Which of the Following Statements is True About Control Mechanisms? Quiz and Flashcards

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Questions and Answers

Which of the following is NOT a key element in the implementation of results controls?

Defining performance targets

Providing rewards related to target attainment

Measuring employee skills and competencies (correct)

Setting performance requirements for each organization, unit, and activity

What is the primary purpose of results controls?

To provide rewards to employees based on their individual actions

To define the dimensions on which results are required (correct)

To measure financial performance only

To limit the autonomy of individual employees

Which of the following is a key challenge in implementing results controls?

Limiting the autonomy of individual employees

Defining the appropriate performance measures and indicators (correct)

Ensuring that all employees have the necessary skills and competencies

Providing rewards to all employees equally

What is the primary advantage of results controls?

They enable autonomy of individual action by focusing on outcomes Signup and view all the answers

How do results controls help organizations attract employees?

By benefiting good performers, which helps attract confident employees Signup and view all the answers

What is the primary purpose of results controls in addressing control problems?

To induce employees to behave in a way that is consistent with the overall organizational structure Signup and view all the answers

According to the passage, which of the following is a key feature of enabling controls?

Empowerment of employees to solve problems Signup and view all the answers

What does 'repair' in the context of management control refer to according to the passage?

Modifying performance indicators when problems arise Signup and view all the answers

What is the relationship between enabling controls and coercive controls according to the passage?

Enabling and coercive controls can coexist when managers have the freedom to choose control types Signup and view all the answers

What is the main purpose of flexibility in enabling controls according to the passage?

To enable employees to adapt routines and procedures to local contingencies Signup and view all the answers

What does 'internal transparency' refer to in the context of enabling controls?

Employees' understanding of how the control system functions Signup and view all the answers

How do enabling controls and coercive controls differ in their impact on employees according to the passage?

Enabling controls empower employees while coercive controls constrain them Signup and view all the answers

What are some common forms of ROI-type ratios employed by companies?

Return on investment (ROI), Return on Equity (ROE), Return on capital employed (ROCE) Signup and view all the answers

Which measure combines operating decisions and financing decisions?

Stockholders equity Signup and view all the answers

What can both the numerator and denominator include in ROI-type ratios?

Only a subset of the line items reflected on corporate financial statements Signup and view all the answers

Which method involves decomposing ROI into two components?

DuPont Method of Profitability Analysis Signup and view all the answers

What does the measure 'Total assets employed minus current liabilities' exclude?

Short-term creditors financing Signup and view all the answers

Why might the measure 'Total assets employed minus current liabilities' encourage managers to use an excessive amount of short-term debt?

It excludes short-term creditors financing from the measure Signup and view all the answers

What is the main purpose of offering flexible hours as a non-monetary compensation policy?

To increase employee satisfaction Signup and view all the answers

How can job sharing be described based on the text?

A solution to provide part-time employment opportunities Signup and view all the answers

In the context of non-monetary compensation policies, what does the provision of child care facilities aim to do?

Attract parents of young children to consider job offers Signup and view all the answers

What is the classification of incentive systems mentioned in the text?

Individual and Team-Based only Signup and view all the answers

What is the effect of strong training programs on a company, according to the text?

Attracting high quality candidates Signup and view all the answers

Why is it mentioned that time-based incentives follow the same method but with different formulas?

To provide insight into how incentives are calculated Signup and view all the answers

Sales managers who are accountable for their salespeople's salaries, commissions, and certain expenses are considered to manage:

A net revenue center Signup and view all the answers

Which of the following statements about profit centers is true?

Profit center managers are held accountable for profits but not for the investments made to generate them. Signup and view all the answers

Which of the following is NOT a characteristic of profit centers?

They relate outputs to inputs through a profit calculation. Signup and view all the answers

Which of the following is an example of a profit center given in the text?

Hospitals Signup and view all the answers

Which of the following is a reason why business terminology is often not precise?

Many firms refer to their investment centers as profit centers. Signup and view all the answers

In the context of the text, what does it mean for a responsibility center to be 'charged' for something?

It has to pay for that thing. Signup and view all the answers

Study Notes

Control Mechanisms

Control Mechanisms are categorized into Results Controls, Action Controls, Personnel Controls, and Cultural Controls
Results Controls are used to alleviate lack of direction and solve motivational problems

Results Controls

Involves defining the dimensions of results required and measuring performance
Difficulties in defining the "right" measures and indicators
Combination of financial and non-financial measures
Setting performance targets and providing rewards related to target attainment

Elements of Results Controls

Defining dimensions on which results are required
Measuring performance
Setting performance targets
Providing rewards related to target attainment

Advantages and Disadvantages of Results Controls

Advantages:
- Feasibility even when information about overall organizational goals is lacking
- Allow for autonomy of individual action as the emphasis is placed on the outcome
Disadvantages: Not specified

Enabling Controls

Features:
- Repair: allowing employees to solve problems or repair processes that do not work efficiently
- Flexibility: allowing employees to depart from procedures in their work if the situation requires it
- Internal transparency: employees' understanding of the control system

ROI (Return on Investment) Measures

Common ROI measures: Return on Investment (ROI), Return on Equity (ROE), Return on Capital Employed (ROCE), Return on Net Assets (RONA), Return on Controllable Assets (ROCA)
ROI can be decomposed into its two components using the DuPont Method of Profitability Analysis
Alternative definitions of investment:
- Total assets available
- Total assets employed
- Total assets employed minus current liabilities
- Stockholders equity
Alternative definitions of cost: Not specified

Incentive Systems

Classification: Individual, Team-Based, Organization Level
Individual Incentive Systems:
- Time-based: incentives paid on the basis of time saved
- Time-based incentives: follow the same method with different formulas

Responsibility Centers

Classification: Revenue Centers, Profit Centers, Investment Centers
Profit Centers: whose managers are held accountable for some measure of profits
Investment Centers: whose managers are held accountable for investments made to generate profits

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Description

Test your knowledge of control mechanisms used in organizations to manage and direct employee behavior towards achieving organizational goals. Explore different types of controls such as results controls, action controls, and personnel controls.

Control Mechanisms in Organizations

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