Deck 7: Organization Structure and Management Systems: the Fundamentals of Strategy Implementation

Question 1

What does the "agency problem" mean?

Answer 1

An agency relationship is defined as a situation where a third party (the principal) contracts with another party (the agent) to act on behalf of the principal for a remuneration.
This situation describes a general framework within which the relationship between owners and managers of a firm appears as a specific case.
Because the agent has access to sensitive and complete information, because the agent has powerful leverage to influence the firm's strategy, and because sometimes the interests of the owners may differ from the interest of the managers, a problem may arise: how can the owners make sure that the managers are always acting in their best interest and that they are not entering into over-risky behaviors or undertaking strategic actions in a self-serving way?
Several responses exist within the firm, essentially around different mechanisms:
1-Managers' compensation aligning the two parties' interests
2-The controlling role of the Board of directors
3-The concentration of capital contributing to the emergence of strong and attentive stockholders
4-The external mechanism of corporate market where an underperforming firm faces the risk of being acquired by a raider or another firm
5-Shared values within the firm

Question 2

Financial systems:

A)Focus only on the budgetary process
B)Only address two main aspects of the lifeblood of the firm: capital expenditures and operating expenses
C)Cannot provide an accurate snapshot of the firm regarding its financial overall position
D)Are the primary mechanism through which top managers seek to control the firm

Answer 2

D

Question 3

The Ch'in dynasty of China in 220BC was:

A)A large administrative hierarchy acting as a bureaucracy
B)A strong theocracy
C)An extremely large bureaucracy
D)An old adhocracy

Answer 3

A

Question 4

Corporate culture:

A)Was invented by management consultants twenty years ago and is not relevant anymore
B)Encompasses the common beliefs, shared values, and behavioral norms of the organization
C)Consists of the recipes built over time for success in an industry or a firm
D)Exists at different levels of the firm.

Question 5

The Standard Oil (US), Mitsui, and the British South Africa companies were organized under a:

A)Functional structure
B)Holding structure
C)Divisional structure
D)Matrix structure

Question 6

What is a networks structure? What would be an example of such a structure?

Question 7

Organizational networks are generally composed of:

A)Friends and professional contacts
B)Individuals connected via online facilities such as Facebook.
C)Mainly small and closely interdependent, specialized firms that cooperate to design and produce products, often under the aegis of a much larger central coordinator firm.
D)Organizations connected through professional associations

Question 8

What are interdependence and its impact on organizational structure?

Question 9

The most important element in a strategic management process is:

A)The simplicity of the process
B)The speed of the process
C)The dialog, commitment and consensus generated by the process
D)The profitability of the firm

Question 10

The description of pin manufacture was an illustration of:

A)Henry Ford's organizational principles with the Ford T
B)Henry Mintzberg's division of labor and need for coordination
C)Dupont and Sears Roebuck's organizational forms in the 1940s
D)Adam Smith's specialization and division of labor

Question 11

Why have firms transformed their organizational structure over time?

Question 12

Why is a matrix structure more efficient?

Question 13

Corporate culture

A)Can be manipulated over time by the CEO and the HR department
B)Is a property of the organization, which may or may not be of use as a mechanism for assisting co-operation.
C)Is determined by careful psychometric evaluation at the recruitment stage.
D)"Eats strategy for lunch".

Question 14

The disaster of the Spanish armada attack of England, and the failure of the DaimlerBenz-Chrysler merger illustrate:

A)The difficulty of implementing strategy and the strength of the connection between strategy formulation and implementation
B)The importance of collecting information about the enemy or the potential partner before taking action
C)The weaknesses of the respective leaders of these organizations
D)The fragility of a firm's strengths that could be nullified by the enemy or partner

Question 15

What was the 1952 Mandela Plan for the ANC?

Question 16

Apple and General Motors have both shifted:

A)From a divisional structure to a functional structure
B)From a functional structure to a divisional structure
C)From a bureaucracy to an organic structure
D)From a matrix structure to a divisional structure

Question 17

How can we define an organizational structure?

Question 18

Human resource management systems are key because:

A)Motivating human resources appears to be difficult for top managers
B)The firm's performance and actions ultimately depend on people
C)People can leave the organization and file law suits against it
D)Human resources are the lever to increase cooperation within the firm

Question 19

Project-based forms of structure can be found in industries such as:

A)Movie industry, automobile manufacturing, and consumer electronics
B)Oil exploration, consulting, and mass retailing
C)Construction, consulting, and engineering
D)Oil exploration, mass retailing, and pharmaceutical industry

Question 20

Are financial incentives always positive for a firm?

Question 21

Does it make sense for a firm to revert to a functional structure?

A)Maybe. It depends whether such a change is appropriate in the prevailing circumstances
B)Yes. The traditional functional structure has stood the test of time.
C)No. It's a retrograde step.
D)Yes, if part of a retrenchment strategy.

Question 22

Strategic planning systems:

A)Are not used anymore because they have been heavily criticized, for example by Mintzberg
B)Are an important vehicle for bringing consistency within the firm but encourage internal competition and conflicts
C)Are the preserve of top managers only for confidentiality reasons
D)Vary considerably from one firm to another with regards to dimensions such as the frequency of cycle, the autonomy of units and the autocracy of the corporate centre.

Question 23

Max Weber's system of bureaucracy can be defined as:

A)An organization which is generally associated with large state agencies
B)An organization where productivity and efficiency are poor
C)A convenient term to refer to large organizations but without any precise meaning
D)An organizational hierarchy operating via standardized rules and procedures, with little or no room for creativity.

Question 24

Economies of scale, learning, and standardization of control systems are:

A)Additional factors influencing the definition of organizational units, over and above co-ordination issues.
B)The most important factors influencing the definition of organizational units
C)Factors that build competitive advantage
D)Implementation levers

Question 25

The functional structure is conducive to:

A)A high degree of centralized control from the CEO and top managers
B)The goals and behavioral norms of departments within the organization
C)Functional lines
D)Functional processes linked to physical operations

Question 26

Tasks, products geography, and processes are:

A)Dimensions that serve as a basis for grouping employees into organizational units
B)Strategic dimensions for building the strategic formula at the corporate level
C)Dimensions used to define organizational units
D)Dimensions used to build international structures

Question 27

In practice, matrix structures tend to:

A)Lead to excessive complexity
B)Slow down the decision-making processes
C)Result in many political battles between managers
D)All of the above

Question 28

An agency relationship exists when:

A)Organizational departments create and pursue their own goals at the expense of the overall corporate interests
B)Managers are not running the firm in the best interests of its owners
C)A principal contracts with an agent to act on behalf of the principal
D)An agent does not act in the best interest of the principal

Question 29

For firms organized around functional structure, the real problems arise when:

A)Top managers must envision their succession
B)The firm grows its range of products and businesses
C)Divisions cannot communicate to each other
D)The economy is in bad shape

Question 30

The multi-divisional structure emerged as part of:

A)Expansion and growth within a firm
B)Increasing competition within industries
C)Consolidation of industries
D)Diversification of large firms in the early 20th century.

Question 31

At the "reciprocal" level of interdependence:

A)Individuals are mutually dependent
B)Individuals operate independently
C)The output of one individual is the input of the next
D)Individuals expect to be assisted in return if they assist a colleague

Question 32

Routines are:

A)Random sequences of actions that become institutionalized within the organization
B)Regular, predictable and familiar sequences of coordinated actions by individuals
C)Predictable sequences of uncoordinated actions across organizational units
D)Regular sequences of coordinated actions by mutual adjustment across individuals

Question 33

The critical issue in organizational design is to:

A)Increase the speed of response of top management, which is overloaded with information from lower levels
B)Increase efficiency and responsiveness to external change
C)Divide labor in a coherent and relevant manner
D)Adapt to the environment's speed of change

Question 34

"Pooled", "sequential", and "reciprocal" are levels of:

A)Organizational interdependence
B)Interdependence among individuals analyzed by HR managers
C)Strategic interdependence with suppliers, customers, and partners
D)The speed of change of strategic interdependence

Question 35

An analogy to illustrate the adaptability of modular organizational structures may be:

A)A car in which the gearbox can be replaced with an updated design, without needing to alter the rest of the car.
B)A car in which the rear seats fold down to make more space for luggage.
C)A car manufactured in several stages.
D)Confusing

Question 36

Architectural knowledge is:

A)The knowledge about how to link together specialized knowledge from different fields
B)The ability to build a system for managing knowledge, such as a sophisticated data base and exchange systems
C)An emerging aspect of organizational learning mentioned in recent academic literature
D)A and C above

Question 37

Strict matrix structures, with equal emphasis on different organizational dimensions:

A)Are leading to increased complexity.
B)Put extra emphasis on the geography and product dimensions
C)Are rarely efficient and have been abandoned by most of the firms who originally espoused them.
D)Lead to less political in-fighting than the Functional and Divisional structures

Question 38

According to Burns and Stalker's two organizational forms, mechanistic and organic, their relative merits:

A)Depend on the activities at stake and the stability of the environment
B)Are unclear and depend largely on top managers
C)Are immaterial, since there is no choice involved.
D)Depend on the technologies employed in the industry

Question 39

Large divisionalized firms are organized in three levels:

A)Corporate R&D department, central administrative departments, and business units
B)Corporate center, integrative departments, and business centers
C)Corporate center, divisions, and business units
D)Corporate headquarters, business units, and organizational gatekeepers

Question 40

Management systems provide:

A)The means to run a firm effectively and efficiently while minimizing human intervention
B)Informational mechanisms and financial mechanisms to provide resources to a firm at any price
C)Control for stakeholders in general and pressure for employees
D)Mechanisms for communication, decision-making, and control to achieve a balance between coordination and cooperation

Question 41

The pioneers of the multidivisional structure were:

A)General Electric and General Motors
B)Standard Oil and Mitsui
C)Sears Roebuck and Shell
D)DuPont and General Motors

Question 42

According to Mintzberg, structure can be defined simply as:

A)The ways in which labor is divided into distinct tasks, and coordination is achieved among these tasks
B)The ways in which tasks are divided among divisions, and managerial coordination achieved from the highest level of the organization
C)A set of resources and capabilities organized around divisions and departments
D)The achievement of coordination and cooperation between organizational tasks

Question 43

To enhance a better alignment between the interests of the organization's owners and those of its managers:

A)Results in control mechanisms which still produce negative results
B)Is an ongoing issue of corporate governance
C)Rests on financial incentives being sufficiently lucrative.
D)Uses corporate culture as a risky tool that managers do not master well

Question 44

According to Chandler, the critical transformations that led to modern corporations are:

A)The development of a line-and-staff structure, and the extension of activities to a broader geographical area
B)The extension of activities to a broader geographical area, and growth through acquisitions
C)The development of a line-and-staff structure, and the emergence of functional and later, divisional structures.
D)The development of divisions and decentralization of power to the lower levels of the organization

Question 45

The epithet "Great strategy; lousy implementation" implies that:

A)Strategic failures are mostly due to mistakes by middle and low managers
B)Formulation and implementation of strategy cannot be separated
C)Just formulating a good strategy is insufficient.
D)B and C above

Question 46

Management writer Tom Peters stated that "strategy follows structure". Others say the opposite. More accurately;

A)Strategy and structure are interdependent
B)Structure is a key component of strategy implementation
C)Strategy formulation and implementation cannot be separated
D)All of the above

Question 47

Organizational design is about:

A)Selecting the right people at the right place
B)Determining the best criteria for department groupings
C)Developing unique structures for matching capabilities to external opportunities
D)Selecting structures, systems, and management styles that can best implement strategies

Question 48

The shift to shared service organizations, the use of alliances and partnerships, and the delayering of hierarchies were aimed at improving:

A)Market share and reputational assets
B)Speed and decentralization
C)Responsiveness and flexibility
D)Flexibility and lower costs

Question 49

An advantage of the systems view of hierarchy is:

A)Its simplicity
B)It economizes on coordination
C)It enables adaptability because subsystems can change more readily
D)Both b and c

Question 50

A fundamental challenge of managing a large firm is to achieve an optimal trade-off between:

A)Cooperation and division of unqualified labor
B)Division of labor and efficiency
C)Division of labour, specialisation, co-ordination and co-operation.
D)Cooperation, coordination and profit.

Question 51

Many principles of management are derived from the military because:

A)The military was really interested in managing large organizations
B)The first books on management were written by high ranking officers
C)Organizations behave in the same way as national armies, and can be managed with identical principles
D)Prior to the development of business education, the military were the training ground for most business leaders, and most ideas about running large organizations were based on the military.

Question 52

The fact that a corporation has a legal identity distinct from its members:

A)Does not entail any specific consequence
B)Facilitates the growth of large organisations comprising thousands of employees.
C)Enables the corporation to have large numbers of owners, and its ownership to be transferred
D)B and C above

Question 53

Specialization enables:

A)Gains of effectiveness for the whole organization
B)Huge gains in productivity for the organization, and hence also per individual worker.
C)Control over individuals
D)Cost of coordination

Question 54

Roles and directives, mutual adjustment, and routines are:

A)Only organizational devices that every firm has to use
B)Means for controlling employees in an organization
C)Means for people to build a hierarchy within the firm
D)Means for achieving required levels of coordination between workers

Question 55

The agency problem refers to:

A)The risk that the agent does not behave in the principal's interest
B)Problems that occur between a corporate headquarters and its branches or heads of divisions
C)Top managers' unethical and fraudulent behaviors
D)The problem with using outside contractors.

Question 56

Hierarchy is a feature of:

A)Social systems
B)Almost all complex systems
C)Biology
D)Organizations only

Question 57

The emergence and proliferation of the business corporation depended upon:

A)Laws to permit the existence of a separate legal entity for such a corporation.
B)Laws permitting limited liability.
C)The development of effective structures to manage organisations comprising thousands of people.
D)All of the above

Question 58

To chose a coordination mechanism, managers must look at:

A)The types of activity and the intensity of collaboration needed
B)The level of complexity of the task and the general level of prices in the market
C)The intensity of collaboration required and the willingness of employees to support their use
D)The types of activities and the size of the market

Question 59

Adaptability, as one advantage of hierarchy, requires:

A)Flexibility
B)Some degree of decomposability
C)Manager commitment
D)Financial resources

Question 60

Shared values are an example of:

A)Industry beliefs and corporate recipes
B)A mechanism which can sometimes be used by management to achieve goal alignment within organizations as an alternative to hierarchical control.
C)The opposite of monetary performance incentives
D)An ordinary component of the organization

Question 61

Until the late nineteenth century nearly all firms were small and family owned, and located in just one place.

Question 62

Adhocracy is a structure where values, motivation, and willingness to participate, mutual respect, and communication effectiveness allow a high level of coordination that limits the need for formal control

Question 63

Most strategists agree that strategy implementation and management can be even more important than strategy formulation

Question 64

The basic design for complex organizations is hierarchy

Question 65

Nelson Mandela's organizational redesign of the ANC illustrates the disadvantages of hierarchical structures in achieving coordination and adaptability. .

Question 66

Economies of scale are a factor that could impact the definition of organizational units

Question 67

The multidivisional and the divisional structures are the same

Question 68

"Structure follows Strategy" is the correct view.

Question 69

By the 1920's, several large industrial enterprises replaced their functional and holding company structures with multi-divisional structures.

Question 70

The fundamental problem of large organizations is that specialisation leads to lack of co-ordination.

Question 71

In the capitalist economy, production is organized in two ways: in markets, by the price mechanism, and in firms, by managerial direction

Question 72

Human resources management systems are used to incentivize and monitor employees so that they are aligned with and capable of achieving the firm's goals.

Question 73

Corporate culture is nowadays something which can be predictably molded as an effective control mechanism.

Question 74

Team-based and project-based organizations are not considered to be types of structures

Question 75

Some of the main bases for grouping employees within an organization are tasks, products, geography, and process because these make natural sense in terms of the need for employees to interact.

Question 76

The matrix structures came to the fore in the 1960's and 1970's in order to simply the management of multinational, multi-product companies

Question 77

A general trend regarding control in organizations is the emphasis on a better integration of management systems

Question 78

Much of the world's production of goods and services is undertaken by corporations, which are entities legally distinct from their members:

A)This depends on how this production is measured
B)This is true if we except the Roman Catholic church and national armies
C)This is not true
D)This is true

Question 79

Which of the following statements is correct?

A)Markets are organized by the "invisible hand" of price mechanisms, whereas firms are organized by the "visible hand" of management
B)Markets are organized by the "visible hand" of price mechanisms, whereas firms are organized by the "invisible hand" of management
C)Firms and markets are two institutions that comprise the capitalist economy
D)Answers a and c

Question 80

Strategic planning systems are in fact embedded in top managers' minds because of the complexity and the confidentiality of the topic