Business Acumen
Business intelligence
Ability to use information to gain a deeper understanding of an organization and make sound business decisions.
A large clothing company has a bad reputation because of its hiring practices, its treatment of employees, and its lack of support to the communities it operates in. The CEO and senior managers are known to make decisions based solely on revenue potential, without regard for the impact it may have on society. In fact, the CEO has commented several times that investing money in anything other than operations is a bad business strategy and unethical in terms of the company's obligation to its investors. Recently, major suppliers for the company, located outside the company's home country, were accused of unethical labor practices, unsafe workplace conditions, and possible human rights violations. This has become a public relations nightmare. Several groups have called for boycotts against the company. At the last shareholders' phone conference, several institutional investors expressed their displeasure with management's failure to respond strongly to the problems with suppliers. The CEO expressed his belief that critics were being unrealistic about their expectations for the suppliers. In fact, they were themselves insensitive to business practices and local norms in these countries. Concerned with the negative publicity and lacking confidence in the CEO's response to it, the company's board of directors requests that the CHRO immediately be given the task of formulating a committee to audit the company's operating practices, its employer branding, and its attitude on social issues. This action would at least show that the company has heard the criticisms. The CEO immediately goes to the CHRO's office and angrily says that the CHRO will be showing disloyalty if the CHRO conducts this audit. The CHRO had been one of the CEO's first hires. How should the CHRO respond to this situation?
Accept the board's assignment, explaining to the CEO the board's power to order this. Rationale: The CHRO has an ethical obligation to fulfill the appropriate request from the board and to disregard personal ties to the CEO
What budgeting method is based on how much it costs to perform different enterprise activities and allocates funding according to the strategic significance of the activities?
Activity-based Rationale: Activity-based budgeting recognizes the interrelationships among various activities required to create value in an organization. It is based on how much it costs to perform different enterprise activities. Funding may be allocated based on the strategic significance of the activities.
A small company is in the start-up phase of the organizational life cycle. The owner has been hiring talent and compensating employees at high levels but not offering a benefits package. As the organization grows and more employees are hired, the owner is being pressured to implement a benefits package in addition to direct compensation. The owner is not knowledgeable about benefits and has made the decision to hire an HR generalist to handle benefits and other HR functions. The HR generalist's first priority is to make recommendations about a benefits package that will attract and retain top talent while being fiscally responsible. The growth plan for the organization is to grow globally and engage in a global recruitment, selection, and hiring strategy. The HR generalist needs to create a total compensation package that will be relevant in all locations globally. The HR generalist has conducted an employee survey asking questions about the types of benefits employees want. The survey results indicate that employees are seeking ways to balance their work life with their home life. How should the HR generalist handle this feedback?
Align offered benefits with the organizational strategy, culture, and employee desires. Rationale: it ensures that the benefits match the organization's strategy and culture.
Equity
Amount of owners' or shareholders' portion of a business.
What is a business case?
Analysis of a problem and possible solutions Rationale: A business case is a request for the allocation of resources to implement a solution to a problem or a plan to take advantage of an opportunity. Strong business cases are aligned with the organization's strategy and include a cost-benefit analysis of alternative solutions to the problem or opportunity, including taking no action. The business case usually includes discussion of risks. A cost-benefit analysis is not a business case but is an important part of a business case. Market research may be an input into the business case analysis. A scenario-based test would project the results of a business plan under differents sets of variables (e.g., supply prices, market share).
An HR specialist prepares a business case to support an initiative. The case includes descriptions of the project's goals, benefits, method, budget, and time line. Which information is required to complete the business case?
Analysis of the initiative's possible risks Rationale: The business case should include some discussion of possible risks and approaches to managing them. Detailed descriptions and plans are not appropriate for this audience. Endorsements are not usually part of a business case, but it would certainly be a good idea to encourage supporters to communicate to management their reasons for support.
A clothing retail company with three locations in a popular beach resort area has been in business for over three years. There are two similar retailers in the same beach town competing for the same customers and labor pool. Recently the company has had extensive growth due to a new clothing design. Despite the growth in sales, their turnover is high. Employees do not stay longer than 90 days, as the competition is enticing sales staff away. Turnover is now affecting their customer satisfaction and increasing the workload on the remaining staff. Most of the management staff started as sales floor employees and received little to no management training. One of the key criteria used in promoting staff is their success on the sales floor, leading to complaints of internal selection unfairness. Recent exit interviews suggest low morale, poor leadership, and lack of work/life balance as the top three reasons for leaving the company. Knowing that there are plans to launch two new product lines in the near future, the CEO has asked the HR director to search and find a new supplier to provide new employee orientation for all new sales staff. Twenty companies have submitted requests for proposals, and the CEO wants a short list to be presented in the next two days. What action should the HR director take first to create a robust workforce plan that addresses the expected organizational growth?
Analyze current labor trends along with internal staffing metrics to ensure appropriate staffing levels to meet expected organizational growth. Rationale: The best strategy should consider both internal and external influences for better alignment with organizational growth.
A renowned financial institution, a former leader in the financial market, is now facing decelerated growth. Its product portfolio lacks innovation compared to that of competitors. Although the institution was once a favorite place to work, recently HR has been facing issues attracting top talent, and time-to-hire metrics have deteriorated. A technology gap between the leadership and the employees is beginning to widen. The founder, who is very sales-oriented, is not an early adopter when it comes to technology. Since his client relationships all began with face-to-face contact, he is wary that technology removes the personal element. To create a more collaborative culture and social learning environment, the HR talent development lead (TDL) wants to foster a culture of learning and innovation. This will require a change in corporate culture and a significant investment in new technology. Despite a recent upgrade, the learning management system (LMS) still feels outdated, sluggish, and static. The TDL believes that a new LMS with more powerful social learning technologies will be critical for attracting and retaining top talent, capturing the attention of a broader and rapidly changing demographic, and meeting their demands. The workforce is around 40% Millennials, compared with 10% just five years ago. The TDL understands that cross-functional collaboration will be required to sort out the features needed to support the organization's learning management system. What is the best way to organize the right cross-functional team?
Assemble a team including senior functional leaders and younger managers with an interest in diversity and innovation. Rationale: The team should include senior leaders and younger leaders who represent the spectrum of LMS users as well as the spectrum of potential mentors and collaborators. Assembling a team of experts will provide more efficient use of time and resources.
A small company is in the start-up phase of the organizational life cycle. The owner has been hiring talent and compensating employees at high levels but not offering a benefits package. As the organization grows and more employees are hired, the owner is being pressured to implement a benefits package in addition to direct compensation. The owner is not knowledgeable about benefits and has made the decision to hire an HR generalist to handle benefits and other HR functions. The HR generalist's first priority is to make recommendations about a benefits package that will attract and retain top talent while being fiscally responsible. The growth plan for the organization is to grow globally and engage in a global recruitment, selection, and hiring strategy. The HR generalist needs to create a total compensation package that will be relevant in all locations globally. A new employee is hired who is not married but who has a domestic partner. Currently, the organization's health insurance covers spouses but not domestic partners. The new employee has requested that the partner be covered through the organization's health insurance. How should the HR generalist handle the request?
Audit the current policy for fairness and present a business case to the owner to change the rule. Rationale: Through research, the HR generalist can learn the reason for the rule. Then, if possible, he can present a business case to change the rule if it makes good business sense.
An HR data analyst uses internal and external data and translates it into meaningful information to support an operations decision to relocate a distribution center to another state. What term best describes the data analyst's activity?
Business intelligence Rationale: Business intelligence allows analysts to retrieve timely, accurate, and complete data and transform that into accurate, actionable information to support decision making.
Enterprise resource planning (ERP)
Business management software, usually a suite of integrated applications, that a company can use to collect, store, manage, and interpret data from many business activities.
Which is the most appropriate use of online analytical processing?
Calculating a company's use of leave to determine the effective value of its leave policy over the past five years Rationale: The number of data points and the period of time will identify trends in the use of leave. Other factors could influence how successful new candidates will be and the employee promotion rate. There aren't enough data points to suggest the use of online analytical processing when measuring the employee turnover rate.
A nonprofit social services organization has experienced rapid growth and is expanding services into new markets. The number of social service professionals in the organization has doubled in two years. At the same time, performance and service quality assessments are showing quality regression as the organization expands. The CEO and the executive committee are worried about the decline in performance and service quality levels. They suspect the issue is due to the quality of new hires and/or a lack of incentive among employees. Until recently, the organization has been managing HR functions with a small team of two employees. However, leadership has approved the hire of an experienced HR manager to improve HR processes in hopes to reverse the downward trend of performance and service quality. The new HR manager begins to tackle the issue by conducting an internal analysis to diagnose the root causes of the service quality decline. The analysis uncovers several critical problem areas to be addressed, including vague job descriptions, a lack of formal orientation, low base pay, an ineffective performance review program, and the lack of a recognition and awards program. The required changes identified by the HR manager will require additional resources and significant financial investment. One of the members of the executive committee proposes that it is best to terminate all current employees and start over with new ones who are better qualified, with the belief that starting from scratch would be cheaper than fixing the problems as they stand now. What action should the HR manager take in order to ensure that employees understand what is expected of them and how the new performance management system will work?
Conduct a communication campaign that includes ongoing communications for all employees and training for supervisors to reinforce with their direct reports. Rationale: When managing a change, ensuring effective communication throughout the organization is critical for success. A two-pronged approach helps ensure that the right level of detail is being communicated based on the individuals' roles and the degree of impact the new program will have. The centralized messages are generic and relevant to the entire organization. Training the supervisors and managers enables them to deliver specific messages to each of their direct reports individually to help them understand the impact and what the change means to them.
A small company is in the start-up phase of the organizational life cycle. The owner has been hiring talent and compensating employees at high levels but not offering a benefits package. As the organization grows and more employees are hired, the owner is being pressured to implement a benefits package in addition to direct compensation. The owner is not knowledgeable about benefits and has made the decision to hire an HR generalist to handle benefits and other HR functions. The HR generalist's first priority is to make recommendations about a benefits package that will attract and retain top talent while being fiscally responsible. The growth plan for the organization is to grow globally and engage in a global recruitment, selection, and hiring strategy. The HR generalist needs to create a total compensation package that will be relevant in all locations globally. The benefits package was implemented 12 months ago, and the HR generalist has been asked by the owner to provide feedback regarding the success of the package. What is the first step in providing this feedback?
Conduct a gap analysis and a utilization review. Rationale: A gap analysis should be conducted to identify whether the benefits are in line with the organization's strategy.
A clothing retail company with three locations in a popular beach resort area has been in business for over three years. There are two similar retailers in the same beach town competing for the same customers and labor pool. Recently the company has had extensive growth due to a new clothing design. Despite the growth in sales, their turnover is high. Employees do not stay longer than 90 days, as the competition is enticing sales staff away. Turnover is now affecting their customer satisfaction and increasing the workload on the remaining staff. Most of the management staff started as sales floor employees and received little to no management training. One of the key criteria used in promoting staff is their success on the sales floor, leading to complaints of internal selection unfairness. Recent exit interviews suggest low morale, poor leadership, and lack of work/life balance as the top three reasons for leaving the company. Knowing that there are plans to launch two new product lines in the near future, the CEO has asked the HR director to search and find a new supplier to provide new employee orientation for all new sales staff. Twenty companies have submitted requests for proposals, and the CEO wants a short list to be presented in the next two days. Based on the current turnover and lack of management training, what should the HR director do first as part of a needs analysis?
Conduct a job analysis for all management positions to ensure that job descriptions and specifications are appropriate. Rationale: This should always be the first step in designing any training. Having a good understanding of the job is a critical piece of training design.
A renowned financial institution, a former leader in the financial market, is now facing decelerated growth. Its product portfolio lacks innovation compared to that of competitors. Although the institution was once a favorite place to work, recently HR has been facing issues attracting top talent, and time-to-hire metrics have deteriorated. A technology gap between the leadership and the employees is beginning to widen. The founder, who is very sales-oriented, is not an early adopter when it comes to technology. Since his client relationships all began with face-to-face contact, he is wary that technology removes the personal element. To create a more collaborative culture and social learning environment, the HR talent development lead (TDL) wants to foster a culture of learning and innovation. This will require a change in corporate culture and a significant investment in new technology. Despite a recent upgrade, the learning management system (LMS) still feels outdated, sluggish, and static. The TDL believes that a new LMS with more powerful social learning technologies will be critical for attracting and retaining top talent, capturing the attention of a broader and rapidly changing demographic, and meeting their demands. The workforce is around 40% Millennials, compared with 10% just five years ago. How can the TDL ensure that the LMS is consistently and widely used and supports the cost of investment?
Create an effective communication plan so employees are aware of the benefits the new LMS offers and implement incentives for using the LMS. Rationale: For the LMS to be consistently used, employees must be aware of its capabilities. In addition to awareness, employees will need training to capitalize on the benefits. For an incentive to use the LMS, adding a performance measurement to job descriptions may provide the right nudge.
What are the key components of a business intelligence system?
Data gathering, data warehousing, query and reporting Rationale: A business intelligence system has three components: a means to gather information from various data collection points, a secure means of storing or warehousing data so that it is available to users, and the means to analyze the data via queries and reports.
A nonprofit social services organization has experienced rapid growth and is expanding services into new markets. The number of social service professionals in the organization has doubled in two years. At the same time, performance and service quality assessments are showing quality regression as the organization expands. The CEO and the executive committee are worried about the decline in performance and service quality levels. They suspect the issue is due to the quality of new hires and/or a lack of incentive among employees. Until recently, the organization has been managing HR functions with a small team of two employees. However, leadership has approved the hire of an experienced HR manager to improve HR processes in hopes to reverse the downward trend of performance and service quality. The new HR manager begins to tackle the issue by conducting an internal analysis to diagnose the root causes of the service quality decline. The analysis uncovers several critical problem areas to be addressed, including vague job descriptions, a lack of formal orientation, low base pay, an ineffective performance review program, and the lack of a recognition and awards program. The required changes identified by the HR manager will require additional resources and significant financial investment. One of the members of the executive committee proposes that it is best to terminate all current employees and start over with new ones who are better qualified, with the belief that starting from scratch would be cheaper than fixing the problems as they stand now. How should the HR manager respond to the executive who proposes to terminate current employees and start over by hiring new employees?
Demonstrate the projected costs for the proposed solution, including costs related to building a new workforce vs. training the existing workforce. Rationale: It is important to present the HR business case for a change in terms of financial benefits and return on investment (ROI). Part of the ROI analysis should include scenarios of different options or solutions, including the costs of rebuilding the workforce vs. training the current workforce. This response would provide the executive committee member with a hard-data comparison of the options being considered.
A clothing retail company with three locations in a popular beach resort area has been in business for over three years. There are two similar retailers in the same beach town competing for the same customers and labor pool. Recently the company has had extensive growth due to a new clothing design. Despite the growth in sales, their turnover is high. Employees do not stay longer than 90 days, as the competition is enticing sales staff away. Turnover is now affecting their customer satisfaction and increasing the workload on the remaining staff. Most of the management staff started as sales floor employees and received little to no management training. One of the key criteria used in promoting staff is their success on the sales floor, leading to complaints of internal selection unfairness. Recent exit interviews suggest low morale, poor leadership, and lack of work/life balance as the top three reasons for leaving the company. Knowing that there are plans to launch two new product lines in the near future, the CEO has asked the HR director to search and find a new supplier to provide new employee orientation for all new sales staff. Twenty companies have submitted requests for proposals, and the CEO wants a short list to be presented in the next two days. What steps should the HR director take to develop a short list of possible training vendors?
Determine, with the CEO, key criteria that should be considered, using this information to narrow the search. Rationale: The CEO may, based on hands-on experience in the company, have specific concerns that need to be addressed. Additionally the HR director may have some ideas about how the course should be designed and delivered in the future. Combining both viewpoints can create an informed and well-structured process of short listing.
A nonprofit social services organization has experienced rapid growth and is expanding services into new markets. The number of social service professionals in the organization has doubled in two years. At the same time, performance and service quality assessments are showing quality regression as the organization expands. The CEO and the executive committee are worried about the decline in performance and service quality levels. They suspect the issue is due to the quality of new hires and/or a lack of incentive among employees. Until recently, the organization has been managing HR functions with a small team of two employees. However, leadership has approved the hire of an experienced HR manager to improve HR processes in hopes to reverse the downward trend of performance and service quality. The new HR manager begins to tackle the issue by conducting an internal analysis to diagnose the root causes of the service quality decline. The analysis uncovers several critical problem areas to be addressed, including vague job descriptions, a lack of formal orientation, low base pay, an ineffective performance review program, and the lack of a recognition and awards program. The required changes identified by the HR manager will require additional resources and significant financial investment. One of the members of the executive committee proposes that it is best to terminate all current employees and start over with new ones who are better qualified, with the belief that starting from scratch would be cheaper than fixing the problems as they stand now. The HR manager has identified several HR problems that need to be solved. What should the HR manager do first?
Develop and propose a talent management strategy to hire and train qualified staff, establish performance expectations, and reward high-performing employees. Rationale: It is important for HR to demonstrate its strategic value by developing solutions and an overall approach that will address all identified problem areas and will lead to achieving business objectives.
Value chain
The process by which an organization creates the product or service it offers to the customer.
A clothing retail company with three locations in a popular beach resort area has been in business for over three years. There are two similar retailers in the same beach town competing for the same customers and labor pool. Recently the company has had extensive growth due to a new clothing design. Despite the growth in sales, their turnover is high. Employees do not stay longer than 90 days, as the competition is enticing sales staff away. Turnover is now affecting their customer satisfaction and increasing the workload on the remaining staff. Most of the management staff started as sales floor employees and received little to no management training. One of the key criteria used in promoting staff is their success on the sales floor, leading to complaints of internal selection unfairness. Recent exit interviews suggest low morale, poor leadership, and lack of work/life balance as the top three reasons for leaving the company. Knowing that there are plans to launch two new product lines in the near future, the CEO has asked the HR director to search and find a new supplier to provide new employee orientation for all new sales staff. Twenty companies have submitted requests for proposals, and the CEO wants a short list to be presented in the next two days. An applicant from a local competitor has offered to give the HR director information on the previous employer's salary and benefits upon hire. What action should the HR director take in response to this offer?
Do not hire the candidate, indicating that the company does not participate in unethical behavior. Rationale: The applicant is using leverage to get a position. Once hired, this person may use similar tactics in the new workplace. Moreover, hiring the applicant would be unethical.
What type of analytical task would be best served by online analytical processing (OLAP)?
Exploring the types of variables that may be affecting attendance rates Rationale: OLAP allows the analyst to sort data quickly in different ways, according to different and multiple variables. A conventional relational database would be sufficient to identify a trend in one factor or numbers in different departments. A cost-effectiveness analysis could be done on a spreadsheet.
Assets
Financial, physical, and sometimes intangible properties an organization owns.
In a value chain, which business function is likely to be closest to the customer?
Fulfillment Rationale: The value chain sequences the activities (inside and outside the organization) that are required to deliver a product/service (value) to a customer. Fulfillment is the last function completed before the product or service reaches the customer.
A small company is in the start-up phase of the organizational life cycle. The owner has been hiring talent and compensating employees at high levels but not offering a benefits package. As the organization grows and more employees are hired, the owner is being pressured to implement a benefits package in addition to direct compensation. The owner is not knowledgeable about benefits and has made the decision to hire an HR generalist to handle benefits and other HR functions. The HR generalist's first priority is to make recommendations about a benefits package that will attract and retain top talent while being fiscally responsible. The growth plan for the organization is to grow globally and engage in a global recruitment, selection, and hiring strategy. The HR generalist needs to create a total compensation package that will be relevant in all locations globally. The HR generalist is charged with recommending a benefits package that will attract and retain talent. How should he begin the process?
Gather data through a needs assessment to identify what benefits are needed and match them to the overall organizational strategy. Rationale: The needs assessment is the first step. This will identify the benefits required and those that are consistent with the mission of the organization.
An organization has moved to larger facilities and doubled its workforce. However, it still experiences problems with back orders, which results in customer dissatisfaction. What phase of the organization/product life cycle is the organization probably in?
Growth Rationale: The growth phase is characterized by change and expansion in terms of facilities, marketing, and people. These resources are needed to keep up with the demand for products or services. This phase is often accompanied by backlogs and scheduling problems while the organization adjusts to increased demands.
The annual loss ratio for a company's health plan is a staggering 158%. The head of HR has been asked by the CEO to propose changes to the plan that will lower costs while retaining as many of the current benefits as possible. An actuarial review reveals that the riders for dental and prescription drug coverage account for 84% of the plan's claims and that three employees in a workforce of 91 account for 73% of the claims. After reviewing a series of benefit options, the head of HR decides that the best option is a plan that doubles the deductibles on the dental and prescription benefits while also lowering the maximum reimbursement coverage by 25%. She makes a presentation outlining this suggestion to the company's executive committee. After a brief discussion of the rationale and the merits, the chief operating officer mentions that the company should announce the plan's changes to employees immediately. The head of HR responds that doing so would risk defeating the purpose of the changes. Without further discussion, the executive committee proceeds to vote and accepts the changes to become effective upon plan renewal the following month. Two months after the introduction of the new plan, it is discovered that two employees made bulk prescription purchases (a six-month supply) one week prior to the changes in the benefit plan going into effect. This seems a peculiar coincidence, and the head of HR suspects a leak of confidential information. What is the first step the head of HR should take to handle the suspected leak of confidential information?
HR should confidentially interview the employees who used the benefits just prior to the changes to assess their rationale. Rationale: The first step should be to make no assumptions and use a due process, least disruptive approach, starting by gathering evidence from the first verifiable source of the leak.
Accounts payable
Money an organization owes its vendors and suppliers.
Accounts receivable
Money an organization's customers owe the organization.
A large clothing company has a bad reputation because of its hiring practices, its treatment of employees, and its lack of support to the communities it operates in. The CEO and senior managers are known to make decisions based solely on revenue potential, without regard for the impact it may have on society. In fact, the CEO has commented several times that investing money in anything other than operations is a bad business strategy and unethical in terms of the company's obligation to its investors. Recently, major suppliers for the company, located outside the company's home country, were accused of unethical labor practices, unsafe workplace conditions, and possible human rights violations. This has become a public relations nightmare. Several groups have called for boycotts against the company. At the last shareholders' phone conference, several institutional investors expressed their displeasure with management's failure to respond strongly to the problems with suppliers. The CEO expressed his belief that critics were being unrealistic about their expectations for the suppliers. In fact, they were themselves insensitive to business practices and local norms in these countries. Concerned with the negative publicity and lacking confidence in the CEO's response to it, the company's board of directors requests that the CHRO immediately be given the task of formulating a committee to audit the company's operating practices, its employer branding, and its attitude on social issues. This action would at least show that the company has heard the criticisms. While the company's leadership is struggling with this issue, the CHRO receives an urgent call from the global head of recruiting. Recruiters report that their appearance at job fairs has been met with what seems to be organized demonstrations. The fairs have produced very few prospective candidates. The recruiting head asks what the CHRO wants them to do. How should the CHRO respond?
Hold off on appearances at job fairs for now and focus on using recruiting firms. Rationale: Since this aspect of the recruitment strategy is not producing results and is probably damaging the recruiting team's engagement, it would be best to revise the strategy for now.
The annual loss ratio for a company's health plan is a staggering 158%. The head of HR has been asked by the CEO to propose changes to the plan that will lower costs while retaining as many of the current benefits as possible. An actuarial review reveals that the riders for dental and prescription drug coverage account for 84% of the plan's claims and that three employees in a workforce of 91 account for 73% of the claims. After reviewing a series of benefit options, the head of HR decides that the best option is a plan that doubles the deductibles on the dental and prescription benefits while also lowering the maximum reimbursement coverage by 25%. She makes a presentation outlining this suggestion to the company's executive committee. After a brief discussion of the rationale and the merits, the chief operating officer mentions that the company should announce the plan's changes to employees immediately. The head of HR responds that doing so would risk defeating the purpose of the changes. Without further discussion, the executive committee proceeds to vote and accepts the changes to become effective upon plan renewal the following month. Two months after the introduction of the new plan, it is discovered that two employees made bulk prescription purchases (a six-month supply) one week prior to the changes in the benefit plan going into effect. This seems a peculiar coincidence, and the head of HR suspects a leak of confidential information. Why should the company remain with the benefit provider?
If benefit entitlements remain similar, finding and using a new benefit provider would not address the root cause as measured by the loss ratio. Rationale: It demonstrates an understanding of both the short- and long-term issues.
The annual loss ratio for a company's health plan is a staggering 158%. The head of HR has been asked by the CEO to propose changes to the plan that will lower costs while retaining as many of the current benefits as possible. An actuarial review reveals that the riders for dental and prescription drug coverage account for 84% of the plan's claims and that three employees in a workforce of 91 account for 73% of the claims. After reviewing a series of benefit options, the head of HR decides that the best option is a plan that doubles the deductibles on the dental and prescription benefits while also lowering the maximum reimbursement coverage by 25%. She makes a presentation outlining this suggestion to the company's executive committee. After a brief discussion of the rationale and the merits, the chief operating officer mentions that the company should announce the plan's changes to employees immediately. The head of HR responds that doing so would risk defeating the purpose of the changes. Without further discussion, the executive committee proceeds to vote and accepts the changes to become effective upon plan renewal the following month. Two months after the introduction of the new plan, it is discovered that two employees made bulk prescription purchases (a six-month supply) one week prior to the changes in the benefit plan going into effect. This seems a peculiar coincidence, and the head of HR suspects a leak of confidential information. Why would announcing any plan changes to employees in this way be problematic?
Incentivizing use just prior to a change could increase the loss ratio even further, requiring even more funding adjustments to make the plan sustainable. Rationale: It demonstrates a superior understanding of the cause-and-effect relationship between a plan's use and its funding. It also incorporates the moral hazard associated with asymmetric information (one side having more information than the other).
What financial document lists the revenues, expenses, and profits of an organization for a designated period of time?
Income statement Rationale: The income statement shows revenues, expenses, and profits for the organization. The balance sheet shows its assets, liabilities, and shareholders' equity.
What form of budgeting uses the prior year's budget as the basis for the next budget?
Incremental budgeting Rationale: Incremental or line-item budgeting uses the previous year's budget. The prior budget is simply increased by a set percentage. Additional funds are requested based on need and objectives.
A company has reached a point of stability in its internal processes and ways of doing business. What stage of the life cycle characterizes this company?
Maturity Rationale: As an industry, organization, or product matures, problems are largely resolved. In an organization, staffing and culture begin to stabilize, and the rate of change levels off. Policies, procedures, and rules are formalized and communicated to all employees. Training is emphasized, and labor cost control becomes a factor.
HR and talent management ask a talent acquisition specialist to provide an analysis that explores hiring and turnover trends across demographics, performance levels, and promotion histories. Which is the best tool to obtain this information?
Online analytical processing (OLAP) Rationale: OLAP applications have the ability to produce a time series illustrating trends while also comparing multiple sets of data within one report. The other responses would provide only some of the necessary data; additional analysis would be required.
Liabilities
Organization's debts and other financial obligations.
Business case
Presentation to management that establishes that a specific problem exists and argues for a proposed solution.
Online analytical processing (OLAP)
Processing applications that store data in a multidimensional "cube," which enables users to analyze data quickly in a variety of different ways.
A nonprofit social services organization has experienced rapid growth and is expanding services into new markets. The number of social service professionals in the organization has doubled in two years. At the same time, performance and service quality assessments are showing quality regression as the organization expands. The CEO and the executive committee are worried about the decline in performance and service quality levels. They suspect the issue is due to the quality of new hires and/or a lack of incentive among employees. Until recently, the organization has been managing HR functions with a small team of two employees. However, leadership has approved the hire of an experienced HR manager to improve HR processes in hopes to reverse the downward trend of performance and service quality. The new HR manager begins to tackle the issue by conducting an internal analysis to diagnose the root causes of the service quality decline. The analysis uncovers several critical problem areas to be addressed, including vague job descriptions, a lack of formal orientation, low base pay, an ineffective performance review program, and the lack of a recognition and awards program. The required changes identified by the HR manager will require additional resources and significant financial investment. One of the members of the executive committee proposes that it is best to terminate all current employees and start over with new ones who are better qualified, with the belief that starting from scratch would be cheaper than fixing the problems as they stand now. The HR manager needs to define key metrics to show the return on investment for the proposed HR solutions. Which of the following would be the most critical indicator?
Quality of service Rationale: The HR problems were originally identified by the CEO and the executive committee because of the decline in the quality of service. This has been established as the critical metric to measure the performance and success of the organization.
Gross profit margin
Ratio of gross profit to net sales.
Net profit margin
Ratio of net income (gross sales minus expenses and taxes) to net sales.
Which approach to offsetting a downturn is often used by companies in the decline phase of their life cycle?
Reducing costs Rationale: Decline occurs when an industry, organization, or product begins to experience a sustained drop in demand. When the decline is apparent, leadership often may introduce cost reduction measures.
A large clothing company has a bad reputation because of its hiring practices, its treatment of employees, and its lack of support to the communities it operates in. The CEO and senior managers are known to make decisions based solely on revenue potential, without regard for the impact it may have on society. In fact, the CEO has commented several times that investing money in anything other than operations is a bad business strategy and unethical in terms of the company's obligation to its investors. Recently, major suppliers for the company, located outside the company's home country, were accused of unethical labor practices, unsafe workplace conditions, and possible human rights violations. This has become a public relations nightmare. Several groups have called for boycotts against the company. At the last shareholders' phone conference, several institutional investors expressed their displeasure with management's failure to respond strongly to the problems with suppliers. The CEO expressed his belief that critics were being unrealistic about their expectations for the suppliers. In fact, they were themselves insensitive to business practices and local norms in these countries. Concerned with the negative publicity and lacking confidence in the CEO's response to it, the company's board of directors requests that the CHRO immediately be given the task of formulating a committee to audit the company's operating practices, its employer branding, and its attitude on social issues. This action would at least show that the company has heard the criticisms. What would be the most effective tactic in persuading the CEO to accept the audit?
Refer to examples of competitors who have met both financial and corporate social responsibility (CSR) objectives. Rationale: Since he is primarily interested in financial performance, the CEO needs to see evidence that financial objectives can successfully coexist with CSR objectives.
A renowned financial institution, a former leader in the financial market, is now facing decelerated growth. Its product portfolio lacks innovation compared to that of competitors. Although the institution was once a favorite place to work, recently HR has been facing issues attracting top talent, and time-to-hire metrics have deteriorated. A technology gap between the leadership and the employees is beginning to widen. The founder, who is very sales-oriented, is not an early adopter when it comes to technology. Since his client relationships all began with face-to-face contact, he is wary that technology removes the personal element. To create a more collaborative culture and social learning environment, the HR talent development lead (TDL) wants to foster a culture of learning and innovation. This will require a change in corporate culture and a significant investment in new technology. Despite a recent upgrade, the learning management system (LMS) still feels outdated, sluggish, and static. The TDL believes that a new LMS with more powerful social learning technologies will be critical for attracting and retaining top talent, capturing the attention of a broader and rapidly changing demographic, and meeting their demands. The workforce is around 40% Millennials, compared with 10% just five years ago. The TDL knows that championing creativity and innovation in a risk-averse industry is a challenge because this behavior is usually not promoted or rewarded. How should the talent development lead position the proposed LMS to gain leadership commitment for investing in this new technology?
Show how the LMS can effectively use technology, trends, and innovations to support the organizational strategy. Rationale: The TDL should develop knowledge about LMS applications that directly support the organizational strategy.
Cash flow statement
Statement of an organization's ability to meet its current and short-term obligations, showing incoming and outgoing cash and cash reserves in operations, investments, and financing.
Balance sheet
Statement of an organization's financial position at a specific point in time, showing assets, liabilities, and shareholder equity.
Income statement
Statement that reports revenues, expenses, and profits for a specified period of time, for example, quarterly or annually.
Value
The benefit created when an organization meets its strategic goals; measure of usefulness, worth, or importance.
How is Porter's "Five Forces" framework used in developing strategies?
To understand competitive factors that influence the strategy Rationale: Porter's "Five Forces" framework helps strategists understand the competitive forces at work in their industries so that they can assess the strengths and weaknesses of their own competitive position.
What is the best description of an information system portal?
User's point of access to system data and applications Rationale: An information system portal is the point of entry for a user into an information system. The system does not need to be web-hosted. It may provide access to the system's search engine, but it is not a search engine. It may be customized to users.
What is the most accurate characterization of business value?
Value may be different in different organizations. Rationale: Because value is tied to an organization's mission, the definition of value will vary. It may not be solely financial and may depend on internal assessment rather than external judges. The need to create the desired value must be communicated to and understood by the entire organization.
The annual loss ratio for a company's health plan is a staggering 158%. The head of HR has been asked by the CEO to propose changes to the plan that will lower costs while retaining as many of the current benefits as possible. An actuarial review reveals that the riders for dental and prescription drug coverage account for 84% of the plan's claims and that three employees in a workforce of 91 account for 73% of the claims. After reviewing a series of benefit options, the head of HR decides that the best option is a plan that doubles the deductibles on the dental and prescription benefits while also lowering the maximum reimbursement coverage by 25%. She makes a presentation outlining this suggestion to the company's executive committee. After a brief discussion of the rationale and the merits, the chief operating officer mentions that the company should announce the plan's changes to employees immediately. The head of HR responds that doing so would risk defeating the purpose of the changes. Without further discussion, the executive committee proceeds to vote and accepts the changes to become effective upon plan renewal the following month. Two months after the introduction of the new plan, it is discovered that two employees made bulk prescription purchases (a six-month supply) one week prior to the changes in the benefit plan going into effect. This seems a peculiar coincidence, and the head of HR suspects a leak of confidential information. How should the company react to the employees who are using the benefits excessively?
Wait until the plan changes are in effect and then hold a company-wide meeting using aggregated data to explain why the changes are necessary. Rationale: It educates all employees while addressing the root cause and avoids allocating blame after the fact.
Which budgeting method is being used by a manager who begins with no allocated budget and must justify allocations based on how the function will contribute to the organization's strategic goals?
Zero-based budgeting Rationale: Zero-based budgeting requires all managers to start at zero. A department must justify its entire budget and show how its funding will help the organization to meet its goals. In zero-based budgeting, all operations are given a priority rating, each unit or goal is ranked, and funds are given in order of the ranking.