Deck 7: Principles of Planning

Question 1

The management by objectives (MBO) approach has been found to be ineffective for nonprofit organizations.

Answer 1

False

Question 2

Of the four primary management functions, organizing usually precedes planning.

Answer 2

False

Question 3

Organizations exist for various purposes but have the same types of objectives.

Answer 3

False

Question 4

An organization's vision outlines what the organization exists to do, given a particular group of customers and customer needs.

Question 5

Planning is the process of determining how the organization will achieve its objectives.

Question 6

Managers should establish performance objectives that are within easy reach for employees.

Question 7

The final responsibility for organizational planning rests with the firm's chief executives.

Question 8

Organizational planners must know how all parts of the organization function and interrelate.

Question 9

A key element of any management by objectives (MBO) program is top management support and commitment.

Question 10

A disadvantage of a management by objectives (MBO) program is that it can be time consuming.

Question 11

Suboptimization is the process of assigning subobjectives to the various people or units in the organization based on the organizational objectives.

Question 12

The affirmative purpose of planning is to minimize risk by reducing the uncertainties surrounding business conditions and clarifying the consequences of related management activities.

Question 13

According to Drucker, management should set objectives that indicate the company's responsibilities to its customers and society but should not specify the extent to which the company intends to live up to these responsibilities.

Question 14

Organizational objectives are the targets toward which the management system is directed.

Question 15

Premises are the assumptions upon which alternatives to reaching organizational objectives are based.

Question 16

A potential disadvantage of planning is that it can take up too much managerial time.

Question 17

Management's evaluation of organizational planners should be completely objective.

Question 18

Short-term objectives are targets to be achieved within five to seven years.

Question 19

One of the primary guidelines for establishing quality objectives is that management should set objectives only in relation to other organizational objectives.

Question 20

The last step in the planning process focuses on developing plans to pursue the chosen alternative for reaching organizational objectives.

Question 21

The primary management function is ________.

A) organizing
B) influencing
C) controlling
D) planning
E) staffing

Question 22

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
Which of the following steps in the planning process should precede all the others?

A) develop premises upon which each alternative is based
B) develop plans to pursue the chosen alternative
C) list alternative ways of reaching objectives
D) choose the best alternative for reaching objectives
E) A reduction in production costs leads to lower prices. F) put plans into action

Question 23

The protective purpose of planning is to ________.

A) decrease paper work and red tape
B) increase the degree of organizational success
C) optimize the use of organizational resources
D) minimize risk by reducing the uncertainties surrounding business conditions
E) maximize the organization's ability to leverage environmental opportunities

Question 24

The process of determining how an organization can get where it wants to go and what it will do to accomplish its objectives is ________.

A) organizing
B) influencing
C) planning
D) controlling
E) analyzing

Question 25

________ is the key to a successful planning process.

A) Classification
B) Repetition
C) Implementation
D) Evaluation
E) Standardization

Question 26

A firm's ________ refer(s) to what it exists to do, given a particular group of customers and customer needs.

A) operational plan
B) unique selling proposition
C) organizational purpose
D) long-term goal
E) vision statement

Question 27

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
The first step in the planning process is to ________.

A) list alternative ways of reaching objectives
B) state organizational objectives
C) develop the premises upon which each alternative is based
D) develop plans to pursue the chosen alternative
E) put plans into action

Question 28

Which of the following statements is true about the planning subsystem?

A) It utilizes all of an organization's resources.
B) It reduces the need for strict control over the planning process.
C) It helps managers organize the overall management system and enhance its success.
D) It allows different organizational departments to develop their own strategic plans.
E) It places the responsibility of identifying organizational objectives on different departments.

Question 29

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
Alternatives to reach an organizational objective are based on assumptions which are called ________.

A) objectives
B) missions
C) goals
D) premises
E) priorities

Question 30

The affirmative purpose of planning is to ________.

A) increase the degree of organizational success
B) increase the level of workplace diversity
C) optimize the use organizational resources
D) refine work methods and reduce production costs
E) improve organizational compliance with industry standards

Question 31

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
The last step in the planning process is to ________.

A) put the plans into action
B) evaluate the organizational goals
C) choose the best alternative for reaching objectives
D) develop the premises upon which each alternative is based
E) state the organizational objectives

Question 32

A system created as part of the overall management system is a(n) ________.

A) offshoot
B) microsystem
C) spinoff
D) subsystem
E) outgrowth

Question 33

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
What is the underlying assumption in the first alternative?

A) Customers associate high prices with high quality and vice versa.
B) Customers are more quality conscious than price sensitive.
C) Low-cost raw materials will not affect the overall quality of the final product.
D) The company's relationship with its current suppliers is strong.

Question 34

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
After identifying the alternative ways in which the organization can reach its objectives, a manager should ________.

A) develop plans for each alternative
B) choose the best alternative for reaching objectives
C) rank each alternative according to complexity
D) develop premises on which to base each alternative
E) choose the alternative which is most cost effective

Question 35

Which of the following is the fundamental purpose of planning?

A) eliminating risk
B) helping the organization reach its objectives
C) optimizing the use of resources
D) identifying organizational objectives
E) organizing work processes

Question 36

One of ValuTech's objectives for the year is to bring down the firm's production costs by 5 percent. To meet this objective, managers have suggested the following alternatives:
(1) Use alternate suppliers who can provide raw materials at a lower cost.
(2) Adopt cutting-edge technology that makes the production process more efficient.
What is the underlying assumption in the second alternative?

A) Competitors are also likely to adopt high-end technology.
B) Consumers' purchase decisions are directly influenced by the manufacturing process.
C) The availability of better technology translates into higher worker productivity.
D) The costs associated with upgrading will outweigh the benefits.
E) Alternate suppliers can provide raw materials at a lower cost.

Question 37

Planning is advantageous to an organization, particularly in the creation of new ventures. According to an often-cited survey, as many as 65 percent of all newly started businesses are not around to celebrate a fifth anniversary. This high failure rate seems primarily a consequence of inadequate planning. Successful businesses have an established plan, a formal statement that outlines the objectives the organization is attempting to achieve. Planning does not eliminate risk, of course, but it does help managers identify and deal with organizational problems before they cause havoc in a business. Which of the following best expresses the main point of this paragraph?

A) Adequate planning eliminates business risk.
B) All ventures have a 65 percent chance of failure.
C) Existing businesses do not derive as much value from planning compared to new ventures.
D) Effective planning helps managers identify and plan for all organizational problems.
E) Companies that plan well appear to have a better chance at success.

Question 38

Which of the following is an advantage of planning?

A) eliminates all risks
B) enhances decision coordination
C) emphasizes immediate goals
D) suboptimizes the use of resources
E) promotes individual performance

Question 39

A disadvantage of planning is that it ________.

A) causes managers to focus on the future
B) reduces organizational flexibility once plans are set
C) requires organizational resources
D) can take up too much managerial time
E) involves planning for situations that may not occur

Question 40

The targets toward which an open management system is directed are ________.

A) organizational purposes
B) operational plans
C) organizational objectives
D) business processes
E) objective indicators

Question 41

When established subobjectives are aimed in different directions, a manager should ________.

A) determine the initial purpose of planning and then revise the objectives accordingly
B) choose the subobjective that better contributes to the overall organizational objectives
C) revise the organization's entire strategic plan
D) identify alternative ways of reaching organizational objectives
E) consider eliminating the objectives all together

Question 42

One of the organizational objectives of Valpo Industries, a pharmaceutical firm, is "to develop a new line of drugs for the treatment of life-threatening diseases such as cancer and AIDS, through the use of patented technology and processes." According to Drucker, this objective relates to ________.

A) market standing
B) innovation
C) productivity
D) profitability
E) public responsibility

Question 43

According to Drucker, which of the following key areas for organizational objectives is more personal and subjective in nature, and hence likely to arouse managerial opposition?

A) productivity
B) innovation
C) worker performance and attitude
D) physical and financial resources
E) market standing

Question 44

John F. Mee suggested that organizational objectives for businesses can be summarized in three points. Identify the correct statement.

A) Service to society is the motivating force for managers.
B) The people responsible for attaining objectives should have a voice in setting them.
C) Managers are not bound by the ethical codes of the society in which the business operates.
D) Managers should establish performance objectives that they know are within reach for employees.
E) Service to customers by the provision of desired economic values justifies the existence of the business.

Question 45

Intermediate-term objectives are targets to be achieved in _______.

A) one year or less
B) one to five years
C) three to seven years
D) five to seven years
E) five to ten years

Question 46

A(n) ________ involves breaking an organizational objective down into subobjectives so individuals at different levels of the organization know what they must do to reach the overall organizational objective.

A) suboptimization process
B) intermediate-term plan
C) organizational hierarchy
D) hierarchy of objectives
E) organizational purpose

Question 47

Which of the following is an example of a statement of organizational purpose?

A) To increase the company's market share by 20 percent by 2011.
B) To execute all projects in a timely and professional manner.
C) To be the leading provider of professional health care services.
D) To provide our employees with a challenging and rewarding work environment.
E) To build long-lasting customer relationships based on trust.

Question 48

The condition that exists when organizational subobjectives conflict or are not directly aimed at accomplishing the overall organizational objectives is ________.

A) diminution
B) deduction
C) aggregation
D) suboptimization
E) minimization

Question 49

Targets to be achieved in one year or less are ________.

A) time-bound actions
B) departmentalized goals
C) short-term objectives
D) long-term objectives
E) intermediate-term plans

Question 50

HomeTurf is a retailer of wooden furniture. The firm currently has three stores and has plans to set up two more within the next eight months. This is an example of a(n) ________ objective.

A) intermediate-term
B) short-sighted
C) long-term
D) short-term
E) suboptimal

Question 51

Which of the following refers to targets to be achieved within a timeframe of five to seven years?

A) short-term objectives
B) intermediate-term plans
C) long-term objectives
D) operational goals
E) medium-term objectives

Question 52

Which of the following is NOT one of the key areas in which Drucker advised managers to set management system objectives?

A) market standing
B) profitability
C) government regulation
D) innovation
E) public responsibility

Question 53

According to Drucker, which of the following goal areas relates to a tangible, impersonal characteristic of organizational operations?

A) number of employees
B) innovation
C) managerial performance and development
D) worker performance and attitude
E) public responsibility

Question 54

One of the short-term objectives of Alport Corporation, a manufacturer of construction equipment, is "to achieve a 15 percent return on investment (ROI) by September 2011."According to Drucker, this objective relates to ________.

A) innovation
B) productivity
C) market standing
D) managerial performance
E) profitability

Question 55

It is important for organizations to ensure that the objectives they set for their employees are ________.

A) unrealistically high
B) within easy reach
C) low
D) within reach, but not easy reach
E) out of reach

Question 56

According to Drucker, which of the following is an example of an organizational objective related to productivity?

A) to reduce overall inventory management costs by 15 percent
B) to increase the use of environmentally-friendly workplace practices
C) to lower the rate of attrition in the organization within the next 6 months
D) to increase the unit's monthly output by 10 percent within the next 12 months
E) to reduce total overhead costs by 5 percent by the end of the year

Question 57

Plaxo Industries is a large-scale manufacturer of commercial kitchen equipment whose products are currently sold in Europe and the Middle East. Plaxo wants to foray into the Asian market and the company's management has set a target of entering the Chinese market by 2018. This is an example of a(n) ________ objective.

A) short-term
B) intermediate-term
C) long-term
D) medium-term
E) operational

Question 58

One of the corporate objectives of Supra Inc. is "to enrich the quality of life in the community by providing education, training, and employment opportunities."According to Drucker, this organizational objective relates to ________.

A) managerial performance and development
B) innovation
C) public responsibility
D) worker performance and attitude
E) market standing

Question 59

A management guideline which recommends that managers clearly determine, understand, and state organizational objectives before they initiate any action is the ________.

A) management-by-objectives approach
B) hierarchy of needs
C) principle of the objective
D) hierarchy of objectives
E) concept of suboptimization

Question 60

Tandem Industries is a cycle manufacturer. As part of its planning activities, it sets an objective to increase its market share by 5 percent within 3 years. This is an example of a(n) ________ objective.

A) short-term
B) intermediate-term
C) long-term
D) suboptimal
E) principled

Question 61

ABC Corp. is an information technology company. The IT department wants to upgrade the firm's technological infrastructure but the cost of upgrading is likely to take up at least 60 percent of the firm's cash reserves. The finance manager is reluctant to release funds for this purpose. According to him, "The economy is still in a state of uncertainty. The company is better off preserving its cash reserves rather than investing it."
In order to increase the quality of their objectives, managers should ________.

A) set employees' goals as high as possible
B) ensure that they set objectives entirely by themselves
C) establish goals which are within easy reach
D) let the people responsible for attaining the objectives have a voice in setting them
E) avoid relating objectives to specific actions

Question 62

Which of the following guidelines for establishing quality objectives helps keep the risk of suboptimization to a minimum?

A) relating objectives to specific actions whenever necessary
B) stating objectives as specifically as possible
C) setting objectives only in relation to other organizational objectives
D) specifying when goals are expected to be achieved
E) stating objectives clearly and simply

Question 63

One of the primary advantages of management by objectives (MBO) is that ________.

A) it saves time
B) it is an easy process
C) it gains employee commitment
D) it reduces the volume of paper work in the organization
E) it places the responsibility for goal attainment solely on managers

Question 64

ABC Corp. is an information technology company. The IT department wants to upgrade the firm's technological infrastructure but the cost of upgrading is likely to take up at least 60 percent of the firm's cash reserves. The finance manager is reluctant to release funds for this purpose. According to him, "The economy is still in a state of uncertainty. The company is better off preserving its cash reserves rather than investing it."
Which of the following, if true, would most support the finance manager's point of view?

A) There is a correlation between a firm's level of technological investment and its long-term growth.
B) Gains from technology are hard to predict on account of uncertain demand.
C) The returns from other investment opportunities are much more attractive.
D) Recent reports suggest that the economy is yet to fully recover from the recession.
E) Banks are hesitant to lend to the company on account of uncertain economic conditions.

Question 65

Mintzberg pointed out that the top managers of organizations have many different roles to perform. As ________, they must represent their organizations in a variety of social, legal, and ceremonial situations.

A) organizational figureheads
B) disturbance handlers
C) liaisons
D) resource allocators
E) monitors

Question 66

A sales manager sets the following performance objective for members of his sales team: To increase customer sales by 10 percent within the next 6 months. Which of the following is a valid criticism of this objective?

A) It does not pinpoint expected results.
B) It is not stated in simple fashion.
C) It is not achievable.
D) It is does not relate to specific actions.
E) It is not related to other organizational objectives.

Question 67

In line with the organization's objectives, the sales managers at MagnaCorp must ensure that all products are sufficiently stocked so that customer orders are fulfilled and stockout situations do not arise. The operations managers, on the other hand, have been instructed to lower inventory costs and hence, prefer to keep stock levels to a minimum. This situation is an example of ________.

A) management by objectives
B) secondary objectives
C) intermediate-term plans
D) planning subsystems
E) suboptimization

Question 68

What is the rationale behind letting the people responsible for attaining certain objectives have a voice in setting them?

A) Employees are more capable than managers and are better at establishing objectives.
B) Managers are motivated when their employees are allowed to have a say in goal setting.
C) Employees can showcase their managerial potential when they are allowed to set their own goals.
D) Managers tend to set objectives that are often easily achievable and do not challenge employees.
E) The people responsible for attaining the objectives know their job better than the managers do.

Question 69

When setting objectives, managers should state objectives as specifically as possible because ________.

A) it ensures that employees have explicit directions for what they should do
B) it ensures that employee productivity will vary according to the needs of the situation
C) it allows employees to make inferences about what they should do to accomplish their goals
D) it allows them to set the pace for employees' work
E) it reduces the risk of suboptimization

Question 70

In a management by objectives program (MBO), why must managers be careful not to conclude automatically that employees have produced at an acceptable level simply because they have reached their objectives?

A) The objectives may have been set too low in the first place, and managers may have failed to recognize it at the time.
B) The MBO framework is naturally flawed and requires managers to use subjective criteria to evaluate performance.
C) The employees may have reached their objectives by means that the organization had not considered.
D) The MBO approach measures perfomance based merely on goal attainment and not on the level of effort expended.
E) The objectives set for employees may not be aligned with the overall organizational objectives.

Question 71

Which of the following is the first step in the management by objectives (MBO) process?

A) set worker objectives
B) review organizational objectives
C) develop performance evaluation criteria
D) evaluate past performance
E) establish rewards

Question 72

Which of the following is the last step in the management by objectives (MBO) process?

A) review performance objectives
B) evaluate performance
C) give rewards
D) monitor progress
E) set performance goals

Question 73

Which of the following is an accurate statement in reference to management by objectives (MBO)?

A) Rewards are given to workers independent from their objective attainment.
B) Managers and workers meet to agree on worker objectives.
C) Managers and workers do not meet to monitor progress.
D) Managers set objectives for workers without their input.
E) Rewards are given on the basis of the manager's effort .

Question 74

After setting worker objectives, the next step in a management by objectives (MBO) program is to ________.

A) develop performance evaluation criteria
B) review organizational objectives
C) establish rewards
D) monitor progress
E) evaluate past performance

Question 75

The final responsibility for organizational planning rests with ________.

A) the planning department
B) the designated organizational planner
C) the shareholders
D) the chief executives
E) the first-level managers

Question 76

Which management writer popularized management by objectives (MBO)?

A) Tom Peters
B) Frederick Taylor
C) Peter Drucker
D) Abraham Maslow
E) Henry Fayol

Question 77

"To lower the rate of employee attrition within the organization by 5 percent through the use of effective employee retention and motivation techniques." Which of the following is a valid criticism of this objective?

A) It is not stated in a simple fashion.
B) It does not provide a timeframe for achieving objectives.
C) It is not related to specific actions.
D) It is not achievable.
E) It does not pinpoint expected results.

Question 78

ABC Corp. is an information technology company. The IT department wants to upgrade the firm's technological infrastructure but the cost of upgrading is likely to take up at least 60 percent of the firm's cash reserves. The finance manager is reluctant to release funds for this purpose. According to him, "The economy is still in a state of uncertainty. The company is better off preserving its cash reserves rather than investing it."
Which of the following, if true, would most support the IT department's plan to upgrade the firm's technology?

A) Efficiency gains from the new technology would offset the payments in 10 years.
B) ABC Corp. has always been ahead of the technology-curve.
C) The proposed technology is going to be the industry standard in the next year.
D) The firm has not made any significant investments in the recent past.
E) Investment in technology is always a gamble-it may or may not pay off.

Question 79

Why is it important to provide employees with a timeframe for accomplishing their objectives?

A) to instill a sense of urgency in employees
B) to allow employees to pace themselves
C) to make the goals more meaningful
D) to reduce the risk of suboptimization
E) to motivate employees to improve their performance

Question 80

Which of the following is NOT a necessary factor for a successful management by objectives (MBO) program?

A) Management must follow through on employee performance evaluations by rewarding employees accordingly.
B) Top management must be committed to the MBO process and set appropriate objectives for the organization.
C) Managers and subordinates together must develop and agree on each individual's goals.
D) Employee performance should be conscientiously evaluated against established objectives.
E) Managers must conclude automatically that employees have produced at an acceptable level because they have reached their objectives.