejay should develop rituals, symbols, or sayings that will preserve and promote the organization's culture in the long term. d. Veejay should continue to promote the shared vision and cultural values of the organization, which include expert knowledge and excellent customer service 38. Just a few years ago, Stacie leveraged her experience with opening foreign offices for a large, global corporation into a service business of her own. Her organization partners with other companies that want to outsource that start-up process so they can enter foreign markets more quickly with less hassle. Growth has been explosive, and Stacie’s organization has reached 60 employees in three years. They are working virtually from offices all around the globe, which has caused some challenges due to differences in language, customs, best practices, and the like. What do you anticipate will happen in this organization in the future? a. Cultural differences will work themselves out, and shared cultural values will naturally emerge over time b. The organization will continue to perform at a high level due to its smart business model c. The organization’s achievement culture will continue to drive high performance d. The organization’s success will be difficult to sustain without a clearly defined, shared culture 39. The basic assumption underlying the philosophy of hierarchical control is that employees: a. need to be closely monitored and controlled. b. should be empowered to make decisions. c. find fulfillment in meaningful work. d. prefer strict guidelines and policies.

40. The basic assumption underlying the philosophy of decentralized control is that employees: a. are more comfortable with task-related job descriptions. b. need strict guidelines and policies. c. work best when they are fully committed to the organization. d. work best in a vertical structure.

41. In an organization using hierarchical control, it is believed that employees are motivated by: a. contributing to the shared purpose or mission of the organization. b. extrinsic rewards, such as wages and benefits. c. autonomy and empowerment. d. the nature of the work itself.

42. Intel’s company motto is “Sponsors of Tomorrow.” Which of the following statements best describes how this motto reflects the organization’s culture? a. It gives Intel employees a collective identity as “sponsors.” b. It focuses Intel employees’ actions on innovating for the future. c. It reinforces Intel employees’ focus on meeting the future needs of customers through innovation. d. It gives Intel employees a collective identity as “sponsors” who are focused on meeting the future needs of customers through innovation.

43. As the director of a nonprofit organization that builds homes for low-income families, you know how proud and fulfilled the organization’s volunteer home builders feel when they work on a new home. You want all of the organization’s employees to understand and share those feelings because they are integral to your culture. What is the best way you could communicate that aspect of your culture to new hires?

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Chapter 11: Organization Culture and Control a. Commission a documentary filmmaker to create a short film that tells the story of the organization, as well as some of the families’ stories, and show it to new hires b. Work collaboratively with all employees to develop a slogan that conveys the organization’s core values c. Require each new employee to work on a building project within the first month of their employment with the organization d. Hire a graphic design firm to create a new logo for the organization that captures the idea of home, community, and pride 44. After one month on the job as the new president of a small and struggling toy manufacturer that employs about 65 people, you’ve recognized that the organization’s culture needs a greater emphasis on collaboration. You also sense that the entire staff needs some motivation and inspiration, so you’ve asked all the department heads to help you plan an offsite meeting with a variety of team-building exercises for all employees. At today’s planning session with these leaders, you suggested a collaborative art project as one of the exercises, but several department heads rolled their eyes and one spoke up, saying that was a terrible idea. They all felt that employees would much rather participate in sporting events so they could win prizes. What does this tell you about the organization’s culture? a. The organization’s culture still favors competition over collaboration. b. The organization’s culture will always favor competition over collaboration. c. The organization’s members are only motivated by rewards. d. The organization’s culture does not embrace creativity.

45. When you first started your online budget travel business a few years ago, you focused yourself and your few team members on providing information on budget hotels. You didn’t know it, but you were creating an achievement culture.

But as the business has grown, you’ve realized that your organization has missed several valuable opportunities to generate revenue by not pursuing other related products and services. You wish your employees would pay more attention to the marketplace and have a more entrepreneurial mindset. What can you do? a. Stick with the achievement culture but expand the parameters by redefining the organization’s goals b. Encourage a clan culture by making a special effort to show your employees how much their work contributes to the organization c. Foster an adaptability culture that responds to the external environment with innovative and creative ideas d. Adopt a bureaucratic culture and design a system for developing new product and service ideas 46. Over the last twenty years, you’ve risen through the ranks at your organization to become a regional manager overseeing about 50 locations of a nationwide fast-food chain. You’ve always appreciated your organization’s bureaucratic culture because it is key to keeping quality consistently high and managing costs effectively. However, at a recent meeting with all of the other regional and district managers, the problem of high employee turnover came up. Many reported that employees don’t feel satisfied so they quit, while other managers complained that today’s employees just don’t have a sense of loyalty or commitment to the organization. Of all the possible solutions suggested at the meeting, which one seems to be the best choice? a. Improve the hiring and training processes to ensure you’ve found employees who are committed to the organization b. Adjust the training program and create a rewards system that lets employees know they are appreciated c. Conduct an internal campaign that inspires employees to embrace the organization’s mission and purpose d. Give employees at all levels greater flexibility in how they perform their work 47. At a software development company located near Seattle, Washington, developers work in flexible teams. New teams form whenever a developer gets an idea for a new product, and old teams dissolve as projects are completed. Team members are very receptive to the feedback and ideas they get from members of the sales team, as the sales force is closest to the customers. The salespeople like it when their ideas are accepted because new product development is one of Powered by Cognero

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Chapter 11: Organization Culture and Control the metrics the sales manager uses to evaluate the performance of each salesperson. He also expects them to meet minimum quotas in terms of number of products sold, total sales, and more. Which of the following statements best describes the culture within this organization? a. Overall, this organization has a strong adaptability culture as reflected in its collaborative, flexible team environment and focus on meeting customer needs. b. This organization has a strong clan culture as it is focused on meeting the needs of its employees in order to generate high performance, and this culture is particularly strong in the sales department. c. Within this organization, the sales department has a clear focus on the organization’s mission, but this focus does not extend out to the product development department. d. Overall, this organization has a strong adaptability culture as reflected in its collaborative, flexible team environment, although the sales department has developed a more bureaucratic subculture focused on goal achievement and consistency.

48. With decentralized control, power is based on: a. networks and associations. b. formal authority. c. knowledge and experience. d. control over resources.

49. All effective control systems involve the use of established standards. a. feedback b. technology c. guidelines and policies d. rules

to determine whether organizational performance meets

50. Which of the following statements about feedback control systems is true? a. The feedback control model is represented visually as a series of four steps laid out in a straight line, suggesting the linear nature of control. b. Feedback control systems are useful in setting standards of performance, but are not useful in making adjustments to work activities. c. Managers must carefully assess what they are measuring to avoid setting irrelevant or misleading performance metrics in their feedback control systems. d. Feedback control systems can be used to measure data-driven metrics, such as sales and productivity, but cannot be used to measure performance in “soft” areas, such as innovation or corporate social responsibility.

51. The balanced scorecard is a comprehensive management control system that can be used on: a. product-based firms but not service-oriented firms. b. for-profit organizations but not hybrid or nonprofit organizations. c. domestic organizations but not multinational or global organizations. d. all types of for-profit, hybrid, and nonprofit organizations.

52. A strategy map is a powerful tool managers can use to see the: a. cause-effect relationships among various strategies and tactics employed by the organization. b. cause-effect relationships among various performance metrics. c. interactions among various departments and their effect on performance.

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Chapter 11: Organization Culture and Control d. cause-effect relationships among the organization’s culture, strategy, and structure.

53. You have just spent more than two months working with your top managers to complete a balanced scorecard and strategy mapping exercise on your regional chain of sporting goods stores. As you sit back at your desk, you can’t help but feel disappointed as you look at the organization’s low score on internal business processes. Based on the cause-effect relationships revealed by the strategy map, which of the following should you address first? a. Conduct an audit of your internal business processes b. Adjust the metrics used to measure financial performance c. Place a renewed focus on customers’ satisfaction d. Start developing a culture of learning and growth 54. Theo is the head of sales for a company that builds new homes. He wants to make sure the organization’s salespeople are generating as many leads as possible, following up on all solid leads, selling as many homes as they can, and upselling the upgraded features when possible. What type of control should Theo use? a. Outcome control b. Behavior control c. Hierarchical control d. Centralized control 55. You are feeling somewhat conflicted. As the manager of a sub sandwich and soup shop, you know the employees hate to be micromanaged and you want to empower them. At the same time, however, you want to ensure consistency in the products they serve, such as portion size and ingredient freshness, and you know from experience how easy it is to get off track. How can you accommodate these needs? a. Train the employees well and trust that they will always adhere to the guidelines you’ve taught them b. Train the employees well and conduct periodic checks of the food preparation area, employees, and orders c. Focus on outcome control and delegate behavior control to the assistant manager so that employees know what to expect from each of you d. Adjust your own expectations and accept the fact that in this situation, you must use behavior control mechanisms

56. Explain social capital and its benefits to an organization.

57. Describe the two levels of organizational culture.

58. Discuss how stories and sayings are used as tools used to shape an organization’s culture.

59. Identify the various dimensions of cultures in an organization.

60. Compare and contrast the four types of culture described in the text.

61. Explain the relationship between cultural values and business performance.

62. Compare hierarchical control with decentralized control in relation to culture, and explain how they are used in most organizations today.

63. Students’ answers will vary but should demonstrate their understanding of the two key concepts: hierarchical control Powered by Cognero

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Chapter 11: Organization Culture and Control and decentralized control. For hierarchical control, students should describe a work environment in which consistency is important and decision-making is not required frequently. For example, students might describe work in a fast-food restaurant or on a production assembly line, in which the work is very routinized. Students will most likely describe a wide range of possible work environments that can be decentralized, especially those in which creative work and innovation are important or in which employees encounter a wide range of experiences that require empowered decision making.

64. Describe an experience from your own life (at home, at school, on a job) that demonstrates the four steps of the feedback control model. Be sure to include how you responded to the corrective action.

65. Describe the purpose of a strategy map, especially in terms of identifying cause-effect relationships.

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Chapter 11: Organization Culture and Control Answer Key 1. True 2. False 3. False 4. True 5. True 6. False 7. False 8. False 9. True 10. False 11. False 12. a 13. c 14. a 15. a 16. d 17. a 18. a 19. c 20. a 21. d 22. d 23. a 24. c 25. d Powered by Cognero

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Chapter 11: Organization Culture and Control 26. a 27. a 28. b 29. c 30. c 31. b 32. d 33. c 34. a 35. b 36. d 37. b 38. d 39. a 40. c 41. b 42. d 43. c 44. a 45. c 46. b 47. d 48. c 49. a 50. c 51. d Powered by Cognero

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Chapter 11: Organization Culture and Control 52. b 53. d 54. a 55. b 56. Social capital refers to the quality of interactions among people and whether they share a common perspective. In organizations with a high degree of social capital, relationships are based on trust, mutual understandings, and shared norms and values that enable people to cooperate and coordinate their activities to achieve goals. An organization can have either a high or a low level of social capital. One way to think of social capital is as goodwill. When relationships both within the organization and with customers, suppliers, and partners are based on honesty, trust, and respect, a spirit of goodwill exists and people willingly cooperate to achieve mutual benefits. A high level of social capital enables frictionless social interactions and exchanges that help facilitate smooth organizational functioning. Relationships based on cutthroat competition, self-interest, and subterfuge can be devastating to a company.

57. Organizational culture exists at two levels. On the surface are visible artifacts and observable behaviors—the ways people dress and act; office layouts; the type of control systems and power structures used by the company; and the symbols, stories, and ceremonies organization members share. The visible elements of culture, however, reflect deeper values in the minds of organization members. These underlying values, assumptions, beliefs, and thought processes operate unconsciously to define the culture. The attributes of culture display themselves in many ways but typically evolve into a patterned set of activities carried out through social interactions. Those patterns can be used to interpret culture.

58. Stories are narratives based on true events that are frequently shared among employees and told to new employees to inform them about an organization. Many stories are about company heroes who serve as models or ideals for upholding cultural norms and values. Some stories are considered legends because the events are historic and may have been embellished with fictional details. Stories keep alive the primary values of the organization and provide a shared understanding among all employees. Sayings are mottoes or mantras that encapsulate key cultural values, such as Walmart’s “always low prices.”

59. Managers want a corporate culture that reinforces the strategy and structural design that the organization needs to be effective within its environment. The correct relationship among cultural values, organizational strategy and structure, and the environment can enhance organizational performance. Cultures can be assessed along many dimensions, such as the extent of collaboration versus isolation among people and departments, the importance of control and where control is concentrated, or whether the organization’s time orientation is short range or long range. Two of the most important dimensions are (1) the extent to which the competitive environment requires flexibility or stability and (2) the extent to which the organization’s strategic focus and strength are internal or external.

60. The four types of culture described in the text are: adaptability, achievement, clan, and bureaucratic. The adaptability and achievement cultures both have more of an external strategic focus. The adaptability culture is best for a rapidly changing environment, where flexibility, responsiveness, and creativity are required. The achievement culture is better suited to stable environments, and it places a heavy emphasis on performance and competition. The clan and bureaucratic cultures both have more of an internal strategic focus. The clan culture is also well suited to a rapidly changing environment, and it emphasizes teamwork and friendliness. Finally, the bureaucratic culture should only be used in a stable environment, where control and order are valued.

61. Research has shown that there is a direct correlation between culture and business performance. A strong culture that encourages responsiveness and change enhances organizational performance by energizing and motivating employees, Powered by Cognero

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Chapter 11: Organization Culture and Control unifying people around shared goals and a higher mission, and shaping and guiding behavior so that everyone’s actions are aligned with strategic priorities. The right culture can drive high performance. On the other hand, when cultural values aren’t connected to business performance, they aren’t likely to benefit the organization during hard times.

62. Hierarchical control and decentralized control represent different philosophies of corporate culture. Hierarchical control involves monitoring and influencing employee behavior through extensive use of rules, policies, hierarchy of authority, written documentation, reward systems, and other formal mechanisms. With hierarchical control, the organization culture is somewhat rigid, and managers do not consider culture a useful means of controlling employees and the organization. In contrast, decentralized control relies on cultural values, traditions, shared beliefs, and trust to foster compliance with organizational goals. With decentralized control, the culture is adaptive, and managers recognize the importance of organizational culture for uniting individual, team, and organizational goals for greater overall control.

Most organizations display some aspects of both hierarchical and decentralized control, but managers generally emphasize one or the other, depending on the organizational culture and their own beliefs about control.

63. Whistle-blowing involves employee disclosure of illegal, immoral, or illegitimate practices on the part of the organization. As ethical problems in the corporate world increase, many companies are looking for ways to protect whistle-blowers. In addition, calls are increasing for stronger legal protection for those who report illegal or unethical business activities. When there are no protective measures, whistle-blowers suffer, and the company may continue its unethical or illegal practices. Many governments, including the United States and Japan, have passed laws aimed at protecting whistle-blowers, but that is not enough. Enlightened managers strive to create an organizational climate and culture in which people feel free to point out problems and managers take swift action to address concerns about unethical or illegal activities. Organizations can view whistle-blowing as a benefit to the company, helping prevent the kind of disasters that have hit companies such as Enron, Bear Stearns, Countrywide, News Corporation, and Lehman Brothers.

64. Students’ answers will vary but should demonstrate their understanding of the four steps in the feedback control model. Answers may describe experiences in which their parents, coaches, teachers, or supervisors set strategic goals, established metrics and standards of performance, compared metrics of the student’s actual performance to standards, and took corrective action as needed.

65. A strategy map provides a visual representation of the key drivers of an organization’s success and shows how specific outcomes in each area are linked. The strategy map is a powerful way for managers to see the cause–effect relationships among various performance metrics. A map typically illustrates the four key areas that contribute to a firm’s long-term success—a learning and growth culture, internal processes, customer service, and financial performance—and how the various outcomes in one area link directly to performance in another area. The idea is that effective performance in terms of learning and growth serves as a foundation to help achieve excellent internal business processes. Excellent business processes, in turn, enable the organization to achieve high customer service and satisfaction, which enables the organization to reach its financial goals and optimize its value to all stakeholders.

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Chapter 12: Innovation and Change

Indicate whether the statement is true or false.

1. Product and service innovations are designed to make production more efficient or to produce greater volume. a. True b. False 2. An innovative organization is characterized by flexibility and empowered employees and the absence of rigid work rules. a. True b. False 3. Companies that want to support innovation implement a variety of mechanisms that encourage a top-down flow of ideas. a. True b. False 4. Idea incubator is a popular way to facilitate the development of new ideas within an organization. a. True b. False 5. Corporate intrapreneurship attempts to develop an internal entrepreneurial spirit, philosophy, and structure that will produce a lower-than-average number of innovations. a. True b. False 6. Companies encourage idea champions by providing freedom and slack time to creative people. a. True b. False 7. Horizontal coordination decreases both the amount and the variety of information for new product development. a. True b. False 8. Organizations that successfully adopt many management changes often have a smaller administrative ratio. a. True b. False 9. Organizations that have an organic technical core readily adopt management changes. a. True b. False 10. Organization development focuses on the human and social aspects of an organization as a way to improve the organization’s ability to adapt and solve problems. a. True b. False

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Chapter 12: Innovation and Change

Indicate the answer choice that best completes the statement or answers the question.

11. change occurs occasionally, with periods of relative stability, and managers can respond with technical, product, or structural innovations as needed. a. Disruptive b. Episodic c. Structural d. Continuous 12.

change occurs frequently, with fewer and shorter periods of stability. a. Disruptive b. Episodic c. Structural d. Continuous

13. The Research and Development Unit of Blue Lagoon, a multinational electronic brand, has released another update to Lagoon X4848i, a smartphone. This latest update is their fourth within a year. This adaptation to environmental shift is an example of the company’s response to change. a. disruptive b. continuous c. episodic d. annual 14. Which of the following is a difference between episodic change and continuous change? a. Episodic change occurs occasionally, while continuous change occurs frequently. b. Episodic change occurs with fewer and shorter periods of stability, while continuous change occurs with frequent and longer periods of stability. c. Episodic change requires complete replacement of an existing product, while continuous change requires partial replacement of an existing product. d. Episodic change enables distinctive competence, while continuous change disables distinctive competence.

15. innovation refers to innovations in products or services that typically start small and end up completely replacing an existing product or service technology for producers and consumers. a. Disruptive b. Organizational c. Open d. Culture 16. innovations are changes in an organization’s production process, including its knowledge and skill base, that enable distinctive competence. a. Strategy and structure b. Product and service c. Technology d. Culture 17.

innovations pertain to the administrative domain in an organization.

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Chapter 12: Innovation and Change a. Technology b. Strategy and structure c. Culture d. Product and service 18.

innovations refer to changes in the values, attitudes, expectations, beliefs, abilities, and behavior of employees. a. Technology b. Strategy and structure c. Culture d. Product and service

19. Organizational a. environment b. innovation c. change d. behavior

is considered the adoption of a new idea or behavior by an organization.

20. Organizational general environment. a. environment b. innovation c. change d. behavior

is the adoption of an idea or behavior that is new to an organization’s industry, market, or

21.

is the generation of novel ideas that may meet perceived needs or respond to opportunities. a. Implementation b. Innovation c. Creativity d. Sustainability

22. Which of the following occurs when organization members actually use a new idea, technique, or behavior? a. Implementation b. Standardization c. Creativity d. Sustainability 23. A(n) structure stifles innovation with its emphasis on rules and regulations. a. mechanistic b. organic c. matrix d. multidomestic 24. Which of the following approaches is used to incorporate structures and management processes that are appropriate to both the creation and the implementation of innovation? a. Dual-core approach Powered by Cognero

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Chapter 12: Innovation and Change b. Top-down approach c. Bottom-up approach d. Ambidextrous approach 25. Which of the following is a difference between exploration and exploitation? a. Exploration extends the search for commercialization of new products beyond the boundaries of an organization, while exploitation limits itself to the boundary of an organization. b. Exploration involves adoption of a management practice, while exploitation involves implementation of a management practice. c. Exploration encourages creativity and developing new ideas, while exploitation implements those ideas to produce routine products. d. Exploration generates ideas that may meet perceived needs, while exploitation generates ideas that respond to opportunities.

26. Clint Hill, CEO of Oregano Systems, a software engineering company, holds internal contests on the company intranet to get his engineers to speak up with their ideas for improving the company. Employees vote on their favorites and the winner takes home a cash prize. In this scenario, which of the following approaches does Oregano Systems utilize? a. Top-down approach b. Bottom-up approach c. Dual-core approach d. Horizontal coordination approach 27. Idea refers to coming up with new ideas for products or services. a. conversion b. generation c. creation d. incubation 28. structures means an organization creates an organic structure when such a structure is needed for the initiation of new ideas. a. Switching b. Spanning c. Opening d. Moving 29.

refer to a technique used to give free rein to creativity within organizations. a. Skunkworks b. Creative departments c. Venture teams d. Switching structures

30. Which of the following is true of venture teams? a. They free creative people from the bureaucracy of a large corporation. b. They are used to develop an internal entrepreneurial spirit among all employees. c. They impede the development of new ideas within an organization.

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Chapter 12: Innovation and Change d. They are constrained by organizational procedures.

31. A(n) is a separate, small, informal, highly autonomous, and often secretive group that focuses on breakthrough ideas for the business. a. creative department b. idea incubator c. new-venture fund d. skunkworks 32. means that each department involved with new products has excellent linkage with relevant sectors in the external environment. a. Horizontal coordination b. Boundary spanning c. Open innovation d. Management innovation 33.

means that technical, marketing, and production people share ideas and information. a. Horizontal coordination b. Boundary spanning c. Open innovation d. Management innovation

34. means extending the search for and commercialization of new products beyond the boundaries of an organization and even beyond the boundaries of an industry. a. Horizontal coordination b. Boundary spanning c. Open innovation d. Management innovation 35. The point of the approach is that many organizations must adopt frequent management changes and need to be structured differently from organizations that rely on frequent technical and product changes for competitive advantage. a. horizontal coordination b. top-down c. ambidextrous d. dual-core 36. refers to the adoption and implementation of a management practice, process, structure, strategy, or technique that is new to an organization and is intended to further organizational goals. a. Horizontal coordination b. Management spanning c. Open innovation d. Management innovation 37. Organizational focuses on the human and social aspects of an organization as a way to improve an organization’s ability to adapt and solve problems.

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Chapter 12: Innovation and Change a. innovation b. change c. development d. behavior 38. The approach brings together participants from all parts of an organization—often including key stakeholders from outside the organization as well—in an off-site setting to discuss problems or opportunities and plan for change. a. ambidextrous b. large group intervention c. dual-core d. closed innovation 39. When an organization development consultant brings together a group to discuss and solve problems such as conflicts, goals, decision making, or communication, the intervention technique is called: a. crowdsourcing. b. team building. c. culture management. d. technical training.

40. Which of the following techniques for implementing change hinges on top management support? a. Establishing a sense of urgency for change b. Establishing a coalition to guide the change c. Restraining idea champions d. Finding an idea that fits the need 41. Henderson Heating and Air has been a leader in producing heating and air conditioning units for use in private homes for more than 60 years. Over the past decade or so, consumers have begun to demand units that use less electricity, and Henderson has responded by making significant modifications to its products, thus making them far more energy efficient.

What type of change describes Henderson’s adjustments to its product line? a. Episodic change b. Continuous change c. Disruptive innovation d. Productive change 42. You’ve been leading a small publishing company for many years. Your 60-person team excels at producing books on the culinary arts, but recently you’ve determined that you’ll need to produce technology-based products—such as ebooks and audiobooks—in order to remain competitive. However, the production director has pointed out that it’s not that simple. Producing technology-based products requires different skills than producing books. What additional innovation will you need to implement next to achieve your goals? a. Use new technology in the creation of these new products b. Create a new production department for technology-based products c. Reorganize the organization into technology-based teams d. Encourage employees to embrace the new technology-based products 43. As the co-owner and manager of Village Greens, an organic farm-to-table restaurant, you’re thrilled that foodies from near and far have taken note of your establishment and are turning out in droves for meals. But you’re not so happy with Powered by Cognero

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Chapter 12: Innovation and Change all the customer complaints you’ve been getting about the long wait times for meals, especially when they show up on social media. You’re not sure how to solve the problem, but yesterday the sous chef came to you with a plan for rearranging the kitchen to make it more efficient. She estimates the redesign will shave off lots of prep time, allowing the staff to get meals out faster. What should you do next? a. Share the proposal with the chef and other senior staff members and decide whether to move forward with the redesign b. Ask other members of the kitchen staff to create similar proposals and combine the best of their ideas c. Set the proposal aside temporarily until you can determine whether the kitchen layout is the true source of the problem d. Pay three or four members of the kitchen staff to come in during off hours and rearrange the kitchen per the sous chef’s proposed layout 44. Your advertising agency is considered one of the most innovative in the city, which has allowed you to attract the best and brightest employees in the industry. Unfortunately, however, once they’re on board, employees generally become dissatisfied. Account executives say they’re frustrated at being left out of important communications and decisionmaking, while designers and copy writers complain about being pulled in too many different directions. Recently, you hit upon an idea that you think will solve these problems. Instead of organizing your employees by function, you want to restructure them into dedicated teams, one for each of your major clients. Your VP and other department heads agree, even though it will mean major changes in their job responsibilities. What should you do next? a. Hold a company meeting in which you share the proposed reorganization plan with all employees and ask them to identify potential problems b. Get feedback on your plan from at least five of your long-term, trusted employees c. Ask the department heads to come up with alternate ideas for solving communication and morale issues d. Hold a company meeting in which you explain how the reorganization plan will work and when it will start 45. As the shift supervisor at a manufacturing plant, you’ve been very impressed with your newest employee, Shawna, who started working for your organization about three weeks ago. She is dedicated and enthusiastic. She has just flagged you down to her work station, and now she’s explaining how she would like to reconfigure it. What should you do next? a. Approve Shawna’s proposed changes and encourage her to generate more ideas like these b. Discuss Shawna’s ideas with the other shift supervisors and decide whether to implement them c. Establish whether Shawna’s ideas address a need for change or simply reflect her personal preferences d. Implement Shawna’s recommendations at all work stations on the production floor 46. Research and development, also known as R&D—it seems like these functions are always lumped together, but not at one leading technology company. In this organization, two separate teams have been set up. One team is charged with imagining future innovations, while the other team follows a process for determining when, how, and why to implement these innovations. Which of the following statements is true about this organization? a. This organization must be using an ambidextrous approach, in which one group explores new ideas and the other exploits them. b. This organization must be using a bottom-up approach, in which one group explores new ideas, and the best of these are then elevated to a higher-level group for further development. c. This organization must be using a skunkworks approach; the separation allows the first group to explore ideas in secret before sharing them with the second group. d. This organization must be using new-venture funding, in which the two groups share seed money allotted to highly ambitious, innovative projects.

47. Creative departments and idea incubators are most likely associated with the approach, while corporate intrapreneurship is most likely associated with the approach to managing technology change.

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Chapter 12: Innovation and Change a. venture team; ambidextrous b. ambidextrous; bottom-up c. venture team; bottom-up d. bottom-up; ambidextrous 48. Historically, your company has produced headphones and ear buds, but recently one of your engineers proposed an interesting idea: using the organization’s sound technology to create a device that will help cure insomnia. After looking at relevant research, you and your executive team all agree the idea has tremendous potential, but it will require an enormous investment to develop the new product. What could you do to minimize the risks involved with developing this idea and ensure success? a. Create a design that is both comfortable and attractive b. Collaborate with other relevant organizations in designing, developing, and testing the new product c. Prepare to invest heavily in the launch and subsequent advertising of the new product d. Avoid confusion among consumers by rebranding your organization to reflect the new, broader range of products 49. Historically, your company has produced headphones and ear buds, but recently one of your engineers proposed an interesting idea: using the organization’s sound technology to create a device that will help cure insomnia. After looking at relevant research, you and your executive team all agree the idea has tremendous potential, but it is risky because it means moving beyond the sound system industry and into the medical device industry. However, because your organization has always used the horizontal coordination model, you feel confident of success. Which of the following is contributing most to your confidence level on this particular new venture? a. Your organization has highly competent individuals working in R&D, marketing, and production. b. Individuals working in your organization’s R&D department have links to R&D professionals in the medical device industry. c. Individuals working in R&D, marketing, and production in your organization are adept at sharing ideas and information. d. Individuals working in R&D, marketing, and production in your organization understand customer needs.

50. Research shows that about 40 percent of organizations associate faster product development with success. Why? a. Faster product development ensures the organization is meeting shifting customer demands. b. Beating competitors to market with new products gives an organization first-mover advantages. c. Getting new products into the marketplace faster means the organization is responsive to shifting environmental factors, such as customer demands. d. The higher costs associated with speedy product development are more than offset by being first to market with a new product.

51. Your advertising agency is considered one of the most innovative in the city, which has allowed you to attract the best and brightest employees in the industry. Unfortunately, however, once they’re on board, employees often become dissatisfied. Generally speaking, internal communication is poor and morale is low, and you believe these issues are holding your organization back from achieving its full potential. Recently, you hit upon an idea that you think will solve these problems. Instead of organizing your employees by function, you want to organize them into dedicated teams, one for each of your major clients. Your VP and other department heads agree, even though it will mean major changes in their job responsibilities. In terms of a dual-core approach, which of the following is true? a. This plan is related to the technical core because it aligns teams according to the expertise and skills of each member. b. This plan is related to the management core because is alters the job responsibilities of top managers.

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Chapter 12: Innovation and Change c. This plan is related to the technical core because teams will be dedicated to individual customers. d. This plan is related to the management core because it involves organizational structure.

52. The owner of Southern Landscaping Supply, a company that caters to professional landscapers, has just purchased Roscoe Garden & Gifts, a company that provides flowers, plants, and other gardening supplies to home gardeners.

Although the two original organizations’ products overlap, their culture, processes, and customers are very different.

Thus, the owner is anticipating some challenges in merging the two organizations into a cohesive whole. What would you recommend she do to ease the cultural changes? a. Develop team-building exercises for each newly merged team in the organization b. Bring together all members of the new organization, including some key customers, for an off-site meeting to discuss opportunities, potential problems, and plans for change c. Assemble representatives from various departments in a neutral location to expose and resolve conflicts d. Teach managers to encourage employee empowerment, teamwork, and collaboration 53. Every month at the meeting of department heads, it’s the same old story. The sales manager yells at the production manager for costly delays, then the production manager points the finger of blame at the head of product development, who in turn shouts at the sales manager for not getting more accurate customer feedback to her team. As the CEO, you’re sick of this toxic culture. What’s your best option for resolving the problems? a. Replace all three department heads with people who are collaborative team players, willing to resolve differences like professionals b. Get “the whole system in the room” by holding an off-site meeting for all employees to discuss the underlying problems and make plans for change c. Have the members of each department work together to develop possible solutions, then have each department head share their proposals with the other two department heads d. Bring together representatives from each of the three departments at a neutral location to expose the source of the conflicts and propose solutions 54. Marybeth runs a 12-person catering business. They’ve been fairly successful so far, but she believes that with more creativity and better internal communication, her business could grow to a much higher level. Her vision for her future organization is clear. What does she need to succeed in implementing this vision? a. A bigger staff b. A new structure c. A strategy d. Better management skills 55. After years of hounding the CEO, you have finally received approval to move forward with getting a new customer relationship management (CRM) solution. You’re positive this new CRM software is going to help your sales team’s performance skyrocket. Of the following, what should be your next step in ensuring a successful transition to the new CRM software and all that it entails? a. Involve the members of the sales team in identifying the organization’s needs and selecting the most appropriate CRM software program b. Provide the sales team with plenty of training opportunities c. Reassure the sales team so they feel confident and capable of mastering the new CRM software d. Set reasonable sales goals for the sales team until they’ve had a chance to learn the new CRM software

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Chapter 12: Innovation and Change 56. What is disruptive innovation?

57. Discuss in detail the required elements of successful change in an organization.

58. Why do organizations employ the ambidextrous approach?

59. What is open innovation?

60. What is management innovation?

61. Discuss the dual-core approach.

62. What is organization development?

63. Discuss the large group intervention approach.

64. Discuss in detail the techniques that can be used to successfully implement change.

65. Discuss in detail the techniques employed by managers to overcome resistance.

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Chapter 12: Innovation and Change Answer Key 1. False 2. True 3. False 4. True 5. False 6. True 7. False 8. False 9. False 10. True 11. b 12. d 13. b 14. a 15. a 16. c 17. b 18. c 19. c 20. b 21. c 22. a 23. a 24. d 25. c Powered by Cognero

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Chapter 12: Innovation and Change 26. b 27. b 28. a 29. c 30. a 31. d 32. b 33. a 34. c 35. d 36. d 37. c 38. b 39. b 40. b 41. a 42. b 43. a 44. d 45. c 46. a 47. b 48. b 49. b 50. c 51. d Powered by Cognero

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Chapter 12: Innovation and Change 52. b 53. d 54. d 55. a 56. Disruptive innovation refers to innovations in products or services that typically start small and end up completely replacing an existing product or service technology for producers and consumers. Companies that initiate a disruptive innovation typically win big; companies affected by a disruptive innovation may be put out of business. Established companies typically ignore the initial small innovation because they want to hang onto their established business models.

57. The required elements of successful change are ideas, needs, decision to adopt, implementation, and resources. For a change to be successfully implemented, managers must make sure each element occurs in the organization. If one of the elements is missing, the change process will fail.

1. Ideas. Change is an outward expression of ideas. No company can remain competitive without new ideas. An idea is a new way of doing things. It may be a new product or service, a new management concept, or a new procedure for working together in the organization. Ideas can come from within or from outside the organization.

2. Need. Ideas are generally not seriously considered unless there is a perceived problem or crisis that provides a need for change. A perceived need for change occurs when managers see a gap between actual performance and desired performance in the organization. Managers try to establish a sense of urgency so that others will understand the need for change. Sometimes a crisis provides an undoubted sense of urgency.

3. Decision to adopt. The decision to adopt occurs when managers or other decision makers choose to go ahead with a proposed idea. Key managers and employees need to be in agreement to support the change. For a major organizational change, the decision might require the signing of a legal document by the board of directors. For a small change, a middle manager or lower-level manager might be authorized to make the decision to adopt an idea.

4. Implementation. Implementation occurs when organization members actually use a new idea, technique, or behavior.

Materials and equipment may have to be acquired, and workers may have to be trained to use the new idea.

Implementation is a very important step because without it, previous steps are to no avail. Implementation of change is often the most difficult part of the change process. Until people use the new idea, no change has actually taken place.

5. Resources. Human energy and activity are required to bring about change. Change does not happen on its own; it requires time and resources, for both creating and implementing a new idea. Employees have to provide energy to see both the need and the idea to meet that need. Someone must develop a proposal and provide the time and effort to implement it. Most innovations go beyond ordinary budget allocations and require special funding.

58. To attain both innovation and efficiency, many organizations use an ambidextrous approach. Ambidextrous approach incorporates structures and management processes that are appropriate to both the creation and the implementation of innovation. Another way to think of the ambidextrous approach is to look at the organization design elements that are important for exploring new ideas versus the design elements that are most suitable for exploiting current capabilities.

Exploration means encouraging creativity and developing new ideas, whereas exploitation means implementing those ideas to produce routine products.

59. Many successful companies include customers, strategic partners, suppliers, and other outsiders directly in the product and service development process. One of the most popular trends is open innovation. In the past, most businesses generated their own ideas in-house and then developed, manufactured, marketed, and distributed them, which represents a closed innovation approach. Today, though, forward-looking companies are trying a different method. Open innovation means extending the search for and commercialization of new products beyond the boundaries of an organization and even beyond the boundaries of an industry.

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Chapter 12: Innovation and Change 60. Management innovation refers to the adoption and implementation of a management practice, process, structure, strategy, or technique that is new to an organization and is intended to further organizational goals. This type of change pertains to the design and structure of the organization itself, including restructuring, downsizing, teams, control systems, information systems, and departmental grouping.

61. The dual-core approach to organizational change identifies the unique processes associated with management change.

Organizations—schools, hospitals, city governments, welfare agencies, government bureaucracies, and many business firms—can be conceptualized as having two cores: a technical core and a management core. Each core has its own employees, tasks, and environmental domain. Innovation can originate in either core.

The management core is above the technical core in the hierarchy. The responsibility of the management core includes the structure, control, and coordination of the organization itself and concerns the environmental sectors of government, financial resources, economic conditions, human resources, and competitors. The technical core is concerned with the transformation of raw materials into organizational products and services and involves the environmental sectors of customers and technology.

62. Managers use a variety of approaches and techniques for changing corporate culture. One method of quickly bringing about culture change is known as organization development (OD), which focuses on the human and social aspects of an organization as a way to improve the organization’s ability to adapt and solve problems. OD emphasizes the values of human development, fairness, openness, freedom from coercion, and individual autonomy that allows workers to perform the job as they see fit, within reasonable organizational constraints.

63. The large group intervention approach, sometimes referred to as “whole system in the room,” brings together participants from all parts of an organization—often including key stakeholders from outside the organization as well—in an off-site setting to discuss problems or opportunities and plan for change. A large group intervention might involve 50 to 500 people and last for several days.

64. Top leaders articulate the vision and set the tone, but managers and employees throughout an organization are involved in the process of change. A number of techniques can be used to successfully implement change.

1. Establish a sense of urgency for change. Once managers identify a true need for change, they thaw resistance by creating a sense of urgency in others that the change is really needed.

2. Establish a coalition to guide the change. Effective change managers build a coalition of people throughout the organization who have enough power and influence to steer the change process. For implementation to be successful, there must be a shared commitment to the need and possibilities for change.

3. Create a vision and strategy for change. Leaders who have taken their companies through major successful transformations often have one thing in common: They focus on formulating and articulating a compelling vision and strategy that will guide the change process. Even for a small change, a vision of how the future can be better and strategies to get there are important motivations for change.

4. Find an idea that fits the need. Finding the right idea often involves search procedures—talking with other managers, assigning a task force to investigate the problem, sending out a request to suppliers, or asking creative people within the organization to develop a solution.

5. Create change teams. The need for resources and energy to make change happen is important. Separate creative departments, new-venture groups, and ad hoc teams or task forces are ways to focus energy on both creation and implementation.

6. Foster idea champions. One of the most effective weapons in the battle for change is the idea champion. The most effective champion is a volunteer champion who is deeply committed to a new idea. The idea champion sees that all technical activities are correct and complete.

65. To increase the chance of successful implementation, managers acknowledge the conflict, threats, and potential losses perceived by employees. Several strategies can be used by managers to overcome resistance: 1. Top management support. The visible support of top management makes people aware of the importance of the change.

Top management support is especially important when a change involves multiple departments or when resources are Powered by Cognero

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Chapter 12: Innovation and Change being reallocated among departments.

2. Participation and involvement. Early and extensive participation in a change should be part of implementation.

Participation gives those involved a sense of control over the change activity.

3. Alignment with needs and goals of users. The best strategy for overcoming resistance is to make sure change meets a real need. Resistance can be frustrating for managers, but moderate resistance to change is good for an organization.

Resistance provides a barrier to frivolous changes and to change for the sake of change. The process of overcoming resistance to change normally requires that the change be good for its users.

4. Communication and training. Communication means informing users about the need for change and the consequences of a proposed change, preventing rumors, misunderstanding, and resentment.

5. An environment that affords psychological safety. Psychological safety means that people feel a sense of confidence that they will not be embarrassed or rejected by others in an organization. People need to feel secure and capable of making the changes that are asked of them.

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Chapter 13: Decision Making Processes

Indicate whether the statement is true or false.

1. In the problem identification stage, information about environmental and organizational conditions is monitored to determine if performance is satisfactory and to diagnose the cause of shortcomings. a. True b. False 2. Particularly complex nonprogrammed decisions are often referred to as wicked decisions because simply defining the problem can turn into a major task. a. True b. False 3. The bounded rationality perspective to decision making describes how decisions actually have to be made under severe time and resource constraints. a. True b. False 4. The point of the rational approach is that managers should try to use systematic procedures to arrive at good decisions. a. True b. False 5. Intuitive processes are not used in the problem solution stage of decision making. a. True b. False 6. One of the implications of coalition building for organizational decision behavior is that decisions are made to optimize rather than satisfice problem solutions. a. True b. False 7. The incremental model places major emphasis on political and social factors that influence decision outcomes. a. True b. False 8. A decision interrupt takes place when an organization must cycle back through a previous decision and try something new. a. True b. False 9. In the garbage can model of decision making, solutions are proposed only when problems exist. a. True b. False 10. Evidence-based management can be particularly useful for overcoming fear of loss and the problem of escalating commitment. a. True Powered by Cognero

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Chapter 13: Decision Making Processes b. False

Indicate the answer choice that best completes the statement or answers the question.

11. In the problem stage of organizational decision making, information about environmental and organizational conditions is monitored to determine if performance is satisfactory and to diagnose the cause of shortcomings. a. identification b. generation c. solution d. deconstruction 12. In which of the following stages of the organizational decision-making process are alternative courses of action considered and one alternative is selected and implemented? a. The problem monitoring stage b. The problem identification stage c. The problem solution stage d. The problem generation stage 13. Which of the following statements is true of programmed decisions? a. They are well defined. b. They are the decisions for which criteria of performance are normally fuzzy. c. They are non-repetitive. d. They are the decisions for which a single solution is custom-tailored to the problem.

14. Which of the following is a characteristic of programmed decisions? a. They are poorly structured. b. They lack clear-cut decision criteria. c. They have easily specified alternatives. d. They are unique and non-repetitive.

15. Which of the following is true about nonprogrammed decisions? a. They have clear-cut decision criteria. b. They have many alternatives. c. They are novel. d. They are well defined.

16. The approach to individual decision making stresses the need for systematic analysis of a problem followed by choice and implementation in a logical, step-by-step sequence. a. intuitive b. rational c. bounded rationality d. problemistic search 17. Tom Smith is the marketing manager of Food Lion, a chain of grocery stores in North Carolina. Each year, Tom is required to make a decision on whether the current advertising campaign needs to be revamped to generate the sales Powered by Cognero

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Chapter 13: Decision Making Processes targets for the year. In order to help him arrive at a decision, Tom reads up on latest shopping trends of buyers, observing buying habits of customers, and reviewing daily sales figures. In this scenario, Tom is: a. monitoring the decision environment. b. defining the decision problem. c. specifying decision objectives. d. diagnosing the problem.

18. Which of the following steps in the rational approach to decision making involves having a clear understanding of the various options available to achieve desired objectives? a. Specifying decision objectives b. Diagnosing the problem c. Monitoring the decision environment d. Developing alternative solutions 19. The first four steps of the rational approach to decision making are specifically designed to help a manager: a. implement a solution. b. devise a problem solution. c. evaluate alternative solutions. d. identify the problem.

20. The final four steps of the rational approach to decision making constitute the problem making. a. identification b. solution c. diagnosis d. monitoring

stage of decision

21. Which of the following is an organizational constraint during nonprogrammed decision making? a. Level of shared perspective b. Desire to satisfy emotional needs c. Personal desire for prestige d. Individual decision style 22. In decision making, experience and judgment rather than sequential logic or explicit reasoning are used to make decisions. a. rational b. ethical c. intuitive d. meditated 23.

is a new trend in decision making that involves combining intuitive and analytical thought. a. Quasirationality b. Satisficing c. Organized anarchy d. Point-counterpoint

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Chapter 13: Decision Making Processes 24. The approach to organizational decision making has been described as the analog to the rational approach by individual supervisors. a. bounded rationality b. intuitive c. management science d. problemistic 25. The Carnegie model of organizational decision making says that organizational decisions: a. involve few managers because of the simplicity with which decisions are made. b. involve a coalition of many managers to make the final choice. c. use coalitions only at higher levels of management. d. use coalitions only at lower levels of management.

26. According to organizational decision making, means organizations accept a reasonable rather than a maximum level of performance, enabling them to achieve several goals simultaneously. a. satisficing b. escalating c. constraining d. bargaining 27. According to organizational decision making, solution to quickly resolve an issue. a. problemistic search b. satisficing c. coalition formation d. bargaining

means managers look around the immediate environment for a

28. The places less emphasis on the political and social factors but tells more about the structured sequence of activities undertaken from the discovery of a problem to its solution. a. garbage can model b. management science approach c. bounded rationality approach d. incremental decision model 29. Larry is the CEO of a chain of fast food restaurants that operates all over the U.S. It comes to his notice that one of the branches in Boston has received a lot of complaints from customers who claim that the staff is rude and the service is delayed. Larry arranges to get feedback from customers of the branch in question. In the context of the incremental decision model, Larry is in the phase of the decision sequence. a. identification b. development c. evaluation d. selection 30. In the selection phase of the decision sequence, the form of selection is used when a final choice falls upon a single decision maker, and the choice involves decision based upon experience.

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Chapter 13: Decision Making Processes a. judgment b. analysis c. bargaining d. authorization 31. Which of the following is a difference between the garbage can model and the incremental and Carnegie models? a. Unlike the incremental and Carnegie models, the garbage can model is only applicable at the problem solution stage of decision making. b. Unlike the incremental and Carnegie models, the garbage can model deals with the pattern or flow of multiple decisions within organizations. c. Unlike the incremental and Carnegie models, the garbage can model is only applicable at the problem identification stage of decision making. d. Unlike the incremental and Carnegie models, the garbage can model focuses on how a single decision is made by the top management of an organization.

32. The originators of the garbage can model of decision making referred to highly uncertain conditions in an organization as a(n) . a. high-velocity environment b. systematic revolution c. high-frequency environment d. organized anarchy 33.

is a characteristic that results in organized anarchies. a. Slow change b. Well-defined goals c. Unclear technology d. Bureaucratic environment

34. Which of the following is a possible consequence of using the garbage can model for organizational decision making? a. Solutions are proposed only when problems exist. b. Problems are always solved once they have been identified. c. Choices are made without solving problems. d. Solutions are present for all kinds of problems.

35. In the context of the contingency decision-making framework, refers to the agreement among managers about the nature of an issue or opportunity and about which goals and outcomes to pursue. a. problem consensus b. technical knowledge c. point-counterpoint d. decision learning 36. In the context of the contingency decision-making framework, how to solve problems and reach organizational goals. a. coalition formation b. technical knowledge

refers to understanding and agreement about

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Chapter 13: Decision Making Processes c. intuitive decision making d. problem consensus 37. According to the contingency decision-making framework, hope that it will work in this situation. a. coalition b. inspiration c. imitation d. recognition 38.

means adopting a decision tried elsewhere in the

suggests that the threat of a loss has a greater impact on a decision than the possibility of an equivalent gain. a. The Carnegie model b. Prospect theory c. The bounded rationality perspective d. McGregor’s Theory X

39. Sheila is one of the managers at Benson & Parker Advertising, an agency based in New York. She is a member of a coalition of managers who are deciding whether to shift their headquarters to Texas. Even though Sheila is against the move, she decides to suppress her opinion because most of the managers of the company favor the move. In this scenario, Sheila is engaging in . a. commitment escalation b. bargaining c. problemistic search d. groupthink 40. management means a commitment to make more informed and intelligent decisions based on the best available facts. a. Intuition-based b. Evidence-based c. Ethics-based d. Value-based 41. After that phone call you just received from the sales manager, your blood pressure is sky high. He is furious that a huge order for one of your company’s most important clients shipped five days late. You had no idea the production department was so far off schedule. Based on where you are in the rational approach to decision making and problem solving, what should you do next? a. Talk to your colleagues and collect information that may indicate a problem b. Talk to your colleagues to nail down the essential details of the problem, such as what happened and who was involved c. Discuss the decision objectives with the sales manager to determine what the organization should strive to achieve in solving the problem d. Analyze the information and data you have to diagnose the underlying problem 42. When you heard that a huge order for one of your company’s most important clients shipped five days late, you immediately went to the production supervisor to find out why. She explained that the raw materials needed to produce the order arrived later than expected. Your first thought is to find a more reliable supplier that will deliver materials on Powered by Cognero

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Chapter 13: Decision Making Processes time. Based on where you are in the rational approach to decision making and problem solving, what should you do next? a. Continue investigating the underlying cause of the late shipment b. Research alternative suppliers c. Compare the prospective suppliers on price and quality and check their references d. Choose a new supplier based on the information you’ve compiled 43. With the winter holidays fast approaching, Mandy needs to hire two additional salespeople for her bakery. She had high hopes for the young man she just interviewed for one of the positions because he has prior experience in the bakery department of a supermarket, but she’s already decided not to hire him. He nervously shook her hand and didn’t make eye contact much during the interview, and Mandy feels he wouldn’t be friendly towards customers. Which cognitive bias might be at work here? a. Being influenced by emotions b. Escalating commitment c. Prospect theory d. Being influenced by initial impressions 44. Last year, Maxim convinced his boss to allow him to invest in an expensive customer relationship management software package so that all customer data could be consolidated in one place. Maxim and his team worked together to research various options and choose what they all agreed was the best solution, and everyone was eager to go through the training process. Since then, however, Maxim’s team has had trouble adapting to the software, which can be cumbersome to use. And because it doesn’t have the exact features they need, team members frequently keep their own records outside the system. Maxim has encouraged his team to try harder to learn the CRM system and keep all data within it. Which cognitive bias is most likely to be influencing him in this situation? a. Escalating commitment b. Prospect theory c. Overconfidence d. Emotion 45. The winter holidays are coming up, and Mandy needs to hire two additional salespeople for her bakery in preparation for the busy season ahead. Ideally, she thinks to herself, she’d like to find two people just like Samantha—super-friendly, efficient, and enthusiastic with outstanding skills in sales, too. Yet, after five interviews, she’s beginning to lose hope that she’ll ever find anyone as good. What could Mandy do to prevent her cognitive biases from influencing her perception of job candidates? a. Delegate the interviewing and decision-making process to a trusted employee b. Assign a trusted employee to play the role of devil’s advocate as she reviews each candidate c. Ask a couple of other employees to interview the candidates with her and provide insights on each one d. Enlist her entire team to engage in groupthink when reviewing candidates 46. At Logitech Corp., you’ve had a long-standing custom of allowing many employees to work from home. Recently, however, this benefit has become a problem. The VP of operations insists that performance and innovation are flagging because there isn’t enough face-to-face communication among employees. But when you’ve discussed a policy change with the head of HR, he says you’ll lose many of your best employees, most of whom strongly value telecommuting. As the CEO, what is your best option for resolving this issue? a. Decide to require employees to return to working in the office and risk losing good employees b. Decide to allow employees to continue working from home and invest in technology that will improve internal communications c. Invite the VP of operations, the HR director, and several other managers to work with you on finding a Powered by Cognero

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Chapter 13: Decision Making Processes workable solution d. Engage in a problemistic search to find a quick solution to this problem 47. When you heard that a huge order for one of your company’s most important clients shipped five days late, you immediately went to the production supervisor to find out why. She explained that the raw materials needed to produce the order arrived later than expected. You’ve decided to find a more reliable supplier that will deliver materials on time, but since you’ve been dealing with this supplier for many years, you decide to give the supplier’s account rep a call to explain why you won’t be doing business with her company anymore. Much to your surprise, she explains that her deliveries have been late because your company’s purchase orders arrive too late. In terms of Mintzberg’s decision model, what does this mean for you? a. You’ve hit an “interrupt” in the development phase that is sending you back to the diagnosis part of the identification phase. b. You’ve hit an “interrupt” in the diagnosis stage that is sending you back to the recognition stage. c. You’ve hit an “interrupt” in searching for a solution in the development phase that is pushing you to design a custom solution. d. You’ve hit an “interrupt” in the selection phase that is sending you back to the diagnosis part of the identification phase.

48. Coalition building is most valuable in which phase of the incremental decision model? a. Identification b. Development c. Selection d. Implementation 49. The CEO of your organization, who is known for his entrepreneurial vision, has just returned from a three-day trip to Hong Kong. He immediately calls you into his office to tell you he’d like you to move forward with setting up a Hong Kong office as soon as possible. He’s convinced your firm’s products will sell extremely well in Hong Kong, and, he says, he wants to “strike while the iron is hot, hot, hot!” You’re completely shocked because, up until this moment, you weren’t aware of any plans to expand globally, but he is obviously convinced this is the growth opportunity he’s been looking for. Which characteristic of organized anarchy may lead to problems with the CEO’s decision? a. Problematic preferences b. Unclear technology c. Turnover d. Lack of planning 50. The creators of the garbage can model have identified four “streams” that contribute to a somewhat random pattern of organizational decision making. These four streams are: a. Problems, ideas, resources, choice opportunities b. Problems, potential solutions, coalitions, choice opportunities c. Problems, needs, ideas, choice opportunities d. Problems, potential solutions, participants, choice opportunities 51. Ruby and Glenda Jackson opened Sisters’ BBQ Shack, a carryout restaurant on Highway 9 about 20 years ago. For the first 10 years, the two of them were able to run their award-winning BBQ stand by themselves. Then social media came along, and their business exploded. Customers now wait 30 to 60 minutes to get their meals—longer on weekends—and the kitchen is chaotic. Ruby, Glenda, and four assistants are crammed into the tiny space, dipping and dancing around each other and inefficiently serving up great food. According to the garbage can model, which of the following best Powered by Cognero

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Chapter 13: Decision Making Processes explains this situation? a. Despite their financial success, the Jacksons can’t afford to expand or modify the kitchen. b. The Jacksons excel at food preparation but don’t have the organizational expertise to resolve the problem. c. The Jacksons have simply accepted the cramped kitchen and have given up on improving the situation. d. Ruby and Glenda are so busy running their business and addressing other, higher priority issues that they don’t have time to resolve the problem with the kitchen.

52. You asked for it, you got it. During your first week on the job as the new president of a plastic container manufacturing company, you asked each department head and manager to describe his or her biggest challenges. You got quite an earful, everything from the need for better computer systems to poor internal communication to low morale and high employee turnover. And every single one of them insisted that his or her problem was the most pressing! According to the contingency framework for choosing the best decision model, which model should you use? a. Use management science because problem consensus is certain and solution knowledge is certain b. Use the Carnegie model because problem consensus is uncertain and solution knowledge is certain c. Use the incremental decision model because problem consensus is certain and solution knowledge is uncertain d. Use the garbage can model because problem consensus is uncertain and solution knowledge is uncertain 53. The phrase “it’s only a failure if we fail to capture the lesson” embodies the spirit of: a. organizational learning. b. decision learning. c. disruptive learning. d. decision mistakes.

54. Logitech, Inc. operates in an extremely competitive, high-velocity environment. One way the CEO helps the organization’s managers make good decisions under rapidly changing circumstances is to divide the managers into opposing groups and ask them to present and debate two (or more) solutions to a problem. This technique is called: a. point-counterpoint. b. groupthink. c. collaborative problem-solving. d. coalition building.

55. Ben and Peter, best friends since grade school, have sunk their life savings into developing a new line of grooming products for men. The two business partners are clear on their biggest problem—they desperately need to build awareness of the products. But they can’t agree on the best means of achieving awareness. They’ve had long debates over the merits and costs of all types of advertising, social media, product giveaways, and more, and they’re still not sure how to proceed.

What does the contingency framework for choosing a decision model suggest they do? a. Use management science because problem consensus is certain and solution knowledge is certain b. Use the Carnegie model because problem consensus is uncertain and solution knowledge is certain c. Use the incremental decision model because problem consensus is certain and solution knowledge is uncertain d. Use the garbage can model because problem consensus is uncertain and solution knowledge is uncertain

56. Describe the difference between programmed decisions and nonprogrammed decisions, and provide an example of each.

57. List and describe the steps of the rational approach to decision making.

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Chapter 13: Decision Making Processes 58. Identify and explain four biases that affect individual decision making.

59. Explain the role of intuition in decision making.

60. In the context of incremental decision model, describe the identification phase of decision making.

61. In the context of incremental decision model, describe the development phase of decision making.

62. In the context of incremental decision model, describe the selection phase of decision making.

63. Discuss the consequences of the garbage can decision process for organizational decision making.

64. What is technical knowledge? Using an example, explain why technical knowledge is necessary to make good decisions.

65. Define evidence-based management. How do decision makers use it to make better decisions?

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Chapter 13: Decision Making Processes Answer Key 1. True 2. True 3. True 4. True 5. False 6. False 7. False 8. True 9. False 10. True 11. a 12. c 13. a 14. c 15. c 16. b 17. a 18. d 19. d 20. b 21. a 22. c 23. a 24. c 25. b Powered by Cognero

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Chapter 13: Decision Making Processes 26. a 27. a 28. d 29. a 30. a 31. b 32. d 33. c 34. c 35. a 36. b 37. c 38. b 39. d 40. b 41. b 42. a 43. d 44. a 45. c 46. c 47. a 48. a 49. a 50. d 51. c Powered by Cognero

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Chapter 13: Decision Making Processes 52. b 53. b 54. a 55. c 56. Programmed decisions are repetitive and well defined, and procedures exist for resolving the problem. They are well structured because criteria of performance are normally clear, good information is available about current performance, alternatives are easily specified, and there is relative certainty that the chosen alternative will be successful. Examples of programmed decisions include decision rules, such as when to replace an office copy machine, when to reimburse managers for travel expenses, or whether an applicant has sufficient qualifications for an assembly-line job. Many companies adopt rules based on experience with programmed decisions. For example, a rule for hotel managers assigning staff for banquets is to allow one server per 30 guests for a sit-down function and one server per 40 guests for a buffet.

Nonprogrammed decisions are novel and poorly defined, and no procedure exists for solving the problem. They are used when an organization has not seen a problem before and may not know how to respond. Clear-cut decision criteria do not exist. Alternatives are fuzzy. There is uncertainty about whether a proposed solution will solve the problem. Typically, few alternatives can be developed for a nonprogrammed decision, so a single solution is custom-tailored to the problem.

Managers at fast-food chain McDonald’s face various decisions, some programmed and some nonprogrammed. Many nonprogrammed decisions, such as the decision to enter a new market for McDonald’s, involve strategic planning where uncertainty is great and decisions are complex.

57. According to the rational approach, decision making can be broken down into eight steps: ∙ Monitor the decision environment. In the first step, a manager monitors internal and external information that will indicate deviations from planned or acceptable behavior. He or she talks to colleagues and reviews financial statements, performance evaluations, industry indices, competitors’ activities, and so forth. ∙ Define the decision problem. The manager responds to deviations by identifying essential details of the problem: where, when, who was involved, who was affected, and how current activities are influenced. ∙ Specify decision objectives. The manager determines what performance outcomes should be achieved by a decision. ∙ Diagnose the problem. In this step, the manager digs below the surface to analyze the cause of the problem. He or she might gather additional data to facilitate this diagnosis. Understanding the cause enables appropriate treatment. ∙ Develop alternative solutions. Before a manager can move ahead with a decisive action plan, he or she must have a clear understanding of the various options available to achieve desired objectives. The manager may seek ideas and suggestions from other people. ∙ Evaluate alternatives. This step may involve the use of statistical techniques or personal experience to gauge the probability of success. The manager assesses the merits of each alternative, as well as the probability that it will achieve the desired objectives. ∙ Choose the best alternative. This step is when the manager uses his or her analysis of the problem, objectives, and alternatives to select a single alternative that has the best chance for success. ∙ Implement the chosen alternative. Finally, the manager uses managerial, administrative, and persuasive abilities and gives directions to ensure that the decision is carried out, sometimes called execution of the decision. This might be considered the core of the decision process because any decision that is not successfully implemented is a failed decision, no matter how good the chosen alternative might be. Managers have to mobilize the people and resources to put the decision into action. Execution may be the hardest step of decision making. The monitoring activity (step 1) begins again as soon as the solution is implemented. For many managers, the decision cycle is a continuous process, with new decisions made daily based on monitoring the environment for problems and opportunities.

58. The following is a list of four biases that affect individual decision making: ∙ Being influenced by initial impressions. When considering decisions, the mind often gives disproportionate weight to the Powered by Cognero

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Chapter 13: Decision Making Processes first information it receives. These initial impressions, statistics, or estimates act as an anchor to our subsequent thoughts and judgments. Anchors can be as simple as a random comment by a colleague or a statistic read in a newspaper. Past events and trends also act as anchors. For example, in business, managers frequently look at the previous year’s sales when estimating sales for the coming year. Giving too much weight to the past can lead to poor forecasts and misguided decisions. ∙ Seeing what you want to see. People frequently look for information that supports their existing instinct or point of view and avoid information that contradicts it. This bias affects where managers look for information, as well as how they interpret the information they find. People tend to give too much weight to supporting information and too little to information that conflicts with their established viewpoints. ∙ Being influenced by emotions. A recent study of traders in London investment banks found that effective regulation of emotions was a characteristic of higher-performing traders. Lower-performing traders were less effective in managing and modulating their emotional responses. Another finding is that doctors make less effective decisions when they feel emotions of like or dislike for a patient. If they like a patient, they are less likely to prescribe a painful procedure. If they feel dislike, they may blame the patient for the condition and provide less treatment. Managers make better decision when—to the extent possible—they take emotions out of the decision-making process. ∙ Being overconfident. Most people overestimate their ability to predict uncertain outcomes. For example, a manager at a fast-food chain was sure that low employee turnover was a key driver of customer satisfaction and store profitability, so he decided to invest in programs to keep employees happy. However, when managers analyzed store data, they found that some locations with high turnover were highly profitable, while some with low turnover were struggling. Overconfidence can be particularly dangerous when making risky decisions.

59. In intuitive decision making, experience and judgment rather than sequential logic or explicit reasoning are used to make decisions. Most researchers have found that effective managers use a combination of rational analysis and intuition in making complex decisions under time pressure. Intuition is not arbitrary or irrational because it is based on years of practice and hands-on experience, often stored in the subconscious. When managers use their intuition based on long experience with organizational issues, they more rapidly perceive and understand problems, and they develop a gut feeling or hunch about which alternative will solve a problem, speeding the decision-making process. The value of intuition for effective decision making is supported by a growing body of research from psychology, organizational science, and other disciplines. When someone has a depth of experience and knowledge in a particular area, the right decision often comes quickly and effortlessly because the individual recognizes patterns based on information that has been largely forgotten by the conscious mind. Managers use previous experience and judgment to incorporate intangible elements at both the problem identification and problem solution stages. Executives frequently make decisions without explicit reference to the impact on profits or to other measurable outcomes. Many intangible factors—such as a person’s concern about the support of other executives, fear of failure, and social attitudes—influence selection of the best alternative. These factors cannot be quantified in a systematic way, so intuition guides the choice of a solution. Managers may make a decision based on what they sense to be right rather than on what they can document with hard data. Intuition can also balance and supplement rational analysis to help managers make better decisions.

60. The identification phase of decision making begins with recognition. Recognition means one or more managers become aware of a problem and the need to make a decision. Recognition is usually stimulated by a problem or an opportunity. A problem exists when elements in the external environment change or when internal performance is perceived to be below standard. In the case of firing a radio announcer, comments about the announcer came from listeners, other announcers, and advertisers. Managers interpreted these cues until a pattern emerged that indicated a problem had to be dealt with.

The second step is diagnosis, in which more information is gathered if needed to define the problem situation. Diagnosis may be systematic or informal, depending upon the severity of the problem. Severe problems do not allow time for extensive diagnosis; the response must be immediate. Mild problems are usually diagnosed in a more systematic manner.

61. In the development phase of decision making, a solution is shaped to solve the problem defined in the identification phase. The development of a solution takes one of two directions. First, search procedures may be used to seek out alternatives within the organization’s repertoire of solutions. In the case of firing a star announcer, for example, managers Powered by Cognero

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Chapter 13: Decision Making Processes asked what the radio station had done the last time an announcer had to be let go. To conduct the search, organization participants may look into their own memories, talk to other managers, or examine the formal procedures of the organization. The second direction of development is to design a custom solution. This happens when the problem is novel so that previous experience has no value. Mintzberg found that in these cases, key decision makers have only a vague idea of the ideal solution. Gradually, through a trial-and-error process, a custom-designed alternative will emerge.

Development of the solution is a groping, incremental procedure, building a solution brick by brick.

62. The selection phase of decision making is when the solution is chosen. This phase is not always a matter of making a clear choice among alternatives. In the case of custom-made solutions, selection is more an evaluation of the single alternative that seems feasible. Evaluation and choice may be accomplished in three ways. The judgment form of selection is used when a final choice falls upon a single decision maker, and the choice involves judgment based upon experience.

In analysis, alternatives are evaluated on a more systematic basis, such as with management science techniques.

Mintzberg found that most decisions did not involve systematic analysis and evaluation of alternatives. Bargaining occurs when selection involves a group of decision makers. Each decision maker may have a different stake in the outcome, so conflict emerges. Discussion and bargaining occur until a coalition is formed, as in the Carnegie model described earlier.

When a decision is formally accepted by the organization, authorization takes place. The decision may be passed up the hierarchy to the responsible hierarchical level. Authorization is often routine because the expertise and knowledge rest with the lower-level decision makers who identified the problem and developed the solution. A few decisions may be rejected because of implications not anticipated by lower-level managers.

63. There are four specific consequences of the garbage can decision process for organizational decision making: ∙ Solutions may be proposed even when problems do not exist. An employee might be sold on an idea and might try to sell it to the rest of the organization. ∙ Choices are made without solving problems. A choice—for example, creating a new department or revising work procedures—may be made with the intention of solving a problem; but, under conditions of high uncertainty, the choice may be incorrect. Moreover, many choices just seem to happen. People decide to quit, the organization’s budget is cut, or a new policy bulletin is issued. These choices may be oriented toward problems but do not necessarily solve them. ∙ Problems may persist without being solved. Organization participants get used to certain problems and give up trying to solve them; or participants may not know how to solve certain problems because the technology is unclear. ∙ A few problems are solved. The decision process does work in the aggregate. In computer simulations of the garbage can model, important problems were often resolved. Solutions do connect with appropriate problems and participants so that a good choice is made.

64. Technical knowledge refers to understanding and agreement about how to solve problems and reach organizational goals. This variable can range from complete agreement and certainty to complete disagreement and uncertainty about cause–effect relationships leading to problem solution. One example of low technical knowledge occurred at Dr. Pepper/Seven-Up Inc. Managers agreed on the problem to be solved—they wanted to increase market share from 6 to 7 percent. However, the means for achieving this increase in market share were not known or agreed on. A few managers wanted to use discount pricing in supermarkets. Other managers believed they should increase the number of soda fountain outlets in restaurants and fast-food chains. A few other managers insisted that the best approach was to increase advertising. Managers did not know what would cause an increase in market share. Eventually, the advertising judgment prevailed, but it did not work very well. The failure of the decision reflected managers’ low technical knowledge about how to solve the problem.

When means are well understood, the appropriate alternatives can be identified and calculated with some degree of certainty. When means are poorly understood, potential solutions are ill-defined and uncertain. Intuition, judgment, and trial and error become the basis for decisions.

65. Evidence-based management means a commitment to make more informed and intelligent decisions based on the best available facts and evidence. It means being aware of one’s biases, seeking and examining evidence with rigor. Managers practice evidence-based decision making by being careful and thoughtful rather than carelessly relying on assumptions, past experience, rules of thumb, or intuition. Evidence-based management can be particularly useful for overcoming fear Powered by Cognero

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Chapter 13: Decision Making Processes of loss and the problem of escalating commitment. To practice evidence-based management, managers use data and facts to the extent possible to inform their decisions. Many manager problems are uncertain, and hard facts and data are not available, but by always seeking evidence, managers can avoid relying on faulty assumptions. Decision makers can also do a postmortem of decisions to evaluate what worked, what did not, and how to do things better. The best decision makers have a healthy appreciation for what they do not know. They are always questioning and encouraging others to question their knowledge and assumptions. They foster a culture of inquiry, observation, and experimentation.

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Chapter 14: Conflict, Power and Politics

Indicate whether the statement is true or false.

1. As interdependence increases, the potential for conflict decreases. a. True b. False 2. A major source of conflict involves competition between groups for what members perceive as limited resources. a. True b. False 3. Although managers strive to use a rational approach, the political model prevails because each department has different interests it wants met and different goals it wants to achieve. a. True b. False 4. Teams and task forces reduce conflict and enhance cooperation because they integrate people from different departments. a. True b. False 5. Legitimate power stems from the ability to bestow rewards—a promotion, raise, or pat on the back—to other people. a. True b. False 6. Coercive power derives from a person’s greater skill or knowledge about the tasks being performed. a. True b. False 7. In forward-thinking organizations, top managers want lower-level employees to have greater power so they can do their jobs more effectively. a. True b. False 8. Horizontal power is defined by the formal hierarchy or the organization chart. a. True b. False 9. Three domains of political activity in most organizations are social affiliation, hierarchical referrals, and rules and procedures. a. True b. False 10. Resources are always important to organizational survival. a. True b. False

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Chapter 14: Conflict, Power and Politics

Indicate the answer choice that best completes the statement or answers the question.

11. is defined as the behavior that occurs among organizational groups when participants identify with one group and perceive that other groups may block their group’s goal achievement or expectations. a. Goal incompatibility b. Intergroup conflict c. Intragroup conflict d. Strategic contingency 12. is rivalry among groups in the pursuit of a common prize, whereas conflict presumes direct interference with goal achievement. a. Competition b. Assimilation c. Intergroup conflict d. Strategic contingency 13. Which of the following is true of conflicts? a. Conflicts are less severe than competition. b. In conflicts, groups clash indirectly. c. In conflicts, groups are in fundamental opposition. d. Conflicts occur vertically, but not horizontally.

14. The sources of intergroup conflict are: a. goal incompatibility, differentiation, task interdependence, and limited resources. b. group creation, observable group differences, group disorientation, and commitment. c. frustration, power, work rotation, and authority. d. financial independence, organic structures, delegation, and insubordination.

15. is defined as the dissimilarities in cognitive and emotional orientations among managers in diverse functional departments. a. Goal incompatibility b. Differentiation c. Task interdependence d. Dependency 16. In which of the following types of task interdependence methods is there little interaction between departments? a. Pooled interdependence b. Sequential interdependence c. Reciprocal interdependence d. Round-robin interdependence 17. In interdependence, the output of one department goes to the next department. a. pooled b. sequential c. reciprocal Powered by Cognero

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Chapter 14: Conflict, Power and Politics d. priority-based 18. In interdependence, departments mutually exchange materials and information. a. pooled b. sequential c. reciprocal d. priority-based 19. Which of the following types of task interdependence has a minimal potential for conflict? a. Pooled interdependence b. Sequential interdependence c. Reciprocal interdependence d. Round-robin interdependence 20. Which of the following is true of the relationship between interdependence and conflicts between departments? a. As interdependence increases, the potential for conflict increases. b. In case of pooled interdependence, the potential for conflict is high. c. Greater interdependence diminishes the potential for conflict. d. In case of reciprocal interdependence, the potential for conflict is minimal.

21. As task interdependence moves from pooled to reciprocal, a. conflict decreases and competition increases b. the potential for cooperation increases c. the potential for conflict increases d. goal incompatibility diminishes

.

22. When goals are in alignment, there is little differentiation, departments are characterized by pooled interdependence, and resources seem abundant, managers can use a . a. rational model of organization b. sequential method of task interdependence c. reciprocal method of task interdependence d. priority-based model of organization 23. Which of the following is true of the rational model of organization? a. In the rational organization, behavior is random and accidental. b. In the rational organization, goals are clear and choices are made in a logical way. c. It works well for every circumstance. d. It is an ideal that is fully achievable in the real world.

24. Which of the following is true of teams and task forces in the context of conflicts? a. They reduce conflict and enhance cooperation because they integrate people from different departments. b. They pursue only one group’s outcomes and force the other group into submission. c. They do not function effectively when there is sequential interdependence between departments. d. They work well during confrontation, but not with negotiation among departments.

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Chapter 14: Conflict, Power and Politics 25. are designed to increase worker participation and provide a cooperative model for solving union-management problems. a. Labor-management teams b. Sequential interdependence models c. Rational organizational models d. Transaction processing systems 26.

occurs when parties in conflict directly engage one another and try to work out their differences. a. Confrontation b. Negotiation c. Assimilation d. Competition

27. is the bargaining process that often occurs during confrontation and that enables the parties to systematically reach a solution. a. Confrontation b. Negotiation c. Assimilation d. Competition 28. is a strong intervention to reduce conflict because it involves bringing the disputing parties together and allowing each side to present its version of the situation. a. Workplace mediation b. Confrontation c. Pooled interdependence d. Rational model 29. Which of the following is an advantage of practicing member rotation? a. Individuals become submerged in the values, attitudes, problems, and goals of the other department. b. Conflicts between departments are reduced in a fast pace. c. Task interdependence between departments is greatly reduced. d. Although, the perceptions and attitudes that promote conflict cannot be changed, confrontation and negotiation are completely diminished.

30. is the ability of one person or department in an organization to influence other people to bring about desired outcomes. a. Cooperation b. Collaboration c. Power d. Personal position 31.

power is the authority granted by the organization to the formal management position a manager holds. a. Legitimate b. Reward c. Coercive

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Chapter 14: Conflict, Power and Politics d. Referent 32. Jenson is the project lead in a software company. In addition to his everyday job roles, he is also responsible for grading his employees based on their performance and giving them incentives and promotions. In this scenario, Jenson holds power. a. legitimate b. reward c. coercive d. referent 33. Which of the following types of power does a manager enjoy because of his right to promote subordinates? a. Legitimate power b. Reward power c. Coercive power d. Referent power 34. The authority to punish or recommend punishment is called a. legitimate b. reward c. coercive d. referent

power.

35. John is a manager at Trespach Inc. His subordinates respect him, and several of them have made comments such as, “I want to be as good a manager as he is one day.” He is highly respected and admired. John holds power. a. legitimate b. expert c. coercive d. referent 36. is a force for achieving desired outcomes, but only as prescribed by the formal hierarchy and reporting relationships. a. Authority b. Assimilation c. Interdependence d. Confrontation 37. People have authority in an organization because of: a. the positions they hold. b. the skill and knowledge they possess. c. their personal characteristics. d. the resources they control.

38.

is power sharing, the delegation of power or authority to subordinates in an organization. a. Empowerment b. Confrontation

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Chapter 14: Conflict, Power and Politics c. Assimilation d. Competition 39. are events and activities both inside and outside an organization that are essential for attaining organizational goals. a. Organizational politics b. Strategic contingencies c. Collective dependencies d. Network centralities 40. Jeannette noticed that her boss, the store manager, always seems overly busy and stressed out, so Jeannette offered to take over the task of scheduling the salespeople’s weekly shifts. The store manager was relieved to delegate this timeconsuming task to an experienced employee, and Jeannette is enjoying having the ability to give her friends the best time slots and her less-than-friendly co-workers the undesirable time slots. Which tactic has Jeannette used to increase her own power? a. Entering areas of high uncertainty b. Creating dependencies c. Providing scarce resources d. Satisfying strategic contingencies 41. Twice a year, a large corporation’s salespeople meet up in a major city like Miami or San Francisco for sales conferences. Next February’s meeting will be held in Santa Fe. Everyone in the organization is aware that the salespeople are treated to excellent hotels with amazing meals and fairly extravagant parties during these conferences. Back at headquarters, the rest of the employees feel some degree of resentment, and that emotion boiled over into outright anger today. You see, HR announced that the one party they get each year—the annual holiday party—has been canceled as a cost-saving measure. Which of the following is the most likely source of this conflict? a. Preferential treatment of one group over another b. Access to special benefits c. Differences in the sales manager’s personal power as opposed to other department heads’ personal power d. Competition for limited financial resources 42. Within the manufacturing plant of Reliable Garment Production Co., a company that makes clothing for many of the top fashion labels, there is a great deal of conflict. The employees who assemble the garments are extremely frustrated.

They are rarely able to meet their daily production quotas because the employees who cut the fabric are almost always running behind schedule. Which of the following is the most likely source of this conflict? a. Competition for limited resources b. Differentiation in orientations c. Sequential interdependence d. Reciprocal interdependence 43. As the manager of the manufacturing plant at Reliable Garment Production Co., a company that makes clothing for many of the top fashion labels, you are tired of hearing about an ongoing conflict. The assembly line supervisor says her people can’t meet their daily production quotas because the employees who cut the fabric are almost always running behind schedule and deliver too many cut pieces too late in the day. But the cutting department supervisor says his team is doing the best they can, and the assemblers need to appreciate just how hard the cutters’ work is. You’re thinking that if they’d all stop arguing, they could easily meet their quotas. Which of the following is the best tactic you could use to enhance collaboration and end the conflict between the two groups?

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Chapter 14: Conflict, Power and Politics a. Reduce the quota-driven expectations for both groups to ease the pressure on employees b. Create a task force of members from both groups to determine how to reduce the quotas c. Replace the two supervisors who are having a personal conflict d. Rotate members of the assembly department into the cutting department and vice versa so they can understand the work better 44. At the nonprofit agency where they work, Li, who manages a clean water campaign has been in conflict with Taylor, who heads up a vaccination project, over the distribution of money in next year’s budget. Their boss has asked them to sit down with her in a day-long meeting to hash out their differences and negotiate a solution. In response, Li has kicked off the day with an emotionally moving PowerPoint presentation in which he makes a compelling argument for getting nearly all of the money. Which negotiation strategy is Li using? a. A win-win strategy b. A win-lose strategy c. A collective bargaining strategy d. A persuasive strategy 45. Roberto is a programmer at a tech company that is using a bossless work environment. He’s a sociable guy, so he makes a point of having lunch or going out for drinks after work with many of his co-workers, whether they are on his current team or even in his department or not. Through these interactions, he keeps up-to-date on current and upcoming projects. He also makes a habit of dropping by the company owner’s office a few times a month to catch up on the company’s news and share his observations on what’s happening within the organization. What two types of vertical power does Roberto use? a. Formal position and control of information b. Resources and control of information c. Control of information and network centrality d. Network centrality and people 46. At Panera, a fast-casual restaurant chain, managers believe in empowering front-line employees in a number of different ways. Which of the following is the best example of employee empowerment? a. Employees are allowed to personalize their name badges with nicknames, stickers, etc. b. Employees are encouraged to suggest and develop new menu items. c. Employees can approve special requests and modifications to orders. d. Employees can offer to remake an order or offer a refund if a customer complains about an order.

47. At a national accounting firm, account executives—essentially, the sales reps for the organization—appear to have tremendous power. Each one handles only a few major clients, with whom they work very closely. Internally, the account executives are deeply involved in the work of each project team assembled to work on client accounts, and they have frequent interactions with many other departments, such as legal and billing. Which of the following statements best summarizes the power held by account executives? a. Account executives’ power comes from centrality, in that they interact closely with many other departments, serve as the primary liaisons with the organization’s clients, and thus directly influence the final output of the organization. b. Account executives’ power comes from nonsubstitutability, meaning that no other members of the organization could serve the same functions as the account executives. c. Account executives’ power comes from their ability to reduce uncertainty within the organization based on their intimate knowledge of the organization’s clients. d. Account executives’ power comes their intimate knowledge of and control over the financial state of the Powered by Cognero

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Chapter 14: Conflict, Power and Politics organization’s clients.

48. In a large pharmaceutical company, researchers are divided up into teams. Once each quarter, team leaders meet with the head of R&D to provide progress reports, explain why promising projects should continue, and request funding for ongoing work. Based on the presentations, the R&D head then determines which teams move forward with ongoing projects and which teams get reassigned to new projects. What two types of vertical power does the R&D head wield? a. Formal position and control of information b. Resources and formal position c. Control of information and network centrality d. Network centrality and people 49. Three months ago Digitech was in crisis mode, so the board of directors brought in a whole new executive team. The new CEO and the new Chief Technology Officer have worked together for many years at a competing firm, where they were known as the “dynamic duo.” An entrepreneur who has launched several successful technology start-ups was brought in to head up new product development, and the top salesperson from yet another competing firm was invited to take the helm of Sales & Marketing. Which of the following is most likely true about the power of these new managers from the perspective of the CEO? a. Except for the CEO, the other three executives have equal amounts of power. b. Except for the CEO, the head of Sales & Marketing has the most power, as is the case in all large corporations. c. Except for the CEO, the entrepreneur has the most power because of her demonstrated success. d. Due to the long working relationship with the CEO, the Chief Technology Officer probably has the most power of the three VP-level executives.

50. Which of the following statements about organizational politics is true? a. Political behavior can be either a positive or negative force. b. Political behavior involves deception and dishonesty for the purpose of self-interest. c. Political behavior inevitably leads to conflict, disharmony, low morale, and job dissatisfaction. d. Political behavior is only used in the resolution of conflicts and uncertainty.

51. Political activity tends to be most visible when: a. uncertainty is low. b. managers are confronted with nonprogrammed decisions. c. low-level managers are competing for power. d. high-level managers are competing for scarce resources.

52. Which of the following is an example of political activity related to structural change? a. Jin, a team leader, senses that shifts in the external environment are about to make her team’s work more valuable to the organization, so she approaches upper management with a proposal to split off her team into its own department with herself as the new department head. b. Howard, a mid-level manager, has decided to retire next year, so he informs Terry, his favorite employee, in advance so that she can start working on the high-profile projects and building the relationships she’ll need to land Howard’s position when he’s gone. c. Li, the head of a clean water project within a larger nonprofit organization, makes sure he attends every organizational fundraiser so he can serve as an evangelist for his project. d. Learning that she must phase out three employees from her 22-person team in response to the organization’s declining performance over the past several years, Patricia negotiates a healthy severance package for the three Powered by Cognero

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Chapter 14: Conflict, Power and Politics downsized employees.

53. Power in organizations is: a. associated with individuals acting alone, not with departments acting collectively. b. determined by a manager’s personality and style. c. exercised through individual political behavior. d. always used to the benefit of an individual, not for a department or the organization as a whole.

54. Under the umbrella of a nonprofit organization, Li is heading up a project to bring clean drinking water to sub-Saharan Africa. He is passionate about this project, not just because he knows it will be good for his career but because he is a true evangelist for clean drinking water. What is the best way for Li to use his soft power to influence the organization’s contributors and managers to allocate more money for his project? a. Build a coalition of like-minded people within the organization b. Find ways to return the favor whenever someone supports his project c. Educate himself so he becomes more of an influential expert on the need for clean drinking water d. Emphasize the higher purpose of his project when making appeals 55. Cashiers at Save-A-Dollar are using outdated cash registers that require far more effort and time than modern equipment. Customers sometimes lose their patience due to the slow machines, and several of the cashiers suffer from carpal tunnel syndrome because of those old registers. Bonnie, one of the cashiers, has suggested an upgrade to the manager several times, but he doesn’t see the need for change. Of the following political tactics, which one should Bonnie use to convince the manager to make this investment? a. Convince the other cashiers to join her in making an appeal to the manager b. Convince the other cashiers to work extra shifts at no cost in exchange for new register equipment c. Become an expert on using new register equipment and promise to train the other cashiers on the new equipment when it arrives d. Appeal to the manager’s sympathy by emphasizing the health problems related to the old equipment

56. Briefly discuss the three ingredients that are required for an intergroup conflict.

57. Briefly explain goal incompatibility with an example.

58. Briefly explain the rational model of behavior.

59. What is the political model of behavior? Why does it prevail?

60. Discuss confrontation and negotiation.

61. Define authority. What are the three properties that identify authority?

62. What is network centrality? Explain it with an example.

63. Briefly explain centrality in the context of strategic contingencies that influence horizontal power among departments.

64. Define politics and organizational politics.

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Chapter 14: Conflict, Power and Politics 65. Explain the four tactics for increasing power.

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Chapter 14: Conflict, Power and Politics Answer Key 1. False 2. True 3. True 4. True 5. False 6. False 7. True 8. False 9. False 10. True 11. b 12. a 13. c 14. a 15. b 16. a 17. b 18. c 19. a 20. a 21. c 22. a 23. b 24. a 25. a Powered by Cognero

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Chapter 14: Conflict, Power and Politics 26. a 27. b 28. a 29. a 30. c 31. a 32. b 33. b 34. c 35. d 36. a 37. a 38. a 39. b 40. b 41. d 42. c 43. d 44. b 45. c 46. d 47. a 48. b 49. d 50. a 51. b Powered by Cognero

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Chapter 14: Conflict, Power and Politics 52. a 53. c 54. d 55. a 56. Conflict among departments and groups in organizations, called intergroup conflict, requires three ingredients: group identification, observable group differences, and frustration. First, employees have to perceive themselves as part of an identifiable group or department. Second, there has to be an observable group difference of some form. Groups may be located on different floors of the building, members may have different social or educational backgrounds, or members may work in different departments. The ability to identify oneself as a part of one group and to observe differences in comparison with other groups is necessary for conflict.

The third ingredient is frustration. Frustration means that if one group achieves its goal, the other will not; it will be blocked. Frustration need not be severe and only needs to be anticipated to set off intergroup conflict. Intergroup conflict will appear when one group tries to advance its position in relation to other groups.

57. The goals of each department reflect the specific objectives members are trying to achieve. The achievement of one department’s goals often interferes with another department’s goals, leading to conflict. University police, for example, have a goal of providing a safe and secure campus. They can achieve their goal by locking all buildings on evenings and weekends and not distributing keys. Without easy access to buildings, however, progress toward the science department’s research goals will proceed slowly. On the other hand, if scientists come and go at all hours and security is ignored, police goals for security will not be met. Goal incompatibility throws the departments into conflict with each other.

58. When goals are in alignment, there is little differentiation, departments are characterized by pooled interdependence, and resources seem abundant, managers can use a rational model of organization. As with the rational approach to decision making, the rational model of organization is an ideal that is not fully achievable in the real world, though managers strive to use rational processes whenever possible. In the rational organization, behavior is not random or accidental. Goals are clear and choices are made in a logical way. When a decision is needed, the goal is defined, alternatives are identified, and the choice with the highest probability of success is selected. The rational model is also characterized by centralized power and control, extensive information systems, and an efficiency orientation.

59. The opposite view of organizational processes is the political model. When differences are great, organization groups have separate interests, goals, and values. Disagreement and conflict are normal, so power and influence are needed to reach decisions. Groups will engage in the push and pull of debate to decide goals and reach decisions. Information is ambiguous and incomplete. The political model describes the way organizations operate much of the time. Although managers strive to use a rational approach, the political model prevails because each department has different interests it wants met and different goals it wants to achieve. Purely rational procedures do not work for many circumstances.

60. Confrontation occurs when parties in conflict directly engage one another and try to work out their differences.

Negotiation is the bargaining process that often occurs during confrontation and that enables the parties to systematically reach a solution. These techniques bring appointed representatives from the departments together to work out a serious dispute. Confrontation and negotiation involve some risk. There is no guarantee that discussions will focus on a conflict or that emotions will not get out of hand. However, if members are able to resolve the conflict on the basis of face-to face discussions, they will find new respect for each other, and future collaboration becomes easier. The beginnings of relatively permanent attitude change are possible through direct negotiation.

61. Authority is a force for achieving desired outcomes, but only as prescribed by the formal hierarchy and reporting relationships. Three properties identify authority: Powered by Cognero

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Chapter 14: Conflict, Power and Politics 1. Authority is vested in organizational positions. People have authority because of the positions they hold, not because of personal characteristics or resources.

2. Authority is accepted by subordinates. Subordinates comply because they believe position holders have a legitimate right to exercise authority. In most North American organizations, employees accept that supervisors can legitimately tell them what time to arrive at work, the tasks to perform while they are there, and what time they can go home.

3. Authority flows down the vertical hierarchy. Authority exists along the formal chain of command, and positions at the top of the hierarchy are vested with more formal authority than are positions at the bottom.

62. Network centrality means being centrally located in the organization and having access to information and people that are critical to the company’s success. Managers as well as lower-level employees are more effective and more influential when they put themselves at the center of a communication network, building connections with people throughout the company.

Think about the importance of networks of relationships in the political arena. Abraham Lincoln is considered by historians to be one of the greatest U.S. presidents partly because he built relationships and listened carefully to a broad range of people both inside and outside of his immediate circle when the nation was so bitterly divided over the Civil War. He included people who did not agree with him and were critical of his goals and plans.

63. Centrality reflects a department’s role in the primary activity of an organization. One measure of centrality is the extent to which the work of the department affects the final output of the organization. For example, the production department is more central and usually has more power than staff groups (assuming no other critical contingencies).

Centrality is associated with power because it reflects the contribution made to the organization. The corporate finance department of an investment bank generally has more power than the stock research department. When the finance department has the limited task of recording money and expenditures, it tends to be low in power because it is not responsible for obtaining critical resources or for producing the products of the organization. Today, however, finance departments have greater power in many organizations because of the greater need for controlling costs.

64. Politics is the use of power to influence decisions in order to achieve those outcomes. The exercise of power to influence others has led to two ways to define politics: as self-serving behavior or as a natural organizational decision process. The first definition emphasizes that politics is self-serving and involves activities that are not sanctioned by the organization.

The formal definition of organizational politics is as follows: organizational politics involves activities to acquire, develop, and use power and other resources to influence others and obtain the preferred outcome when there is uncertainty or disagreement about choices.

65. Four tactics for increasing power are as follows: 1. Enter areas of high uncertainty. One source of individual or departmental power is to identify key uncertainties and take steps to remove those uncertainties. Uncertainties could arise from stoppages on an assembly line, from the quality demanded of a new product, or from the inability to predict a demand for new services. Once an uncertainty is identified, the department can take action to cope with it. By their very nature, uncertain tasks will not be solved immediately. Trial and error will be needed, which is to the advantage of the department. The trial-and-error process provides experience and expertise that cannot easily be duplicated by other departments.

2. Create dependencies. Dependencies are another source of power. When the organization depends on a department or individual for information, materials, knowledge, or skills, that department or individual will hold power over others. An equally effective and related strategy is to reduce dependency on other departments by acquiring necessary information or skills when possible, so that one’s department is not in a dependent position.

3. Provide scarce resources. Resources are always important to organizational survival. Departments that accumulate resources and provide them to an organization in the form of money, information, or facilities will be powerful.

4. Satisfy strategic contingencies. The theory of strategic contingencies says that some elements in the external environment and within the organization are especially important for organizational success. A contingency could be a critical event, a task for which there are no substitutes, or a central task that is interdependent with many others in the organization. An analysis of the organization and its changing environment will reveal strategic contingencies. To the Powered by Cognero

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Chapter 14: Conflict, Power and Politics extent that contingencies are new or are not being satisfied, there is room for a department to move into those critical areas and increase its importance and power.

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