Business Canadian 8th Edition Griffin Test Bank

Business Canadian 8th Edition Griffin
Test Bank
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Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 7—Organizing the Business Enterprise
Chapter 07: Organizing the Business Enterprise
Chapter 07 Multiple Choice Questions
1. Roger is analyzing the jobs to be done in his company, their specific overall purpose, and how the jobs
relate to each other. Roger is analyzing the company's
a. job descriptions.
b. organizational chart.
c. organizational structure.
d. departmentalization.
e. chain of command.
Difficulty: 1 Page-Reference: 216
Question ID: 07-1-01 Skill: Comprehension
Objective: 7.1
Answer : c.organizational structure.
2. Organizational structure is
a. the relationship between the chain of command in a decentralized organization.
b. the specification of the way in which the organization manages the projects.
c. teams of individuals temporarily working on a special project together.
d. the specification of the jobs to be done within a business, and how much decentralization will be
permitted.
e. the specification of the jobs to be done within a business and the relationship of these jobs with
each other.
Question ID: 07-1-02 Skill: Knowledge
Objective: 7.1
Answer : e.the specification of the jobs to be done within a business and the relationship of these jobs
with each other.
3. When Ford executives announced changes intended to eliminate corporate bureaucracy, speed
decision making, and improve communication and working relationships among people at different
levels of the organization, these changes were examples of the ________ function of management.
a. organizing
b. planning
c. directing
d. controlling
e. none of these
Objective: 7.1
Answer : a.organizing
4. Which of the following clarifies structure and shows employees where they fit into a firm's operations?
a. Organization chart
b. Responsibility
c. Departmentalization
d. Delegation
e. The mission statement
Copyright © 2014 Pearson Canada Inc. 1

Objective: 7.1
Answer : a.Organization chart
5. Which of the following does not have a significant influence on organizational structure?
a. An institution's mission
b. An institution's strategy
c. Changes in environmental circumstances
d. An institution's profits
e. An institution's purpose
Objective: 7.1
Answer : d.An institution's profits
6. What is the purpose of organization charts?

a. They portray the firm's structure and the relationship of employees within the organization.
b. They are a valuable tool for companies experiencing a large increase in research and development expenditur
new products.
c. They show the grouping of jobs into logical units.
d. They are used to plan marketing campaigns.
e. They determine which jobs need to be accomplished and who will perform them.
Objective: 7.1
Answer : a.They portray the firm's structure and the relationship of employees within the organization.
7. What is the meaning of the individual boxes shown on an organization chart?

a. Each box is appropriately labelled as a function or a process in the flow of materials/services.
b. Each box represents a job within the company.
c. Each box indicates a different geographical departmentalization.
d. Each box represents a group of people.
e. Each box represents a product or service provided by the organization.
Difficulty: 1 Page-Reference: 216-218
Objective: 7.1
Answer : b.Each box represents a job within the company.
8. What is the meaning of the solid lines connecting the boxes on an organization chart?
a. They identify the relationship of the important staff departments.
b. They identify the level of specialization within the organization.
c. They identify the reporting relationship, or chain of command, within the organization.
d. They identify the relationship between the processes in the flow of materials/services.
e. They identify the products or services available from the organization.
Objective: 7.1
Answer : c.They identify the reporting relationship, or chain of command, within the organization.

9. The chain of command has the following characteristics except

a. solid lines in an organization chart show the chain of command.
b. when the chain of command is not clear, many different kinds of problems can arise.
c. it shows the flow of decision-making power in a firm.
d. the chain of command shows both the informal and formal organizational structure.
e. it shows the reporting relationships within a business.
Objective: 7.1
Answer : d.the chain of command shows both the informal and formal organizational structure.
10. Scott is looking at a chart showing the company's organization structure. He notices that there is a solid
line connecting Judy and Charles to Kara. This means that
a. all reports created by Judy and Charles must be sent to Kara.
b. the product flows from Judy and Charles to Kara.
c. there is a direct telephone line between Judy and Charles and Kara.
d. Kara has more seniority than Judy or Charles.
e. Judy and Charles both report to Kara.
Objective: 7.1
Answer : e.Judy and Charles both report to Kara.
11. Businesses spend a great deal of time developing organization charts because
a. charts portray the firm's structure and the relationship of employees within the organization.
b. a chart determines which jobs need to be accomplished and who will perform them.
c. charts are a valuable tool for companies that are involved in the research and development of new products.
d. charts are useful when planning marketing campaigns.
e. all of these.
Objective: 7.1
Answer : a.charts portray the firm's structure and the relationship of employees within the organization.
12. Joanne is showing new employees the position she occupies in the organizational hierarchy. Joanne is
using
a. a chain of command chart.
b. a manual of positions and relationships.
c. an organization chart.
d. a job specialization chart.
e. a replacement chart.
Objective: 7.1
Answer : c.an organization chart.

13. Whether a business is large or small, the starting point in developing its organizational structure is
a. determining a strategic plan.
b. appointing a board of directors.
c. establishing a mission statement.
d. determining who will do what.
e. none of these are correct.
Objective: 7.1
Answer : d.determining who will do what.
14. The chain of command illustrates ____________, while the organization chart illustrates ________.
a. job specialization; the company's structure
b. reporting relationships; job specialization
c. centralization; decentralization
d. functional departmentalization; job specialization
e. reporting relationships; the company's structure
Objective: 7.1
Answer : e.reporting relationships; the company's structure
15. The process of identifying the specific jobs that need to be done and designating the people who will
perform them leads to
a. segmentation.
b. departmentalization.
c. job specialization.
d. group tasks.
e. mission enhancement.
Objective: 7.2
Answer : c.job specialization.
16. In a Disney animated feature, the job of one cartoonist may be to draw the face of a single character
throughout the feature. This is an example of
a. mission enhancement.
b. segmentation.
c. departmentalization.
d. group tasks.
e. job specialization.
Objective: 7.2
Answer : e.job specialization.

17. Grouping jobs into logical units is called

a. departmentalization.
b. process management.
c. specialization.
d. development of the grapevine.
e. authorization.
Objective: 7.2
Answer : a.departmentalization.
18. The two basic building blocks of all business organizations are
a. specialization and departmentalization.
b. profit centres and divisions.
c. functional and divisional departmentalization.
d. managers and workers.
e. centralization and decentralization.
Objective: 7.2
Answer : a.specialization and departmentalization.
19. Michael is in the process of taking the department's overall "job" and breaking it down into smaller and
smaller "jobs." Michael is working on
a. a matrix structure.
b. job specialization.
c. departmentalization.
d. job classification.
e. job analysis.
Objective: 7.2
Answer : b.job specialization.
20. Which of the following is correct with regard to job specialization?

a. It is a new idea.
b. Its application is limited to factory work.
c. It is a natural part of organizational growth.
d. It makes it more difficult to replace people who leave the organization.
e. All of these are correct.
Objective: 7.2
Answer : c.It is a natural part of organizational growth.
21. Departmentalization refers to

a. the number of employees managed by a single supervisor.
b. the level at which decisions are made.
c. the duty to perform an assigned task.
d. the grouping of specialized jobs into logical units.
e. the establishment of a unit that is responsible for its own costs and profits.


Objective: 7.2
Answer : d.the grouping of specialized jobs into logical units.
22. At Merrick Manufacturing, the design department gets rewarded when projects earn high returns, but
schedules are not important to the department. By contrast, the production department gets rewarded
when projects are on time, but the money that those projects earn is not important. Given that situation,
which of the following situations would most likely lead to a conflict between design and production?
a. Should the company invest in a new project that requires a large initial investment but is expected to lead to
revenue stream in the long run?
b. Should the company launch a project later than planned in order to make changes that will make it more attra
to customers?
c. Should the company focus on existing customer needs or should it anticipate unexpressed needs?
d. Would the product development process at Merrick be more effective if the company had a more traditional
organizational structure?
e. When a project does not meet expectations, is the failure caused by faulty product design or inadequate mar
development?
Question ID: 07-1-22 Skill: Analysis
Objective: 7.2
Answer : b.Should the company launch a project later than planned in order to make changes that will
make it more attractive to customers?
development schedules don't matter. By contrast, the production department gets rewarded when
projects are completed on time, but the money that those projects earn doesn't matter. Top managers
believe that this division of labour keeps employees focused on the tasks that fit their skills and leads to
a better product. Which of the following would support top management's belief?
a. Design department members have to spend a lot of time interacting with people from marketing so they know
marketing will attempt to sell the completed project.
b. Even when unanticipated environmental changes make the project unattractive to customers, the production
department still tries to complete the project according to the original schedule and budget.
c. After a product specification is completed, knowing what kind of thinking went into the product specification is
necessary to complete the project effectively.
d. The current team process is the same as the process that Merrick's executives have used in previous eras.
e. The rationale for the team process is presented to new employees as part of their formal orientation to the
company.
Objective: 7.2
Answer : c.After a product specification is completed, knowing what kind of thinking went into the
product specification is not necessary to complete the project effectively.

development schedules don't matter. By contrast, the production department gets rewarded when
projects are completed on time, but the money that those projects earn doesn't matter. Top managers
believe that this division of labour keeps employees focused on the tasks that fit their skills and leads to
a better product. Which of the following would weaken the claim that this division of labour keeps
employees focused on the tasks that fit their skills and leads to a better product?
a. Some employees who work in the marketing department used to work in the design department.
b. Projects often fail to meet their revenue goals because design develops products for market segments that
marketing has difficulty reaching.
c. Projects are often late because of product distribution problems that occur after the project is completed.
d. More projects fail because they go over budget than because they do not achieve their revenue goals.
e. Unanticipated environmental occurrences cause some projects to be unprofitable.
Objective: 7.2
Answer : b.Projects often fail to meet their revenue goals because design develops products for
market segments that marketing has difficulty reaching.
25. David has grouped some jobs together in such a way that they can be treated as if they are a separate
business that is responsible for its costs, revenues, and profits. David has created a
a. functional department.
b. profit centre.
c. departmentalized work group.
d. matrix structure.
e. divisionalized department.
Objective: 7.2
Answer : b.profit centre.
26. The men's clothing department at Sears is an example of a

a. functional department.
b. process department.
c. product department.
d. profit centre.
e. matrix structure.
Objective: 7.2
Answer : d.profit centre.
27. ComputerLand's structure is set up so that each location is responsible for its own costs and profits.
Each location is
a. a specialized unit.
b. a process department.
c. a profit centre.
d. a product department.
e. a centralized department.
Objective: 7.2

Answer : c.a profit centre.
28. Businesses use profit centres because

a. sales revenue in various territories is easier to determine.
b. each individual reports to no more than two managers.
c. a greater degree of job specialization can be attained.
d. the organization may be divided according to the production process used.
e. each separate unit is responsible for its own costs.
Objective: 7.2
Answer : e.each separate unit is responsible for its own costs.
29. Stores like Sears and The Bay are most likely to departmentalize by
a. function.
b. geography.
c. process.
d. customer.
e. product.
Objective: 7.2
Answer : d.customer.
30. Gleason Corp. is organized on the basis of geography. Top managers know that the company will not
be profitable this year, and it has had trouble developing new products. Which of the following would
strengthen the argument that the company should change its organizational structure?
a. The company values both corporate social responsibility and profitability.
b. Divisions have neglected new product offerings and have instead emphasized traditional revenue sources.
c. Division managers have focused on short-term revenue instead of developing long-term (and profitable)
relationships.
d. The markets Gleason serves have different requirements in different geographic areas.
e. The revenue of the various divisions varies quite a bit.
Objective: 7.2
Answer : b.Divisions have neglected new product offerings and have instead emphasized traditional
revenue sources.
31. Which of the following would MOST strongly suggest that a company should change its organizational
structure from geographic departmentalization to product departmentalization?
a. The largest growth area for the company is governmental contracts, and they have quite different buying
procedures than those of other customers.
b. The company has a separate accounting department in each region where it operates.
c. Managers must be experts in at least one of the products the company sells if they hope to be effective.
d. The company wants to build continuing relationships with customers and sell them as many of the company'
products as possible.
e. The communication between the marketing departments in different regions has not been very effective.
Objective: 7.2

Answer : c.Managers must be experts in at least one of the products the company sells if they hope to
be effective.
32. Which of the following would MOST strongly suggest that a company should change its organizational
structure from geographical to functional?
a. The company has human resource departments in each of its regions.
b. Product development failures happen because the product developers were isolated from the opinions of
customers.
c. The company earns large revenue from the services it offers to public schools.
d. Managers are complaining that they have only a limited understanding of organizational goals.
e. The sales techniques that work in one region are often much less effective in other regions.
Objective: 7.2
Answer : a.The company has human resource departments in each of its regions.
33. Susie's Pets and Supplies, a retail shop that sells pets and many related products needed by those
pets, has recently reorganized. One area of the store is exclusively for dogs, another exclusively for
cats, another exclusively for tropical fish, and so on. The shop is departmentalized by
a. process.
b. function.
c. geography.
d. customer.
e. product.
Objective: 7.2
Answer : e.product.
34. Home Depot and other hardware stores are typically departmentalized by
a. product.
b. geography.
c. customer.
d. function.
e. process.
Objective: 7.2
Answer : a.product.
35. Why is it often difficult for managers to decide whether to use product or geographic
departmentalization?
a. Because consumer tastes are constantly changing
b. Because global competition is so intense
c. Because product and geographic departmentalization each have advantages and disadvantages
d. Because managers in foreign countries overstep their authority and have to be reined in
e. Because communicating with far-flung parts of an organization is now easier than it used to be
Objective: 7.2

Answer : c.Because product and geographic departmentalization each have advantages and
disadvantages
36. Stores like HMV are divided into departments like classical music, R&B, pop, and so on. This illustrates
departmentalization by
a. process.
b. customer.
c. function.
d. geography.
e. product.
Objective: 7.2
Answer : b.customer.
37. Pickle maker Vlasic has separate departments to transform cucumbers into fresh-packed pickles,
pickles cured in brine, and relishes. They have chosen departmentalization by
a. customer.
b. function.
c. process.
d. geography.
e. product.
Objective: 7.2
Answer : c.process.
38. As part of your annual physical, you notice that while at the hospital you'll be sent to X-ray, to the Lab
for blood workups, to another department for stress testing, and so on. You realize that since each test
requires different equipment and worker skills, the hospital is departmentalized by
a. geography.
b. function.
c. process.
d. product.
e. customer.
Objective: 7.2
Answer : c.process.
39. Electronic Universe is organized by departments such as televisions sets, VCR, radio, etc. What type of
departmentalization do they use?
a. Product
b. Process
c. Geographic
d. Functional
e. Electronic
Objective: 7.2
Answer : a.Product

40. What explanation best describes customer departmentalization?

a. The firm is divided according to the functions performed in a particular grouping of specialists.
b. The company is departmentalized according to the process used to produce goods/services for customers.
c. The company is divided according to a specific customer target.
d. The company is divided along the lines of the specific goods/services produced for customers.
e. None of these.
Objective: 7.2
Answer : c.The company is divided according to a specific customer target.
41. An international company that has organized itself by areas such as North America, Europe, Pacific,
and South America is departmentalized by
a. function.
b. product.
c. customer.
d. process.
e. geography.
Objective: 7.2
Answer : e.geography.
42. Firms that have departments such as production, marketing, finance, human resources, etc. are using
________ departmentalization.
a. geographic
b. product
c. customer
d. process
e. functional
Objective: 7.2
Answer : e.functional
43. In reviewing the organizational structure of your company, you notice that Engineering is subdivided
into mechanical, electrical, and software. Additionally, the Accounting Department is subdivided into
Accounts Payable, Accounts Receivable, and Asset Management. What type of departmentalization
has the company selected?
a. Process
b. Functional
c. Geographic
d. Product
e. Customer
Objective: 7.2
Answer : b.Functional

44. Which form of departmentalization is most likely to be used by a public utility company?
a. Geographic
b. Functional
c. Product
d. Process
e. Customer
Objective: 7.2
Answer : a.Geographic
45. The type of departmentalization where all the engineers are in an Engineering Department, all the
customer service reps are in a Customer Service Department, and all the accountants are in an
Accounting Department is called __________ departmentalization.
a. customer
b. process
c. product
d. functional
e. geographic
Objective: 7.2
Answer : d.functional
46. Determining how people performing certain tasks can best be grouped together is called
a. departmentalization.
b. controlling.
c. planning.
d. specialization.
e. directing.
Objective: 7.2
Answer : a.departmentalization.
47. Which of the following is an advantage of customer departmentalization?

a. Employees will make more money and have more job security.
b. Top managers can easily see how the production process is working.
c. Greater expertise can be developed when specialists of one function work together.
d. Top managers can determine when resources need to be changed because of increasing demand in a partic
geographic area.
e. The business benefits from efficiencies and customers get better service.
Objective: 7.2
Answer : e.The business benefits from efficiencies and customers get better service.

48. As you enter your favourite store looking for a graduation gift for your cousin, you notice the signs
suspended from the ceiling: Men's, Women's, Children's, Infant's. The store is departmentalized by
a. geography.
b. customer.
c. function.
d. product.
e. process.
Objective: 7.2
Answer : b.customer.
49. A machine shop has arranged all of the drill presses in one area, all the lathes in another, all the
surface grinders in still another, etc. Because of the differences in equipment and operator skills, the
machine shop has chosen departmentalization by
a. process.
b. function.
c. customer.
d. product.
e. geography.
Objective: 7.2
Answer : a.process.
50. The Ice Cubes Coffee Company has department titles such as accounting, human resource
management, marketing, and production. What is the form of departmentalization being used at Ice
Cubes Coffee?
a. Customer
b. Process
c. Functional
d. Product
e. Geographic
Objective: 7.2
Answer : c.Functional
51. Which of the following best describes responsibility?

a. The liability of subordinates for accomplishing tasks assigned by managers
b. The power to make the decisions necessary to complete a task
c. The assignment of a task, responsibility, or authority by a manager to a subordinate
d. The duty to perform an assigned task
e. The number of people supervised by one manager
Objective: 7.3
Answer : d.The duty to perform an assigned task

52. Which of the following best describes authority?

a. The assignment of a task, responsibility, or authority by a manager to a subordinate
b. The power to make the decisions necessary to complete a task
c. The number of people supervised by one manager
d. The liability of subordinates for accomplishing tasks assigned by managers
e. The duty to perform an assigned task
Objective: 7.3
Answer : b.The power to make the decisions necessary to complete a task
53. Which of the following best describes delegation?

a. The duty to perform an assigned task
b. The liability of subordinates for accomplishing tasks assigned by managers
c. The assignment of a task, responsibility, or authority by a manager to a subordinate
d. The power to make the decisions necessary to complete a task
e. The number of people supervised by one manager
Objective: 7.3
Answer : c.The assignment of a task, responsibility, or authority by a manager to a subordinate
54. When delegating, managers must do all of the following except

a. decide on the nature of the work.
b. match the job with skills.
c. make sure the person understands the objectives.
d. make sure the pay of the person matches his or her level of responsibility.
e. make sure the subordinate has the time and training.
Objective: 7.3
Answer : d.make sure the pay of the person matches his or her level of responsibility.
55. Which of the following best describes accountability?

a. The assignment of a task, responsibility, or authority by a manager to a subordinate
b. The number of people supervised by one manager
c. The duty to perform an assigned task
d. The liability of subordinates for accomplishing tasks assigned by managers
e. The power to make the decisions necessary to complete a task
Objective: 7.3
Answer : d.The liability of subordinates for accomplishing tasks assigned by managers
56. What term describes a manager's action of assigning a task to a subordinate?

a. Subordinate empowerment
b. Authority
c. Delegation
d. Accountability
e. Responsibility

Objective: 7.3
Answer : c.Delegation
57. Which of the following is an advantage of delegation?

a. Increases work skills of subordinates
b. Permits the manager to focus on the day-to-day operations
c. Makes it easier to punish workers who perform tasks poorly
d. Permits the manager to exercise closer control over subordinates
e. Subordinates are not held accountable for tasks assigned by delegation
Objective: 7.3
Answer : a.Increases work skills of subordinates
58. The requirement for a subordinate to show the results of assigned duties to a supervisor is
a. delegation.
b. empowerment.
c. specialization.
d. integration.
e. accountability.
Objective: 7.3
Answer : e.accountability.
59. You are the manager of the Marketing Department. In order to get office and art supplies you must
submit a purchase requisition. Company policy states that you can only approve up to $500; any more
must have the signature of your boss. Based on this you are lacking in which of the following?
a. Accountability
b. Delegation
c. Span of control
d. Responsibility
e. Authority
Objective: 7.3
Answer : e.Authority
60. At Roger's company, new products are developed using a team approach. The vice presidents of
production, marketing, finance, and engineering meet weekly to cover topics of common interest and
new products are usually on the agenda. Recently there have been numerous delays in launching most
of the new products and along with the delays has come much finger-pointing. Which of the following
items is lacking in this situation and is probably a major cause for the poor performance?
a. Authority
b. Span of control
c. Responsibility
d. Delegation
e. Accountability
Question ID: 07-1-60 Skill: Application
Objective: 7.3

Answer : c.Responsibility
61. Scott's management style is one where he gets his subordinates heavily involved in department
activities. After assigning specific tasks, he follows up with them to be sure that they are completing the
assigned activities. What is Scott's assigning of activities called?
a. Authority
b. Responsibility
c. Accountability
d. Span of control
e. Delegation
Objective: 7.3
Answer : e.Delegation
62. Scott's management style is one where he gets his subordinates heavily involved in department
activities. After assigning specific tasks, he follows up with them to be sure that they are completing the
assigned activities. What is the name for the duty that Scott believes his subordinates owe him?
a. Span of control
b. Responsibility
c. Authority
d. Delegation
e. Accountability
Objective: 7.3
Answer : e.Accountability
63. In order to ensure standardization, at McDonald's most lower-level decisions must be approved by
upper management. Which of the following terms describes this approach?
a. Centralized organization
b. Decentralized organization
c. Functional authority
d. Responsibility
e. Wide span of control
Objective: 7.3
Answer : a.Centralized organization
64. Which organization delegates certain decision-making authority to lower-level managers so that they
can be more responsive to customers' needs?
a. Centralized
b. Quasi-centralized
c. Span of control
d. Chain of command
e. Decentralized
Objective: 7.3
Answer : e.Decentralized

65. Which of the following is accurate with respect to General Motors' history with centralization and
decentralization?
a. The company has been centralized for most of its history.
b. The decentralization that was evident early in GM's history eventually led to a very high-cost way of operatin
because of all the different car designs that were developed by GM's various divisions.
c. By the middle of the 20th century, GM's decentralization approach had gotten the company into trouble, so it
to a more centralized operation.
d. Decentralization at GM resulted in almost identical cars being developed in the different divisions of the com
e. Decentralization has been the cause of GM's troubles during the last decade.
Objective: 7.3
Answer : b.The decentralization that was evident early in GM's history eventually led to a very high-
cost way of operating because of all the different car designs that were developed by GM's
various divisions.
66. What are the circumstances under which decision-making authority is likely to be decentralized?
a. A company where managers practice little delegation
b. A company where the top managers control everything
c. A small owner-operated company
d. A large organization where top managers cannot personally supervise every detail
e. When high dollar value decisions are made
Objective: 7.3
Answer : d.A large organization where top managers cannot personally supervise every detail
67. Distribution of authority deals with the concepts of ________ and ________ of decisions.
a. authority; decentralization
b. authority; accountability
c. accountability; centralization
d. responsibility; authority
e. decentralization; centralization
Objective: 7.3
Answer : e.decentralization; centralization
68. Managers at a national fast food chain are debating whether their company should be centralized or
decentralized. Which of the following would MOST strongly support the conclusion that the company
should be centralized?
a. The company's restaurants are spread out over a large geographic area.
b. Many managers want to be able to have a say in making policy.
c. Most entry-level workers at the company are part-time.
d. Organizations that choose centralization are likely to be organizations in crisis.
e. Customers choose the company because of the consistency of their dining experience.
Objective: 7.3
Answer : e.Customers choose the company because of the consistency of their dining experience.

decentralized. Which of the following would MOST strongly support the conclusion that the company
should be decentralized?
a. Academic research shows that decentralization is a popular topic.
b. A big percentage of the company's revenue comes from just a few menu items.
c. The popularity of the company's special menu items varies greatly across different geographic regions.
d. The company has been growing more quickly than its major competitors.
e. If there is a well-publicized instance of discrimination at a single outlet of the company, that can really change
public's perception of the entire company.
Objective: 7.3
Answer : c.The popularity of the company's special menu items varies greatly across different
geographic regions.
70. The performance of Marsdon Corp., formerly a centralized company, improved noticeably after it
decentralized decision making. Which of the following would strengthen the argument that moving to a
more decentralized form was responsible for the improved performance at Marsdon?
a. The former centralized system required the various business units to answer the same basic questions each
b. In this industry, a company can be profitable if just a few of its products earn unusually high returns.
c. Centralization was originally implemented so the company wouldn't lose its core focus.
d. An economic downturn that took place after Marsdon decentralized had the effect of reducing the discretiona
income of Marsdon's customers.
e. Marsdon's competitors make change to their management structures as they try to become more efficient.
Objective: 7.3
Answer : d.An economic downturn that took place after Marsdon decentralized had the effect of
reducing the discretionary income of Marsdon's customers.
decentralized. Which of the following questions would likely be key in a centralized authority?
a. What are the procedures the company should use to ensure food safety?
b. Which colleges and universities should the company visit to recruit current students for entry-level managem
positions?
c. How should the various regional divisions spend the money in their advertising budgets?
d. What special menu items should be offered in order to attract new customers?
e. Should marketing efforts focus on getting new customers or trying to take customers away from the company
competitors?
Objective: 7.3
Answer : a.What are the procedures the company should use to ensure food safety?
72. An organization which begins to eliminate management levels in a "downsizing" restructuring is moving
toward
a. a tall, centralized structure.
b. a line organization.
c. an informal organization.
d. a flat, decentralized structure.
e. it is not possible to tell with this information.


Objective: 7.3
Answer : d.a flat, decentralized structure.
73. Span of control refers to

a. the responsibility for tasks.
b. the number of people managed by one manager.
c. the authority for tasks.
d. accountability to complete tasks.
e. decentralization of decision-making.
Objective: 7.3
Answer : b.the number of people managed by one manager.
74. What type of authority flows up and down the chain of command?
a. Team authority
b. Reverse vertical authority
c. Specialists' authority
d. Line authority
e. Staff authority
Objective: 7.3
Answer : d.Line authority
75. Which of the following items would tend to support wider spans of control as the best choice?
a. Subordinates perform complex tasks.
b. Subordinates work independently of each other.
c. Subordinates perform non-routine tasks.
d. Subordinates perform diverse tasks.
e. One subordinate's tasks depend on another subordinate's tasks.
Objective: 7.3
Answer : e.One subordinate's tasks depend on another subordinate's tasks.
76. Kara is an accounts receivables clerk in the accounting department. Her boss, Tina, oversees the work
of several clerks. The type of authority which Tina has is
a. command authority.
b. staff authority.
c. line authority.
d. committee and team authority.
e. direct authority.
Objective: 7.3
Answer : c.line authority.

77. Hillary has just graduated from law school and has taken a position with a legal firm. At first she will
assist the partners, but eventually she will handle cases on her own. Hillary is
a. a staff member of the firm.
b. a line member of the firm.
c. a member of the management team.
d. a committee member of the firm.
e. a work team member of the firm.
Objective: 7.3
Answer : b.a line member of the firm.
78. Line authority covers those people who ________, while staff authority covers those people who
________.
a. are indirectly involved in producing goods or services; are directly involved in producing goods or services
b. advise line managers; advise staff managers
c. advise staff managers; do things
d. are directly involved in producing goods or services; provide professional advice to line managers
e. are in human resource departments; are involved in manufacturing or sales
Objective: 7.3
Answer : d.are directly involved in producing goods or services; provide professional advice to line
managers
79. A corporate attorney is reviewing the marketing department's contract with a new advertising agency.
The term for the type of authority the attorney has is
a. staff authority.
b. committee authority.
c. command authority.
d. line authority.
e. direct authority.
Objective: 7.3
Answer : a.staff authority.
80. Which of the following would have staff authority in a manufacturing firm?
a. Assembly line worker
b. Marketing manager
c. Human resources manager
d. Machine shop foreman
e. Purchasing department manager
Objective: 7.3
Answer : c.Human resources manager

81. In reviewing the firm's organization chart, Martin, who is an attorney, notices that there is a dotted line
between him and the V.P. of Sales. This means that
a. the V.P. is Martin's boss.
b. Martin has a line responsibility to the V.P.
c. Martin and the V.P. serve on the same committee or work team.
d. Martin has the final decision regarding any legal matters in Sales.
e. Martin will assist the V.P. but the V.P. will make the final decision.
Objective: 7.3
Answer : e.Martin will assist the V.P. but the V.P. will make the final decision.
82. Ted, the Human Resources manager, is reviewing a batch of resumes that are in response to a job
advertisement in a local paper. After selecting six candidates, the resumes are sent to the Sales
Manager for selection of the candidates to be interviewed. Ted has what kind of authority?
a. Line authority
b. Expert authority
c. Staff authority
d. Direct authority
e. Command authority
Objective: 7.3
Answer : c.Staff authority
83. A group of top managers has been selected to guide the restructuring of the company's business.
Because of the critical nature of its activities, the group has probably been granted
a. line authority.
b. committee and team authority.
c. staff authority.
d. executive authority.
e. temporary authority.
Objective: 7.3
Answer : b.committee and team authority.
84. The development of the decision-making hierarchy is a three-step process, which involves
a. researching information, evaluating information, and distributing information.
b. centralizing resources, assigning tasks, and delegating responsibility.
c. assigning tasks, performing tasks, and distributing authority.
d. outsourcing work, monitoring progress, and insourcing finished products.
e. none of these.
Objective: 7.3
Answer : c.assigning tasks, performing tasks, and distributing authority.

85. Bob has noticed that some of the tasks that he has assigned to his subordinates are not getting
completed properly. The most likely explanation is
a. he has assigned authority without assigning responsibility or accountability.
b. he has not assigned authority, accountability or responsibility.
c. he has assigned responsibility and accountability without giving the necessary authority.
d. he has assigned authority and responsibility without assigning accountability.
e. none of these.
Objective: 7.3
Answer : c.he has assigned responsibility and accountability without giving the necessary authority.
86. Where a quick response time is critical, ________ is typically used.

a. functional authority
b. a narrow span of control
c. centralized decision making
d. team authority
e. decentralized decision making
Objective: 7.3
Answer : e.decentralized decision making
87. Which of the following is likely to be evident at a small, owner-operated firm?

a. Decentralization
b. Functional authority
c. Team authority
d. A narrow span of control
e. Centralization
Objective: 7.3
Answer : e.Centralization
88. As organizations grow and prosper, which type of decision-making tends to be adopted by more
successful companies?
a. Functional authority
b. Decentralization
c. Accountability
d. Narrow span of control
e. Centralization
Objective: 7.3
Answer : b.Decentralization

89. The greater the __________, the wider the span of control is likely to be, while the greater the
________, the narrower the span of control is likely to be.
a. complexity of the task; employees' abilities
b. the supervisor's managerial skills; interrelationship of the tasks
c. uniqueness of the task; routineness of the task
d. interrelationship of the tasks; the supervisor's managerial skills
e. complexity of the task; the supervisor's managerial skills
Objective: 7.3
Answer : b.the supervisor's managerial skills; interrelationship of the tasks
90. Which of the following would tend to support narrower spans of control?
a. Subordinates work independently of each other.
b. Subordinates perform complex tasks.
c. Subordinates perform diverse tasks.
d. When tasks are not routine.
e. All of these.
Objective: 7.3
Answer : e.All of these.
91. Departments that are directly linked to the production or sales of revenue-generating products are
a. staff departments.
b. function critical departments.
c. line departments.
d. matrix departments.
e. none of these.
Objective: 7.3
Answer : c.line departments.
92. Clark Equipment Company manufactures small earth movers. In this company, all of the following
would be line departments except
a. purchasing.
b. accounting.
c. sales.
d. distribution.
e. assembly.
Objective: 7.3
Answer : b.accounting.

93. Employees with specific areas of expertise like accounting, law, and human resources are usually given
_________ authority, while managers of areas like production, finance, and marketing are usually given
________ authority.
a. line; staff
b. staff; line
c. functional; staff
d. team; staff
e. none of these
Objective: 7.3
Answer : b.staff; line
94. Groups of operating employees empowered to plan and organize their own work and to do that with a
minimum of supervision are called
a. operating teams.
b. employee committees.
c. work teams.
d. autonomous employee teams.
e. none of these.
Objective: 7.3
Answer : c.work teams.
95. What is the difference between line managers and staff managers?
a. Staff managers have no authority over their subordinates, while line managers do.
b. Line managers usually have more formal education than staff managers.
c. Line managers are more important.
d. In a manufacturing firm, line managers are involved in areas like marketing and production, while staff manag
work in areas like marketing research, personnel, and legal.
e. Staff managers have more authority than line managers.
Objective: 7.3
Answer : d.In a manufacturing firm, line managers are involved in areas like marketing and production,
while staff managers work in areas like marketing research, personnel, and legal.
96. In a firm that does marketing research for other firms, which of the following would be a line position?
a. Market researchers
b. Accountants
c. Legal experts
d. Human resource people
e. It is not possible to tell
Objective: 7.3
Answer : a.Market researchers

97. All of the following are either advantages or disadvantages of the functional structure except
a. no single function is responsible for overall organizational performance.
b. employees have clearly defined career paths.
c. increases accountability.
d. focuses attention on the key activities that must be performed.
e. conflicts may arise among the functional areas.
Objective: 7.4
Answer : c.increases accountability.
98. Which of the following is not an advantage of the functional structure?

a. It focuses attention on the key activities that must be performed.
b. There is little duplication of activities.
c. Employees have clearly defined career paths.
d. The structure is simple and easy to understand.
e. No single function is responsible for overall organizational performance.
Objective: 7.4
Answer : e.No single function is responsible for overall organizational performance.
99. Scott has reviewed the organizational structure of his company and found that there is a lot of
specialization within each area, employees seem to have clearly defined career paths, and there is little
duplication of activities. He is most likely working in a company with a(n) ________ structure.
a. international
b. divisional
c. functional
d. conglomerate
e. matrix
Objective: 7.4
Answer : c.functional
100. What is an advantage of the functional organization?

a. The members of the organization speak a foreign language.
b. The organization is staffed with people who have expert knowledge about the product.
c. Coordinating highly specialized functions is easy.
d. Members of the organization report to two or more managers.
e. The functions are performed by experts in their field.
Objective: 7.4
Answer : e.The functions are performed by experts in their field.

101. United Technologies departments include Pratt & Whitney, Carrier Air Conditioning, Otis Elevator, and
Flight Systems. UTC has a(n) ________ organizational structure.
a. functional
b. international
c. divisional
d. matrix
e. multinational
Objective: 7.4
Answer : c.divisional
102. Which organizational structure relies on product departmentalization?

a. Functional
b. Matrix
c. Divisional
d. Project
e. International
Objective: 7.4
Answer : c.Divisional
103. All of the following are either advantages or disadvantages of the divisional structure except
a. a lack of communication among divisions may occur.
b. accommodates change and expansion.
c. activities may be duplicated across divisions.
d. company politics may affect the allocation of resources.
e. focuses attention on the key activities that must be performed.
Objective: 7.4
Answer : e.focuses attention on the key activities that must be performed.
104. Which of the following is not an advantage of the divisional structure?

a. Activities may be duplicated across divisions.
b. Training for top management is encouraged.
c. Accountability is increased.
d. Develops expertise in the various divisions.
e. Change and expansion are facilitated.
Objective: 7.4
Answer : a.Activities may be duplicated across divisions.

105. Michael is analyzing the structure of his new employer. It is highly flexible and can readily adapt to
changing circumstances. It also is heavily dependent upon committee and team authority. The firm is
probably using the ________ structure.
a. matrix
b. functional
c. conglomerate
d. divisional
e. international
Objective: 7.4
Answer : a.matrix
106. In which structure will an individual report to two or more managers?

a. Divisional
b. Conglomerate
c. Duopoly
d. Matrix
e. Functional
Objective: 7.4
Answer : d.Matrix
107. Which of the following is the best explanation of a matrix structure?

a. Teams are formed in which employees report to two or more managers.
b. A matrix structure is based upon the geographical areas of the world.
c. A matrix occurs when one firm purchases another and combines the staff activities.
d. A matrix occurs when the organization is restructuring from a tall to a flat organization.
e. A matrix divides the organization into divisions, each of which operates as a semi-autonomous unit.
Objective: 7.4
Answer : a.Teams are formed in which employees report to two or more managers.
108. An organization that customarily uses teams of individuals from several departments to work on special
projects is using a(n) ________ organizational structure.
a. decentralized
b. matrix
c. international
d. line and staff
e. conglomerate
Objective: 7.4
Answer : b.matrix

109. Which organizational structure is used in the following situation: The firm is making a sales proposal
that must include suggested computer hardware, software, an overall systems design, and estimated
costs, and a manager is assigned who assembles a group of company specialists from various
departments to prepare the proposal to the customer.
a. Strategic business unit structure
b. Product departmentalization
c. Geographic departmentalization
d. Matrix structure
e. Centralized structure
Objective: 7.4
Answer : d.Matrix structure
110. As the world grows increasingly complex and fast paced, organizations continue to seek new forms of
organization that permit them to compete effectively. The following are all examples of the new forms
except
a. boundaryless organization.
b. virtual organization.
c. global organization.
d. team organization.
e. learning organization.
Objective: 7.4
Answer : c.global organization.
111. A ________ organization has little or no formal structure, with only a handful of permanent employees.
a. learning
b. flexible
c. boundaryless
d. team
e. virtual
Objective: 7.4
Answer : e.virtual
112. A ________ organization seeks to integrate continuous improvement with continuous employee
development.
a. virtual
b. flexible
c. learning
d. boundaryless
e. team
Objective: 7.4
Answer : c.learning

113. Gerry owns a medium-sized firm that employs 78 people. It would most likely have a ________
structure.
a. functional
b. international
c. matrix
d. conglomerate
e. divisional
Objective: 7.4
Answer : a.functional
114. As companies get larger and more complex, they are likely to move away from the __________
structure.
a. matrix
b. international
c. functional
d. divisional
e. conglomerate
Objective: 7.4
Answer : c.functional
115. Which organizational structure is used most frequently by small- and medium-sized firms?
a. Functional
b. Quasi-divisional
c. Divisional
d. International
e. Matrix
Objective: 7.4
Answer : a.Functional
116. Which of the following is an advantage of a functional structure?

a. Functional areas get approval from top management for a variety of decisions.
b. Expertise develops within each function.
c. No single function is responsible for overall company performance.
d. Conflicts between functional areas may arise.
e. None of these
Objective: 7.4
Answer : b.Expertise develops within each function.

117. Which of the following is correct with regard to divisional structures?

a. Unhealthy competition may arise between the divisions.
b. The different divisions all pursue the same corporate identity.
c. Different divisions do not share certain corporate-level resources like market research data.
d. If a lot of control is delegated to divisional managers, corporate managers have a better understanding of d
operations in the divisions.
e. There is little duplication of effort because the various divisions must work together to achieve overall corpo
objectives.
Objective: 7.4
Answer : a.Unhealthy competition may arise between the divisions.
118. Elizabeth reports to three managers. Elizabeth's company uses the ________ corporate structure.
a. matrix
b. triple
c. functional
d. divisional
e. conglomerate
Objective: 7.4
Answer : a.matrix
119. Walmart has adopted a(n) ___________ structure.

a. conglomerate
b. international
c. functional
d. divisional
e. matrix
Objective: 7.4
Answer : b.international
120. Organizations in which traditional boundaries and structures are minimized or eliminated are called
__________ organizations.
a. learning
b. virtual
c. Smith's
d. boundaryless
e. international
Objective: 7.4
Answer : d.boundaryless

121. In ________organizations, people "float" from project to project as dictated by their skills and the
demands of the project.
a. learning
b. virtual
c. team
d. boundaryless
e. international
Objective: 7.4
Answer : c.team
122. When clients of Global Research Consortium request various services, the staff of three permanent
employees contracts out the work to people with appropriate skills. GRC is therefore a(n) __________
organization.
a. virtual
b. team
c. international
d. boundaryless
e. learning
Objective: 7.4
Answer : a.virtual
123. A ________ organization focuses on employee development and continually transforming itself to
respond to changing demands and needs.
a. team
b. learning
c. boundaryless
d. project
e. virtual
Objective: 7.4
Answer : b.learning
124. Which of the following organizational systems is the part that can be seen and represented in chart
form?
a. Formal organization
b. Grapevine
c. Informal organization
d. Normal organization
e. Product organization
Objective: 7.5
Answer : a.Formal organization

125. Everyday social interactions among employees that transcend formal jobs and job interrelationships are
called the
a. informal organization.
b. formal organization.
c. process organization.
d. gossip structure.
e. production organization.
Objective: 7.5
Answer : a.informal organization.
126. The ________ is an informal communication network that runs through an organization.
a. grapevine
b. intrapreneur
c. intranet
d. span of control
e. message center
Objective: 7.5
Answer : a.grapevine
127. Which of the following is correct with regard to the grapevine?

a. Managers can eliminate the grapevine, but it takes a lot of time and effort to do so.
b. All things considered, it is best for the manager to ignore the grapevine because the accuracy of the inform
carries is inconsistent and unpredictable.
c. The grapevine is an early warning system, so managers should pay attention to it.
d. Managers cannot have an influence on the information carried by the grapevine because it is controlled by
informal organization.
Objective: 7.5
Answer : c.The grapevine is an early warning system, so managers should pay attention to it.
128. Which of the following is a disadvantage of informal communications?

a. Managers can easily interrupt the flow of information which the employees may believe to be important.
b. Good news may spread very rapidly through the informal channel.
c. It flows through the chain of command.
d. Rumours and distorted or inaccurate information may be flowing through the grapevine at a fast rate.
e. Studies have shown that the rumours and gossip on the grapevine are almost always accurate.
Objective: 7.5
Answer : d.Rumours and distorted or inaccurate information may be flowing through the grapevine at a
fast rate.

129. Gerry, president of Erin Enterprises, knew he had to lay off 5% of his employees in order to stay
profitable. Gerry wanted to ease the aggravation of telling his employees, so he used the ________
prior to his formal announcement.
a. matrix strategy
b. virtual method
c. grapevine
d. virtual organization
e. "keep-ʹem-in-the-dark" strategy
Objective: 7.5
Answer : c.grapevine
130. When musicians and singers at the New York Metropolitan Opera play poker during intermissions, this
is an example of
a. poor control by management.
b. informal groups.
c. the grapevine.
d. rumours.
e. unethical employee behaviour.
Objective: 7.5
Answer : b.informal groups.
131. Which of the following is correct with regard to the informal organization?
a. It matches up pretty closely with the formal organization.
b. The term refers to the breaking down of barriers between formal departments.
c. Managers should try to suppress the informal organization because it often provides employees with inacc
information.
d. Managers should tune in to the grapevine because it is an early warning system.
Objective: 7.5
Answer : d.Managers should tune in to the grapevine because it is an early warning system.
132. The grapevine is an informal _________ network.

a. task
b. communication
c. budget
d. gossip
e. structural
Objective: 7.5
Answer : b.communication
Chapter 07 True/False Questions

1. Each firm has the same basic organizational elements and thus the same basic structure.
a. True
b. False
Objective: 7.1
Answer : b.False
2. Organizational structure involves the relationships of jobs within an organization.

a. True
b. False
Objective: 7.1
Answer : a.True
3. Organizational structure is influenced by the firm's mission and size, but not by the technology used in
the firm.
a. True
b. False
Objective: 7.1
Answer : b.False
4. Most business organizations change their structures on a continuing basis.

a. True
b. False
Objective: 7.1
Answer : a.True
5. The chain of command shown on an organization chart reflects manager and subordinate relationships.
a. True
b. False
Objective: 7.1
Answer : a.True
6. Job specialization involves breaking jobs down into specific tasks which are then assigned to different
individuals.
a. True
b. False
Objective: 7.2
Answer : a.True

7. The two basic building blocks of all business organizations are specialization and departmentalization.
a. True
b. False
Objective: 7.2
Answer : a.True
8. In small organizations, jobs tend to be unspecialized.

a. True
b. False
Objective: 7.2
Answer : a.True
9. Departmentalization allows a firm to treat a department as a profit centre, i.e., a separate unit
responsible for its own costs and profits.
a. True
b. False
Objective: 7.2
Answer : a.True
10. Because customer departmentalization involves setting up departments that focus on meeting the
needs of specific customers, it is generally more effective than functional departmentalization.
a. True
b. False
Objective: 7.2
Answer : b.False
11. When home improvement giant Lowe's reorganized its merchandising operations into two divisions
(building and outdoor products, and kitchen, bath, and home décor products), this was an example of
customer departmentalization.
a. True
b. False
Objective: 7.2
Answer : b.False
12. The development of more sophisticated communication technologies has motivated some companies
to move away from geographic departmentalization and toward product departmentalization.
a. True
b. False
Objective: 7.2

Answer : a.True
13. The process of grouping together jobs into logical units is known as departmentalization.
a. True
b. False
Objective: 7.2
Answer : a.True
14. Functional departmentalization means organizing departments according to the function they perform
(e.g., marketing, finance, production, human resources, etc.).
a. True
b. False
Objective: 7.2
Answer : a.True
15. Attempts to organize workers into departments that are based on anything other than customers have
been largely unsuccessful.
a. True
b. False
Objective: 7.2
Answer : b.False
16. Customer departmentalization tends to make a retail store more efficient and allows sales people tend
to gain expertise in their specific department.
a. True
b. False
Objective: 7.2
Answer : a.True
17. Process departmentalization is based upon the steps that are needed to actually produce a good or
service.
a. True
b. False
Objective: 7.2
Answer : a.True
18. Larger firms tend to use several different types of departmentalization for various levels in the
organization.
a. True
b. False

Objective: 7.2
Answer : a.True
19. After jobs are departmentalized then they should be specialized.

a. True
b. False
Objective: 7.2
Answer : b.False
20. Stores like HMV typically use product departmentalization.

a. True
b. False
Objective: 7.2
Answer : b.False
21. A pickle maker like Vlasic usually has several departments that transform cucumbers into fresh-packed
pickles. Vlasic is using product departmentalization.
a. True
b. False
Objective: 7.2
Answer : b.False
22. Customer departmentalization generally is more effective than geographic departmentalization.

a. True
b. False
Objective: 7.2
Answer : b.False
23. Responsibility is the power to make decisions for those tasks that you have been given the authority to
perform.
a. True
b. False
Objective: 7.3
Answer : b.False
24. Delegation occurs when a manager assigns a task to a subordinate who then is accountable to the
manager for completion of the task.
a. True
b. False
Objective: 7.3

Answer : a.True
25. Research has shown that the primary reason managers fail to delegate is their need to control
everything and everybody.
a. True
b. False
Objective: 7.3
Answer : b.False
26. The assignment of a task, a responsibility, and/or authority by a manager to a subordinate is known as
delegation.
a. True
b. False
Objective: 7.3
Answer : a.True
27. Delegation is practiced by line managers, but not by staff managers.

a. True
b. False
Objective: 7.3
Answer : b.False
28. If any line department fails to complete its task, the company cannot effectively sell and deliver finished
goods.
a. True
b. False
Objective: 7.3
Answer : a.True
29. Staff departments aid line departments in making decisions but do not have the authority to make final
decisions.
a. True
b. False
Objective: 7.3
Answer : a.True
30. Assigning tasks is the first step in the process of deciding who makes which decisions.
a. True
b. False
Objective: 7.3

Answer : a.True
31. McDonald's uses decentralization as a way to maintain standardization.

a. True
b. False
Objective: 7.3
Answer : b.False
32. A centralized organization structure is generally better for developing subordinates than a decentralized
structure.
a. True
b. False
Objective: 7.3
Answer : b.False
33. The long history of General Motors illustrates both the advantages and disadvantages of
decentralization.
a. True
b. False
Objective: 7.3
Answer : a.True
34. The history of General Motors illustrates the fact that decentralization is generally better than
centralization.
a. True
b. False
Objective: 7.3
Answer : b.False
35. A centralized organization is one way for a large firm with many branches to maintain control and
ensure that the branches are operated in a standard fashion.
a. True
b. False
Objective: 7.3
Answer : a.True
36. Centralized organizations usually have wide spans of control because a lot of delegation is taking
place.
a. True
b. False

Objective: 7.3
Answer : b.False
37. When many employees are performing the same simple task, a wide span of control is feasible.
a. True
b. False
Objective: 7.3
Answer : a.True
38. In a large manufacturing business, staff departments like law, accounting, and human resources are
typically evident.
a. True
b. False
Objective: 7.3
Answer : a.True
39. Managers of staff departments do not have line authority over their subordinates.
a. True
b. False
Objective: 7.3
Answer : b.False
40. The goals of the organization determine whether a given function is classified as "line" or "staff."
a. True
b. False
Objective: 7.3
Answer : a.True
41. Barrett Services Ltd. is an executive search company, that is, it facilitates the hiring of managers at
other companies that are its clients. Therefore, at Barrett human resources is a line (not a staff) activity.
a. True
b. False
Objective: 7.3
Answer : a.True
42. A team organization relies almost exclusively on project type teams with little or no underlying
functional hierarchy.
a. True
b. False
Objective: 7.3

Answer : a.True
43. Because customer innovation centres have expertise on product development, brand management,
and sales, they are used to overcome one of the disadvantages of the functional structure: poor
interdepartmental communication.
a. True
b. False
Objective: 7.4
Answer : a.True
44. Moving products that were formerly in independent divisions into the same division overcomes the
problem of lack of coordination.
a. True
b. False
Objective: 7.4
Answer : a.True
45. One of the problems with the divisionalized structure is that different divisions can unknowingly
duplicate their activities.
a. True
b. False
Objective: 7.4
Answer : a.True
46. In some organizations the matrix structure is temporary, while in others the structure is permanent.
a. True
b. False
Objective: 7.4
Answer : a.True
47. If Global Research Consortium offers research and consulting services to firms doing business in Asia,
this is an example of a learning organization.
a. True
b. False
Objective: 7.4
Answer : b.False
48. Functional organization structures are used primarily by large, corporate businesses.
a. True
b. False

Objective: 7.4
Answer : b.False
49. All things considered, the functional structure is probably the best one.
a. True
b. False
Objective: 7.4
Answer : b.False
50. In both the divisional and international structures, departments are quite autonomous and are free to
run as they best see fit.
a. True
b. False
Objective: 7.4
Answer : a.True
51. The project organization is not much used by Canadian firms because their megaprojects are too large
for the matrix structure to work.
a. True
b. False
Objective: 7.4
Answer : b.False
52. The matrix structure is especially desirable for firms that want to establish long-term relationships
among members of the special project teams.
a. True
b. False
Objective: 7.4
Answer : b.False
53. Boundaryless and virtual organizations both function without traditional boundaries.
a. True
b. False
Objective: 7.4
Answer : a.True
54. Walmart's relationship with some of its suppliers is an example of a boundaryless organization.
a. True
b. False
Objective: 7.4

Answer : a.True
55. A virtual organization has very little formal organizational structure.

a. True
b. False
Objective: 7.4
Answer : a.True
56. Learning organizations are most commonly found in universities and community colleges.
a. True
b. False
Objective: 7.4
Answer : b.False
57. A properly structured formal organization is necessary to eliminate the negative effects of the informal
structure.
a. True
b. False
Objective: 7.5
Answer : b.False
58. The informal organization is sometimes just as powerful, if not more powerful, than the formal structure.
a. True
b. False
Objective: 7.5
Answer : a.True
59. Studies of the grapevine network within organizations have shown that the rumours and gossip on the
grapevine are almost always accurate, and that a prudent manager is wise to act on that information.
a. True
b. False
Objective: 7.5
Answer : b.False
60. Because the grapevine is a mechanism for informal communication, it is most commonly found in
organizations that are having problems.
a. True
b. False
Objective: 7.5

Answer : b.False
61. Attempts to eliminate the grapevine are fruitless, so managers should not waste their time trying to do
so.
a. True
b. False
Objective: 7.5
Answer : b.False
Chapter 07 Short Answer Questions
1. What is an organization chart?

Objective: 7.1
Answer : An organization chart is a diagram depicting a company's structure, showing employees
where they fit into its operations.
2. Explain the meaning of the term organizational structure.

Objective: 7.1
Answer : - a tool that shows the specification of the jobs to be done within a business and how those
jobs relate to one another
3. Identify the two building blocks of organizational structure.

Objective: 7.2
Answer : Specialization and departmentalization.
4. What is specialization?
Objective: 7.2
Answer : Specialization is determining who will do what.
5. Identify five forms of departmentalization.

Objective: 7.2
Answer : Customer, product, process, geographic, and functional.
6. Ace Products, a manufacturer of copiers, printers, and fax machines, has vice-presidents for the federal
government, airlines, and banks. How is Ace Products departmentalized?
Objective: 7.2
Answer : Ace Products is departmentalized by customer.

7. Johnson Products has vice-presidents for copiers, printers, and fax machines. How is Johnson
Products departmentalized?
Objective: 7.2
Answer : Ace Products is departmentalized by product.
8. Bright Products has vice-presidents for Europe, North America, and Asia. How is Ace Products
departmentalized?
Objective: 7.2
Answer : Ace Products is departmentalized by geography.
9. What is one of the advantages of departmentalization by customer?

Objective: 7.2
Answer : It makes shopping easier for customers.
10. What are the advantages and disadvantages of departmentalization by geography?

Objective: 7.2
Answer : It ensures quick, responsive reaction to the needs of customers, but it may also lead to
duplicate production and other facilities, as well as compartmentalization of knowledge.
11. What is responsibility?

Objective: 7.3
Answer : Responsibility is the duty to perform an assigned task.
12. What is authority?

Objective: 7.3
Answer : Authority is the power to make the decisions necessary to complete a task.
13. What is delegation?

Objective: 7.3
Answer : Delegation is the assignment of a task, responsibility, or authority by a manager to a
subordinate.
14. What is accountability?

Objective: 7.3
Answer : Accountability is the liability of subordinates for accomplishing tasks assigned by managers.

15. What is a centralized organization?

Objective: 7.3
Answer : In a centralized organization, upper-level managers hold most decision-making authority.
16. What is a decentralized organization?

Objective: 7.3
Answer : In a decentralized organization, much of the decision-making authority is delegated to lower
levels of management.
17. Identify two characteristics of flat organizations.

Objective: 7.3
Answer : Flat organizations have few layers of management and wide spans of control.
18. Identify two characteristics of tall organizations.

Objective: 7.3
Answer : Tall organizations have multiple layers of management and narrow spans of control.
19. What is span of control?

Objective: 7.3
Answer : The span of control is the number of people supervised by one manager.
20. Identify the three forms of authority.

Objective: 7.3
Answer : Line authority, staff authority, and committee and team authority.
21. What type of authority flows up and down the chain of command?
Objective: 7.3
Answer : Line authority.
22. What type of authority is held by specialists in law, accounting, and human resource management?
Objective: 7.3
Answer : Staff authority.
23. Identify the four basic forms of organizational structure.


Objective: 7.4
Answer : Functional, divisional, project, and international.
24. What is a team organization?

Objective: 7.4
Answer : A team organization relies almost exclusively on project-type teams, with little or no
underlying functional hierarchy.
25. What is a divisional structure?

Objective: 7.4
Answer : This type of structure divides the organization into several divisions, each of which operates
as a semi-autonomous unit and profit centre.
26. What is a project organization?

Objective: 7.4
Answer : In this type of structure, teams of specialists are formed from different functional areas of the
organization to work on a specific project.
27. What is a boundaryless organization?

Objective: 7.4
Answer : One in which traditional boundaries and structures are minimized or eliminated altogether.
28. What is the informal organization?

Objective: 7.5
Answer : The informal organization is the network of everyday social interactions among company
employees that is unrelated to the firm's formal authority structure.
29. Is the informal organization positive or negative?

Objective: 7.5
Answer : The informal organization can be both positive and negative. It can help employees feel that
they belong, it allows them to "let off steam" in a safe environment, and it provides
information. On the negative side, it can reinforce organizational politics and provide distorted
information.
30. What is the grapevine?

Objective: 7.5
Answer : The grapevine is the informal communication network that runs through an organization.

Chapter 07 Essay Questions
1. What is the purpose of developing an organization chart? How are these charts used?
Objective: 7.1
Answer : - to illustrate to employees how their job fits into the organization
- to show the chain of command (authority) and flow of formal communication
2. What are the major factors that determine how a firm should be best organized?
Objective: 7.1
Answer : firm's purpose, mission statement, strategies, size of the firm, technology changes,
competition, government regulations, any changes to its internal or external environments
3. What elements work together to determine an organization's structure? What types of circumstances
affect this structure?
Objective: 7.1
Answer : - elements working together include an organization's purpose, mission, and strategy
- size, technology, and changes in the environmental circumstance affect an organization's
structure
4. Discuss the relationship between chain of command and an organization chart, including what the
boxes, dotted lines, and solid lines represent.
Objective: 7.1
Answer : diagram showing reporting relationships; solid lines = direct reports; dotted lines = staff
authority; one box = one job; helps employees know where they fit in
5. What are the two basic building blocks of organizational structure?

Objective: 7.2
Answer : - specialization: determining who will do what
- departmentalization: determining how people performing certain tasks can best be grouped
together
6. Describe the five most common methods of departmentalization within an organization. Identify the
advantages of each method.
Objective: 7.2

Answer : - customer: departmentalization according to types of customers likely to buy a given product
- product: departmentalization according to the products being created
- process: departmentalization according to the production process used to create a good or
service
- geographic: departmentalization according to the area of the country or world supplied
- functional: departmentalization according to functions or activities
7. What are specialization and departmentalization, and how do they relate one to another?
Objective: 7.2
Answer : specialization means breaking down the elements of an overall job into smaller jobs;
departmentalization is grouping those smaller jobs into logical units.
8. Discuss the three-step process used to establish the decision-making hierarchy.

Objective: 7.3
Answer : - Assigning tasks: determining who can make decisions and specifying how they should be
made
- Performing tasks: implementing decisions that have been made
- Distributing authority: determining whether the organization is to be centralized or
decentralized
9. Why should a manager maintain equilibrium between authority and responsibility?

Objective: 7.3
Answer : - with authority comes responsibility
- you cannot hold an employee responsible for a task without giving her/him the authority to
use the firm's resources to carry out the tasks.
10. Explain what is meant by "span of control." What factors need to be considered when establishing the
span of control for a manager?
Objective: 7.3
Answer : - span is the number of people managed by one supervisor/manager
- factors that determine this are:
- employees' abilities
- the supervisor's managerial skills
- similarity and simplicity of tasks
- extent to which tasks are interrelated
11. Compare and contrast the three forms of authority: line, staff, and committee and team authority.
Objective: 7.3

Answer : - line authority is based on chain of command and operates vertically; it is a telling function
- staff authority is based on expertise and flows horizontally; it is an advising function
- committee authority is based on granting power for a specified period to perform a
specialized task
12. Describe what responsibility and authority are and how they are related.
Objective: 7.3
Answer : responsibility is the duty to perform a task; authority is the power to make decisions related to
that responsibility; each responsibility should have a commensurate degree of authority
13. Describe what delegation and accountability are and how they are related.
Objective: 7.3
Answer : delegation occurs when a manager assigns a task to a subordinate; accountability is the
subordinate's duty to perform the assigned task
14. What are centralization and decentralization, and how are they related to span of control and
delegation?
Difficulty: 2 Page-Reference: 222-223, 225-226
Objective: 7.3
Answer : with centralization the decision-making is concentrated in top management; with
decentralization the opposite is true; span of control is the number of people reporting to a
manager and it is wider when a firm is decentralized; likewise delegation is more likely in a
decentralized structure
15. Describe a line-and-staff organization, being sure to discuss what line authority and staff authority are
and the way they interrelate.
Objective: 7.3
Answer : line managers are responsible for all activities that get a good to a customer; staff managers
are to counsel and advise line managers and generally assist them in getting their jobs done;
final decisions are made by line managers with input and help from staff managers
16. Describe the purposes of a learning organization.

Objective: 7.4
Answer : - main purpose is to integrate continuous improvement with employee learning and
development; other purposes include:
- facilitating life-long learning
- improving quality
- continuous improvement
- performance measurements
17. Discuss the advantages and disadvantages of a functional structure.


Objective: 7.4
Answer : - see Table 7.1 in the text
18. Describe the divisional structure and the advantages and disadvantages for companies. Also give an
example of a real company who uses this type of structure.
Objective: 7.4
Answer : - a divisional structure allows a firm to be divided into segments each of which then operates
and makes decisions on their own
- e.g., General Motors, Chevrolet, Pontiac
- see Table 7.2 in the text
19. As the world grows increasingly complex and fast paced, organizations continue to seek new forms of
organization that permit them to compete effectively. Identify and describe some of these new forms.
Objective: 7.4
Answer : - boundaryless organization: one in which traditional boundaries and structures are
minimized or eliminated altogether
- team organization: relies almost exclusively on project-type teams, with little or no
underlying functional hierarchy
- virtual organization: has little or no formal structure
- learning organization: works to integrate continuous improvement with continuous employee
learning and development
20. Why is the divisional organizational structure used by many large corporations?
Objective: 7.4
Answer : divisions operate as independent business; many large corporations have several
businesses that are not related and that are well suited to be run independently
21. Why should a firm consider the matrix organizational structure for developing new products?
Objective: 7.4
Answer : flexible; focused on customer not functions; use resources on other products
22. Explain the functional structure, and note its advantages and disadvantages.
Objective: 7.4
Answer : - in the functional structure, the various units of the organization are formed based on the
functions that must be carried out to reach organizational goals.
- for advantages and disadvantages, see Table 7.1 in the text
23. Explain the divisional structure, and describe its advantages and disadvantages.
Objective: 7.4

Answer : - a divisional structure allows a firm to be divided into segments, each of which then operates
and makes decisions on its own
for advantages and disadvantages, see Table 7.2 in the text
24. What should be the reaction of a manager who discovers the existence of a grapevine in the
organization?
Objective: 7.5
Answer : - probably do nothing!
- a good manager, with good people skills, can use it to his/her advantage in an informational
and interpersonal role.
25. What factors exist to cause the grapevine to work effectively?

Objective: 7.5
Answer : - a relaxed management style
- a decentralized organization
- a warm working environment
- a motivated employee group
- shared decision making

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Chapter 07: Organizing the Business Enterprise

Chapter 07 Multiple Choice Questions

Copyright © 2014 Pearson Canada Inc. 1

6. What is the purpose of organization charts?

7. What is the meaning of the individual boxes shown on an organization chart?

Copyright © 2014 Pearson Canada Inc. 2

9. The chain of command has the following characteristics except

Copyright © 2014 Pearson Canada Inc. 3

Copyright © 2014 Pearson Canada Inc. 4

17. Grouping jobs into logical units is called

20. Which of the following is correct with regard to job specialization?

21. Departmentalization refers to

Copyright © 2014 Pearson Canada Inc. 5

Question ID: 07-1-21 Skill: Knowledge

Copyright © 2014 Pearson Canada Inc. 6

26. The men's clothing department at Sears is an example of a

Copyright © 2014 Pearson Canada Inc. 7

Answer : c.a profit centre.

28. Businesses use profit centres because

Copyright © 2014 Pearson Canada Inc. 8

Copyright © 2014 Pearson Canada Inc. 9

Copyright © 2014 Pearson Canada Inc. 10

40. What explanation best describes customer departmentalization?

Copyright © 2014 Pearson Canada Inc. 11

47. Which of the following is an advantage of customer departmentalization?

Copyright © 2014 Pearson Canada Inc. 12

51. Which of the following best describes responsibility?

Copyright © 2014 Pearson Canada Inc. 13

52. Which of the following best describes authority?

53. Which of the following best describes delegation?

54. When delegating, managers must do all of the following except

55. Which of the following best describes accountability?

56. What term describes a manager's action of assigning a task to a subordinate?

Copyright © 2014 Pearson Canada Inc. 14

57. Which of the following is an advantage of delegation?

Copyright © 2014 Pearson Canada Inc. 15

Copyright © 2014 Pearson Canada Inc. 16

Copyright © 2014 Pearson Canada Inc. 17

Copyright © 2014 Pearson Canada Inc. 18

Question ID: 07-1-72 Skill: Comprehension

73. Span of control refers to

Copyright © 2014 Pearson Canada Inc. 19

Copyright © 2014 Pearson Canada Inc. 20

Copyright © 2014 Pearson Canada Inc. 21

86. Where a quick response time is critical, ________ is typically used.

87. Which of the following is likely to be evident at a small, owner-operated firm?

Copyright © 2014 Pearson Canada Inc. 22

Copyright © 2014 Pearson Canada Inc. 23

Copyright © 2014 Pearson Canada Inc. 24

98. Which of the following is not an advantage of the functional structure?

100. What is an advantage of the functional organization?

Copyright © 2014 Pearson Canada Inc. 25

102. Which organizational structure relies on product departmentalization?

104. Which of the following is not an advantage of the divisional structure?

Copyright © 2014 Pearson Canada Inc. 26

106. In which structure will an individual report to two or more managers?

107. Which of the following is the best explanation of a matrix structure?

Copyright © 2014 Pearson Canada Inc. 27

Copyright © 2014 Pearson Canada Inc. 28

116. Which of the following is an advantage of a functional structure?

Copyright © 2014 Pearson Canada Inc. 29

117. Which of the following is correct with regard to divisional structures?

119. Walmart has adopted a(n) ___________ structure.