MGT 3830 Test 3 Chapt 7

Disadvantages of SBU Structure

1. it requires an additional layer of management 2. increases salary expenses

Which approach for managing and resolving conflict involves ignoring the problem in hopes that the conflict will resolve itself? A. avoidance B. resistance C. Compliance D. diffusion E. confrontation

A.avoidance

Resistance to change can manifest itself through: A. absenteeism B. sabotaging production machines C. filing unfolded grievances D. unwillingness to cooprate E. all of the above

E. all of the above

Which of these involves comparing a firm against the best firms in the industry on a wide variety of performance-related criteria? A. restructuring B. process redesign C. Reengineering D. delayering E. benchmarking

E. benchmarkign

What is not one of the basic ways a divisional structure can be organized? A. by geographic area B. by product or service C. by customer D. By process E. by cost

E. by cost

R&D

Research and development

An effective bonus system should be based on two key factors: annual objectives and long-term objectives. (T/F)

T

Annual objectives are key components in the strategic-management process because they dictate how resources will be allocated. (T/F)

T

Cornerstones of reengineering are decentralization, reciprocal interdependence and information sharing. (T/F)

T

Exchanging members of conflicting parties so each can gain an appreciation of the other's point of view exemplifies a confrontation approach (T/F)

T

Four types of resources that can be used to achieve desired objectives are financial, physical, human and technological. (T/F)

T

Gain sharing requires employees or departments to establish performance targets; if actual results exceed objectives, all members get a bonus. (T/F)

T

Ideally, the rational type change strategy is the most desirable. (T/F)

T

In developing an organizational chart, avoid having a particular person reporting more than one person above them in the chain of command. (T/F)

T

It is always easier to say you are going to do something (strategy formulation) than to actually do it (strategy implementation). (T/F)

T

Medium-sized firms tend to be divisionally structured, whereas large firms tend to use an SBU (Strategic business unit) or matrix structure. (T/F)

T

Most large companies have abandoned the functional structure in favor of decentralization. (T/F)

T

Not allocating resources allocating resources according to the priorities indicated by approved objectives is detrimental to the strategic-management processes. (T/F)

T

People's anxieties are raised with the thought of change because they fear economic loss, inconvenience, uncertainty and a break in normal social patterns. (T/F)

T

Policies refer to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals. (T/F)

T

Reengineering does not actually affect the organizational structure or chart, nor does it imply job loss or employee layoffs (T/F)

T

Resistance to change can be considered the single greatest threat to successful strategy implementation. (T/F)

T

Restructuring is also called rightsizing. (T/F)

T

Strategy formulation requires coordination among a few individuals, but strategy implementation requires coordination among many. (T/F)

T

The most complex of all designs is a matrix structure. (T/F)

T

Undesirable conduct such as distorting the record can be a result of over emphasis on achieving objectives. (T/F)

T

Unlike strategy formulation, strategy implementation varies considerably among different types and sizes of organizations. (T/F)

T

When developing an organizational chart, is it not wise to recommend a duel title for just one executive. (T/F)

T

With a divisional structure by customer, an organization can effectrively cater to the requirements clearly defined by customer groups. (T/F)

T

CFO

chief financial officer

CIO

chief information officer

CLO

chief legal officer

CMO

chief marketing officer

COO

chief operations officer

CSO

chief strategy officer

CTO

chief technology officer

vertical consistency of objectives

compatibiity of objectives from the CEO (corporate level) down to the Presidents (divisional level) on down to the managers (functional level)

Primary benefit sought from restructuring

cost reduction

establishing annual objectives

the decentralized managerial activity that determines appropriate/desired targets to achieve by region/product/service

Policies

the means by which annual objectives will be achieved. These include guidelines, rules, and procedures established to support efforts to achieve stated objectives. These are guides to decision making and address repetitive or recurring situations.

Divisional Structure

the type of organizational design is based on having various profit centers or segments by geographic area, by product or service, by customer or by process.. With this structure, tfunctiohnal activities are performed both centrally and in each separate division.

How large firms tend to be structured:

they use an SBU structure or a matrix structure

Strategic business unit (SBU)

this type of organizational design groups similar divisions together into units; widely used when a firm has many divisions/segments in order to reduce span of control reporting to a COO

Matrix Structure

this type of organizational design places functional activities along the top row and divisional projects/units along the left side to create a rubric where managers have two bosses- both a a functional boss and a project boss, thus creating the need for extensive vertical and horizontal flows of authority and communication--most complex of all designs

Divisional structure by product (or services)

used when an organization's products or services differ substantially EX: Proctor and Gamble

Divisional structure by Customer

when a few major customers are of paramount importance and many different services are provided to these customers EX: book publishing companies

Disadvantags of a Functional Organizational Structure

1. Accountability forced to the top 2. Delegation of authority and responsibility not encouraged 3. minimized career develeopment 4. low employee and manager morale 5. inadequate planning for products and markets 6. leads to short-term, narrow thinking 7. leads to communication problems

3 Categories for managing and resolving conflict:

1. Avoidance 2. Defusion 3. Confrontation

Disadvantages of a Divisional Organizational Structure

1. Can be costly 2. Duplication of functional activities 3. Requires a skilled management force 4. Requires an elaborate control system 5. COmpetition among divisions can become intense as to be dysfunctional 6. Can lead to limited sharing of ideas and resources 7. Some regions, products or customers may receive special treatment

Hierarchy of Policies

1. Company Strategy 2. Divisional Objective 3. Production Department Objective

Five tests to determine whether a performance-pay plan will benefit an organization:

1. Does the plan capture attention 2. Do employees understand the plan 3. Is the plan improving communication 4. Does the plan pay out when it should 5. Is the company or unit performing better?

4 steps in the rational/self interest strategy

1. Employees are invited to participate in the process of change and in the details of the transition 2. Motivation or incentive to change is required 3. Communication is needed so people can understand the purpose for the changes 4. Giving and receiving feedback

Some management issues central to strategy implementation:

1. Estalish annual objectives 2. Devise policies 3. Allocate resources 4. Alter an existing organizational structure 5. Restructure and reengineer 6. Revise and reward incentive plans 7. Minimize resistance to change 8. Match managers with strategy 9. develop a strategy supportive to culture 10. Adapt production and operations processes 11. Develop an effective human resources function 12. downsize and furlough as needed 13. link performance and pay to strategies

Seven basic types of organizational structure:

1. Functional 2. Divisional by geographic area 3. Divisional by product 4. Divisional by customer 5. Divisional process 6. Strategic Business Unit (SBU) 7. Matrix

Advantages of SBU Structure

1. Improved coordination and accountability 2. Makes the tasks of planning and control by the corporate office more manageable

Advantages of a Divisional organizational structure

1. accountability is clear 2. allows local control of local situations 3. Creates career development chances 4. Promotes delegation of authority 5. leads to competitive climate internally 6. allows easy adding of new products or regions 7. allows strict control and attention to products, customers or regions

Fifteen guidelines for Developing an organizational chart

1. Instead of "chairman" of the board, make it "chairperson" of the board 2. Make sure the board of directors reveals diversity in race, ethnicity, gender and age 3. make sure the chair of the board is not also the CEO or president of the company 4. Make sure the CEO of the firm does not also carry the title "president" 5. Reserve "president" for the division heads of the firm 6. Make sure there's a COO 7. Make sure presidents of divisions report to the COO 8. Make sure functional executives such as CFO, CIO, CMO, CSO, R&D, CLO, CTO, and HRM report to the CEO, not the COO 9. Make sure every executive has one boss, so lines int he chart should be drawn accordingly, assuring unity of command. 10. Make sure span of control is reasonable, no more than 10 persons reporting to any other person 11. Make sure diversity in race, ethnicity, gender, and age is well represented among corporate executives 12. Avoid a functional type structure for all but the smallest firms. 13. Decentralize, using some form of divisional structure, whenever possible 14. Use an SBU type structure for large, multidivisional firms 15. Make sure executive titles match product names as best possible in division-by-product and SBU-designated firms

Strategy implementation nature

1. Managing forces during the action 2. focuses on efficiency 3. primarily operational process 4. requires special motivation and leadership skills 5. coordination among many individuals 6. varies substantially among different types and sizes of organizations

Advantages of a Matrix Structure

1. Project objectives are clear 2. Employees can clearly see results of their work 3. Shutting down a project is easily accomplished 4. Facilitates uses special equipment, personnel, and facilities 5. Functional resources are shared instead of duplicated as in a divisional structure

5 Policies to improve compensation practices

1. Provide full transparency to all stakeholders 2. Reward long-term performance with long-term pay, rather than annual incentives 3. Base executive compensation on actual company performance, rather than stock price 4. Extend the time-horizon for bonuses 5. Increase equity between workers and executives

Disadvantages of a Matrix Structure

1. Requires excellent vertical and horizontal flows of communication 2. Costly because it creates more manager positions 3. Violates unity of command principal 4. Creates dual lines of budget authority 5. Creates dual sources of reward and punishment 6. Creates shared authority and reporting 7. Requires mutual trust and understanding

Advantages of a Functional Organizational Structure

1. Simple and inexpensive 2. Capatilizes on specialization of business activities such as marketing and finance 3. Minimizes need for elaborate control system 4. allows for rapid decision making

Two major reasons changes in strategy often require changed in the way an organization is structured:

1. Structure largely dictates how objectives and policies will be established 2. structure dictates how resources will be allocated

Some Management trade-off decisions required in Strategy Implementation:

1. To emphasize short-term profits or long-term growth 2. To emphasize profit margin or market share 3. To emphasize market development or market penetration 4. To lay off or furlough 5. To take high risk or low risk 6. To be more socially responsible or more profitable 7. To outsource jobs or pay more to keep jobs at home 8.To acquire externally or to build internally 9. To restructure or reengineer 10. To use leverage or equity to raise funds 11. To use part-time or full-time employees

Symptoms of an Ineffective Organizational Structure:

1. Too many levels of management 2. Too many meetings attended by too many people 3. Too much attention being directed toward solving interdepartmental conflicts 4. Too large a span of control 5. Too many unachieved objectives 6. Declining Corporate or business performance 7. Losing ground to Rival firms 8. Revenue or earnings divided by number of employees or number of managers is low compared to rival firms

Establishing annual objectives can lead to conflict because

1. individuals have different expectations and perceptions 2. schedules create pressure 3. personalitites are incompatible 4. misunderstandings occur between line managers and staff managers

Strategy Formulation Nature

1. positions forces before the action 2. Focuses on effectiveness 3. primarily an intellectual process 4. requires good intuitive and analytical skills 5. coordination among a few individuals 6. concepts and tools don't differ greatly for organizations

Why do changes in company strategy often require changes in the way an organization is structured? A. Structure dictates how goals and objectives will be established B. Structure dictates authority over projects C. structure dictates how resources will be obtained D. structure dictates strategy E. structure dictates how money is spent

A. structure dictates how goals and objectives will be established

What are three categories of approaches for managing and resolving conflict? A. Avoidance, diffusion, and confrontation B. Avoidance, payoff, and diffusion C. Confrontation, ignorance and objectivity D. Buy, Sell and hold E. There are no good ways to manage conflict

A. avoidance, diffusion, and confrontation

How would Hershey's current divisional structure most likely be classified? A. by geographic area B. by product C. by service D. by customer E. by process

A. by geographic area

Medium-sized firms are more likely to use which type of structure? A. divisional B. matrix C. SBU D. functional E. process

A. divisional

A divisional structure by geographic area is most appropriate when: A. organizations have similar branch facilities located in widely dispersed areas B. an organization offers only a limited number of products or services C. strict control and attention to product lines are needed D. an organization has many skilled managers E. the firm serves one geographic area

A. organizations have similar branch facilities located in widely dispersed areas

_______ is not a major factor that commonly prohibits effective resource allocation. A. under protection of resources B. organizational politics C. Vague strategy targets D. reluctance to take risks E. lack of sufficient knowledge

A. under protection of resources

Which Fortune 500 CEO had the greatest salary in 2004? A. Richard Kinder from Kinder Morgan Energy B. Bob Nardelli from Home Depot C. Steve Jobs from Apple Computer D. Jeff Bezos from Amazon E. Warren Buffett from Berkshire Hathaway

B. Bob Nardelli from Home Depot

What is the best divisional structure when a few major customers are a paramount importance and many different services are provided to these customers? A. by geographic area B. by customer C. by product D. by process E. by cost

B. by customer

A disagreement between two or more parties on one or more issues is called a(n) A. integrated solution B. conflict C. compromise D. diffusion E. avoidance

B. conflict

The primary benefit sought from restructuring is A. employee involvement B. cost reduction C. increased morale D. increased number of hierarchical levels in the organiation E. increased innovation

B. cost reduction

Restructuring is also referred to as A. starting over B. delayering C. diversifying D. job security E. integrating

B. delayering

What types of organizational structure do most small businesses follow? A. Divisional structure by product B. functional structure C. divisonal structure by customer D. process type structure E. matrix structure

B. functional structure

Which pay strategy is not a form of incentive compensation? A. bonus system B. hourly wage C. gain sharing D. profit sharing E. all of these are forms of incentive compensation

B. hourly wage

What are guidelines, methods, procedures, rules, forms, and administrative practices known as? A. long-term objectives B. policies C. annual objectives D. strategies E. goals

B. policies

Which of the following issues may not require a management policy? A. To establish a high- or low-safety stock of inventory B. to increase motivation C. to offer numerous or few employee benefits D. to discourage insider trading E. To promote from within to or to hire from the outside

B. to increase motivation

Which would most likely be incorporated into written objective statements? A. Maximize B. minimize C. 10% increase D. adequate E. all of the above

C. 10% increase

Establishing objectives is a A. top-level activity B. centralized activity C. decentralized activity D. centralized-decentralized activity E. command-and-control activity

C. decentralized activity

What change strategy involves giving orders and enforcing those orders? A. Self-interest B. educative C. force D. Rational E. diffusion

C. force

Which organizational structure is the most simple and inexpensive? A. departmental B. strategic business unit C. functional D. decentralized E. process

C. functional

Which of these is true about strategy implementation? A. it is positioning forces before the action B. It focuses on effectiveness C. it is primarily an operational process D. it is primarily an intellectual process E. it requires intuitive skills

C. it is primarily an operational process

What is the most complex organizational structure? A. divisional B. SBU C. Matrix D. Functional E. geographical

C. matrix

A firm uses information techonology to break down functional barriers and create a work system based on business processes, products, or outputs rather than functions or inputs in: A. restructuring B. benchmarking C. reengineering D. decentralization E. delayering

C. reengineering

What action involves reconfiguring or redesigning work, jobs and processes for the purpose of improving costs, quality, service and speed? A. restructuring B. downsizing C. reengineering D. delayering E. benchmarking

C. reengineering

Conflict in an organization is A. always bad B. always good C. sometimes bad and sometimes good D. a sign of bankruptcy E. avoidable

C. sometimes bad and sometimes good

Which organizational structure has ambiguous roles for senior executives as a major disadvantage? A. functional B. divisional C. strategic business unit (SBU) D. matrix E. process

C. strategic business unit (SBU)

Which of the following is not true about objectives? A. they should be communicated throughout the organization B. they should have an appropriate time dimension C. they should incorporate policies D. they should be measurable E. they should be consistant

C. they should incorporate policies

CEO

Chief executive officer

CIO

Competitive intelligence officer

Which approach for managing and resolving conflict involves playing down differences between conflicting parties while accentuating similarities and common interests? A. Avoidance B. resistance C. compliance D. diffusion E. confrontation

D. diffusion

What pay strategy requires employees or departments to establish performance targets, such as "if actual results exceed objectives then all members get bonuses." A. profit sharing B. bonus system C. salary D. gain sharing E. hourly wage system

D. gain sharing

When developing an organizational chart, you should: A. recommed dual titles for executives B. use the title "president" for the top person C. Make sure that the chief financial officer is not at the same level as the chief operating officer D. Have division presidents report to a chief operating officer E. have the controller or treasurer report directly to the president

D. have division presidents report to a chief operating officer

A change in strategy that attempts to convince people the change is to their personal advantage is A. diffusion B. force C. educative D. rational E. compromise

D. rational

How are objectives in the areas of profitability, growth and market share commonly established? A. Business segment B. geographic location C. customer groups D. products E. all of the above

E. all of the above

A divisional structure by product is most effective when A. special emphasis needs to be placed on specific products B. an organization offers few products C. an organization's products or services differ substantionally D. special emphasis needs to be placed on specific services E. all of the above

E. all of the above

Considerable time and effort should be devoted to assuring objectives are conceived because they represent the basis for A. monitoring processes B. establishing divisional priorities C. allocating resources D. evaluating resources E. all of the above

E. all of the above

Which approach for managing and resolving conflict involves exchanging members of conflicting parties of that each can gain an appreciation of the others point of view? A. avoidance B. resistance C. compliance D. diffusion E. confrontation

E. confrontation

Which of these is not one of the tests used to determine whether a performance pay plan will benefit an organization? A. Does the plan capture attention? B. Do employees understand the plan? C. Is the plan imporving communication? D. Does the plan pay out when it should? E. Does the plan reduce management layers?

E. does the plan reduce management layers

Which term is most concerned primarily with shareholder well-being rather than employee well-being? A. benchmarking B. reengineering C. product redesign D. process management E. restructuring

E. restructuring

A bottom-up flow of communication is essential for developing top-down support. (T/F)

F

A functional structure can be effective at limiting short-term and narrow thinking. (T/F)

F

A rational change strategy means giving orders and enforcing those orders. (T/F)

F

Avoidance, infusion and confrontation are the classifications for the various approaches for minimizing and resolving conflict. (T/F)

F

Because activities are organized according to the way work is actually performed, a divisional structure by process is similar to the matrix structure. (T/F)

F

Concerning managing and resolving conflict, defusion includes such actions as ignoring the problem in hopes that the conflict will resolve itself. (T/F)

F

Conflict of any kind is avoidable in organizations. (T/F)

F

Effective strategy formulation can usually guarantee successful strategy implementation. (T/F)

F

Holding a meeting at which conflicting parties present their views and work through their differences is a part of the diffusion strategy of managing conflict. (T/F)

F

Horizontal consistency is more important than vertical consistency in developing annual objectives. (T/F)

F

In 2004, salaries and bonuses of CEOs in the USA decreased by 5%. (T/F)

F

In 2004, the highest paid CEO was Steve Jobs from Apple Computer. (T/F)

F

In terms of number of employees, restructuring usually involves increasing the size of the firm. (T/F)

F

Strategies clarify what can and cannot be done in pursuit of an organization's objectives. (T/F)

F

Strategy formulation is the managing of forces during the action, whereas strategy implementation is the positioning of forces before the action. (T/F)

F

Tasks and activities are grouped together by buisness function in a divisional organizational structure (T/F)

F

The fastest of all approaches to implement change is the rational change strategy. (T/F)

F

The focus of restructuring is changing the way work is actually carried out. (T/F)

F

The rational change strategy is one that presents information to convince people of the need for change. (T/F)

F

When developing an organizational chart, the top executive of the firm should be reserved for the president. (T/F)

F

With a divisional structure, it is possible that compeititon between divisions may become so intense that leads to improved sharing of ideas and resourcews for the common good of the firm. (T/F)

F

With the matrix structure it is common for functional resources to be duplicated. (T/F)

F

MO

Maintenance officer

Primary reason why divisional and functional managers should be involved as much as possible in strategy-formulation and strategy-implementation activities

Managers and employees are motivated more by perceived self interests than by organizational interests

Resource allocation

a central strategy implementation activity that entails distributing financial, physical, human and technological assets to allow for strategy execution

Conflict

a disagreement between two or more parties on one or more issues

Bonus System

a form of incentive compensation whereby employees and/or managers receive a year-end or period-end reward, usually cash, based on some organizational performance criteria such as sales, profit, production efficiency, quality, and safey; used to motivate individuals to support strategy-implementation efforts

Gain Sharing

a form of incentive compensation whereby employees and/or managers receive bonuses when actual results exceed some pre-determined performance targets

Profit Sharing

a form of incentive compensation whereby some of a firm's earnings are distributed to employees/managers based on some pre-determined formula; used to motivate individuals to support strategy-implementation efforts

Force change strategy

a management technique to facilitate a firm adapting to new strategies/ policies/situations by simply giving orders and enforcing those orders; has the advantage of being fast, but is plagued by low commitment

Self-interest change strategy

a management technique to facilitate a firm to new strategies/policies/situations by attempts to convince individuals that the change is to their personal advantage. When this appeal is successful, strategy implementation can be relatively easy. However, implementation changes are seldom to everyone's advantage.

Educative change strategy

a management technique to facilitate a firm to new strategies/policies/situations by presenting to employees/managers information that reveals why the firm needs to do ewhat is to be done; this approach can be slow but oftentimes yields high commitment

Confrontation

a method for reducing conflict exemplified by exchanging members of conflicting parties so that each can gain an appreciation of the other's point of view, or holding a meeting at which conflicting parties present their views and work through their diferences

Defusion

a method for reducing conflict includes playing down differences between conflicting parties while accentuating similarities and common interests, or compromising so that there is either a clear winner nor loser, or resorting to majority rule, or appealing to a higher authority or redesigning present positions

Avoidance

a method for reducing conflict through such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals (or groups).

Resistance to change

a natural human tendency to be wary of new policies/strategies due to potential negative consequences; if not managed then this could result in sabotaging production machines, absenteeism, filing unfounded grievances, and an unwillingness to cooperate

Six Sigma

a quality boosting process improvement technique that entails training several key persons in techniques to monitor, measure, and improve processes and eliminate defects in a firm; trained persons can earn blackbelts

Functional Structure

a type of organizational design that groups tasks and activities by business function, such as production/operations, marketing, finance/accounting, research and development, and management information systems

Benchmarking

an analytical tool used to determine how a firm's value chain activities compare to rival firms in order to better gain and sustain competitive advantages

Divisional structure by geographic area

appropriate for organizations whose strategies need to be tailored to fit the particular needs and characteristics of customers in different geographic areas EX: Hershey Foods

Strategy formulation A. is managing forces during the action B. focuses on effectiveness c. is primarily an operational process d. requires coordination among many people e. all of the above

b. focuses on effectiveness

Which term is best defined as a central management activity that allows for strategy execution? A. policy-making B. goal-setting C. establishing annual objectives D. Resource allocation E. conflict

d. resource allocation

annual objectives

desired targets to achieve; used to focus/direct/channel efforts and activites of organization members. They (1) represent the basis for allocating resources; (2) are a primary mechanism for evaluating managers; (3) are the major instrument for monitoring progress toward achieving long-term objectives; and (4) establish organizational, divisional, and departmental priorities

How medium firms tend to be structured:

divisionally structured (decentralized)

Other names for restructuring

downsizing, rightsizing, delayering

Divisional structure by process

evaluated on profits and revenues

The most widely used organizational structure

functional or centralized

How small firms tend to be structured:

functionally structured (centralized)

HRM

human resources manager

Strategic Business Unit (SBU)

in multi-divisional organizations, this structure can greatly facilitate strategy-implementation efforts EX: Halliburton

These terms and phrases should be avoided

maximize, minimize, as soon as possible, and adequate

Annual objectives should be

measurable, consistent, reasonable, challenging, clear, communicated throughout the organizaation, characterized by an appropriate time dimension, and accompanied b commensurate rewards and sanctions

Restructuring

modifying the firm's chain of command and reporting channels to improve effiency and effectiveness

horizontal consistency of objectives

objectives need to be compatible across functions; for example if marketing wants to sell 10% more than production must produce 10% more

For a matrix structure to be effective:

organizations need participative planning, training, clear mutual understanding of roles and responsibilities, excellent internal communication, and mutual trust and confidence

In organizations that do not use a strategic-management approach to decision making, resource allocation is often based on

political or personal factors

Other names for reengineering

process management, process innovation, or process redesign

Objectives should state

quantity, quality, cost, and time and should be verifiable

This change strategy is the most desireable

rational/self interest change

Reengineering

reconfiguring or redesigning work, jobs, and processes in a firm, for the purpose of improving cost, quality, service and speed

The real value of any resource allocation program lies in the

resulting accomplishment of an organizations' objectives

Policy

specific guidelines, methods, procedures, rules, forms and administrative practices established to support and encourage work toward stated goals

Structure influences

strategy