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  • CHAPTER 11: ORGANIZATIONAL DESIGN Test Correlation Table Question Types/Level of Difficulty LEARNING OBJECTIVES Easy Moderate Difficult 1. Describe the two fundamentals TF 2, 6, 10, 11, 12, 1, 4, 5, 7, 8, 9, 3, 15 of organizing. 14 13, 16 MC 1, 5, 7, 15 3, 4, 6, 8, 9, 10, 2, 11, 12, 17 13, 14, 18, 19, 20 ES 1 — — 2. Explain the five aspects of an TF 17, 19, 20, 21, 21, 28, 30, 31 18, 22, 24, 29 organization’s vertical design. 23, 25, 26, 27 MC 21, 22, 24, 25, 27, 29, 30, 31, 23, 26, 28, 37, 32, 33, 39, 42, 34, 35, 36, 38, 41, 47 44, 45 40, 43, 46, 48 ES — 2 3 3. Describe four types of horizontal TF 33, 41 34, 36, 37, 38, 32, 35, 39 design. 40, 42 MC 51, 52, 53, 54, 55, 56, 57, 58, 60, 61, 62, 64, 63, 74, 76, 81 59, 65, 66, 67, 68, 69, 73, 75, 82 70, 71, 72, 77, 78, 79, 80, 83 ES 4 6, 7 5 4. Describe two methods of TF 43, 45, 46, 47 44, 49, 50, 51, 48 integration. 52, 53, 54 MC 102 85, 86, 87, 88, 84, 96, 99 89, 90, 91, 92, 93, 94, 95, 97, 98, 100, 101, 103, 105, 106 ES 8 — 9 19
  • CHAPTER 11: ORGANIZATIONAL DESIGN True/False Questions Learning Objective 1 1. According to the “Chapter 11 Preview," Home Depot must continue to open new stores in order to maintain their financial performance. ANSWER: F, Knowledge, Moderate, p. 298 2. Home Depot has been unable to find a new formula that will enable them to continue the large-scale growth that they experienced in the 1990s. ANSWER: T, Knowledge, Easy, p. 298 3. Organizational design is the formal system of working relations that separates and gathers tasks. ANSWER: F, Knowledge, Difficult, p. 298 4. An organizational unit could refer to both teams and departments. ANSWER: T, Knowledge, Moderate, p. 299 5. Each box on an organizational chart represents an individual. ANSWER: F, Knowledge, Moderate, p. 299 6. Organizational levels can be counted simply by the number of vertical layers in the organizational chart. ANSWER: T, Knowledge, Easy, p. 299 7. An organizational chart, in general, provides ten major pieces of information about an organization’s structure. ANSWER: F, Knowledge, Moderate, p. 299 8. Daewoo Ford can review the organizational chart of his company to detect gaps in authority or duplication of tasks. ANSWER: T, Application, Moderate, p. 300 9. Sterling Lucas wants to know which individual employed at Fleet Capital Trust has the most political influence. Lucas will be able to rely on the firm’s organizational chart to identify that person. ANSWER: F, Application, Moderate, p. 300 20
  • CHAPTER 11: ORGANIZATIONAL DESIGN 10. An organizational chart is a picture that does not show how things really get done in the organization. ANSWER: T, Knowledge, Easy, p. 300 11. There are two fundamental concepts around which all organizations are organized: differentiation and specialization. ANSWER: F, Knowledge, Easy, p. 300 12. Common rules and goals are aspects of integration. ANSWER: T, Knowledge, Easy, p. 300 13. Specialization is dividing the work of an organization into smaller tasks. ANSWER: F, Knowledge, Moderate, p. 300 14. Division of labor means that workers are considered to be on a different level than management. ANSWER: F, Knowledge, Easy, p. 300 15. Division of labor and specialization are considered to be concepts that are closely related. ANSWER: T, Knowledge, Difficult, p. 300 16. Integration of organizational parts is one way to avoid the need for coordination. ANSWER: F, Knowledge, Moderate, pp. 300–301 Learning Objective 2 17. Having fewer hierarchical levels permits more people to participate in the decision- making process. ANSWER: T, Knowledge, Easy, p. 301 18. Many organizations, like Wells Fargo Bank, are flattening their structures by increasing the number of management layers between the CEO and front-line employees. ANSWER: F, Knowledge, Difficult, p. 301 19. A hierarchy is a circular diagram showing top management at the center and the lowest level employees around the outside. ANSWER: F, Knowledge, Easy, p. 301 21
  • CHAPTER 11: ORGANIZATIONAL DESIGN 20. The number of subordinates that a manager can supervise refers to span of control. ANSWER: T, Knowledge, Easy, pp. 301–302 21. The less a manager knows about potential new operating problems in their department, the wider their span of control should be. ANSWER: F, Knowledge, Easy, p. 302 22. Accountability is the glue that holds the vertical and horizontal parts of an organization together. ANSWER: F, Knowledge, Difficult, p. 302 23. The expectation that an employee will accept credit or blame for results achieved in performing assigned tasks is called accountability. ANSWER: T, Knowledge, Easy, p. 302 24. Oftentimes, a manager makes an employee responsible to perform a task, but does not give the person sufficient authority to get the job done. ANSWER: T, Knowledge, Difficult, p. 302 25. Delegation is the process of giving authority to a person to make decisions and take actions. ANSWER: T, Knowledge, Easy, p. 302 26. One of the barriers to delegation is when authority and responsibility have not been defined clearly. ANSWER: T, Knowledge, Easy, p. 303 27. Companies are generally either totally centralized or totally decentralized. ANSWER: F, Knowledge, Easy, p. 304 28. Centralization is an approach that requires managers to decide what to delegate, to select workers carefully, and to formulate adequate controls. ANSWER: F, Knowledge, Moderate, p. 304 29. Subordinates may make better decisions than managers because they have a better grasp of the facts. ANSWER: T, Knowledge, Difficult, p. 304 30. Uniform policies are a characteristic of decentralized organizations. ANSWER: F, Knowledge, Moderate, p. 305 31. Cost may be the most important factor in determining the extent of centralization. 22
  • CHAPTER 11: ORGANIZATIONAL DESIGN ANSWER: T, Knowledge, Moderate, p. 305 Learning Objective 3 32. Harley-Davidson has chosen a geographic design to capitalize on regional differences in its 1,300 dealers who sell 28 different models of motorcycles. ANSWER: F, Knowledge, Difficult, p. 306 33. Grouping tasks and employees by function can be economical or efficient, but not both. ANSWER: F, Knowledge, Easy, p. 306 34. Kris Kringle uses a functional design for his toymaking operation. This organizational structure may increase career development because each elf trains within their functional area to improve his or her specialized skills. ANSWER: T, Application, Moderate, p. 306 35. Conflicts over product priorities are a potential pitfall of the functional design. ANSWER: T, Knowledge, Difficult, p. 307 36. Organizations, such as Nestlé, Sheraton Hotels, and Celanese Chemical use product departmentalization in part because they have worldwide operations. ANSWER: F, Application, Moderate, p. 309 37. Coordination is usually difficult across product lines because employees tend to focus on goals for their particular product, rather than on broader company goals. ANSWER: T, Knowledge, Moderate, p. 308 38. In the product design, all contributing functions are organized under one manager. ANSWER: T, Knowledge, Moderate, p. 307 39. An emphasis on geographical design makes it possible to benefit from facilities and equipment for production being located in multiple locations, which maximizes flexibility. ANSWER: F, Knowledge, Difficult, p. 310 40. Most of an organization’s functional departments must be duplicated at each location when using geographical design. ANSWER: T, Knowledge, Moderate, p. 310 41. The movie industry is an example where firms use a functional design. ANSWER: F, Knowledge, Easy, p. 312 42. Because network designs work in real time, a delay in one part of the process has ripple effects throughout the system. 23
  • CHAPTER 11: ORGANIZATIONAL DESIGN ANSWER: T, Knowledge, Moderate, p. 312 Learning Objective 4 43. Organizational integration is one of the basic elements of organizing. ANSWER: T, Knowledge, Easy, p. 314 44. An organic system is most appropriate when an organization’s environment is stable and predictable. ANSWER: F, Knowledge, Moderate, p. 315 45. An organic system places less emphasis on standardized rules than a mechanistic system. ANSWER: T, Knowledge, Easy, pp. 314–315 46. In a mechanistic system, decision making tends to be decentralized. ANSWER: F, Knowledge, Easy, pp. 314–315 47. In the New York City Police Department (NYPD), officers perform highly specialized tasks and decision making is highly centralized. This suggests that the NYPD has an organic organization design. ANSWER: F, Application, Easy, p. 314 48. An organization’s technology has a significant impact on its organization design because different types of technologies generate various types of technological interdependence. ANSWER: F, Knowledge, Difficult, p. 316 49. There are three types of technological interdependence: pooled, sequential, and reciprocal. ANSWER: T, Knowledge, Moderate, p. 316 50. An automobile assembly line is an example of pooled interdependence. ANSWER: F, Application, Moderate, p. 317 51. At the ABC Manufacturing Co., the output from department A becomes the input for department B, the output from department B becomes the input for department C. This illustrates sequential interdependence. ANSWER: T, Application, Moderate, p. 317 24
  • CHAPTER 11: ORGANIZATIONAL DESIGN 52. With reciprocal interdependence, the flow of information between individuals within the same department or between departments is serialized. ANSWER: F, Knowledge, Moderate, p. 317 53. Hospital emergency rooms typically operate with reciprocal interdependence. ANSWER: T, Application, Moderate, p. 317 54. Designing an organization to handle reciprocal interdependence and then managing it are relatively simple and straightforward. ANSWER: F, Knowledge, Moderate, p. 317 Multiple Choice Questions Preview 1. How did Home Depot originally organize itself for growth? a. copying the business model of Sears and Wal-Mart b. centralizing its management and purchasing c. appealing to do-it-yourself home owners d. commitment to international markets ANSWER: C, Knowledge, Easy, p. 298 2. Each time Home Depot acquired a competitor or created a new store __________. a. management lost another degree of control over the organization b. its organizational design came under pressure to evolve c. its profitability went up d. its revenues per store went down ANSWER: B, Knowledge, Difficult, p. 298 Learning Objective 1 Fundamentals of Organizing 3. Organizational design is __________. a. a diagram that illustrates the reporting lines between people in an organization b. the skeleton of an organization c. the decisions and actions that result in a structure d. creative planning by owners and top management ANSWER: C, Knowledge, Moderate, p. 298 25
  • CHAPTER 11: ORGANIZATIONAL DESIGN 4. An organizational chart provides the skeletal snapshots of an organization’s structure and includes all of the following except __________. a. tasks b. levels of organization c. lines of authority d. political influence ANSWER: D, Knowledge, Moderate, pp. 299–300 5. Managers frequently are able to describe the structure of their organization with __________. a. an organizational chart b. the financial statements c. a horizontal design d. a vertical design ANSWER: A, Knowledge, Easy, p. 299 6. Victoria Torres is the president of Secure Systems, Inc. Victoria is in the process of making decisions that will put jobs and relationships into a structure. Victoria is creating a(n) __________. a. task structure b. organizational structure c. business plan d. organizational design ANSWER: D, Application, Moderate, p. 298 7. An __________ is a diagram that illustrates the reporting lines between units and people within the organization. a. organization structure b. organizational chart c. organizational design d. organization creation ANSWER: B, Knowledge, Easy, p. 299 8. One of the advantages of organization charts discussed in the text is that __________. a. the chart reveals vital informational channels of communication b. the chart shows political influence c. power and status are reflected by a position’s proximity to the CEO d. the chart shows employees how the pieces of the entire organization are intended to fit together ANSWER: D, Knowledge, Moderate, p. 300 26
  • CHAPTER 11: ORGANIZATIONAL DESIGN 9. One of the disadvantages of an organization chart discussed in the text is that the chart __________. a. cannot show everything about an organization’s structure b. shows employees how the pieces of the entire organization fit together c. is rigid and never changes d. can help management detect gaps in authority or duplication of tasks ANSWER: A, Knowledge, Moderate, p. 300 10. When Darrick Zelenski reviews the organization chart for his company, he can obtain all of the following pieces of information except the __________ in the firm. a. lines of authority b. compensation structure c. subdivisions of tasks d. levels of management ANSWER: B, Application, Moderate, p. 299 11. Luke Klein is looking at the organizational chart for Citation Industries. He can expect that it might give him all of the following information except __________. a. insight into how the entire organization fits together b. cities where people are located c. who reports to whom d. gaps or duplication of activities ANSWER: B, Application, Difficult, p. 300 12. At Home Depot, combining the Southeastern and Mid-Atlantic regions to form a new region is an example of __________. a. integration b. differentiation c. vertical design d. geographic design ANSWER: B, Knowledge, Difficult, p. 300 13. __________ means that the work of the organization is divided into smaller tasks. a. Task division b. Division of labor c. Integration d. Specialization ANSWER: B, Knowledge, Moderate, p. 300 27
  • CHAPTER 11: ORGANIZATIONAL DESIGN 14. There are two fundamental concepts around which all organizations are organized: __________. a. labor and technology b. authority and delegation c. differentiation and integration d. hierarchy and span of control ANSWER: C, Knowledge, Moderate, p. 300 15. Uniqueness of tasks and specialization of workers creates a need for __________. a. differentiation b. integration c. socialization d. delegation ANSWER: A, Knowledge, Easy, p. 300 16. The process of identifying particular tasks and assigning them to departments, teams, or divisions is __________. a. coordination b. specialization c. standardization d. unity of command ANSWER: B, Application, Moderate, p. 300 17. Some degree of coordination is necessary among business units in order for the organization to be effective. This is known as __________. a. regulation b. uniformity c. standardization d. integration ANSWER: D, Knowledge, Difficult, pp. 300–301 18. One of the elements of organizational structure that involves the separation of tasks is __________. a. delegation b. assignment c. structure d. specialization ANSWER: D, Knowledge, Moderate, p. 300 28
  • CHAPTER 11: ORGANIZATIONAL DESIGN 19. John Payer is a supervisor in the CAS (Customer Account Services) unit of the IRS. He is responsible for taxpayer relationship having to do with filing, including processing submissions and payments. Payer’s job represents the __________ element of organizational design. a. enrichment b. human resources c. assignment d. specialization ANSWER: D, Application, Moderate, p. 300 20. Jarrod Tracy is a structural engineer for Bechtel. A job foreman asked Jarrod about the heat and air equipment being delivered to the site but Jarrod knew nothing about it because Bechtel is large and requires a high level of __________. a. delegation b. specialization c. integration d. hierarchy ANSWER: B, Application, Moderate, p. 300 Learning Objective 2 Vertical Design 21. The __________ is a pyramid showing relationships among levels. a. hierarchy b. organizational chart c. task structure d. business plan ANSWER: A, Knowledge, Easy, p. 301 22. During the past few years, many U.S. companies have __________ the number of hierarchical levels in their organizations. a. held constant b. eliminated c. reduced d. increased ANSWER: C, Knowledge, Easy, p. 301 23. Executives hope that fewer organizational levels will create all of the following benefits except __________. a. better control of subordinates b. faster reaction times c. hearing “bad” news more frequently d. more cost effectiveness ANSWER: A, Knowledge, Difficult, p. 301 29
  • CHAPTER 11: ORGANIZATIONAL DESIGN 24. __________ refers to the number of employees directly reporting to a manager. a. Hierarchy b. Accountability c. Span of control d. Delegation ANSWER: C, Knowledge, Easy, p. 301 25. Natalie Sanders thinks that one manager cannot effectively supervise a large number of subordinates. Sanders has each manager in her firm supervise seven employees. Sanders is relying on the __________ principle. a. functional command b. functional design c. span of control d. hierarchy ANSWER: C, Knowledge, Easy, p. 301 26. The key factors discussed in the text that determine the best span of management for any situation include all of the following except the __________. a. union membership of the employees b. competence of both the manager and the employees c. similarity or dissimilarity of tasks being supervised d. incidence of new problems in the manager’s department ANSWER: A, Knowledge, Difficult, p. 302 27. Sherri Delgado is a manager for Sierra Inc. Sierra produces different products in three divisions: tires, compact discs, and pharmaceuticals. Delgado’s span of control is most likely to be __________. a. broad b. narrow c. short d. tall ANSWER: B, Application, Moderate, p. 302 28. Employees of Connect the Dots Learning Centers face well-defined problems of developmentally challenged students, disinterested parents, and supply shortages. Megan Holbrook has been an employee of the center for many years and was recently promoted to a managerial position. Holbrook’s span of control is likely to be __________. a. linear b. vertical c. broad d. narrow ANSWER: D, Application, Difficult, p. 302 30
  • CHAPTER 11: ORGANIZATIONAL DESIGN 29. At the local post office, extensive rules govern the tasks and behavior of employees. Postmasters rely on the rules and standard operating procedures to do much of the controlling of employees. The span of control for a postmaster can be __________ than that of a manager for a restaurant with few rules and procedures. a. greater b. less important c. narrower d. broader ANSWER: D, Application, Moderate, p. 302 30. When a news assistant reports to a senior reporter, who reports to the editor, who reports to the publisher, a flow of __________ has been established. a. accountability b. responsibility c. delegation d. designation ANSWER: A, Application, Moderate, p. 302 31. In creating employee accountability, when __________ is lacking, managers cannot judge the subordinates' accomplishments fairly. a. responsibility b. delegation c. authority d. both a and c ANSWER: D, Knowledge, Difficult, p. 302 32. Managers assign the right to act and make decisions in certain areas to subordinates through __________. a. centralization b. delegation c. span of control d. locus of control ANSWER: B, Knowledge, Easy, p. 302 33. __________ is the right to make decisions. a. Authority b. Decision making c. Power d. Position ANSWER: A, Knowledge, Easy, p. 302 31
  • CHAPTER 11: ORGANIZATIONAL DESIGN 34. Darnell Henley is the captain of the Wichita Wildcats football team and determines all of the game plays. Darnell is able to make these decisions because he has __________. a. authority b. power c. charismatic authority d. accountability ANSWER: A, Application, Moderate, p. 302 35. A company president assigns to an executive assistant the task of preparing a formal statement for presentation to a congressional committee. This is an example of __________. a. organizational design b. locus of control c. misallocation of resources d. delegation of authority ANSWER: D, Application, Moderate, p. 303 36. __________ is not one of the basic components of the delegation process. a. Establishing goals and standards b. Providing training c. Determining political power and alliances d. Involvement ANSWER: C, Knowledge, Moderate, p. 303 37. Antwan Payne is a manager of the marketing department of Paradise Time Share Condominiums. Payne’s subordinate, Chadwick Wolff, is having trouble locating information on the demographics of timeshare buyers. Payne asks Wolff to do the report for him because he doesn’t know how to do it. Payne tells Wolff to check some trade magazines. Wolff is following the __________ principle for improving delegation of authority. a. establish adequate controls b. expecting completed work c. involve subordinates d. timely feedback ANSWER: B, Application, Difficult, p. 303 38. Ron Anderson often writes his own test questions because he thinks that a mistake made by a student writer would be costly. Anderson is reluctant to ___________. a. delegate authority b. give up power c. reduce his span of control d. share credit for good test questions ANSWER: A, Application, Moderate, p. 303 32
  • CHAPTER 11: ORGANIZATIONAL DESIGN 39. Which of the following is not one of the six principles useful for improving delegation of authority? a. ensure clarity b. involve subordinates c. provide training d. All of the above are principles for improving delegation. ANSWER: D, Knowledge, Easy, p. 303 40. __________ is not one of the excuses managers often make for not delegating. a. It takes too much time to explain b. An employee’s mistake could damage the manager’s reputation c. Managers think they can do the job better themselves d. Employees are too busy themselves ANSWER: D, Knowledge, Moderate, p. 303 41. The six practices for achieving effective delegation provide a strong foundation for __________. a. reducing barriers to delegation b. training workers to receive authority c. achieving higher productivity from managers d. all of the above ANSWER: A, Knowledge, Difficult, p. 303 42. American Standard designed its Bulgarian organization to respond to the primary risk factor, which was __________. a. market size b. cultural c. political d. foreign exchange ANSWER: C, Knowledge, Easy, p. 304 43. American Standard was one of the few companies to locate their factory in a rural area rather than the city. All of the following were advantages to the company except __________. a. labor costs would have been higher in the city b. local governmental agencies were appreciative c. labor relations were excellent d. the company was recognized as a major development force ANSWER: A, Knowledge, Moderate, p. 304 33
  • CHAPTER 11: ORGANIZATIONAL DESIGN 44. When authority is concentrated at the top of an organization or department, decision making is __________. a. strategic b. decentralized c. focused d. centralized ANSWER: D, Knowledge, Easy, p. 304 45. When decisions are made by employees throughout an organization or department, decision making is __________. a. accountable b. decentralized a. unfocused b. centralized ANSWER: B, Knowledge, Easy, p. 304 46. One of the advantages of decentralization is that __________. a. top managers develop organizational plans and strategies b. top managers handle routine, day-to-day decisions c. subordinates check everything with the boss to save time d. the organization’s atmosphere fosters competition among employees ANSWER: A, Knowledge, Moderate, p. 304 47. Management’s decision to centralize or decentralize decision making responsibilities can be affected by all of the following factors except __________. a. cost of decisions b. competency levels c. difficulty of decisions d. control mechanisms ANSWER: C, Knowledge, Difficult, p. 305 48. When Home Depot advertises a nationwide sale on paint, all stores charge the same price because decision making has been __________. a. focused b. decentralized c. advertised d. centralized ANSWER: D, Application, Moderate, p. 305 34
  • CHAPTER 11: ORGANIZATIONAL DESIGN 49. Marriott Hotels collects certain key data, including number of beds occupied, employee turnover, number of meals served, and the average amount that guests spend on food and beverages. The decision making Marriott uses is __________. a. decentralized b. centralized c. based on economics d. an example of heuristics ANSWER: B, Knowledge, Moderate, p. 305 50. Organizations such as Centex and Weyerhaeuser work hard to ensure an adequate supply of competent managers and employees. These companies are willing to permit employees to make mistakes involving small costs so as to learn from them. The decision making tends to be __________. a. mechanistic b. centralized c. organic d. decentralized ANSWER: D, Application, Moderate, p. 305 Learning Objective 3 Horizontal Design 51. Functional design is particularly suited for which type of organization? a. high production volume b. narrow range of products c. small organization size d. all of the above ANSWER: D, Knowledge, Easy, p. 306 52. __________ involves dividing organizations into smaller units as a result of growth and increased complexity. a. Job rotation b. Specialization c. Horizontal design d. Vertical design ANSWER: C, Knowledge, Easy, p. 305 53. Kris Cassidy is an employee at a Taco Bell restaurant. As a result of functional design, Cassidy is most likely to work __________. a. in Tacoma, Washington b. at food preparation c. afternoons only d. as a store manager ANSWER: B, Application, Easy, p. 306 35
  • CHAPTER 11: ORGANIZATIONAL DESIGN 54. Management can use any of the basic types of horizontal design, including __________. a. by function b. by product c. geographically d. all of the above ANSWER: D, Knowledge, Easy, p. 305 55. Functional design groups employees __________. a. by accounting and finance only b. according to their areas of expertise and the resources they draw on to perform their jobs c. by production departments only d. according to their past employment and salary level ANSWER: B, Knowledge, Moderate, p. 306 56. Harley-Davidson primarily uses __________. a. functional design b. network design c. product design d. traditional design ANSWER: A, Knowledge, Moderate, p. 306 57. Lynette Ivey and Everett Frank are employees of Catalina Classics, a publishing firm. Both have experience in editing romance fiction. Both require editorial assistance and computer typesetting. If the two are grouped together based on these facts, the company is using __________. a. network design b. product design c. virtual design d. functional design ANSWER: D, Application, Moderate, p. 306 58. All of the following are potential benefits to functional design except __________. a. increased coordination within the function b. better career development within the function c. promotes high-quality technical decision making d. interdepartmental coordination is enhanced ANSWER: D, Knowledge, Moderate, p. 306 59. All of the following are potential disadvantages to functional design except __________. a. conflicts over product priorities b. skills become excessively specialized c. overall organization goals are deemphasized d. managers become experts in a narrow field ANSWER: B, Knowledge, Moderate, p. 307 36
  • CHAPTER 11: ORGANIZATIONAL DESIGN 60. All of the following are advantages of functional design except __________. a. it results in a simple structure b. it focuses on interdepartmental goals c. creation of one department for each primary task d. it keeps administrative expenses low ANSWER: B, Knowledge, Difficult, p. 306 61. All of the following are disadvantages of functional design except _______. a. making quick decisions becomes difficult b. managers must spend time resolving problems among departments c. it promotes skills specialization d. pinpointing the accountability of employees becomes difficult ANSWER: C, Knowledge, Difficult, p. 307 62. Ahmed Delgado has analyzed the use of functional design in his company, Bolsha Resources. He concludes that the organization has reduced duplication of resources, increased coordination within the functional areas, and focused on departmental issues and goals. Ahmed concludes that functional design has had __________. a. completely positive results b. completely negative effects c. no effect d. both positive and negative consequences ANSWER: D, Application, Difficult, pp. 306–307 63. Product design refers to __________. a. the organization of the company around the locations where products are sold b. organizing all functions that contribute to a product under one manager c. the organization of the company around the locations where raw materials are found d. the division of the organization into departments like accounting, finance, and production ANSWER: B, Knowledge, Easy, p. 307 64. __________ is the most commonly used design for companies in the Fortune 500. a. Network design b. Functional design c. Product design d. Geographical design ANSWER: C, Knowledge, Difficult, p. 307 65. All of the following are advantages of product design except __________. a. is most appropriate for slow changes in a product b. allows greater product visibility c. clearly defines responsibilities d. develops managers who can think across functional lines ANSWER: A, Knowledge, Moderate, p. 308 66. All of the following are disadvantages of product design except __________. 37
  • CHAPTER 11: ORGANIZATIONAL DESIGN a. may not use skills and resources effectively b. fosters politics in resource allocation c. is not suited to fast changes in a product d. limits career mobility for personnel outside their product line ANSWER: C, Knowledge, Moderate, p. 308 67. Management wants to ensure a focus on the needs of customers. This firm will likely use __________ design. a. functional b. network c. product d. geographical ANSWER: C, Knowledge, Moderate, p. 308 68. Proctor & Gamble has a product design. The firm most likely chose this organization structure because __________. a. all of their competitors do so b. the customers would require the firm to do so c. the company is organized by geographic location d. it helps in measuring financial performance of each division ANSWER: D, Application, Difficult, p. 307 69. Komatsu uses __________ design to organize its operations. a. product b. supplier c. geographic d. stakeholder ANSWER: A, Knowledge, Difficult, p. 307 70. Sun Tzu is the president of The Art of War, a consulting company. The firm has branches that are diverse in terms of customers, geographic location, and available services. Tzu is most likely to choose to use __________ design for his firm. a. functional b. network c. product d. geographical ANSWER: D, Application, Moderate, p. 309 71. All of the following are advantages of geographical design except __________. a. the equipment used for products is all in one place b. managers know customers’ problems c. managers develop expertise in solving problems unique to one location d. extensive rules and regulations may be required ANSWER: D, Knowledge, Moderate, p. 310 72. All of the following are disadvantages of geographical design except __________. a. achieving uniformity of quality may require extensive regulations b. there may be a conflict between each location’s goals and corporate goals 38
  • CHAPTER 11: ORGANIZATIONAL DESIGN c. managers may develop expertise unique to one location d. all functions are duplicated at each location ANSWER: C, Knowledge, Moderate, p. 310 73. Michele Morrison is the president of Outrageous Outback Adventures, an adventure tour and travel company. One guide is assigned to each particular adventure, but Morrison has set extensive rules that apply to all tours and all guides. Morrison is addressing __________ of geographical design. a. a disadvantage b. the key issue c. an advantage d. the functional aspects ANSWER: A, Application, Difficult, p. 310 74. An example of geographical design is __________. a. determining political power from the organization chart b. organizing a company by sharing of resources c. locating a plant next to raw materials d. creating a standardized advertising campaign for all subsidiaries ANSWER: C, Application, Easy, p. 309 75. Starbucks’ organizational design __________. a. is horizontally integrated b. has the executive level organized by location c. applies rules extensively to all locations d. all of the above ANSWER: C, Knowledge, Difficult, p. 310 76. The Starbucks organization would be characterized by a __________ design. a. functional b. product c. geographical d. network ANSWER: C, Knowledge, Easy, p. 309 77. A network design __________. a. groups employees into interconnected functional networks b. subcontracts some of its operations to other firms c. groups tasks and operations by location d. depends upon regional coordination through technology ANSWER: B, Knowledge, Moderate, p. 310 39
  • CHAPTER 11: ORGANIZATIONAL DESIGN 78. The network design is described by all of the following terms except __________. a. virtual organization b. outsourcing c. divisional structures d. real time ANSWER: C, Knowledge, Moderate, p. 310 79. Cisco Systems primarily uses a __________ design. a. functional b. product c. geographical d. network ANSWER: D, Knowledge, Moderate, pp. 310–312 80. The movie industry is regarded as a network design because it __________. a. outsources its projects to various people b. uses multiple managers c. operates in multiple locations d. is horizontally integrated ANSWER: A, Knowledge, Moderate, p. 312 81. Why does the network design sometimes fail to live up to deadlines? a. inadequate resources b. lack of worker commitment c. unclear lines of authority d. all of the above ANSWER: D, Knowledge, Easy, p. 312 82. DreamWorks takes part in all of the following except __________. a. computer-generated film technology b. video game development c. using HP for animation technology d. outsourcing of artists and actors ANSWER: B, Knowledge, Difficult, pp. 313–314 83. DreamWorks is using __________ to create even more realistic animation for its next generation of films. a. video game technology b. interactive display technology c. Activision d. Hewlett-Packard ANSWER: D, Knowledge, Moderate, p. 314 40
  • CHAPTER 11: ORGANIZATIONAL DESIGN Learning Objective 4 Organizational Integration 84. Which statement about organizational integration is false? a. Management must furnish coordination tools for organizational goals to be achieved. b. Many managers believe that good people can make any organizational design work. c. The text presented two integration methods: behavior and technology. d. There are a variety of methods managers can use for integration of activities. ANSWER: C, Knowledge, Difficult, p. 314 85. A(n) __________ system encourages managers and subordinates to work together in teams and to communicate openly with each other. a. organic b. mechanistic c. network d. virtual ANSWER: A, Knowledge, Moderate, p. 314 86. A(n) __________ system is one in which management breaks activities into separate, highly specialized tasks, relies extensively on standardized rules, and centralizes decision making at the top. a. organic b. mechanistic c. functional d. networked ANSWER: B, Knowledge, Moderate, p. 314 87. Deirdre Drummond is an environmental specialist with the City of Newark sanitation department. The garbage collectors in her department each perform specialized tasks and rely on the department head for decision making. Deirdre works in a(n) __________ organization. a. organic b. mechanistic c. stable d. standardized ANSWER: B, Application, Moderate, p. 314 41
  • CHAPTER 11: ORGANIZATIONAL DESIGN 88. Trinidad Wolff is a computer programmer with a large data processing company. Wolff spends much of his day working as a team with Meghan Kincaid, who is a computer engineer who specializes in computer hardware design. Wolff and Kincaid have authority to make system-wide design decisions and their work as a team facilitates problem solving. Wolff and Kincaid work in a(n) ___________ organization. a. organic b. mechanistic c. network d. virtual ANSWER: A, Application, Moderate, p. 314 89. A(n) __________ system is well suited to a changing environment. a. organic b. mechanistic c. dynamic d. post modern ANSWER: A, Knowledge, Moderate, p. 315 90. A(n) __________ organization may be most appropriate when an organization’s environment is stable and predictable. a. organic b. mechanistic c. network d. geographical ANSWER: B, Knowledge, Moderate, p. 315 91. Which of the following statements is true of a mechanistic organization? a. Authority, responsibility, and accountability are not defined or restricted by level. b. Specific roles are prescribed for each employee. c. Tasks tend to be interdependent. d. Tasks are continually adjusted and refined through employee participation in setting new goals. ANSWER: B, Knowledge, Moderate, p. 315 92. Marshall Dillon manages a McDonald’s. Marshall should adopt a __________ design. a. product b. network c. mechanistic d. organic ANSWER: C, Application, Moderate, pp. 314–315 42
  • CHAPTER 11: ORGANIZATIONAL DESIGN 93. Which of the following statements adequately describes an organic structure? Organic structures __________. a. place emphasis on employees giving and taking orders b. are well-suited to an unchanging environment c. place little emphasis on teamwork d. encourage employees to communicate with anyone who might help solve a problem ANSWER: D, Knowledge, Moderate, pp. 314–315 94. Jewel Martinez owns and operates a business in which products, governmental regulations, and customer demands are constantly changing. To be an effective manager, she should consider __________. a. a mechanistic organization design b. an organic organization design c. hiring individuals with little or no communication or group skills d. a network structure ANSWER: B, Application, Moderate, p. 315 95. The medical services industry is constantly offering new technologies and equipment to assist with the diagnosis and treatment of patients. In addition, recent debates regarding public policy changes suggest that the governmental regulation of medicine is likely to be reformed to some significant degree. Furthermore, providing medical care might be described as a nonroutine service. Considering all of this, medical care providers should use a(n) __________ type of organization design. a. mechanistic b. network c. geographic design d. organic ANSWER: D, Application, Moderate, p. 315 96. Which of the following is true of Flextronics’ procedure for making large capital investments? a. The CEO references the 80-page Corporate Policy Manual. b. Only top managers are authorized to make decisions. c. A long list of standard questions must be answered in the decision process. d. All of the above statements are true. ANSWER: A, Knowledge, Difficult, pp. 315–316 97. An organic system is the most appropriate for Flextronics due to all of the following except: a. the CEO does not like rigid structures, charts, and job duties. b. the CEO believes in allowing people to risk making mistakes. c. the CEO believes that global manufacturing is all about creativity. d. the CEO believes the biggest mistake is to miss important opportunities. ANSWER: C, Knowledge, Moderate, pp. 315–316 43
  • CHAPTER 11: ORGANIZATIONAL DESIGN 98. Louis Escobar owns and manages a store that markets, repairs, sells, and produces televisions and computers. Little coordination of information flow and resource exchange occurs between departments. This is best described as ___________ interdependence. a. pooled b. sequential c. reciprocal d. virtual ANSWER: A, Application, Moderate, p. 316 99. At many commercial banking establishments, the savings, loan, and real estate departments operate according to __________ interdependence organization design. a. pooled b. technological c. reciprocal d. sequential ANSWER: A, Application, Difficult, p. 317 100 __________ interdependence involves the orderly step-by-step flow of information, . tasks, and resources from on individual or team to another within the same department or from one department to another. a. Product b. Pooled c. Output d. Sequential ANSWER: D, Knowledge, Moderate, p. 317 101 Vern Hinson owns an egg farm. At the farm, one person collects the eggs, then another . washes and inspects the eggs, then another person is responsible for placing the different-sized eggs into the correct cartons. This organizational design can best described as __________ interdependence. a. reciprocal b. pooled c. output d. sequential ANSWER: D, Application, Moderate, p. 317 102 If unit A’s output is unit B’s input, and unit B’s output is unit C’s input, then this . arrangement might best be described as relying upon __________ interdependence. a. sequential b. pooled c. reciprocal d. product ANSWER: A, Application, Easy, p. 317 44
  • CHAPTER 11: ORGANIZATIONAL DESIGN 103 Which of the following type of business is most characterized by sequential . interdependence? a. automobile manufacturing b. convenience stores c. hospitals d. airlines ANSWER: A, Application, Moderate, p. 317 104 __________ interdependence involves the need for every individual and department to . work with every other individual and department; information and resources flow back and forth freely until the goal is achieved. a. Task b. Reciprocal c. Sequential d. Pooled ANSWER: B, Knowledge, Moderate, p. 317 105 Jenna Kendrick runs an advertising firm in Phoenix, Arizona. Information and resources . flow back and forth until the service for each client is complete. This is best described as a __________ interdependence organization design. a. task b. perpetual c. reciprocal d. sequential ANSWER: C, Application, Moderate, p. 317 106 Which one of the following types of organizations is most characterized by reciprocal . interdependence? a. automobile manufacturing b. hotels and Motels c. hospital emergency rooms d. fast-food restaurants ANSWER: C, Application, Moderate, p. 317 45
  • CHAPTER 11: ORGANIZATIONAL DESIGN Essay Questions Learning Objective 1 1. What are the two fundamentals of organizing? Describe them. There are two fundamental concepts around which all organizations are organized: differentiation and integration. Differentiation is the specialization and division of labor that enable different competencies to be deployed for various tasks performed by employees with unique abilities. Each work unit is given the opportunity to organize its work differently to meet its objectives. Integration puts the units together so that work can be coordinated. Rules and procedures are instituted, as well as the use of systems and technology. Easy, p. 300 Learning Objective 2 2. Explain the five aspects of an organization’s vertical design. There are five major parts to the vertical organizational design. 1) Hierarchy refers to the relationships among organizational levels. These can be observed in the organizational chart. 2) Span of control is the number of employees directly reporting to a manager. Wider spans create a flatter organization with fewer hierarchical levels. 3) Authority, responsibility, and accountability are the glue that holds the vertical and horizontal parts of the organization together. They indicate who has the right to make decisions, who will be held responsible for performance, and who is accountable for results. 4) Delegation is the process of giving authority to a person (or group) to make decisions. Delegation is directly related to responsibility and accountability. 5) Centralization and decentralization refer to the overall management philosophy regarding the way that decisions are made and implemented. Authority can be retained at the top of the organization or can be spread out to appropriate work units. Moderate, pp. 301–305 46
  • CHAPTER 11: ORGANIZATIONAL DESIGN 3. Describe some of the factors that affect management’s decisions to either centralize or decentralize the authority for decision making. a. Cost of decisions is the most important criteria. High costs relate to the retention of authority at the top of the organization. b. Uniformity of policy is the concern management has toward fairness and equality. Uniform policies aid in administration and comparison of relative efficiencies. c. Competency levels relate to the skills and performance of managers and employees. These must be reasonably high in order to consider decentralization. d. Control mechanisms may be required, particularly in large organizations, in order to ensure that expectations are being met. e. Environmental influences pertains to regulatory restrictions that may affect the degree of autonomy that is appropriate for separate business units. Difficult, p. 305 Learning Objective 3 4. Describe the four types of horizontal design. 1) Functional design: grouping workers according to their areas of expertise and the resources used in their work. 2) Product design: organizing around the functions that contribute to a product that competes against competitors in its own market. 3) Geographical design: activities are organized around a physical location based on customers, competitors, or resources of production. 4) Network design: relates to outsourcing organizational activities that are subcontracted to other firms Easy, pp. 306–313 5. What are the advantages and disadvantages of functional design? a. Advantages 1) Supports skill specialization. 2) Reduces duplication of resources and increases coordination within the functional area. 3) Enhances the career development and training within the department. 4) Allows superiors and subordinates to share common expertise. 5) Promotes high-quality technical problem solving. b. Disadvantages 1) Inadequate communication between departments. 2) May create conflict over product priorities. 3) May make interunit coordination difficult. 4) Focuses on departmental rather than organizational issues and goals. 5) Develops managers who are experts in narrow fields. Difficult, pp. 306–307 47
  • CHAPTER 11: ORGANIZATIONAL DESIGN 6. Describe how Starbucks uses its strategic action competency to develop its organizational design. With 6,000 locations worldwide and $3 billion in sales, Starbucks has successfully established itself on three continents. Starbucks combines a functional design with a geographical design. At the top is the functional group of executive vice presidents over finance, supply chain, etc. but below the senior vice president for coffee is a geographic structure. This consists of four regional presidents who are accountable for procedures and profits for their geographic area. Below these regional presidents are district managers who handle store operations. Moderate, pp. 309–310 7. Discuss the benefits and dangers of a network design. The network design makes it possible to link up with the skills of other organizations to rapidly achieve ambitious goals. Skills that do not exist in the organizations can be acquired for the purpose of a project, and then rapidly disassembled. This creates the opportunity for speed, flexibility, creativity, and cost effectiveness. The dangers relate to a lack of control and commitment that can occur through limited coordination and overall management difficulty. Delays can result when goals are not met. Lack of knowledge can be a disadvantage when relying on the specialized skills of others. Urgency levels may not be as high at the outsourced organization. Also, lines of accountability are not always clear. Moderate, p. 312 Learning Objective 4 8. Describe the two systems of integration. The mechanistic system (also known as the bureaucratic system) breaks activities into separate tasks and relies on standardized rules, with decision making centralized at the top. This is appropriate for a relatively stable organizational environment. An organic system encourages managers and subordinates to work together in teams and communicate openly with each other. This type of decision making tends to be decentralized and is well suited to a changing environment. Easy, pp. 314–315 48
  • CHAPTER 11: ORGANIZATIONAL DESIGN 9. Explain two of the three types of technical interdependence. Give an organizational example of each. a. Pooled interdependence involves little sharing of information or resources among individuals within a department or among departments. Each department in the organization works on its own specialized tasks. Various departments within a bank are a good example of pooled interdependence. b. Sequential interdependence involves the orderly step-by-step flow of information, tasks, and resources from one individual or team to another within the same unit or from one unit to another. The output of one department becomes the inputs for another department. A car assembly line is typical of sequential interdependence. c. Reciprocal interdependence takes place when every individual in a work unit needs to work with every other individual and unit. Information and resources flow back and forth freely until the goal is achieved. A hospital would be a typical example of reciprocal interdependence. Difficult, pp. 316–317 49