30 Questions
Which of the following is NOT a key element in the implementation of results controls?
Measuring employee skills and competencies
What is the primary purpose of results controls?
To define the dimensions on which results are required
Which of the following is a key challenge in implementing results controls?
Defining the appropriate performance measures and indicators
What is the primary advantage of results controls?
They enable autonomy of individual action by focusing on outcomes
How do results controls help organizations attract employees?
By benefiting good performers, which helps attract confident employees
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
According to the passage, which of the following is a key feature of enabling controls?
Empowerment of employees to solve problems
What does 'repair' in the context of management control refer to according to the passage?
Modifying performance indicators when problems arise
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
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
What does 'internal transparency' refer to in the context of enabling controls?
Employees' understanding of how the control system functions
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
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)
Which measure combines operating decisions and financing decisions?
Stockholders equity
What can both the numerator and denominator include in ROI-type ratios?
Only a subset of the line items reflected on corporate financial statements
Which method involves decomposing ROI into two components?
DuPont Method of Profitability Analysis
What does the measure 'Total assets employed minus current liabilities' exclude?
Short-term creditors financing
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
What is the main purpose of offering flexible hours as a non-monetary compensation policy?
To increase employee satisfaction
How can job sharing be described based on the text?
A solution to provide part-time employment opportunities
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
What is the classification of incentive systems mentioned in the text?
Individual and Team-Based only
What is the effect of strong training programs on a company, according to the text?
Attracting high quality candidates
Why is it mentioned that time-based incentives follow the same method but with different formulas?
To provide insight into how incentives are calculated
Sales managers who are accountable for their salespeople's salaries, commissions, and certain expenses are considered to manage:
A net revenue center
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.
Which of the following is NOT a characteristic of profit centers?
They relate outputs to inputs through a profit calculation.
Which of the following is an example of a profit center given in the text?
Hospitals
Which of the following is a reason why business terminology is often not precise?
Many firms refer to their investment centers as profit centers.
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.
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
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.
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