Deck 9: Strategic Control and Corporate Governance

Question 1

Continuous monitoring is associated with many benefits including that changes in the competitive environment can be identified early, giving the organization better ability to respond accordingly.

Answer 1

True
Explanation: The benefits of continuous monitoring are evident and include: time lags are dramatically shortened, changes in the competitive environment are detected earlier, and the ability of the organization to respond with speed and flexibility is enhanced.

Question 2

Once a strong and healthy organizational culture has been established, it becomes self-sustaining.

Answer 2

False
Explanation: Powerful organizational cultures just do not happen overnight, and they do not remain in place without a strong commitment, both in terms of words and deeds, by leaders throughout the organization.

Question 3

In single-loop learning, the assumptions, premises, goals, and strategies of the organization are continuously monitored, tested, and reviewed.

Answer 3

False
Explanation: The traditional approach to strategic control is based on a feedback loop from performance measurement to strategy formulation. Such traditional control systems, termed single-loop learning by Chris Argyris of Harvard University, simply compare actual performance to a predetermined goal.

Question 4

Informational control is primarily concerned with whether or not the organization is doing the right things.

Question 5

In contemporary control systems, data and information generated are best interpreted and discussed in online forums, in order to have traceability of the discussion.

Question 6

The traditional approach to strategic control relies on feedback from performance measurement to formulate strategy.

Question 7

Informational controls involve the balance and alignment of the culture, rewards, and boundaries of a firm.

Question 8

Double-loop learning in the contemporary approach to strategic control means that the organizational assumptions, premises, goals and strategies are occasionally monitored, tested, and reviewed.

Question 9

Strategic control systems, both informational and behavioral, are used to correct the performance and ultimate strategy of a firm.

Question 10

As firms downsize, a control system based on rewards and culture becomes dysfunctional.

Question 11

Contemporary strategic controls involve comparing actual performance to predetermined goals.

Question 12

Sales quotas, operating budgets, and production schedules are examples of traditional controls.

Question 13

The collective sum of individual behaviors of the employees of an organization generally results in what is best for the organization; thus, individual rationality assures organizational rationality.

Question 14

For young managers who see themselves as free agents, behavioral controls such as rewards and culture can be an effective way to enhance organizational loyalty.

Question 15

According to a 2012 article published in The Economist, managerial actions to improve company control systems do not need to consider employee perceived reception of these actions.

Question 16

Behavioral controls involve the ability to respond effectively to environmental change.

Question 17

Continuous monitoring enhances the ability of the organization to respond with speed and flexibility.

Question 18

For firms competing in highly unstable and turbulent industries, traditional strategic controls are most appropriate.

Question 19

The traditional approach to strategic control is interactive, while the contemporary approach to strategic control is sequential.

Question 20

Behavioral control is one of two types of strategic control and is concerned with strategy implementation.

Question 21

Different functional areas within an organization often have different reward systems.

Question 22

The three fundamental types of control are culture, rewards and leadership, boundaries and constraints.

Question 23

Culture, a system of unwritten rules that forms and internalized influence over behavior, is often found in professional organizations.

Question 24

Rule-based controls are appropriate in organizations, where most of the employees are unskilled.

Question 25

The need for rules and regulations can be minimized if the organization has a strong culture. There is no necessity to have a system of rewards and incentives as well.

Question 26

Rewards systems that reinforce the core values of the organization and contribute to organizational cohesiveness are the least effective type.

Question 27

All organizations place the same emphasis on each type of control.

Question 28

Regulations backed up with strong sanctions do not help an organization avoid conducting business in an unethical manner.

Question 29

In building strong reward and incentives, it is vital to have good managerial role models.

Question 30

For a reward system to be effective, it must be perceived as fair and equitable.

Question 31

Short-term objectives and action plans are types of boundaries that channel the efforts of employees toward goal accomplishment.

Question 32

Hiring is important in organizations, especially hiring the right people who already identify with the dominant values of the organization and have attributes that are consistent with them.

Question 33

Action plans permit a degree of autonomy for managers who sometimes must modify activities to achieve the desired outcome.

Question 34

Reward systems need to be aligned clearly with the organizational goals and objectives, as demonstrated by Marks and Spencer and their sustainability efforts.

Question 35

Unexpected events have little effect on short-term objectives because short-term objectives are not changeable.

Question 36

Boundaries and constraints are just used to maintain order in an organization and have little effect on the strategic priorities of the organization.

Question 37

Boundaries and constraints, when used properly, can minimize improper and unethical conduct.

Question 38

Central to agency theory is the relationship between two primary players, the principals (stockholders) and agents (management).

Question 39

The primary participants in corporate governance, according to Monks and Minow, are the shareholders, board of directors, and employees.

Question 40

The organizational reward system is typically a weak method for motivating employees.

Question 41

Agency theory is concerned with the problem that arises when it is difficult or inexpensive for the principal to verify what the agent is actually doing.

Question 42

Sound governance practices always leads to superior financial performance.

Question 43

Research has shown that executives who have large holdings of stock in their firm are more likely to have diversification strategies more consistent with shareholder interests, like increasing long-term returns.

Question 44

In order to have effective board operations, firms need to cultivate engaged and committed boards.

Question 45

The corporate governance premium is smaller for firms in countries with sound corporate governance practices compared to countries with weaker corporate governance standards.

Question 46

Changes in board of director configurations since 1987 indicate that board directors were paid more in 2011, were older, were more often female, and were independent from the company (not insiders).

Question 47

According to the Business Roundtable, representing the largest U.S. corporations, the most important quality of a good board of directors is that they do not get involved in critiquing company strategies.

Question 48

The Sarbanes-Oxley Act of 2002 stipulates that executives of a firm will still be able to sell their shares in the firm when other employees cannot.

Question 49

Agency theory is concerned with the problem that arises when the goals of the agents conflict with those of the surrounding community members.

Question 50

The Sarbanes-Oxley Act of 2002 requires that CEOs and CFOs of publicly-listed companies must reveal off-balance-sheet finances and vouch for the accuracy of information provided.

Question 51

CalPERS, the California Public Employees Retirement System, manages over 240 billion dollars in assets. As an example of shared activism, they review all short- and long-term performance figures for each of the firms in which they invest and request changes in the governance structure of those firms, when they feel the firm is not responsive to their concerns.

Question 52

When firms like Siebel Systems, Disney, Oracle, and Microsoft separated the roles of CEO and chairman of the board, they were creating CEO duality.

Question 53

A corporation is a mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party. Management is able to participate in the profits of the enterprise without taking direct responsibility for the operations.

Question 54

Principal-principal (PP) conflicts frequently result in expropriation, which is defined as activities to enrich minority shareholders to assure their support.

Question 55

Stock analysts generally issue more sell recommendations than buy recommendations.

Question 56

Auditors are appointed by the Securities and Exchange Commission to audit company financial statements.

Question 57

Public companies are required by law to disclose information regarding executive compensation packages.

Question 58

One of the most critical roles of the board of directors is to create incentives that align the interests of the CEO and top executives with the interests of shareholders.

Question 59

In emerging economies and continental Europe, principal-principal conflicts are frequent. These consist of conflicts between controlling shareholders and executives.

Question 60

The risk of being acquired by hostile raiders is often referred to as the takeover constraint.

Question 61

According to Studzinski, in a 2014 Fortune magazine article, competing activist investor pressures push company management to decide between bottom line profits or social and environmental benefits. The company can only choose one or the other.

Question 62

According to research on a broad range of companies, boards of directors that have the skills and knowledge to advise CEOs on potential key strategic initiatives add risk more than value to the firm.

Question 63

Informational control systems are concerned with which of the following?

A)Is the organization doing things right?
B)Is the organization doing the right things?
C)Are rules and regulations being followed as information is processed?
D)Is the environment of the organization a necessary and sufficient condition for success?

Question 64

The business media is a significant external control mechanism.

Question 65

Continuous monitoring, in the contemporary approach, is beneficial because

A)it reduces time lags.
B)it increases the time it takes to detect changes in the competitive environment.
C)organizational flexibility is reduced.
D)organization response time is increased.

Question 66

Contemporary approaches to strategic control rely primarily on

A)feedback controls.
B)single-loop learning.
C)double-loop learning.
D)comparative learning.

Question 67

Top managers at ABC Company meet every Friday to review daily operational reports and year to date data. This is an example of

A)behavioral control.
B)informational control.
C)strategy formulation.
D)strategy implementation.

Question 68

Which of the following is the primary drawback of traditional strategic control systems?

A)They are only appropriate when the environment is stable and simple.
B)Goals and objectives cannot be measured with a high level of certainty.
C)They lead to complacency.
D)They lack the flexibility needed to adjust to changes in the environment.

Question 69

For businesses facing complex and turbulent business environments, which of the following is true?

A)Goals and objectives that are uncertain prevent opportunism.
B)Traditional strategic controls are usually inappropriate.
C)Complacency about predetermined milestones can prevent adaptability.
D)Detailed plans are needed to maintain order.

Question 70

Which of the following is not an example of how organizational culture exerts behavioral control?

A)Culture helps maintain control by creating behavioral norms.
B)Culture generates unwritten standards of acceptable behavior.
C)Culture encourages individual identification with the organization and its objectives.
D)Culture sets explicit boundaries.

Question 71

According to a 2011 Harvard Business Review study, women and minorities are overrepresented on boards of firms in the Standard and Poors 500 list.

Question 72

The late Sam Walton, founder of Walmart, used to give pep rallies at local Walmart stores. What purpose did this serve?

A)It was used to remind employees of Walmart rules and regulations.
B)It helped reinforce and sustain the Walmart culture.
C)It demonstrated to employees the importance of articulating explicit goals and objectives.
D)It made the Walmart reward system very explicit.

Question 73

The traditional approach to strategic control is sequential. Which of the following is not one of the steps in the sequence?

A)Action plans are submitted by lower level managers.
B)Performance is measured against the predetermined goal.
C)Strategies are implemented.
D)Strategies are formulated and top management sets goals.

Question 74

In choosing membership on the board of directors, consideration should be given to the size of the board as well as the individual member expertise and commitment to participate fully.

Question 75

As firms simultaneously downsize and face the need for increased coordination across organizational boundaries, a control system based primarily on ______________ is dysfunctional.

A)boundaries and constraints
B)culture and rewards
C)organizational loyalty
D)innovation and risk taking

Question 76

Tesco was forced to restate its earnings for the first half of 2014 to 431 million USD because senior managers in the UK food business had booked income early and delayed the booking of costs in order to improve appearances of financial performance. This scandal results from ____________ and __________.

A)poor environment; management systems
B)poor governance; control
C)external environmental factors; internal environmental factors
D)leadership; financial systems

Question 77

In the contemporary approach to strategic control, adapting to and anticipating both internal and external environmental change is an integral part. The relationships between _________, __________, and __________ are highly interactive.

A)change; leadership; control
B)strategy formulation; leadership; control
C)strategy formulation; implementation; control
D)strategic information; organizational behavior; implementation

Question 78

Behavioral controls are aspects of strategic change that involve finding the appropriate ______________ and ______________ among the culture, rewards, and boundaries of the firm.

A)balance; alignment
B)measure; balance
C)alignment; balance
D)measure; outcome

Question 79

Which of the following is not one of the characteristics of a contemporary control system?

A)It is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans.
B)It must focus on constantly changing information that is strategically important.
C)It circumvents the need for face-to-face meetings among superiors, subordinates, and peers.
D)It generates information that is important enough to demand regular and frequent attention.

Question 80

Single-loop learning, according to Chris Argyris, is most appropriate when the environment is ___________, goals and objective can be measured with a _________ of certainty, and there is ________ need for complex measures of performance.

A)stable; high level; little
B)unstable; low level; great
C)stable; low level; great
D)unstable; high level; little