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410 TEST 3 REVIEW

Control

1. Explain the managerial “control” function.

— Directs activities towards achievement of org goals
— Mgrs form plans/strategies, must ensure plans are carried out
o make sure other people are doing what needs to be done
— Continuous feedback so when plans aren’t carried out properly, they can take steps to
correct problem
o primary control function of mgmt
— Figure out ways to control activities by ensuring creativity, enhancing quality, and
reducing cost
2. What are some signs that controls might be lacking in an org?
Lax top: mgrs don’t emphasize/value need for controls, or set bad examples.
Absence of policies: firm’s expectations not established in writing
Lack of agreed-upon standards: org members are unclear about what needs to be achieved
“Shoot the messenger”: employees feel their careers would be at risk if they reported bad news
Lack of periodic reviews: mgrs do not assess performance on regular/timely basis.
Bad information systems: key data not measured/reported in timely or easily accessible ways
Lack of ethics in culture: org members have not internalized commitment to integrity

3. Summarize how to design an org’l control system (four steps).

a) Set performance standards
b) Measure performance
c) Compare performance against standards and determine deviations
d) Correct problems and reinforce success
4. Explain 3 broad strategies for achieving org’l control. How can clan controls help mgrs lead?
a) Bureaucratic control – rules, regulations, and authority to guide performance
b) Market control – pricing mechanisms and economic info regulate activities
c) Clan control – norms, values, shared goals, and trust among group members
When members of org have common values/goals/trust, formal controls are less necessary.
Works best where there is no “one best way” to do job; employees empowered to make decisions
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5. Give an example of bureaucratic or market control.

 Before operations begin - Feedforward

Bureaucratic – inspection of raw materials, proper selection, training employees
Market – CEO uses market controls (profitability, market share) to evaluate performance
of business unit heads

 While operations are carried out – Concurrent

Bureaucratic – advances in information technology, supervisors monitoring behavior
Market – mgrs use transfer pricing to establish values for internal transactions among
units

 Results (compared to standards) to correct deviations – Feedback

Bureaucratic – supervisors point out/correct improper performance
Market – market rates determine base wage/salary for managers and employees
6. What does a management audit evaluate?
Evaluates effectiveness+efficiency of various systems within org
o External: audits of other companies
o Internal: audits of their own companies

7. Explain the difference between an external and internal audit.

External audit
- Conducted by one business on another
- Financial audits
- Provide essential feedback control when legal and ethical lapses identified
Internal audit
- Assessment of company’s own planning/organizing/leading/controlling processes
- Past/present/future
- Financial stability, production efficiency, sales effectiveness, HR dvlpt, earnings growth,
energy use, public relations, civic responsibility, etc.
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Finance

1. What are financial goals shared by all organizations regardless of sector?

To acquire resources in order to maximize income
To minimize use of resources (efficiency)
To maximize achievement of goals (effectiveness)

2. What 3 factors determine how much real property tax a homeowner/commercial business will
pay
(tax rate) x (assessment % rate) x (property rate)

3. Which sources of revenue are (most) exclusive to each organizational sector?

— Income
— Revenues directly from operations
— Fees and charges (sales)
— Taxes
— Donations
— Sponsorships
— Crowdsourcing
— Advertising sales
— Investing
— Soliciting Investment (debt and equity)
— Grants

4. Distinguish between short-term (current) and long-term debt.

— Borrowing (Banks)
o current/short-term
o Operations support – cash flow management
- Bonds
o Long-term – 10+ years
 Ideally used for capital investment
5. Explain how bonds work.

 Long-term – 10+ years

 Ideally used for capital investment

6. Explain 2 ways that municipal (public) bonds are funded.

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 Public agency (municipal) bonds

o Used for land acquisition, buildings, infrastructure
— General Obligation Bond (GOB)
o backed by “the full faith and credit of govt”
o payback through general operating budget

7. What org issues treasury bonds?

US Treasury
8. What are corporate bonds?

 Debt obligations (IOUs)

 issued by private and public corporations

9. What is a budget? How is it used as a control?

— Investigating what’s being done
— Comparing results with corresponding budget data to verify accomplishments or fix
differences
— Types of budgets include:
o Revenue
o Expense
o Cash
o Capital
o Master
o Production

10. Describe the difference between a capital and an operating budget.

— Operating
o general fund (day-to-day)
— Capital
o loans, bonds
o used for fixed assets
— Show sources of funds, depreciation of current assets, and NPV (net present value)

11. What is incremental budgeting? Under what circumstances is it the most efficient method?
What is the major disadvantage to incremental budgeting? What is the alternative method
discussed in class?
— Incremental budgeting: using previous period's budget or actual performance as basis
with incremental amounts added for new budget period
o Allocation of resources is based upon allocations from the previous period
— Developing new budgets – build from ground up (dynamic) or incremental (stable)
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— Disadvantages are it only assumes minor changes from the preceding period, fosters
overspending, budgetary slack, and a growing disconnect from the budget and the actual
results
— Alternative method is zero-based budgeting

12. What is the purpose of financial ratios? What is the ratio that measures profitability?
— Effective approach for checking enterprise’s overall performance is using key financial
ratios, which suggest strengths and weaknesses
— Ratio that measures profitability – Return on Investment (ROI)

Key Terms

Budget cycle
— Not always annual (Fiscal Year)

Fixed and Variable costs

— Variable: rise when production rises
— Fixed: administrative costs (don’t rise much or at all when production increases)

Activity Based Costing

— Allocate costs according to amount of time employees devote to particular activities

Balance Sheet
— Financial picture of company
— Itemizes assets, liabilities, and stockholders’ equity
— Standard for comparison is often previous year(s)

Assets
values of various items the corporation owns
Liabilities
amount corporation owes to various creditors
Assets – liabilities = owner equity (net worth)
Owner (stockholder) equity
amount accruing to corporation’s owners
Cash budget
— Estimate of all cash receipts/cash expenditures expected to occur
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Management Myopia
— Short term view
— Focuses on company earnings/profits instead of customer’s needs/wants

Leadership

1. Explain the distinction between leading and managing (or strategic leadership and supervisory
leadership).
Supervisory (managing): provides guidance, support, and corrective feedback for day-to-
day activities
Strategic (leading): gives purpose and meaning to orgs, envisioning and creating positive
future
2. Name, describe, and give examples of the 5 sources of power discussed in class.
Power is the ability to influence others
1. Legitimate – has right/authority to tell others what to do.
a. supervisor tells an employee to update the company’s website
2. Reward – influences others bc she controls valued rewards
a. positive performance review and a big pay raise from her boss
3. Referent – personal characteristics appeal to others; CHARISMA
a. Young/ambitious mgrs emulate work habits and personal style of a successful,
charismatic executive
4. Coercive – control over punishments; people comply to avoid these punishments
a. mgr implements absenteeism policy that administers disciplinary actions to
offending employees
5. Expert – certain expertise or knowledge
a. sales mgr gives his salespeople some tips on how to close a deal
3. Describe 3 traditional approaches to understanding leadership.
A. Trait – attempts to determine personal characteristics that great leaders share
 Drive
 Leadership motivation
 Integrity
 Self confidence
 Knowledge of the business
o First theory – leaders were born with these traits; now – leaders can acquire them

B. Behavioral – identify what good leaders do/what behaviors they exhibit.

o Task performance behaviors – ensure work group or org reaches goals
o Telling people what to do/feedback on how they are performing
o Group maintenance behaviors – ensure satisfaction of group members, develop and
maintain harmonious work relationships, and preserve social stability of group.
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o Autocratic leadership – leader makes decisions on their own, then announces decisions
to group
o Democratic leadership – leader solicits input from subordinates
o Laissez-faire – absence of managerial decision-making

C. Situational – universally important traits/behaviors do not exist; varies from situation to

situation
o Hersey and Blanchard’s Situational theory – life-cycle theory of leadership; mgr should
consider employee’s psychological and job maturity before deciding whether task
performance or maintenance behaviors are more important
o Job maturity – level of employee’s skills/technical knowledge relative to task being
performed
o Psychological maturity – employee’s self-confidence and self-respect
o Substitutes for leadership – factors in workplace that can exert the same influence on
employees as leaders would provide
4. What are task maintenance behaviors? Group maintenance behaviors?
Task maintenance behaviors – actions taken to ensure that work group or org reaches
its goals
o Telling people what to do and feedback on how they are performing.

Group maintenance behaviors – actions taken to ensure satisfaction of group members,

develop and maintain harmonious work relationships, and preserve social stability of grp
5. What are some leadership opportunities available within an organization?
Servant-leaders – serves others’ need while strengthening org
Bridge leaders – bridges conflicting value systems or different cultures
Shared leadership – rotating leadership – people rotate through leadership role based on which
person has most relevant skills at particular time
Lateral leadership – peer groups – colleagues at same hierarchical level are invited to
collaborate and facilitate joint problem solving
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Key Terms
Transformational leadership
– Motivates people to transcend their personal interests for the good of the group
Transactional leadership
– Manages through transactions, using legitimate/reward/coercive powers to give commands and
exchange rewards for services rendered
Level 5 leadership
– Strong professional will (determination) + humility that builds enduring greatness
Authentic leadership
– Leader is true to herself while leading
Pseudo-transformational leadership
– Leaders who talk about positive change, but allow their self-interest to take precedence over
followers’ needs
Autocratic leadership
– Leader makes decisions on their own, then announces them to group
Democratic leadership
– Leader solicits input from subordinates
Laissez-faire
– Absence of managerial decision-making
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Motivation
1. What is “motivation”?
— Forces that energize, direct, and sustain person’s efforts.
— Attract people that will be loyal to org (hire right)
— Create environment that fosters loyalty – citizenship, civility.

2. Motivating goals are __, __, ____, and _____.

Specific
Challenging
Acceptable
Meaningful
3. What role does manager/employee collaboration play in making goal setting an effective
motivation tool?
— Agree that goal matches organization and personal vision/goals

4. Describe Thorndike’s Law of Effect.

— Behavior that’s followed by positive consequences will likely be repeated
— Org’l behavior modification attempts to influence people’s behavior and improve
performance by systemically managing work conditions and the consequences of people’s
actions.
5. Explain 2 ways to encourage repeat behavior and 2 ways to discourage repeat behavior.
Encouraging behaviors
o Positive reinforcement – rewards, workplace benefits
o Negative reinforcement – threat of punishment

Discouraging behaviors
o Punishment – administering a consequence
o Extinction – extinction of desired behaviors

6. Give an example of how “extinction” may discourage positive behaviors.

Lack of feedback, or not giving a compliment for a job well done
7. Explain Maslow’s need hierarchy. How does it differ from Alderfer’s ERG theory?
Maslow’s Hierarchy: human needs organized into a pyramid
1. Physiological – food, water, sex, and shelter
2. Safety or security – protection against threat and deprivation
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3. Social – friendship, affection, belonging, love

4. Ego – independence, achievement, freedom, status, recognition, self-esteem
5. Self-actualization – realizing one’s full potential, becoming everything one is capable
of
Alderfer’s ERG Theory: more scientific; people have 3 basic sets of needs that can operate
simultaneously
o Existence needs – material and physiological desires
o Relatedness needs – relationships with others; satisfied through process of sharing
thoughts/feelings
o Growth needs – motivate people to productively/creatively change selves or
environment
8. What 3 factors motivate managers (McClelland)?
A. Need for achievement – strong orientation toward accomplishment; obsession with success
and goal attainment
B. Need for affiliation – reflects strong desire to be liked by other people
C. Need for power – desire to influence/control other people

9. What is an intrinsic reward?

Reward a worker derives directly from performing the job itself
10. What are the factors in Herzberg’s two-factor theory?
Hygiene factors – characteristics of workplace (company policies, working conditions, pay, and
supervision that can make people dissatisfied) EXTRINSIC

Motivators – factors that make a job more motivating (additional job responsibilities,
opportunities for personal growth and recognition, and feelings of achievement) INTRINSIC

11. How can managers restructure jobs and work to motivate employees by making work more
interesting?
Empowerment – sharing power with employees, enhancing their confidence in their ability to
perform jobs, and their belief that they are influential contributors to org
Sharing decision-making (the ability to influence) with others – trust
12. Define terms related to fairness and shared understanding between mgmt and employees.
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Equity theory – people assess how fairly they have been treated according to two key factors:
outcomes and inputs
Procedural justice – using fair process in decision making, and making sure others know that
the process was as fair as possible
Psychological contract – perceptions of what employees owe their employers, and what their
employers owe them
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Teamwork
1. What differentiates a group from a team? The new team environment from a traditional work
environment?
Group – collection of people who interact to undertake a task, but do not necessarily perform as
a unit
Team – people (usually small #) with complementary skills who trust one another and are
committed to common purpose, common performance goals, and common approach for which
they hold themselves mutually accountable
— more involved
— better trained
— higher cooperation
— learning/producing culture

2. Distinguish a “work team” from a project, parallel or management team.

Work team – make or do things
Projector team – work on long term projects, but disband once work is completed
Parallel teams – operate separately from regular work structure, and exist temporarily
Management teams – coordinate and provide direction to subunits and integrate work among
subunits
3. At what level of team development does a team no longer have an immediate supervisor and is
responsible for making decisions made by first-line supervisors?
Self-managed teams – autonomous work groups in which workers are trained to do all or most
jobs in a unit, have no immediate supervisor, and make decisions previously made by frontline
supervisors