Deck 10: Achieving Organizational Control

Question 1

PepsiCo recently received the Alexander Graham Bell Award for Entrepreneurship.

Answer 1

False

Question 2

PepsiCo conducts an annual survey of about 100 senior executives to help demonstrate the condition of its control culture.

Answer 2

True

Question 3

Control involves the processes for ensuring that behaviors and performance conform to an organization's standards and legal requirements, including its rules, policies, procedures, and goals.

Answer 3

True

Question 4

Planning prescribes desired behaviors and results, while controls help maintain or redirect actual behaviors and results.

Question 5

In most modern corporations, planning and control are substitutes for each other.

Question 6

Strategic action is a primary source of control in most organizations.

Question 7

Pressure from a union for an organization to change is an example of stakeholder control.

Question 8

Group controls comprise the norms and values that group or team members share and maintain through rewards and punishments.

Question 9

Objective controls encompass all of the behavior and goals desired by the organization.

Question 10

Employees of PepsiCo may not accept a gift, favor, or payment of any kind from an individual which conducts business with PepsiCo, unless the value is less than $500.

Question 11

At PepsiCo, giving gifts or entertainment to governmental officials and employees is highly regulated and often prohibited.

Question 12

The corrective control model eliminates deviations from an organization's established standards.

Question 13

The first phase in the corrective control model is to define the system.

Question 14

The external control model is a process for detecting and eliminating or reducing deviations from an organization's established standards.

Question 15

A formal control system might be created and maintained for an employee, a department, a process, or an entire organization.

Question 16

Pareto's principle holds that a small number of characteristics always account for a large number of effects.

Question 17

The principle of selectivity is also known as Keyne's law.

Question 18

Monitors are criteria for evaluating qualitative and quantitative characteristics and should be set for each characteristic measured.

Question 19

There are three functional areas of controls performance standards.

Question 20

When formal controls put an emphasis on punishment, strong group controls may emerge to distort the information reported to management.

Question 21

When identifying the key characteristics needed for efficient operations, a manager decides that it is important to determine if there is a difference between what is happening at the company and what should be happening. This manager is involved in the sixth phase of the corrective control model.

Question 22

Fannie Mae is a private company that raises funds from corporations and purchases mortgages from investors.

Question 23

The OFHEO report found that Fannie doctored its earnings for six years so that top executives could collect hundreds of millions of dollars in bonuses.

Question 24

There are five primary types of organizational control: mechanistic, organic, market, financial, and automation.

Question 25

Organic controls rely on a centralized authority structure.

Question 26

Market controls emerged from clan culture.

Question 27

Sarah Greer is a manager at Nokia. Recently she has been informed that some of the telephone operators have been very rude to customers seeking assistance. In order to confirm whether or not this is true, Greer approves of a plan to randomly record the conversations of her operators. This is known as customer monitoring.

Question 28

Financial control includes the mechanisms for preventing or correcting the misuse and misallocation of resources.

Question 29

Budgetary control involves selecting two significant figures, expressing their relationship as a fraction, and comparing its value for two periods of time or with the same ratio of similar organizations.

Question 30

Budgeting is a form of market control.

Question 31

Budgeting has one primary purpose: to assist in allocating resources.

Question 32

A sales budget is a forecast of expected revenues, generally stated by product line on a monthly basis.

Question 33

Western Container Corporation manufactures bottle-making machines.

Question 34

At Western Container Corporation, a number of significant changes were made to the budgeting process, including the plants getting ownership of their budget.

Question 35

Proxy statements are documents stating the rules of internal governance for a corporation as adopted by its board of directors.

Question 36

Conflicts of interest are included in the general provisions of the Sarbanes-Oxley Act.

Question 37

Criminal penalties for destroying, concealing, covering up, or falsifying records or documents may result in individual fines, imprisonment for up to 20 years, or both.

Question 38

Departmental law judges hear cases of discrimination or retaliation at the Department of Labor.

Question 39

An independent board of directors' member would be a person who has worked for the company, but not in the last three years.

Question 40

The board of directors is responsible if executives are allowed to be overpaid.

Question 41

Fiduciary responsibility ensures a corporate environment of strong internal controls, fiscal accountability, high ethical standards, and compliance with all applicable laws and regulations.

Question 42

Board of directors' member Rachel Hoff has a duty to exercise fiduciary responsibility. This means that Hoff can be fined if the organization breaks the law.

Question 43

The Board of Directors of PepsiCo provides general advice and counsel to the Corporation's CEO and senior executives.

Question 44

Major sections of the corporate governance guidelines for the board of directors of PepsiCo address organizational competitive strategies.

Question 45

PepsiCo implemented multilevel web-based training programs around the world that tests understanding of:

A) insider trading
B) sexual harassment
C) safety
D) all of the above

Question 46

PepsiCo conducts an annual survey to help demonstrate the condition of its control culture. The questionnaire probes:

A) employee evaluation
B) incident reporting
C) objective setting
D) all of the above

Question 47

One of PepsiCo's strongest corporate governance attributes is its _____________ that, if needed, can keep management in check.

A) stock options
B) diversified product mix
C) independent corporate board
D) internal board of directors

Question 48

Piyush Patel is the manager of a group of convenience stores. He has installed surveillance cameras on the fuel pump islands. For Patel, video monitoring is a means of __________ customers.

A) controlling
B) restraining
C) manipulating
D) watching

Question 49

A key factor in PepsiCo's receipt of the Alexander Hamilton Corporate Governance Award was its focus on the development of and continued use of effective ___________ controls.

A) corrective
B) preventive
C) security-based
D) profile-based

Question 50

Given the 21^st-century's ever-present threats of terrorism, governments and business firms have substantially accelerated their use of __________ controls.

A) incentive-based
B) organic-based
C) security-based
D) profile-based

Question 51

___________ involves the processes for ensuring that behaviors and decisions conform to an organization's standards and legal requirements, including rules, policies, procedures, and goals.

A) Organizational structure
B) Monitoring
C) Control
D) Planning

Question 52

The need for controls can be illustrated in the way control interacts with planning. One example of this interaction is the fact that planning prescribes __________ behaviors while controls help to maintain or redirect _________ behaviors.

A) correct; incorrect
B) desired; actual
C) process-oriented; result-oriented
D) long-term; short-term

Question 53

Control systems in organizations __________.

A) have a negative connotation to most people
B) are both useful and necessary
C) should interact with planning activities
D) all of the above

Question 54

Juanita Montez is concerned that her company needs to take some steps to ensure that the actions of workers conform to the expectations of the company. Montez is advocating the implementation of a(n) __________.

A) automated network
B) stakeholder education program
C) control system
D) none of the above

Question 55

Mechanisms that are intended to reduce the likelihood of an unwanted event and thereby minimize the need for corrective action are known as __________ controls.

A) predictive
B) preventive
C) invasive
D) organic

Question 56

Controls help maintain or redirect __________ behaviors and results.

A) planned
B) desired
C) forecasted
D) actual

Question 57

All of the following are examples of preventive controls except __________.

A) rules and regulations
B) recruitment and selection procedures
C) retirement incentives
D) training and development programs

Question 58

__________ controls are mechanisms intended to reduce or eliminate unwanted behaviors or results and thereby return the situation to conformity with the organization's regulations and standards.

A) Corrective
B) Interactive
C) Punitive
D) Reactive

Question 59

Maria Sacasa works as a manager at a diamond mine. Because there is a great incentive for the miners to steal some of the diamonds they find, Sacasa spends a great deal of time and effort recruiting, selecting, and training only those workers who are less likely to steal from the firm. Sacasa is relying on __________ controls.

A) corrective
B) preventive
C) organic
D) machine

Question 60

Jeff Washam has been given the responsibility to reduce behaviors of employees that are outside of those allowed by company rules and regulations. Washam will probably rely on __________ controls.

A) recruitment
B) corrective
C) financial
D) stakeholder

Question 61

PepsiCo developed an Internet-based reporting process and established a dedicated international phone lines so that international employees can more easily report misconduct. These are examples of _____________ controls.

A) corrective
B) external
C) individual
D) cost-benefit

Question 62

__________ is (are) not one of the four primary sources of control in most organizations.

A) Stakeholders
B) Competitors
C) The organization itself
D) Groups

Question 63

__________ control refers to pressures on organizations from outside sources, such as governmental agents and customers, to change the organization's behaviors.

A) Stakeholder
B) Media
C) Shareholder
D) Consensus

Question 64

The U.S. Environmental Protection Agency ________________.

A) develops and enforces regulations that implement environmental laws enacted by Congress
B) researches and sets national standards for a variety of environmental programs
C) issues sanctions and takes other steps to assist the states and Indian tribes in reaching the desired levels of environmental quality
D) all of the above

Question 65

At a university, the management class is required to write a ten-page term paper. Alia Wakil and her friends discovered that two of her classmates were cheating by using term papers written by other students in other courses. Instead of telling the teacher, Wakil and her friends confronted the two students and convinced them not to cheat. This type of control is best described as a(n) __________ source of control.

A) organizational
B) group
C) organic
D) ethical

Question 66

The formal rules and procedures for preventing or correcting deviations from plans and for achieving desired goals are also known as a(n) __________ controls.

A) community
B) stakeholder
C) organizational
D) proactive

Question 67

A(n) __________ control refers to the norms and values that team members share and maintain through rewards and punishments.

A) peer-pressure
B) group
C) adaptive reinforcement
D) behavioral

Question 68

__________ control consists of the guiding mechanisms that operate consciously and unconsciously within each person.

A) Individual self-
B) Ethical
C) Moral
D) Self-actualization

Question 69

To be effective, control systems should be __________.

A) acceptable
B) objective
C) complete
D) all of the above

Question 70

A(n) __________ control is impartial and cannot be manipulated by employees for personal gain.

A) self-monitoring
B) legitimate
C) objective
D) clan

Question 71

__________ controls are recognized as necessary and appropriate.

A) Formal
B) Unqualified
C) Bureaucratic
D) Acceptable

Question 72

Dylan Wymann is the CEO of the DMW Corporation. At the annual banquet, Wymann praised the supervisor of the marketing division for minimizing costs through reducing errors at work. Wymann said the marketing department completely met all its projected goals by providing objective rules that were applied in a timely manner. Thus, only the __________ criterion for effective control systems was not mentioned.

A) subjectivity
B) ethical
C) acceptability
D) financial

Question 73

One way to assess the amount of needed formal organizational controls is to examine __________.

A) appropriateness
B) objectiveness
C) acceptability
D) costs and benefits

Question 74

At PepsiCo, employees cannot accept a gift, favor, or special treatment from an individual or corporation which conducts or seeks to conduct business with PepsiCo, unless:

A) it would be consistent with good business practices
B) public disclosure of the transaction would not embarrass PepsiCo
C) it could not be considered a business inducement
D) all of the above

Question 75

Giving gifts to ______________ and employees is highly regulated and often prohibited at PepsiCo.

A) shareholders
B) government officials
C) customers
D) actors

Question 76

Cost-benefit analysis suggests that __________.

A) benefits increase as controls increase
B) beyond a certain point, effectiveness declines with further increases in the amount of control exercised
C) costs outweigh benefits if a group control is used when an organizational control was needed
D) effectiveness and costs are not related

Question 77

One way to develop effective, formal organizational controls is to use a cost-benefit analysis. A cost-benefit analysis addresses each of the following questions except __________.

A) For what desired behaviors and results should organizational controls be developed?
B) What are the costs and benefits of the control system required to achieve the organization's desired behaviors and results?
C) What chance does a competitor have of creating a better control system?
D) What are the costs and benefits associated with alternative control systems?

Question 78

The component(s) of internal control include:

A) risk assessment
B) information and communication
C) monitoring
D) all of the above

Question 79

After calculating the savings and expenditures related to the implementation of a new computer assembly machine, Murdock Construction Company realized that after a certain point adding any more machines would actually result in a decrease in profitability. Murdock Construction probably made this determination using a(n) __________.

A) cost-benefit analysis
B) expert system
C) pay-down chart
D) proforma balance sheet

Question 80

The __________ is a process for detecting and eliminating or reducing deviations from an organization's established standards.

A) punitive reinforcement model
B) adaptive result model
C) corrective control model
D) organic control model