CHAPTER 14: CONTROLMultiple Choice Questions

1. Why does the term “control” often have negative connotations?a. Control is a means of achieving a goal.b. Control is a fundamental characteristic of organized activity.c. Some amount of control in organizations is unavoidable.d. Control connotes restricted freedom of action.

Answer: d (pp. 399 – 400, moderate, recall)

2. Which of the following is not a major control function of management?a. regulating activitiesb. regulating behaviorc. empowering employeesd. ensuring adjustment or conformity to objectives

Answer: c (p. 400, easy, recall)

3. Why is control thought of as a “causal” variable in organizations?a. The results of control efforts can improve planning.b. Poorly administered controls can cause additional problems.c. The analysis of control efforts help managers adapt to changes.d. Control precedes the managerial functions of planning, organizing, and leading.

Answer: a (p. 400, difficult, recall)

4. The first step in the control process, establishing standards, is dependent upon the existence of _____. a. a favorable cost-benefit ratiob. the department of human resourcesc. meaningful and agreed upon performance yardsticksd. a strategic vision and goals for the overall organization

Answer: d (p. 402, moderate, recall)

5. Which of the following should managers avoid when setting standards?a. encouraging participative goal setting b. making standards specific and measurablec. setting difficult goals beyond achievable levels d. tying standards too closely to the firm’s broad strategic goals

Answer: c (pp. 402 – 403, moderate, application)

247Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

6. Which of the following statements about establishing standards is NOT true?a. Participation by those who will be affected by the standards is beneficial.b. Difficult but achievable goals seem to result in low levels of performance.c. Measuring performance against standards cannot readily be accomplished if the

standards are vague.d. In high-level and complex jobs, it is often not possible or desirable to set up easily

quantified standards.

Answer: b (pp. 402 – 404, moderate, recall)

7. When establishing performance targets (or standards), managers should answer all of the following questions EXCEPT _____. a. Who should set the standards?b. How specific should the standards be?c. Can measurement criteria be quantified?d. How difficult should it be to reach the standards?

Answer: c (pp. 403 – 404, moderate, recall)

8. When measuring performance, managers must consider all of the following issues EXCEPT _____.a. Can measurement criteria be quantified?b. Can expensive, noncritical controls be eliminated?c. What system of tactical control is used by the organization?d. Are all necessary aspects of actions contributing to performance being measured?

Answer: c (p. 404, moderate, application)

9. Companies that use “stage gate” control technology divide projects into several stages with gates between them. The gates act as comprehensive quality control checks that have to be passed before a gate will open. Managers measure performance at the end of each stage to decide whether the project should move forward. Which one of the following performance measurement issues does this control strategy address?a. eliminating non-critical, expensive controlsb. quantifying measurement criteria where possiblec. achieving consensus between assessments about performanced. comprehensively measuring all necessary aspects of performance

Answer: d (pp. 404 – 405, moderate, integration)

248Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

10. _____ is usually the most difficult managerial task in the control process.a. Comparing performance to standardsb. Establishing standardsc. Evaluating and taking corrective actiond. Measuring performance

Answer: c (p. 405, moderate, recall)

11. Upon discovering stronger-than-expected sales of its product, a manufacturer of baby food finds that senior citizens who wear dentures are buying the meals meant for toddlers. Consequently, the firm targets a new line of packaged meals to senior citizens. This case suggests managers should always _____.a. investigate positive differences between performance and standardsb. collapse similar, small market segments into one larger segmentc. design products for maximum adjustabilityd. market products to multiple customer segments

Answer: a (p. 406, moderate, application)

12. Which of the following is a reinforcing action that could be taken based on the outcomes of performance measurement?a. increase in trainingb. addition of a new product linec. modification in supervisiond. investment in newer equipment

Answer: b (p. 406, moderate, integration)

13. Which of the following is a corrective action that could be taken based on the outcomes of performance measurement?a. increase in trainingb. increase in recognitionc. addition of a new product lined. increase in production targets

Answer: a (p. 406, moderate, integration)

14. What determines whether a control is considered operational, tactical, or strategic?a. its industryb. its breadth of scopec. its effect on profitabilityd. its implementation schedule

Answer: b (p. 407, moderate, recall)

249Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

15. Which type of control has the broadest organizational scope?a. diagnosticb. operationalc. strategicd. tactical

Answer: c (pp. 407 – 408, easy, recall)

16. Which of the following assessments carried out by the manager of a chain of used-car dealerships has the largest scope?a. deciding upon suitable advertising for the next fiscal yearb. deciding whether to start another dealership in an area with a growing population c. deciding how much inventory to carry in each dealership and the whole companyd. deciding on the appropriate number of sales staff for each dealership

Answer: c (pp. 407 – 408, moderate, application)

17. Research indicates that the efficiencies of managing through centralized control may be _____ when the operating environments of divisions in multidivisional organizations are relatively _____.a. greater; stable and predictableb. lower; stable and predictablec. greater; turbulent and unpredictabled. unchanged; turbulent and unpredictable

Answer: a (p. 408, difficult, recall)

18. Which one of the following is NOT a reason why it is challenging to implement a system of strategic controls? a. Strategic controls affect day-to-day operations.b. Strategic goals are more abstract than tactical goals. c. Relevant standards and measures are hard to develop. d. Organizations operate in unpredictable environments

Answer: a (p. 408, difficult, integration)

19. In the context of the environmental conditions in which large companies operate, _____ is a critical decision. a. how flexible to make the budgetb. how much strategic control systems should be centralized or decentralizedc. how much to invest in pre-control systems for operationsd. how to fund the budget for the training and development department

Answer: b (p. 408, easy, integration)

250Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

20. A strategic control system is likely to be useful when environmental turbulence is _____ and it is _____ to specify and measure precise strategic objectives.a. high; easyb. low; difficultc. high; difficultd. low; easy

Answer: d (p. 409, moderate, integration)

21. Which of the following is NOT a characteristic of a tactical control system?a. related to specific, functional areasb. involves fundamental organizational controlsc. focused on strategy implementationd. built around a long, specific time frame

Answer: d (pp. 409 – 410, moderate, recall)

22. Department A shows an annual after-tax profit of $400,000 from invested assets of $12 million. Department B shows an annual after-tax profit of $400,000 from invested assets of $8 million. Which unit had the best financial performance?a. Department A performed the best.b. Department B performed the best. c. Both departments had the same financial performance.d. Performance cannot be determined from these statistics.

Answer: b (p. 410, difficult, application)

23. The ratio of return on investment (ROI) measures the profitability of a business unit by comparing _____ to _____.a. activity; salesb. liquidity; liabilityc. inventory cost; inventory turnoverd. net profit before taxes; total assets invested

Answer: d (p. 410, moderate, recall)

24. _____ represents a firm’s ability to meet long-term financial obligations.a. Leverage (total debt/total assets)b. Liquidity (current assets/current liabilities)c. Inventory turnover (annual sales/inventory)d. Return on equity (net profit before taxes/total assets invested)

Answer: a (p. 410, easy, recall)

251Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

25. _____ is a measure of how well a firm can meet its short-term cash requirements.a. Leverage (total debt/total assets)b. Liquidity (current assets/current liabilities)c. Inventory turnover (annual sales/inventory)d. Return on equity (net profit before taxes/total assets invested)

Answer: b (p. 410, easy, recall)

26. The _____ is where the selling price of a unit of a product, minus its variable costs, exceeds the fixed costs for that product.a. current ratiob. return on investmentc. inventory turnover ratiod. break-even point

Answer: d (p. 411, easy, recall)

27. Analyzing a firm’s _____can show the amount of a product that must be sold to cover its fixed and variable costs. This analysis is difficult because _____.a. return on equity; it is difficult to determine the total cost of inventoryb. break-even point; it is difficult to project variable costs accuratelyc. efficiency; it is difficult to project variable costs accuratelyd. activity; it is difficult to determine the total cost of inventory

Answer: b (p. 411 – 412, moderate, integration)

28. In contrast to purely strategic controls, budgetary controls typically _____.a. cover a relatively limited time frameb. focus exclusively on one type of objective (financial)c. are not used to compare a total organization’s progress, relative to competitorsd. all of the above

Answer: d (p. 412, moderate, integration)

29. AT&T’s Universal Card Services division uses an 18-month budget, in which the funding for all projects is forecasted and adjusted each quarter. When compared to a traditional budget, which of the following does NOT apply to the AT&T budget?a. It is a rolling budget.b. It requires fewer revisions.c. It requires less managerial time and effort.d. It is more current and, therefore, more accurate.

Answer: c (pp. 412 – 413, moderate, application)

252Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

30. When using budgets as a form of control, managers are faced with the issue of _____.a. whether to used fixed or flexible budgetsb. how to calculate compensation bonusesc. how to evaluate those responsible for meeting specific budgetary targetsd. all of the above

Answer: d (pp. 412 – 413, moderate, application)

31. The _____ of an organization is probably the most widespread tactical control system that the typical employee encounters. a. operating budget b. supervisory structurec. human resource systemd. quantitative forecasting system

Answer: b (p. 413, moderate, recall)

32. The degree of “stretch” in a budget refers to the _____.a. resilience of the budgetb. tightness of the budgetc. acceptability of the budget d. standardization of the budget

Answer: b (p. 413, easy, recall)

33. Which of the following does NOT provide an opportunity for control in the human resource function?a. trainingb. selection c. budgetingd. compensation

Answer: c (p. 414, easy, integration)

34. At Meridian, Inc., employees are given general goals and basic budgets, rather than policy manuals. Furthermore, it is expected that they will be strongly committed to the goals of the organization. Which control approach does Meridian, Inc. use?a. bureaucraticb. commitmentc. operationald. self-reliant

Answer: b (p. 415, easy, application)

253Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

35. All of the following statements are true regarding the commitment (clan) approach to control EXCEPT_____. a. The commitment approach emphasizes shared and deeply held values. b. The clan approach uses corrective action to deal with deviations from standards. c. Creating a genuine clan-like atmosphere among employees is extremely difficult. d. From an employee’s perspective, the employee or her group does the controlling.

Answer: b (p. 415, difficult, recall)

36. Which of the following is NOT a characteristic of bureaucratic control?a. adherence to rules and regulationsb. emphasis on detecting deviance c. formal, impersonal administrationd. mutual assistance in meeting performance standards

Answer: d (p. 415, moderate, recall)

37. South West Trading controls the raw materials used to make its products at the point of origin. In addition, it uses the services of United Parcel Service (UPS) to combine orders from various factories into one container for shipment. What type of control system is being used by South West Trading?a. precontrol of operationsb. strategic control of operationsc. financial control of operationsd. concurrent control of operations

Answer: a (p. 416, moderate, application)

38. _____ is a type of operational control that evaluates the conversion of inputs to outputs while it is happening.a. Precontrolb. Postcontrol c. Concurrent controld. Strategic control

Answer: c (p. 416, easy, recall)

39. Which of the following controls the quality, quantity, and characteristics of the inputs into the production process?a. precontrolb. postcontrolc. reactive controld. concurrent control

Answer: a (p. 416, easy, recall)

254Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

40. Some employers use software to track the key strokes of data-entry employees. The software notes changes in their pace of work and measures their overall productivity. This software is an example of _____.a. precontrol of operationsb. postcontrol of operationsc. concurrent control of operationsd. proactive control of operations

Answer: c (p. 417, moderate, application)

41. Traditionally, manufacturers used quality control personnel to check the rate of defective products and decide what to do if those rates were too high. This system was called _____.a. precontrol of operationsb. postcontrol of operationsc. intermittent control of operationsd. concurrent control of operations

Answer: b (p. 417, moderate, recall)

42. Answering all of the following questions EXCEPT _____ will help managers assess the quality of information collected by a system of controls. a. Is the information useful?b. Is the information objective?c. Is the information timely?d. Is the amount of control balanced?

Answer: d (p. 419, easy, recall)

43. A manager who wants to assess the flexibility of a control system would ask _____.a. Can the controls respond to varying conditions?b. Is the information obtained worth the cost of gathering it?c. Who is responsible for maintaining the system of controls?d. Are the controls correctly situated within the organizational structure?

Answer: a (p. 419, easy, integration)

44. Which of the following is NOT a key factor that managers should use to determine the effectiveness of company control systems?a. amount of controlb. types of controlc. source of controld. focus of control

Answer: b (p. 419, easy, recall)

255Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

45. Which of the following questions does NOT directly address one of the four critical areas examined by the balanced scorecard approach?a. How do shareholders perceive the company?b. How do customers perceive the company?c. How do the employees perceive the organization?d. How well is the company doing at innovating, improving, and creating value?

Answer: c (p. 420, moderate, integration)

46. Proponents of the balanced scorecard approach to control assert that it _____.a. focuses on financial ratios and budgetary controlsb. simplifies the design and implementation of control measuresc. takes a retroactive approach to designing organizational controls d. links measures of organizational success more closely to strategic objectives

Answer: d (p. 420, moderate, integration)

47. Hitt, Black, and Porter note that _____ is one of the greatest control challenges for any organization or manager.a. determining the amount of control to applyb. servicing control systems when they break downc. choosing the time frame on which to focus control effortsd. deciding which part of the production process to control

Answer: a (p. 420, moderate, recall)

48. Which of the following is a common error committed by less-experienced managers?a. They tend to defer control to top management.b. They tend to avoid formal methods and control by “gut” instinct.c. They tend to apply more control than is necessary to show they are “in charge.”d. They tend to forgo control in order to foster good relations with their employees.

Answer: c (p. 420, moderate, recall)

49. A manager of a hotel chain looks at the advertised claims of his competitors over the last 10 years. He becomes concerned that his hotels may not offer the same level of customer service as his competitors do. What should the manager remind himself of before taking action?a. Quality information is useful. b. Quality information is accurate.c. Quality information is objective.d. Quality information is timely.

Answer: c (pp. 422 – 423, moderate, application)

256Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

50. Which of the following situations would be least likely to justify high control costs?a. nuclear power plantsb. military weapons unitsc. customer service call centersd. federal air traffic control agencies

Answer: c (p. 423, easy, application)

True/False

51. In an organizational setting, to “control” means to adjust or bring about conformity to specifications or objectives that have been set.

Answer: True (p. 399, moderate, recall)

52. As the case study of Morton’s Restaurant Group demonstrates, extensive control measures almost always deflate employee morale and lower profitability.

Answer: False (p. 401, moderate, application)

53. A standard of “sell as many units as possible” provides usable guidelines for determining whether the standard has been met.

Answer: False (p. 402, moderate, application)

54. As the complexity of a task increases and its assessment standards become more abstract, there will be a higher potential that performance measurement will cause confusion.

Answer: True (p. 402, moderate, integration)

55. Without a strategic vision and goals for the overall organization, managers will find it difficult to develop meaningful, agreed-upon standards.

Answer: True (p. 402, moderate, recall)

56. In the control process, the measurement of performance pertains to the actions of people and equipment that the organization wants to monitor.

Answer: True (p. 404, moderate, recall)

57. Regardless of cost, performance measurement should always be comprehensive.

Answer: False (p. 405, moderate, integration)

257Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

58. Managers should take reinforcing action when actual performance is worse than expected and take corrective action when actual performance is better than expected.

Answer: False (p. 406, moderate, recall)

59. Hard-and-fast boundaries separate strategic, operational, and tactical controls.

Answer: False (p. 407, moderate, recall)

60. A human resource vice president decides to tie compensation bonuses directly to budgetary controls. Because each department currently uses different bonus standards, such a regulation will affect the entire organization. Therefore, this is a strategic control issue.

Answer: True (pp. 407 – 408, moderate, application)

61. When managers predict a turbulent external environment, they should establish rigid performance standards in order to anchor the firm to strategic goals when the going gets rough.

Answer: False (p. 408, difficult, application)

62. The external environment is the least significant factor affecting whether a strategic control system can be set up.

Answer: False (p. 408, moderate, recall)

63. Strategic control systems are most likely to be useful when objectives are easy to measure and operating environments are relatively calm.

Answer: True (p. 409, moderate, integration)

64. Tactical controls involve the fundamental control arrangements of the organization, those with which its members have to live day to day.

Answer: True (p. 409, moderate, recall)

65. A unit that has a profit of $250,000 for a given year from invested assets of $5 million would have an ROI of .05 for that year.

Answer: True (p. 410, moderate, application)

66. The financial ratio of “leverage” indicates how well the organization can meet its short-term cash requirements.

Answer: False (p. 410, moderate, recall)

258Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

67. ROI (return on investment) measures a company’s efficiency.

Answer: False (p. 410, easy, recall)

68. The break-even point is the amount of a product that must be sold to cover a firm’s fixed and variable costs.

Answer: True (p. 411, moderate, recall)

69. A budget is designed to influence behavior so that forecasts or plans for expenditures and revenues can be achieved.

Answer: True (p. 412, moderate, recall)

70. A rolling budget “rolls over” unused assets into the new budget period.

Answer: False (p. 412, difficult, recall)

71. Supervisory structure is a type of strategic control based on the organization’s overall approach to utilizing its human resources.

Answer: False (pp. 413 – 414, moderate, recall)

72. Selection, training, compensation, and appraisal and evaluation are all opportunities for control in the human resource function.

Answer: True (p. 414, moderate, recall)

73. Shared values and beliefs are the social requirements needed to support a system of bureaucratic control.

Answer: False (p. 415, moderate, application)

74. Most employees can anticipate bureaucratic control’s strict adherence to explicit rules and regulations; however, many employees are unaware that commitment (clan) control can require even stricter adherence to implicit standards.

Answer: True (p. 415 – 416, moderate, integration)

75. Concurrent control focuses on the quality, quantity, and characteristics of the inputs into the production process.

Answer: False (p. 416, moderate, recall)

259Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

76. The contemporary approach to operational control involves shifting the responsibility for control away from operations personnel and toward separate evaluators at the end of the production process.

Answer: False (pp. 417 – 419, easy, integration)

77. Perhaps as many as 60 percent of large U.S. firms appear to have adopted some form of the balanced-scorecard approach to control.

Answer: True (p. 420, difficult, recall)

78. The “balanced scorecard” may include how shareholders perceive the company, how customers perceive the company, and how well the company creates value.

Answer: True (p. 420, moderate, recall)

79. In order to determine the right amount of control to apply in a work situation, the best guideline for a manager to follow is to view the amount of control as something, within limits, that can be adjusted.

Answer: True (p. 422, moderate, recall)

80. The effectiveness of a system of controls has no relationship to the indirect costs of inconvenience and awkwardness during its implementation.

Answer: False (p. 423, moderate, recall)

Short Essay Questions

81. What is control within the context of organizations? (p. 399)

Within the context of organizations, control involves regulation of activities and behaviors in order to conform to specifications or objectives. To control means to adjust or bring about conformity to specifications or objectives. A manager cannot control without restricting. Whether control is good or bad depends on the consequences of the control and the perspectives that are being considered.

82. Explain how control is linked to other managerial functions. (p. 400)

The managerial function of control comes at the end of a chain of the other major functions of planning, leading, and organizing. If those prior functions have been carried out properly, then generating positive responses to controls will be much easier. On the other hand, if major problems have existed in planning, organizing, and leading, almost no amount of attention to control is likely to work very well. As a managerial function, therefore, effective control depends heavily on the other functions that precede it.

260Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

83. What are the four elements of the control process? (p. 402)

The elements are as follows: establish standards; measure performance; compare performance against standards; and evaluate results and, maybe, take action.

84. Explain who should be responsible for setting standards. (p. 403)

Standards can be imposed via a “top down” approach. Top managers who are setting standards should consider these questions: How specific should the standards be? Who should set the standards? How difficult should the standards be to reach? However, it can be beneficial to allow the people who will be affected by the standards to participate in the process of creating them. Such participation can increase the likelihood that they will be committed to the standards. Moreover, their involvement can result in a useful exchange of information and expertise, which can result in better standards.

85. Compare reinforcing actions and corrective actions as outcomes of performance measurement. (p. 406)

Reinforcing actions are taken when actual performance is better than expected performance. Such actions can include increasing rewards and recognition, increasing production targets, and adding new product lines. Corrective actions are taken when actual performance is worse than expected performance. Such actions can include increasing training, modifying supervision, and investing in newer equipment.

86. What is strategic control? (pp. 407 – 408)

Strategic control is focused on how the organization as a whole fits its external environment and meets its long-term objectives and goals. Strategic control systems are designed to determine how well those types of objectives and goals are being met.

87. What are budgetary controls? (p. 412)

Budgetary controls usually cover a relatively limited time frame. They focus exclusively on one type of objective (financial), and they typically cannot be used to compare a total organization’s progress relative to its competitors.

88. Contrast bureaucratic and commitment (clan) controls. (p. 415)

Bureaucratic control stresses adherence to rules and regulations. It is imposed by others. Clan control emphasizes consensus and shared responsibility for meeting goals.

261Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

89. Identify and discuss the three types of operational control. (p. 416)

Precontrol focuses on the quality, quantity, and characteristics of the inputs into the production process. Concurrent control evaluates the conversion of inputs to outputs while it is happening. Postcontrol checks the quality of goods after they have been produced or services after they have been rendered.

90. Discuss the role that the quality of information plays in organizational control. (p. 422 – 423)

Effective control requires the use of high-quality information. Four characteristics determine the quality of information: usefulness, accuracy, timeliness, and objectivity.

Not all data collected for the purposes of control is useful. Sometimes, data that was once useful continues to be collected, even though the data is no longer relevant. In addition, data that is inaccurate or misleading cannot provide a firm basis for control. Since control standards can have powerful effects, all data used must be accurate. Even accurate data, if not delivered on time, is not useful. For effective control, data must be timely. Finally, objective facts are usually better than subjective, possibly biased opinions. Unfortunately, objective data may not be obtainable. Furthermore, some of the most easily measured activities (and most easily controlled) may not be significant to the achievement of long-term, strategic goals. In such cases, thoughtful judgments rather than irrelevant “facts” may provide the best inputs into the process of establishing standards of control.

Note: The remaining questions in this section will be based on the following scenario:

Jean Mullins, vice-president of marketing, began the second quarter meeting on a positive note. “Market share for Winthrop Industries looks great!” she exclaimed. “In fact, we’re at .08 percent above our forecast!” Applause waved through the conference room. The sales team at Winthrop had hoped for some good news after failing to receive an annual bonus last year due to a 17 percent decrease in annual sales; and first quarter sales this year had been flat. It was time for a positive move forward.

“However, based on your monthly sales quotas,” Jean continued, “all sales team members will need to increase the number of sales calls made each week.” The tone of the meeting grew somber. The members of the sales team had been discussing the downward slide in sales within most of Winthrop’s sales regions. Each team member knew that not all news in the meeting would be good.

Jean Mullins continued, “I’ve monitored the number of sales calls made in each region for the past six months and compared that with the resulting sales figures. Here’s what I’ve come up with.” She presented a chart, indicating past sales data for each region. “We had set a quota of eighteen sales calls per week, a year ago, aiming to achieve $10 million in total sales. In order to reach that goal, each team member will now be required to make twenty sales calls per week in each region,” she announced. “We’ll monitor this

262Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

change closely, perhaps readjusting the quota or imposing additional cost-cutting measures.”

91. Explain briefly how the basic control process is being implemented in this scenario. (p. 402)

Standards were established and then revised, based on past and current sales data. The performance of the sales team was measured based on a minimum number of weekly sales calls. That performance was compared with those standards. The outcome of that performance was evaluated, and appropriate action was taken. Given the “open-ended” remarks made by Ms. Mullins, the control process will be ongoing.

92. The textbook discusses three major issues to consider when establishing standards. Explain how those issues have been addressed in this scenario. (pp. 402 – 404)

The standards are specific since the entire sales team will be setting goals based on those standards. The standards have been set by Jean Mullins since it is her responsibility, as the vice-president of marketing, to monitor the sales team’s performance against those standards. The quota of sales calls per week has been raised from eighteen to twenty calls, making the new quota difficult to reach but attainable.

93. What type of action (reinforcing or corrective) was taken in this case? (p. 406)

Corrective action was taken in this scenario since actual performance was worse than expected performance.

94. Explain the use of strategic control in this scenario. (pp. 407 – 408)

Strategic goals are broad and long-term. Strategic control systems are designed to determine how well those goals are being met. The controls used by Jean Mullins support Winthrop’s corporate strategy. The sales team’s objectives are based on the overall goal at Winthrop of $10 million in annual sales. This is a short-term goal; however, achieving that goal is an important element of Winthrop’s strategic goals.

95. Explain the use of financial controls in this scenario. (p. 410)

Tactical control focuses on the implementation of strategy. Such controls involve the fundamental control arrangements of the organization, those with which its members must live day to day. Financial controls contain elements of both strategic and tactical controls. To the extent that they focus on the entire organization, they move toward the strategic end of the continuum of controls; the more they focus on specific units within the organization, the more they move toward the tactical end.

263Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

The goals set in this scenario are based on the relationship between the number of sales calls per week and the dollar amount of sales each quarter; and the relationship of those quarterly dollar amounts to Winthrop’s goal of $10 million in annual sales. The focus is on the sales team: week-by-week, month-by-month, and quarter-by-quarter. The controls applied to the sales team are tactical and support the implementation of Winthrop’s corporate strategy.

96. Explain the importance of supervisory structure controls at Winthrop. (p. 413)

The amount and form of supervisory structure control at Winthrop is critical. The success of Winthrop’s long-term corporate strategy is dependent upon the achievement of annual sales goals, year after year. As the vice-president of sales, Ms. Mullins is setting goals for each member of the sales team. The efforts of each salesperson will either contribute to or hinder the achievement of the goal of $10 million in annual sales.

97. Is bureaucratic control prevalent in this scenario? Explain. (p. 415)

Bureaucratic control stresses adherence to rules and regulations and is “imposed” by others. This approach highlights rational planning and orderliness, and it emphasizes detecting deviance from standards. Jean Mullins is taking a bureaucratic approach to the use of tactical controls. She has analyzed the number of sales calls made in each region for the past six months and compared that data with the resulting sales figures. Based on that analysis, the number of required sales calls has been increased, the purpose being to enable the attainment of the $10 million sales goal. She ends by saying that this change will be monitored closely, and, if needed, additional corrective action may be taken.

98. Is commitment (clan) control prevalent in this scenario? Explain. (p. 415)

Commitment control is not being used in this scenario. Such control stresses obtaining a consensus on what goals should be pursued and developing a shared sense of self-control and responsibility for achieving those goals. The emphasis is on generating shared values and fostering the mutual assistance needed to achieve goals. Unlike the bureaucratic approach, the clan approach tends to treat deviations from standards as a basis for diagnosis rather than for taking corrective actions. Moreover, control is viewed as being “elicited from” instead of “imposed upon” the group, person, or activity.

99. Explain the use of precontrol in this scenario. (pp. 416 – 417)

Precontrol focuses on the quality, quantity, and characteristics of the inputs into the process of producing goods or performing services. Jean Mullins has established sales goals and quotas. She believes that if the salespeople reach those goals and quotas (inputs) month-by-month (process), then they will reach the target of $10 million in annual sales (outcome).

264Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

100. Are concurrent controls used in this scenario? (pp. 416 – 417)

Concurrent controls are used in this case. Sales were down by 17 percent last year. In an effort to overcome that shortfall, Jean Mullins has monitored the number of sales calls made in each region for the past six months and compared that data with the resulting sales figures. She is evaluating the conversion of inputs (sales calls) into outputs (sales figures) while it is happening (month-by-month). Going forward, she intends to continue her concurrent approach, as exemplified in her assertion that further adjustments may be needed.

265Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)