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MGMT 468 Chapter 9
Terms in this set (100)
the process of monitoring and correcting a firm's strategy and performance
a method of organizational control in which a form gathers and analyzes information from then internal and external environment in order to obtain the best fit between the organization's goals and strategies and the strategic environment
a method of organizational control in which a firm influences the actions of employees through culture, rewards, and boundaries
Traditional approach to strategic control
a sequential method of organizational control in which (1) strategies are formulated and top management sets goals, (2) strategies are implemented, and (3) performance is measured against the predetermined goal set.
Contemporary control systems must have 4 characteristics to be effective:
1. The focus is on constantly changing information that has potential strategic importance.
2. The information is important enough to demand frequent and regular attention from all levels of the organization.
3. The data and information generated are best interpreted and discussed in face-to-face meetings.
4. The control system is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans.
a system of shared values and beliefs that shape a company's people, organizational structures, and control systems to produce behavioral norms (how we do things around here)
policies that specify who gets rewarded and why
Boundaries and constraints
rules that specify behaviors that are acceptable and unacceptable
the relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors
The two central aspects of strategic control are ___ control and ___ control.
Which of the following are part of the traditional approach sequence?
-Strategies are formulated and goals are set by top management
-strategies are implemented
-performance is measured against the predetermined set of goals
Which of the following statements are true about the traditional approach to strategic control?
-It is also referred to as "single-loop" learning
-It is often tied to an annual planning cycle
-It is based on a feedback loop comparing performance to a predetermined goal
Which of the following are appropriate conditions for using the traditional approach to strategic control?
-the environment is relatively simple
-the environment is table
-goals and objectives can be measured with certainty
True or false: Informational control is primarily concerned with whether the organization is "doing the right things."
Which of the following statements regarding informational control are correct?
-It deals with internal environment and the external strategic context
-It reviews goal and strategies in the context of the current environment
-It considers assumptions that create the foundation for an organization's strategy
The ___ approach to strategic control is sequential.
The role of ___ control is to challenge the organization's beliefs and goals and to continuously monitor, test, and review strategies.
In the traditional approach to strategic control, control is based on ___.
comparing actual performance to a predetermined goal
Which of the following are characteristics of a contemporary control system?
-the focus is on information that changes and may have strategic importance
-the control system should spur ongoing discussion about underlying data and assumptions
-the data generated are best interpreted and discussed in face-to-face meetings
The traditional approach is the most appropriate when ___.
the objectives can be measured, goals are simple, and the environment is stable
The three elements of behavioral control are culture, rewards, and ___.
Which type of contemporary strategic control focuses on whether the organization is "doing things right"?
What are reasons for emphasizing culture and rewards in a system of behavior controls?
-the competitive environment is complex and unpredictable
-organizations are downsizing and faced with an increasing need to coordinate across boundaries
-there are no long-term contracts between the organization and its key employees
The control system that addresses the assumptions that form the foundation of the organization is ___ control.
A system of shared values and beliefs that shape a company's people, organizational structure, and control systems to produce behavioral norms is ___.
The control process that continuously updates and challenges assumptions that underlie the organization's strategy is ___ control.
Which of the following are true regarding the role that culture plays?
-culture can lead to employees who are more engaged in their job and in the company as a whole
-a strong culture can be more effective than the traditional rewards-and-threats system
-employees who buy into a positive culture are less likely to exhibit selfish behavior
Effective contemporary control systems focus on ___.
constantly changing information
Which of the following statements about creating and maintaining a strong organizational culture are true?
-a strong commitment by leaders is critical to maintaining a strong organizational culture
-storytelling is a way to reinforce an organization's culture
-a strong organizational culture takes time to cultivate
Culture, rewards, and boundaries are key "levers" of ___ controls.
Policies that specify who gets praised and recognized and why is called the ___ system.
In today's complex competitive environment with weakened employee loyalties, the two levers of behavioral control that are the most effective are culture and ___.
Which of the following are reasons incentives can go wrong in a company?
They may cause issues between organizational departments due to differing goals
-they can demotivate employees if compensation is not directly related to their actions
-they may lead to a dysfunctional outcome if the reward is too closely tied to an individual's work
The set of unwritten standards of acceptable behavior in an organization is called organizational ___
Which of the following are characteristics of an effective reward system?
-reinforces basic core values
-perceived as "fair and equitable"
-enhances cohesion and commitment to goals
True or false: a strong culture can be a primary source of competitive advantage.
Which of the following would be the most likely to motivate employees to perform well on the job?
being given the opportunity to lead a project
Which of the following is an effective technique for maintaining organizational culture?
Boundaries and constraints play a valuable role in focusing ___
a company's strategic priorities
A system that focuses and motivates employee efforts on high-priority tasks I called a ___ system
Which one of the following is an attribute of effective short-term objectives?
be specific and measurable
Rule-based controls are most appropriate for organizations that have which of the following?
-unskilled and interchangeable employees
-stable and predictable environments
-great need for consistency in product and services
Enhanced cohesion and reinforcement of basic core values are part of an effective ___ system.
The type of behavior control used in an organization is often based on internal and ___ controls.
Which of the following statements about rewards systems are correct?
-employees respond well to managerial praise and financial rewards
-employees feel rewarded when given new responsibilities
-employees often respond better over the long-term to non financial motivators
Which of the following statements regarding controls in a bureaucratic organization are correct?
-employees are expected to complete their tasks in a specific manner
-controls depend on employees following a formalized set of rules and regulations
Rules that specify behaviors that are acceptable and unacceptable are called ___.
boundaries and constraints
Hiring the right people, training, management role models, and rewards are part of evolving from ___ to culture.
Which of the following statements regarding short-term objectives and actions plans are true?
-short-term objectives should be specific, measurable, attainable, and challenging
-organizations enhance their performance when objectives are difficult, yet achievable
-action plans play a critical role in implementing strategies
___ governance is when shareholders, management, and the board of directors work together to align their goals.
For stable organizations with a largely unskilled workforce and a need to provide a consistent product or service, ____-based controls are the most important.
Managers consider both external and internal factors to determine how to achieve appropriate ___ control over the individuals who work for the organization.
Which of the following is the most likely to lead to superior financial performance of a company?
good corporate governance
In a bureaucratic organization, ____
desired behaviors can be specified in a detailed manner
A mechanism created to allow for different parties to contribute capital, expertise, and labor for the benefit of each party is called a(n) ____
Which of the following are steps that organizations can take to evolve the organization from boundaries to rewards and culture?
-hire the right people
-make training an important part of the organization
-develop a reward system that is clearly aligned with organizational goals
___ deals with the relationship between principals (owners) and their agents (managers/employees)
The relationship between various participants, including shareholders and management, in determining the direction and performance of corporations is called ___.
Shareholder activism and an involved and committed board of directors are mechanisms of ___
Which of the following has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the business owners or shareholders and to act as an intermediary between the shareholders and management?
the board of directors
Which of the following statements are true regarding the role that good corporate governance plays on the decision to invest in companies?
-major institutions often choose to purchase stock of companies known for their good corporate governance practices
-the premium is larger for firms in countries where corporate governance is highly
-positive governance practices often lead to superior financial performance
Which of the following are attributes of an effective board of directors?
-directors provide strong oversight
-directors rigorously evaluate senior managers, the company's strategic plan, and new senior management hires
-directors are actively involved
In a(n) ____, shareholders have limited liability as well as limited involvement with the businesses' operation.
True or false: Research of boards of directors shows that simple restrictions, such as a requirement that a majority of the board members be outside directors, is enough to make the operations of the board effective
Agency theory is concerned with ___.
varying agents' performance
Which of the following are ways in which institutional investors are ending in shareholder activism?
they act aggressively to protect and enhance their investments
Two means of monitoring the behavior of managers through corporate governance mechanisms are through a committed board of directors and ___.
Which of the following are ways that a board of directors can incentivize managers to make decisions that are in the company's shareholders' interest?
-by requiring CEOs become substantial owners of company stock
-through structured salaries, bonuses, and stock options to provide rewards for superior performance over a long-term horizon
-by dismissing poor performing CEOs and other senior managers
The duties of the ___ involve reviewing the organization's financial objectives and major strategies, providing advice to top management, and reviewing systems to ensure compliance with laws and regulations
board of directors
Which of the following duties are primary responsibilities of a board of directors?
-evaluate senior managers' performance
-take control of the management secession process
-rigorously scrutinize strategic plans
Which of the following statements about CEO duality is true?
It is one of the most controversial issues in corporate governance
Which of the following actions can have a positive influence on the dynamics of the boards of directors?
-bringing in the right expertise on the board
-choosing directors who have time to dedicate to their duties on the board
which of the following are components fo the unity-of-command perspective on CEO duality?
-a CEO has a clear focus on both objectives and operations
-a CEO can act more efficiently and effectively when holding both positions
-confusion and conflict is limited between the CEO and chairman
Actions by large shareholders to protect their interests when they feel they are not receiving value maximization is called ___
Which of the following is the agency theory perspective on CEO duality?
There should be separation of power between the CEO and the chairman
True or false: a corporation's board of directors has little control over the amount bonuses and stock options that the corporation's CEO receives for his or her performance
Government regulatory bodies, auditors, public activists, and the media are all ___ governance control mechanisms
The board of directors functions as a "go between" for the
owners and controllers of the corporation
One form of opportunistic behavior that managers exhibit is engaging in excess product-market ___, which reduces their employment risk.
The leadership structure where the CEO acts as both chief executive officer and the chair of the board of directors is called CEO ___.
___ is one external mechanism that provides a solution to opportunistic behavior by managers.
The market for corporate control
True or false: unity-of-command advocates believe that a CEO can act more efficiently and effectively when holding the positions both of CEO and chairman of the board
The risk of being acquired by a hostile raider is often referred to as the ___ and deers opportunistic behavior by management
The ___ theory perspective on CEO duality is based on the separation of power.
___ are independent, certified professionals who verify the firm's books of accounts to unearth financial irregularities and ensure good accounting practices
Which of the following are external governance control mechanisms?
-banks and analysts
-market for corporate control
___ are external control mechanisms that ensure that the firm's finances are in order and loan covenants are being followed.
Banks and analysts
Which of the following are examples of how managers can exhibit opportunistic behavior?
-engaging in on-the-job consumption by spending large sums on executive luxuries
-taking on excessive product-market diversification through corporate acquisitions
Public corporations must disclose financial information to government ___ bodies such as the Securities and Exchange Commission
Which of the following is an external control mechanism in which shareholders dissatisfied with a firm's management sell their shares?
Market for corporate control
Which of the following has an indirect role as an external control mechanism?
The takeover constraint refers to the risk of being acquired by which of the following?
Conflicts between controlling shareholders and minority shareholders are called principal-___ conflicts.
Which of the following statements about external auditors are true?
-they often have lucrative consulting contracts with the firms they audit
-they often fail to catch accounting irregularities
Which of the following is the best description of the expropriation of minority shareholders?
When controlling shareholders have personal gains that exceed their losses from their firm's lowered performance
Which of the following statements about stock analysts are true?
-they make recommendations to there clients to buy, hold, or sell
-they conduct ongoing studies of the firms they follow
-they are often more optimistic than they should be and do not often make "sell" recommendations
Which of the following provides external oversight of companies?
government regulatory bodies
An example of the role that public activists have played as an external control mechanism is pressuring companies to refuse to deal in valuable minerals known as ___ minerals, which rebel groups trade to buy weapons
Principal-principal conflicts are conflicts between controlling shareholders and __ shareholders
When controlling shareholders conduct activities that enrich the controlling shareholders at the expense of the minority shareholders, they are engaging in ___
expropriation of minority shareholders
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