Deck 12: Decision Rights: The Level of Empowerment

Question 1

In addition to other factors, the increased use of technology and the reduced costs of information transfer from local office to corporate headquarters has:

A) significantly increased the need for centralized decision making.
B) only brought about increased costs to decentralization.
C) reduced needs for middle managers and increased the scope of local decision making powers.
D) shown that technology has little impact on the centralization issue.

Answer 1

C

Question 2

Always Round Tire has service stores in many parts of the country. The stores in Tennessee have petitioned for local store manager independence. The managers claim that since Memphis, Nashville, and Knoxville are hundreds of miles apart that each manager is really in a separate market and needs to deal with local marketing, sales, and pricing issues. What issues would need to be considered before giving these local managers the authority that they are requesting?

Answer 2

The company should consider how well the managers' performance can be measured and monitored. There may be agency costs of decentralization, although with the stores all located in Tennessee, these costs may be low. Coordination costs such as coordinating inventory among the stores may also rise under this change. Local managers may not have good access to centralized information such as customer databases, pricing expertise, etc. to be able to make wise pricing decisions.

Question 3

Decentralizing decision rights marries authority with local knowledge. This would seem to be a good thing, but a problem that may arise is that:

A) local management may conserve central management's time and effort.
B) local knowledge may allow local managers to tailor prices and services to local needs
C) lack of local incentives may mean that local managers do not work to maximize firm value.
D) local managers may have too strong a corporate identification.

Answer 3

C

Question 4

Under what conditions will decentralization be beneficial?

Question 5

Jobs have at least two important dimensions:

A) tasks and uncertainty.
B) tasks and decision authority.
C) uncertainty and decision control.
D) decision authority and decision control.

Question 6

In his seminar in Organizational Economics, Professor Chang always uses study teams for presentation of outside research materials. He has found that three students per team tend to work well. Walking into a new class, he finds that registration has allowed 60 students to sign up. He decides to increase the team size from 3 to 8 students. What problems can he expect to deal with during the semester?

Question 7

Which of the following is not a benefit to decentralization of corporate decision-making?

A) Incentive problems
B) More effective use of local knowledge
C) Conservation of time of senior management
D) Training and motivation for local managers

Question 8

If D represents the level of decentralization of corporate decision-making, then Benefits = B*D and Costs = A*D + C*D². The optimal level of decentralization occurs where the:

A) horizontal distance between benefits and costs is greatest.
B) vertical distance between benefits and costs is greatest.
C) sum of the squares of the distance between benefits and costs is minimized.
D) level of benefits is greatest.

Question 9

Macrosoft is implementing a new research and design shop to integrate PC manufacturers' requirements for new computer software with Macrosoft's operating system. The process of integration usually requires five different kinds of software modification tasks, plus decisions about integrating these modifications. Discuss the problems of designing the new jobs in this research and design shop.

Question 10

Kevin Freeman is the head of a team developing plastic knee replacements. Each member of the team brings specialized knowledge to the innovation process. Without both engineers and materials specialists, the project could not be successful. This an example of the:

A) benefits of use of dispersed knowledge.
B) costs of employee of buy-in.
C) costs of collective action problems.
D) problem of the free rider.

Question 11

You are assigned a group project for the class, and you will be graded as a group, and your individual grade will be decided on the group's performance relative to other groups. Will you like this arrangement?

Question 12

Kevin Freeman is the head of a team developing plastic knee replacements. Each member of the team brings specialized knowledge to the innovation process. Kevin noticed that the specialist on bone/artificial materials compatibility is always late to meetings and contributes little. This an example of the:

A) benefits of the use of dispersed knowledge.
B) costs of employee of buy-in.
C) costs of collective action problems.
D) problem of the free rider.

Question 13

What are some of the demerits of decentralization?

Question 14

Decentralized decision-making is very controversial in a corporate environment. Central office managers feel like they are losing control of managers in specific plants or regional offices. What are some of the issues that must be reviewed before making the final decision on where to place final decision-making power?

Question 15

Which of the following is not a cost of decentralization of corporate decision-making?

A) Incentive problems
B) Coordination costs and failures
C) Less effective use of central information
D) More effective use of local knowledge

Question 16

If D represents the level of decentralization of corporate decision-making, then Benefits = B*D and Costs = A*D + C*D². The optimal level of decentralization occurs where:

A) Benefits = Costs
B) Costs are equal to zero
C) D = BD - Ad - CD²
D) D = (B-A)/2C

Question 17

Plain Truth Adverting employs KPR, a large accounting firm, to audit its books each year. This involves considerable expense for the advertising firm, since its sales account managers are very independent and maintain separate record keeping systems. Should the CEO at Plain Truth cancel the audit and rely on a brief year-end summary from each sales account manager? Why?

Question 18

What are influence costs, and why do they inhibit efficient organizational design?

Question 19

Firms grant decision rights to teams of employees for all of the following reasons except to:

A) manage activities
B) make products
C) make basic investment decisions
D) recommend actions

Question 20

A job in sales - such as a sales representative for an agricultural chemical company - usually represents:

A) many tasks and little sales authority.
B) few tasks and very little sales authority.
C) many tasks and a lot of sales authority.
D) few tasks and a lot of sales authority.

Question 21

Boundary setting refers to:
A. managers requesting permission to ratify every decision made by an empowered worker.
B. managers preratifying certain decisions made by empowered workers within a certain range, while still maintaining supervisory control.
C. managers preratifying certain decisions made by empowered workers within a certain range, while still maintaining supervisory control.
D. workers setting up rules of empowerment that might influence their decision making authority.

Question 22

We say that a firm is vertically integrated if:

A) it makes a lot of its own outputs.
B) it makes a lot of its own inputs.
C) it centralizes all output decisions but decentralizes pricing decisions.
D) it decentralizes all input purchases but centralizes output levels.

Question 23

Kevin Freeman's artificial knee research team has discovered an improved materials handling procedure that reduces contamination of the product during assembly. The issue for the company is:

A) how this specific knowledge can be transferred to the company's whole production process.
B) whether or not this specific knowledge can be implemented in the knee team's process.
C) not important, because all new knowledge is always transferred to general corporate use.
D) not important, since this specific knowledge can be kept secret and capitalized later

Question 24

Centralized decision-making is most commonly found in:

A) firms that are expanding into other geographical areas.
B) stable industrial environments.
C) emerging economies and industries.
D) highly vertically integrated firms.

Question 25

Decision management is made up of:

A) initiation and ratification of projects.
B) implementation and monitoring of projects.
C) ratification and monitoring of projects.
D) initiation and implementation of projects.

Question 26

The issue with centralization versus decentralization is:

A) that centralization is always better because one person controls all information.
B) that it is difficult to find out whether one is better than the other in the hierarchy.
C) that decentralization is always better because many people can split the tasks.
D) that it is always easy to find out which is better but not all may agree.

Question 27

Which one of the following is not a benefit of decentralization:

A) effective use of local knowledge.
B) possibility to shirk, enjoy the credit from free riding.
C) conservation of management time.
D) possibility to increase motivation and productivity.

Question 28

If an employee makes a point of stopping each morning in his manager's office to detail the positive outcomes yesterday's work, this is an example of:

A) project initiation.
B) influence costs.
C) project monitoring.
D) decentralization of decision-making.

Question 29

If decision makers do not bear the major wealth effects of decisions, then:

A) the same person in the management structure must hold decision management and decision control.
B) separate decision makers must hold decision management and decision control.
C) decision management is clearly integrated with decision control.
D) the same managers hold initiation and ratification of decisions.

Question 30

Bob is given the right to make a decision. This is an example of:

A) decentralized decision making.
B) centralized decision making.
C) bundling.
D) a nonstandard practice within a hierarchy.

Question 31

Empowerment may be a problem because:

A) managers are never eager to empower anyone else except themselves.
B) managers are usually ambiguous when it comes to empowerment.
C) workers are always eager to empower themselves even though they are usually unqualified.
D) managers are usually very eager to empower those who are least qualified.

Question 32

Each year, most US companies bring a CPA firm to audit their books. This is an example of:

A) how most companies do not trust their managers.
B) separation of decision management and decision control.
C) the impact of influence costs.
D) the benefits of decentralization or outsourcing.

Question 33

Incentive problems are usually:

A) larger, the further up the organization the decision rights are placed.
B) larger, the further down the organization the decision rights are placed.
C) smaller, the further down the organization the decision rights are placed.
D) larger regardless of where the decision rights are placed.

Question 34

An empowered employee has:

A) explicit rights to initiate but not implement any decision.
B) explicit rights to initiate and implement any decision, subject to manager's ratification and monitoring.
C) explicit rights to initiate and implement any decision, sans manager's ratification and monitoring.
D) explicit rights to implement but not initiate any decision.

Question 35

Which of the following is an example of excessive influencing activities?

A) Informing the manufacturing division of defects in a shipment.
B) Estimating the elasticity of demand for your firm's product.
C) Cancelling a meeting with a client to golf with your superiors.
D) Taking clients out to dinner.

Question 36

Decision control is made up of:

A) initiation and ratification of projects.
B) implementation and monitoring of projects.
C) ratification and monitoring of projects.
D) initiation and implementation of projects.

Question 37

The use of hierarchies is common in the modern corporation:

A) because of the principle of comparative advantage.
B) because of the principle of separation of decision management and decision control.
C) to avoid collective action problems.
D) to enhance employee buy-in.